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TMI Blog2024 (10) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC. Exclusion of the category of works contracts by clause (c) will not, per se, defeat the object of the CGST Act. Whether the explanation that lays down the meaning of the expression plant and machinery in Section 17 will apply to the expression plant or machinery used in Section 17 (5)(d)? - HELD THAT:- The explanation to Section 17 defines plant and machinery . The explanation seeks to define the expression plant and machinery used in Chapter V and Chapter VI. In Chapter VI, the expression plant and machinery appears in several places, but the expression plant or machinery is found only in Section 17(5)(d). If the legislature intended to give the expression plant or machinery the same meaning as plant and machinery as defined in the explanation, the legislature would not have specifically used the expression plant or machinery in Section 17(5)(d). The legislature has made this distinction consciously. Therefore, the expression plant and machinery and plant or machinery cannot be given the same meaning. It may also be noted here that the expression plant or machinery is used in dealing with a peculiar case of goods or services being received by a taxable person for the constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vinay Saraf, Adv. Mr. Vishal Agrawal, Adv. Mr. Sasi Prabhu, Adv. Mr. Ravi Bharuka, AOR Mr. Ankit Agarwal, Adv. Mr. Abhishek Deodhar, Adv. Mr. Rahul Unnikrishnan, Adv. Ms. Ritu Jain, Adv. Ms. Aditi Jain, Adv. Ms. Shrishti Agarwal, Adv. Mr. Rohit Agarwal, Adv. Ms. Tuhina, Adv. Ms. Priyanka Rathi, Adv. Ms. Ashwini Chandrasekaran, Adv. Ms. Shubhangi Gupta, Adv. Mr. Pallav Mongia, AOR Mr. Abhishek A Rastogi, Adv. Mr. Nikhil Jain, AOR Ms. Pooja M Rastogi, Adv. Ms. Meenal Songire, Adv. Ms. Divya Jain, Adv. Ms. Divyasha Mathur, Adv. Mr. Sujit Ghosh, Sr. Adv. Ms. Mannat Waraich, AOR Ms. Anshika Aggarwal , Adv For the Respondent : Mr. N.Venkatraman,ASG Mr. Arijit Prasad,Sr.Adv. Mr. Sonu Bhatnagar,Adv. Mr. Indrajit Prasad,Adv. Ms. Ankita Singh,Adv. Mr. Deepak Kumar,Adv. Mr. Gurmeet Singh Makker, AOR Mr. Mukesh Kumar Maroria, AOR Mr. Abhratosh Majumdar, Sr. Adv. Mr. S. Sukumaran, Adv. Mr. Avra Mazumdar, Adv. Mr. Ramesh Patodia,Adv. Mr. Anand Sukumar, Adv. Mrs. Megha Kapoor, Adv. Mr. Bhupesh Kumar Pathak, Adv. Mrs. Ruche Anand, Adv. Ms. Meera Mathur, AOR Mr. Suvendu Suvasis Dash, AOR Mr. Prasenjeet Mohapatra, AOR Mr. D. L. Chidananda, AOR Mr. Naresh Jain, Adv. Mrs. Arti Agrawal, Adv. Mr. Mahav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase/supply of goods and services consumed and used in the construction of the shopping mall. At the same time, the first respondent's letting out of units in the shopping mall attracts CGST based on the rent received by the first respondent since it amounts to the supply of service under the CGST Act. Therefore, the first respondent was desirous of availing the Input Tax Credit (ITC) accumulated against the rental income received by it upon letting out the mall premises. According to the first respondent, when it approached the concerned authorities, it was advised to deposit GST on rent without deducting ITC because of the exception carved out by Section 17(5)(d). 3. The first respondent filed a writ petition before the High Court of Orissa seeking a declaration that Section 17(5)(d) of the CGST Act and the corresponding provisions of the Orissa Goods and Services Act, 2017 do not apply to the construction of immovable property intended for letting out on rent. A prayer in the alternative was made that in the event it is held that the bar under Section 17(5)(d) is applicable even to the construction of immovable property intended for letting out, a declaration be issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enging the constitutional validity of clauses (c) and (d) of Section 17(5). There is a prayer to read down the clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act; and f. Writ Petition (C) No. 1030 of 2022 containing similar prayers SUBMISSIONS ON BEHALF OF ASSESSEES 6. Very detailed submissions have been made by the parties to the civil appeals, intervenors and parties to the writ petitions. We find that the submissions made by the learned counsel for the assessees and the intervenors are repetitive. There are a large number of decisions relied upon, whether relevant or irrelevant. Brevity is the hallmark of good advocacy. It would be ideal if parties on one side file joint written submissions. The Judges and lawyers are humans. Sometimes, bulky compilations and submissions can be counterproductive. 7. Assessees have submitted that clauses (c) and (d) and sub-section (5) of Section 17 are violative of Articles 14, 19(1)(g) and 300A of the Constitution of India. The submissions concerning the challenge to constitutional validity can be summarised as follows: a. Section 17(5)(d) is violative of Article 14 since it classifies assessees engaged in the business of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law. As intelligible differentia does not exist, the first condition of the twin test can be said to be satisfied; c. Break in the credit chain is also not a differentia, since, in the assessees case, unlike in the case of assessees selling immovable properties, there is no break in the credit chain. The break arises when the recipient uses the supplier's output to make non-taxable transactions for which GST is not payable by the recipient. In such a case, credit cannot be utilised in the subsequent leg of the transaction from where the break in the chain took place. Several illustrations have been given in support of this submission. It was submitted that there is no break in the chain at any of the levels, starting from the subcontractor to the main contractor and the petitioner, since all three entities are liable to output GST, and therefore, in such a case, denial of credit cannot be justified; d. It is submitted that even assuming that coming into existence of an immovable property is an intelligible differentia, it has no nexus with the objects of the CGST Act. The reason is that denying credit in such cases essentially perpetuates and continues the cascading effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance was placed on various decisions, including those in the case of R.K Garg v. Union of India and Ors. (1981) 4 SCC 675 , Twyford Tea Co. Ltd. and Anr. v. State of Kerala and Anr. (1970) 1 SCC 189 , Union of India and Ors. v. Nitdip Textile Processors Pvt. Ltd. and Anr. (2012) 1 SCC 226 . Varying standards of review under the doctrine of classification are typically applied to economic and non-economic legislation, with the rational basis test being applied to economic legislation. Various decisions were relied upon dealing with the wide latitude doctrine in relation to economic legislations. Reliance was placed on the Government of Andhra Pradesh and Ors. v. P. Laxmi Devi (2008) 4 SCC 720 , Assistant Commissioner of Urban Land Tax and Ors. v. Buckingham and Carnatic Co. Ltd., Etc. (1969) 2 SCC 55 , Jindal Stainless Ltd. and Anr. v. State of Haryana and Ors. (2017) 12 SCC 1 and State of Tamil Nadu and Anr. v. National South Indian River Interlinking Agriculturist Association (2021) 15 SCC 534 . The true import of the legislative provision is to be understood from the plain reading of the provision and not on the basis of affidavits or submissions of the State. A decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results in the cascading effect of taxes and denial of credit for business expenditure, which is in direct contradiction of the objects of GST Law as elaborated previously. It is submitted that ITC cannot be denied solely because immovable properties are created in the assessee s business. The primary condition for availing of ITC is the nexus between the assessee's input and output business activities, which exists in the assessee s case. Direct corelation with input services or output services is not necessary to avail of the benefit of ITC. c. It is submitted that the phrase on its own account should be read down and given a purposive construction instead of a myopic one. The phrase should be deemed to mean when construction is done for personal use and not for services, i.e., credit should be denied only when goods and services are utilised for the construction of immovable property for his own purposes, like an office building or factory building. In such a case, no further GST on the sale of such a building occurs and, therefore, a chain of taxability breaks. However, when such immovable property is not being used by the assessee itself but is used for other supplies, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral rule under Section 16, must be construed strictly. The expression plant and machinery has been used at least ten times in Chapters V and VI of the CGST Act, and the expression plant or machinery occurs only once in Section 17(5)(d). Therefore, the intention of the legislature to treat the expression plant or machinery differently from the expression plant and machinery is apparent. In the model GST law, which the GST Council Secretariat circulated in November 2016 for inviting suggestions and comments, the expression plant and machinery was used both in clauses (c) and (d) of Section 17(5). However, while enacting the law, the legislature has advisedly used the expression plant and machinery in clause (c) and plant or machinery in clause (d) of Section 17(5). Therefore, the intention of the legislature cannot be brushed aside by contending that the use of the word or in Section 17(5)(d) is a mistake of the legislature. The expression plant or machinery has not been defined under the CGST Act. The definition of plant and machinery provided in the explanation to Section 17 will not apply to the expression plant or machinery . Since the legislature has intentionally used two di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded from the definition of plant and machinery in the explanation to sub-section (5) of Section 17, the word 'plant' in the expression 'plant or machinery' must be taken in its natural sense, which will include buildings. In support of the submission that a shopping mall could be treated as a plant, which will fall in the exception carved out to Section 17(5)(d), reliance was placed on the decision of this Court in the case of CIT, Trivandrum v. Anand Theatres (2000) 5 SCC 393 wherein it was held that when a building is specially designed and constructed with some special features to attract the customers, the building could be treated as a plant. In the case of Commissioner of Income Tax, Karnataka v. Karnataka Power Corporation (2002) 9 SCC 571 , this Court held that an electricity power generating station building would have to be treated as a plant as it would satisfy the functional test or test of essentiality. This Court further held that the judgment in the case of Anand Theatres 19 would be limited to buildings used for hotels or cinemas/theatres. Reliance was also placed on the decision in the case of Commissioner of Income Tax v. Victory Aqua Farm Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 17 starts with the non-obstante clause, it cannot be said that the legislature intended to override Section 16(1) in its entirety. It is submitted that the non-obstante clause in Section 17(5) cannot cut down the construction or restrict the scope of operation of Section 16(1). Reliance was placed on a decision of this Court in the case of R.S. Raghunath v. State of Karnataka Anr. (1992) 1 SCC 335 ; 11. It is pointed out that Section 17(5)(c) carves out an exception only for works contracts, assuming that this is the only category of service where there is no breakage in the chain of taxable supplies. It is submitted that while Section 17(5)(c) allows ITC on works contracts for contractors, ITC has been blocked for other developers; 12. The classification sought to be invoked by the Revenue leads to invidious discrimination within the provision in as much as credit has been allowed for the construction of immovable plant and machinery during the execution of a works contract and for the construction of a building during the execution of work by the sub-contractor under its work contract with the main contractor; 13. It is submitted that Section 16(1) of the CGST Act is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxation statutes, he submitted that the test of vice of discrimination in a taxing statute is less rigorous. He submitted that the Parliament is entitled to make policy choices and adopt appropriate classifications given the latitude that our Constitutional jurisprudence allows in the matters involving tax legislation. The principle of equality does not preclude the classification of property, credit, profession and events for taxation. He submitted that it is settled law, as held in the case of Hari Krishna Bhargav v. Union of India Anr (1966) 2 SCR 22 that a taxing statute is not open to challenge on the ground that the tax is harsh or excessive. He refuted a submission that clauses (c) and (d) of Section 17(5) are fraud on the Constitution or that they are manifestly arbitrary. He invited our attention to a decision of the Constitution Bench in the case of Joseph Shine v. Union of India (2019) 3 SCC 39 and, in particular, what is held in paragraphs 163 to 165. He submitted that considering the test laid down in the said decision, even assuming that clauses (c) and (d) are discriminatory, they are not manifestly discriminatory. He submitted that English decisions will not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discrimination. c. Tax on goods cannot be extended to immovable property. However, taxation on services can be raised even on using immovable properties for rendition of services. He submitted that when it comes to sales tax or VAT on goods, a consistent view taken by this Court is that the sale would include the sale of goods and not the sale of immovables. He submitted that malls, hotels, office buildings, etc., are immovable properties; therefore, GST cannot be levied. He relied upon the earlier decisions of this Court arising out of the Central Excise Act, 1944. According to him, those plants and machinery which are deeply rooted in the earth and cannot be relocated without sufficient damage are immovable goods. However, he accepted that renting an immovable property amounts to a supply of service, which is taxable under the CGST Act. d. While dealing with the case of a shopping mall, he submitted that since a shopping mall is an immovable property, it is excluded from the GST. Therefore, it does not fall in Clause (5)(b) of Schedule II. He submitted that the entire purpose of ITC is to extend the ITC paid at the anterior stage to remove the cascading burden of taxation at a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression plant or machinery in only one place, and the legislative intention has to be adhered to. 18. It was submitted that in certain cases, CENVAT credit was allowed for the construction of buildings. That is the view taken by the Tribunals/High Courts. 19. Concerning the apprehension of misusing GST expressed by the learned ASG, it was submitted that even if the argument of the assessees is accepted, the ITC on goods or services used to construct a warehouse or mall is only to a limited extent of GST payable on rental activity. It was, therefore, submitted that the definition of plant or machinery will not apply to plant and machinery . 20. The learned counsel submitted that there is no conflict between Section 17(5)(d) and Section 16(3). He submitted that Section 16(3) applies to plant and machinery and not to plant or machinery . He submitted that even assuming that Section 16(3) applies to plant or machinery, the effect of the provision is that if the registered person claims depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, he cannot avail of the ITC on the said tax component. He submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing main questions arise for consideration: (i) Whether the definition of plant and machinery in the explanation appended to Section 17 of the CGST Act applies to the expression plant or machinery used in clause (d) of sub-section (5) of Section 17? (ii) If it is held that the explanation does not apply to plant or machinery , what is the meaning of the word plant ? and (iii) Whether clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act are unconstitutional? RULES REGARDING THE INTERPRETATION OF TAXING STATUTES 25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows: a. A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise; b. If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity; c. While dealing wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel Civil Appeal No.2948 of 2023 etc. Page 35 of 91 shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under Section 37; (b) he has received the goods or services or both; Explanation. For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of which have been uploaded by the supplier under subCivil Appeal No.2948 of 2023 etc. Page 40 of 91 section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. (5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021. (6) Where registration of a registered person is cancelled under Section 29 and subsequently the cancellation of registration is revoked by any order, either under Section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under the Income Tax Act. The object is that a registered person does not take advantage of both depreciation and ITC. 29. Now we come to sub-Section (4) of Section 16. Before the amendment made by the Finance Act, 2022, the sub-section read thus: 16. .. .. .. .. .. .. .. .. .. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a taxable person engaged (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him; (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite anything to the contrary in the provisions mentioned in the non-obstante clause. It is pertinent to note that in view of the non-obstante clause used at the beginning of sub-section (5), it seeks to override both sub-section (1) of Section 16 and sub-section (1) of Section 18. As noted earlier, sub-section (1) of Section 16 lays down the eligibility and conditions for taking ITC. Subsection (1) of Section 18 deals with the availability of ITC in special circumstances. Therefore, in the cases covered by subsection (5), ITC is not available. In a sense, sub-section (5) of Section 17 carves out an exception to the provisions of subsection (1) of Sections 16 and 18, which confer the benefit of ITC. ANALYSIS OF CLAUSES (c) AND (d) 31. Now, we analyse clauses (c) and (d) of Section 17(5). Clause (c) applies when works contract services are supplied for constructing immovable property. The definition of works contract under Section 2(119) is extensive. It reads thus: 2. Definitions:- .. .. .. .. .. .. .. .. .. .. (119) works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (c) uses the expression plant and machinery , which is specifically defined in the explanation. Clause (d) uses an expression of plant or machinery , which is not specifically defined. 35. Now, what is material is the explanation to Section 17, which reads thus: 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. The explanation defines the meaning of the expression plant and machinery . However, as stated earlier, the expression plant or machinery has not been defined under the CGST Act. It is pertinent to note that clauses (c) and (d) do not altogether exclude every class of immovable property from the applicability of ITC. In the case of clause (c), if the construction is of plant and machinery as defined, the benefit of ITC will accrue. Similarly, under clause (d), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of subsections (1), (1-A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. ( emphasis added ) 37. In view of clause (a) of sub-section (1) of Section 7, a supply of services such as sale, transfer, licence, rental or lease made for consideration is a supply. Whether the activities or transactions covered by sub-section (1) of Section 7 constitute a supply has to be considered in light of Schedule II. Schedule II has a title: Activities or transactions to be treated as supply of goods or supply of services . The activities/transactions incorporated in Schedule II are treated as a supply of service. As far as lands and buildings are concerned, clauses (2) and (5) of Schedule II are relevant, which read thus : 2. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding. 39. Analysis of the provisions of Section 7 read with Schedule II and III shows that: a. Any lease, tenancy, easement or licence to occupy land is a supply of services. Clause 2(a) is not qualified by the purpose of the use. But the sale of a land is not a supply of service; b. Any lease or letting out of buildings for business or commerce, wholly or partly, is a supply of services. Clause 2(b) will not apply if the lease or letting out of a building is for a residential purpose; c. Renting of an immovable property is a supply of service; d. Construction of a complex, building, civil structure or a part thereof, including a complex, building or civil structure intended for sale to a buyer, wholly or partly, is a supply of service. However, the construction of a complex, building or civil structure, referred to above, is excluded from the category of supply of service if the entire consideration for sale is received after issuance of the completion certificate, wherever required or its first occupation, whichever is earlier. Broadly speaking, if a building or a part thereof to which clause 5(b) is applicable is sold before it is ready for occupation, the construction thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned ASG himself accepted that the expression plant and machinery appears at ten different places in Chapters V (Input Tax Credit) and VI (Tax Invoice, Credit and Debit Notes) of the CGST Act. According to him, the expression plant or machinery appears only in clause (d) of Section 17(5). His submission is that the use of the word or in clause (d) is a mistake of the legislature. To counter this, it was submitted that in the Model GST Law, which the GST Council Secretariat circulated in November 2016 to invite suggestions and comments from the public, the expression plant and machinery was used in clauses (c) and (d). However, while enacting the CGST Act, the legislature has consciously chosen to use the expression plant or machinery only in clause (d). The impugned judgment in the main Civil Appeal is more than five years old. The writ petition in which the impugned decision was rendered is a six-year-old writ petition. If it was a drafting mistake, as suggested by learned ASG, the legislature could have stepped in to correct it. However, that was not done. In such circumstances, it must be inferred that the legislature has intentionally used the expression plant or machinery in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard supply of goods or services or both. The expression includes such foundation and structural support fixed to the earth. However, the definition excludes land, buildings or any other civil structure. 46. The expression plant or machinery has a different connotation. It can be either a plant or machinery. Section 17(5)(d) deals with the construction of an immovable property. The very fact that the expression immovable property other than plants or machinery is used shows that there could be a plant that is an immovable property. As the word plant has not been defined under the CGST Act or the rules framed thereunder, its ordinary meaning in commercial terms will have to be attached to it. 47. There are few decisions relied upon on this aspect. The first is Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works Ors. (2010) 5 SCC 122 . The case arose from the demand for duty and penalty under the Central Excise Act, 1944 (Excise Act). The assessee was manufacturing parts and components for road and civil construction machinery and equipment like Asphalt Drum/Hot Mix Plants, etc. One of the questions examined by the Tribunal was whether the plants so manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar sense means that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it . In the present case, Section 10(5) enlarges the definition of the word plant by including in it the words which have already been mentioned before. The very fact that even books have been included shows that the meaning intended to be given to plant is wide. The word includes is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, those words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include. The word include is also susceptible of other constructions which it is unnecessary to go into. ( emphasis added ) Thereafter, in paragraphs 8 and 9, this Court held thus: 8. It cannot be denied that the business of a hotelier is carried on by adapting a building or premises in a suitable way to be used as a residential hotel where visitors come and stay and where there is arrangement for meals and other ameniti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the point. Paragraphs 61 to 63 of the decision are material, which read thus: 61. Further, there are hotels of all kinds and hotel business can be carried on in all kinds of buildings, may be pucca or kuccha constructions. A building intended to be used or in fact used earlier either as a residential accommodation or business purpose can be converted for running hotel business. Section 32 itself contemplates a hotel business being carried on in a residential accommodation including an accommodation which is in the nature of guest house. On occasions hotel buildings may be constructed with a special design and features so as to attract and accommodate a certain class of tourist. Similarly with regard to cinema business, it can be carried on in a specially-designed and constructed building and also in other buildings. Still, however, it would be difficult to draw a distinction and differentiate by holding that a building which is specially designed and constructed for running a hotel or cinema would be covered by a plant and other buildings used for the same purpose would not get depreciation as plant , even though such business is carried on in such premises. In our view, the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on cinema business cannot be held to be a plant because: (1) The scheme of Section 32, as discussed above, clearly envisages separate depreciation for a building, machinery and plant, furniture and fittings etc. The word plant is given inclusive meaning under Section 43(3) which nowhere includes buildings. The Rules prescribing the rates of depreciation specifically provide grant of depreciation on buildings, furniture and fittings, machinery and plant and ships. Machinery and plant include cinematograph films and other items and the building is further given meaning to include roads, bridges, culverts, wells and tubewells. (2) In the case of Taj Mahal Hotel [(1971) 3 SCC 550 : (1971) 82 ITR 44] this Court has observed that business of a hotelier is carried on by adopting building or premises in suitable way. Meaning thereby building for a hotel is not an apparatus or adjunct for running of a hotel. The Court did not proceed to hold that a building in which the hotel was run was itself a plant, otherwise the Court would not have gone into the question whether the sanitary fittings used in bathroom was plant. (3) For a building used for a hotel, specific provision is made grantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant within the meaning of Section 32 of the Income Tax Act, 1961. This Court heavily relied upon the decision of a three-judge Bench of this Court in the case of Karnataka Power Corporation20. In this case, the question was whether a power-generating station building is a plant. In the decision rendered by a Bench of three Hon ble Judges, it was held that the decision in the case of Anand Theatres19 cannot be read broadly. In paragraphs 5 to 8 of the decision, it was held thus: 5. It was the case of the assessee that it was entitled to investment allowance as applicable to a plant in respect of its powergenerating station building. In a note filed before the Commissioner (Appeals) it stated that it had included for the purpose the value of its potential transformer foundation, cable duct system, outdoor yard structures and tail race channel. It explained that the process of generation started from letting in water from the reservoir into the penstocks and ducts which were the water conductor system into the turbines. Once electricity had been produced by generation, it had to be conducted, as it was not possible to store the same, and the process of generation continued until the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: (SCC p. 430, para 67) 67. (7) To differentiate a building for grant of additional depreciation by holding it to be a plant in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable. This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. ( emphasis added ) 51. We may note here that the decision in the case of Anand Theatres 19 is by a Bench of two Hon ble Judges. Thus, the decision of a larger Bench in the case of Karnataka Power Corporation 20 limits the applicability of the decision in the case of Anand Theatres 19 to hotels or cinema theatres. Therefore, the decision in the case of Anand Theatres 19 cannot be applied while considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, as it applies only to works contract services supplied for the construction of immovable property. Clause (d) deals with services received by a taxable person for the construction of an immovable property on his own account. As clauses (c) and (d) operate in substantially different areas, the argument of ASG relying on discrimination cannot be accepted. 55. Under the CGST Act, as observed earlier, renting or leasing immovable property is deemed to be a supply of service, and it can be taxed as output supply. Therefore, if the building in which the premises are situated qualifies for the definition of plant, ITC can be allowed on goods and services used in setting up the immovable property, which is a plant. 56. In the main appeal, which is the subject matter of this group, the High Court has not decided whether the mall in question will satisfy the functionality test of being a plant. The reason is that the High Court has done the exercise of reading down the provision. Each mall is different. Therefore, in each case, fact-finding enquiry is contemplated. Thus, in the facts of the case, we will have to send the case back to the High Court to decide whether, on facts, the mall i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tax must achieve are matters of legislative policy. M. Hidayatullah, C.J., speaking for the Constitution Bench in Commr. of Urban Land Tax v. Buckingham Carnatic Co. Ltd. [Commr. of Urban Land Tax v. Buckingham Carnatic Co. Ltd., (1969) 2 SCC 55] held : (SCC p. 67, para 10) 10. The objects to be taxed, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the legislature and not to the courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. 105.2. The same principle has been reiterated in Federation of Hotel Restaurant Assn. of India v. Union of India [Federation of Hotel Restaurant Assn. of India v. Union of India, (1989) 3 SCC 634], where M.N. Venkatachaliah, J. (as the learned Chief Justice then was), speaking fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1973) 1 SCC 216 : 1973 SCC (Tax) 307] , K.S. Hegde, J., speaking for a four-Judge Bench observed : (SCC p. 223, para 20) 20. It must be noticed that generally speaking the primary purpose of the levy of all taxes is to raise funds for public good. Which person should be taxed, what transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations. In a democratic set up it is for the legislature to decide what economic or social policy it should pursue or what administrative considerations it should bear in mind. The classification between the processed or split pulses and unprocessed or unsplit pulses is a reasonable classification. It is based on the use to which those goods can be put. Hence, in our opinion, the impugned classification is not violative of Article 14. 105.4. More recently in Union of India v. Nitdip Textile Processors (P) Ltd. [Union of India v. Nitdip Textile Processors (P) Ltd., (2012) 1 SCC 226] , a two- Judge Bench observed : (SCC p. 255, para 67) 67. It has been laid down in a large number of decisions of this Court that a taxation statute, for the reasons of functional expediency and even otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a two-Judge Bench, speaking through K.N. Saikia, J. revisited the precedents of this Court governing the principles of classification in tax legislation and held : (SCC pp. 168-69, para 24) 24. The history of taxation is one of evolution as is the case in all human affairs. Its progress is one of constant growth and development in keeping with the advancing economic and social conditions; and the fiscal intelligence of the State has been advancing concomitantly, subjecting by new means and methods hitherto untaxed property, income, service and provisions to taxation. With the change of scientific, commercial and economic conditions and ways of life new species of property, both tangible and intangible gaining enormous values have come into existence and new means of reaching and subjecting the same to contribute towards public finance are being developed, perfected and put into practical operation by the legislatures and courts of this country, of course within constitutional limitations. 109. The Court held that the principle of equality does not preclude the classification of property, trade, profession and events for taxation subjecting one kind to one rate of taxation and ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive. Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection. That is precisely the reason why courts are averse to entering the area of policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3). ( emphasis added ) Paragraph 142 of the decision reads thus: 142. The above judicial precedents indicate that in the field of taxation, this Court has only intervened to read down or interpret a formula if the formula leads to absurd results or is unworkable. In the present case however, the formula is not ambiguous in nature or unworkable, nor is it opposed to the intent of the legislature in granting limited refund on accumulation of unutilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to the legislature. 58. Essentially, the challenge to constitutional validity is that, in the present case, the provisions do not meet the test of reasonable classification, which is a part of Article 14 of the Constitution of India. To satisfy the test, there must be an intelligible differentia forming the basis of the classification, and the differentia should have a rational nexus with the object of legislation. The Union of India rightly contends that immovable property and immovable goods for the purpose of GST constitute a class by themselves. Clauses (c) and (d) of Section 17(5) apply only to this class of cases. The right of ITC is conferred only by the Statute; therefore, unless there is a statutory provision, ITC cannot be enforced. It is a creation of a statute, and thus, no one can claim ITC as a matter of right unless it is expressly provided in the statute. It cannot be disputed that the legislature can always carve out exceptions to the entitlement of ITC under Section 16 of the CGST Act. 59. Therefore, the cases covered by clauses (c) and (d) of Section 17(5) are entirely distinct from the other cases. This appears to be done to ensure the object of not encro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for the month of March, 2019 in respect of any invoice or debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. The words thirtieth day of November were substituted with effect from 1st October 2022 for the words due date of furnishing of the return under Section 39 for the month of September . We fail to understand how sub-section (4) of Section 16 becomes discriminatory when the legislature says that a registered person shall not be entitled to take ITC in respect of any invoice or debit note for the supply of goods or services or both after the thirtieth day of November following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. It is not shown how the provision is arbitrary and discriminatory. The fact that the provisions could have been drafted in a better manner or more articulately is not sufficient to attract arbitrariness. 64. As we are upho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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