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TMI Blog2020 (3) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... should be a nexus between the impugned items on which ITC is being claimed and outward supply - It is also worth mentioning here that the provisions facilitating availment of Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been misconstrued by the Applicant. Eligibility of input tax credit on taxes paid on annual operation and maintenance services for the pipeline laid outside the factory premises - HELD THAT:- The pipe lines bid outside the factory premises of the applicant are not plant and machinery in view of the above exclusion clause as also that the said pipe lines merit treatment as immovable property. Thus there exist no grounds for availment of Input tax credit on the taxes paid on annual operation and maintenance services of the aforesaid pipeline laid outside the factory premises. - STC/AAR/09/2019 - - - Dated:- 12-3-2020 - Smt. Sonal K. Mishra Joint Commissioner O/o Commissioner, State Tax (CGGST), Raipur, Chhattisgarh And Shri Rajesh Kumar Singh, Additional Commissioner, O/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Contentions of the Applicant:- i. The Applicant seeks clarifications on their admissibility to take credit of taxes paid on pipelines supplied by the contractors, M/s Megha Engineering and Infrastructure Ltd, Jagdalpur, Chhattisgarh (GSTIN-22AAECM7627A1ZX) and M/s Koya and Company Construction Ltd, Jagdalpur, Chhattisgarh (GSTlN-22AACCK3240R1ZH) as part of the contract with the Applicant. ii. There is an express restriction under section 17 of the CGST Act, 2017 on taking credit of taxes paid only in respect of pipelines laid outside the factory premises . The applicant is of the opinion that it is eligible to take credit of taxes paid in respect of mechanical/electrical equipment (other than the pipelines supplied by the contractors) and refrains from seeking an advance ruling in this regard. iii. Consequently, the Applicant expressly restricts the scope of the advance ruling to the Applicant's eligibility to take credit of taxes paid on inputs and input services used in laying the pipeline outside the factory premises and the operation and maintenance services supplied under the contract. iv. As per Section 17(5) of CGST Act, (a) . (b) .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the restriction apply only to long distance cross country pipelines. In their case, the pipeline is laid for short distance of less than 50 kms. from the factory. On question 2, they submitted that there is no restriction to take credit of input tax credit on annual operation and maintenance services for the pipeline as such services are eligible for input credit even on any immovable property. They clarified that they do not intend to capitalize the O M cost and hence the restriction specified in explanation to Section 17(5) (d) applies only if repair and maintenance costs are capitalized. They further drew reference to table 7B/1 in page 15 of 17 of the contract to substantiate that the work does not involve any major repair or renovation and it is only routine maintenance. 6. The legal position, Analysis and Discussion:- At the very outset, we would like io make it clear that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as the CGST Act and the CGGST Act ] are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n HiSmelt technology in Nagarnar, located 16 km from Jagdalpur in the State of Chhattisgarh with on estimated outlay of Rs. 20,000 Crore. As part of the above plan, NMDC is setting up Intake Well pump House and Cross Country Pipeline System at 3.0 MTPA Integrated Steel Plant at Nagarnar, Chhattisgarh. NISP has been awarded contract for setting up of Intake well and Pump House and for laying of Cross Country Pipeline System, including operation and maintenance for five years for NISP to a consortium lead by M/s Megha Engineering and Infrastructure Limited. The scope of work is categorized into 3 categories which are as under i. Construction of intake well and pump house along with supply of associated motors and electrical equipment's ii. Construction of pipeline, erection, installation and commissioning iii. Operation and Maintenance Service for five years 6.3 Section 16(1) of CGST Act stipulates that: Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable 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 this Chapter and Chapter VI, the expression plant and machinery means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes - (i) land, building or any other civil structures; (ii) Telecommunication towers; and (iii) Pipelines laid outside the factory premises . 6.8 Thus in very unambiguous terms the aforesaid explanation to section 17(5) of CGST Act, 2017 excludes pipelines laid outside the factory premises from the scope of plant and machinery. Further, the provisions restrict credit of works contract services for works to be performed on immovable property and also restrict the credit of construction related activity of immovable property even when construction activity do not fall into the scope of works contract. However, works contract and constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoyment of that to which it is attached. Thus the essential character of immovable property , as emerges from the above discussion, relevant to the present context is that it is attached to the earth, or permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply. The project of laying pipe lines covers a large area, tailored specifically to fit the dimensions and orientation of the needs of the project. In no case it appears to be prudent or for that matter viable to move these items from one place to the other. Thus, besides pipelines laid outside the factory premises being outside the scope of plant and machinery as discussed above also fulfills the conditions of it being an immoveable property. 6.11 In the aforesaid context, Hon'ble Supreme Court Judgment in the case of M/s. T.T.G. Industries Ltd. v. Collector of Central Excise, [decided] on 7 May, 2004 (167) E.L.T. 501 (S.C.) in Appeal (civil) 10911 of 1996, wherein the contract was for the design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;plant and machinery' is 'goods' or 'immoveable property. Hon'ble Apex Court held that the same is immoveable property and observing 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 fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the impugned items on which ITC is being claimed and outward supply 6.16 It is also worth mentioning here that the provisions facilitating availment of Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been misconstrued by the Applicant. 6.17 The Applicant in their defense have cited reference to the case law of Vikram Cements Vs. CCE , Jaypee Rewa Cement Vs. CCE MP, Union of India Vs. Hindustan Zinc Ltd, India Cements Ltd vs CCE Hyderabad etc. The aforesaid case laws cited pertain to the erstwhile Rule 57Q of the earlier Central Excise Rules, 1944 as was in vogue, stipulating therein the provisions for availment of credit of Capital goods under cenvat credit regime when the chapter heading/ subheading of the items which qualified being termed as capital goods , were specifically covered under the definition of capital goods mention in the statue viz items falling under chapter 84, 85 etc. of CETA, 1 985. Further in almost ail the case laws cited by the appellant, the credit of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making outward supply of goods or services or both and includes such foundation and structural supports but excludes - (i) land, building or any other civil structures; (ii) Telecommunication towers: and (iii) Pipelines laid outside the factory premises . 7.3 In the preceding paras we have already arrived at the considered conclusion that the pipe lines bid outside the factory premises of the applicant are not plant and machinery in view of the above exclusion clause as also that the said pipe lines merit treatment as immovable property. Thus there exist no grounds for availment of Input tax credit on the taxes paid on annual operation and maintenance services of the aforesaid pipeline laid outside the factory premises. 8. Having regard to the facts and circumstances of the case and discussions as above, we pass the following order:- ORDER (Under section 98 of the Chhattisgarh Goods and Services Tax Act, 2017) No.STC/AAR/09/2019 Raipur Dated 12/3/2020 The ruling so sought by the Applicant is accordingly answered as under: M/s NMDC, the applicant is not eligible to Input tax credit of GST paid on goods and services used for laying of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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