9911796707
TMI Blog2022 (1) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... r Separation Unit interconnected with Pipes and other necessary components, put up administration units, other utilities required for manufacturing of the Industrial and Medical gases with the required foundations and structural supports, i.e., have undertaken original activities of construction - even if only Installation of various components were made in setting up the manufacturing plant, such installation, commissioning are original works of construction. From the various photographs furnished by the appellant, it is evident that the appellant has set up the manufacturing plant with all the required utilities and therefore, there is no doubt that the appellant has taken lease of the land and have undertaken Construction of the manufacturing Plant. Whether the services received by the appellant from IPL i.e., withdrawing the leasehold rights of the land held in favour of the appellant, thereby facilitating the appellant to enter into lease with SICOT for the remaining period of lease can be construed as services received for construction ? - HELD THAT:- The appellants interpretation is that for construction is to be read as for the purpose of construction and only those service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our. Without the appellant having the leasehold rights. they cannot undertake construction of the manufacturing Plant, ASP. Also, ASP is an immovable property and not mere Plant or machinery but can be termed as Plant and Machinery , the Explanation of which specifically excludes land. Thus, it is clear that intention of law maker is to restrict ITC on services related to land, received for construction - the services received from IPL, the cost of which is capitalised along with ASP, is a service received for construction of an immovable property, and therefore the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017. X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in the business of manufacture and supply of industrial & Medical gases, including oxygen (both Industrial & Medical Grade), nitrogen, argon etc. (in both liquid and gaseous form); State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry; INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State of the art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases; INOX and IPL entered into a Memorandum of Understanding for transfer of leasehold rights(MOU) dated 20.11.2020; SIPCOT vide Order No. P-II/SICH/II/IPL/146/2012 dated 28.12.2020 had accorded its approval for transfer of leasehold rights to INOX. Accordingly, SIPCOT has amended its original lease agreement vide a modified lease deed on 12.01.2021 in order to lease the part property t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations where the goods or services are directly used in the construction of the immovable property. They have relied on the ruling issued by the Hon'ble Supreme Court in,- * Sale's Tax Commissioner v. Modi Sugar Mills, 1960 (10) TMI 65 Supreme Court.; * Indian Chamber of Commerce and Others v. Commissioner of Income Tax, 1975 (9) TMI 4 - Supreme Court 4.3 The appellant has stated that the entire premise for denial of credit under the Impugned Order is that the services availed by them from IPL is in relation to acquiring the lease of the land. 'Land' being excluded from the definition of 'plant and machinery', services availed and utilized for acquiring such land on lease is also restricted. However, the Impugned Order has failed to appreciate the fact that in order to fall under restriction of Section 17(5)(d), the primary condition to be satisfied is that the services should be received for Construction' of any immovable property. The exclusion under the definition of plant and machinery' is also in the: context of construction. In the absence of any construction activity, the said restriction do not apply. There is no construction of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve submitted that the ASP does not result in construction of any land, building, civil structure and it is also not a telecommunication tower or pipeline, hence it does not fall under any of the exclusion categories stipulated under the definition of plant and machinery'. The LA in the Impugned Order have presumed that the service received by them is a service for construction of an immovable property namely 'land' and since the explanation to Section 17 of CGST Act excludes 'land' from the definition of plant and machinery' the AAR have denied the benefit of ITC. The said finding of the LA is a complete mis-appreciation of the factual matrix involved in the present case. It is required to be appreciated that the exclusion of land from the definition of 'plant and machinery' will apply only in a situation where services are received for any construction activity. In the present case, the leasehold rights are acquired not for construction of immovable property/ development of land and therefore the exclusion in the definition of 'plant and machinery' would not be triggered. The input service in question enables the Appellant to acquire the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as much as there is no construction of immovable properly. Discussion: 6. We have carefully considered the submissions of the appellant, the ruling of the Lower Authority and the relevant statutory provisions. The factum of the case is that State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry.; INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State-of-the-art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases.; INOX and IPL entered into a Memorandum of Understanding for transfer of leasehold rights(MOU) dated 20.11.2020.; SIPCOT vide Order No. P II/SICH/II/IPL/ 146/2012 dated 28.12.2020 had accorded its approval for transfer of leasehold rights to INOX. Accordingly, SIPCOT has amended its original lease agreement vide a modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an immovable property or * a Plant and Machinery the ASP, claimed to be a movable property * if the entire project is a 'Plant and Machinery', whether the said service being service received for acquiring the leasehold rights of the land is excluded under the explanation of 'Plant and Machinery', which excludes 'Land'. 9.1 Section 17(5) (d) and the relevant explanations under the GST Act and definition of 'Immovable Property' under General Clauses Act is as follows: (5) Notwithstanding anything contained in sub section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation. For the purposes of clauses (c) and (d), the expression construction includes re construction, renovation, additions or alterations or repairs, to the extent of capitalisation to the said immovable properly Explanation. For the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction', the cost of which is capitalised to the said immovable property. The appellant has Erected, Installed and commissioned the various components of the Air Separation Unit interconnected with Pipes and other necessary components, put up administration units, other utilities required for manufacturing of the Industrial and Medical gases with the required foundations and structural supports, i.e., have undertaken 'original' activities of 'construction'. In as much as 'Construction' is an inclusive explanation in the Act, it definitely covers the Original works of Erection, Installation, commissioning of the manufacturing Plant, to the extent such expenditure is capitalised in their book of accounts. Therefore, even if only Installation of various components were' made in setting up the manufacturing plant, such installation, commissioning are original works of construction. From the various photographs furnished by the appellant, it is evident that the appellant has set up the manufacturing plant with all the required utilities and therefore, there is no doubt that the appellant has taken lease of the land and have undertaken 'Construction&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct are required in order to manufacture the resultant product. Crystar beams imported by the appellant are materials, which though not used in the manufacture of H.T. Porcelain Insulators required for Lightening Arrestors, are materials which are required for producing the insulators in the kilns." (emphasis supplied) Thus, the word 'for' do not confine/limit only those goods or services which have a very direct nexus to 'construction'. This view on the ambit of the' word 'for' is endorsed by the Parliament as well in as much as it adopted this contrasting treatment in the context of Notification No. 5/2006 C.E. (N.T.), dated 14.3.2006 issued to effectuate refund under Rule 5 of CENVAT Credit Rules. This Notification originally employed the expression "used in" and Parliament enacted Section 74 of Finance Act, 2010 which retrospectively amended Notification No. 5/2006 C.E. (N.T.), dated 14.3-2006 thereby inter alia replacing the expression "used in" by the expression "used for". The CBEC clarified (vide Circular No. 334/1/2010 TRU dated 26.2.2010) that the effect of the amendment was to expand the scope of refund inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a 'Plant and Machinery' and that it is 'movable', therefore not an 'immovable property'. We find that in a similar situation, in the case of Duncans Industries Ltd. v. State of LLP. & Ors. on 3 December, 1999 Hon'ble Supreme Court had to decide whether the 'plant and machinery' in the fertilizer is 'goods' or 'immovable property. The Apex Court held that the same is immovable property and observed as under :- "The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the Court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the same as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , civil structures' is excluded. In the case at hand the impugned services are received by the appellant 'for construction' of the manufacturing plant which is an immovable property and even if the said plant is considerable as 'Plant and Machinery', the restriction on the services received towards the leasehold of the 'Land' is restricted by Section 17(5)(d) of the Act read with the Explanation for 'Construction' and 'Plant and Machinery'. 10. To sum up, we find that ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturing Plant, ASP. Also, ASP is an immovable property and not mere 'Plant' or 'machinery' but can be termed as 'Plant and Machinery', the Explanation of which specifically excludes land. Thus, it is clear that intention of law maker is to restrict ITC on services related to land, received for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
