9911796707
TMI Blog2025 (1) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... Chemicals Private Limited, (hereinafter referred to as 'appellant') against the Advance Ruling No. GUJ/GAAR/R/53/2021 dated 18.10.2021. 3. Briefly, the facts are enumerated below for ease of reference: * the appellant is a joint venture between GACL & NALCO; * the appellant during the course of proceedings before the GAAR [Gujarat Authority for Advance Ruling] stated that they intend to set up a caustic soda plant and captive power plant. * GIDC had leased a plot of land to GACL; * GACL requested for sub-division of the said plot; it surrendered 391000 sq mtrs to appellant/GNAL on long term lease for the above green field project; * that the deed of rectification was signed on 8.1.2018; * that the consideration was Rs. 72.79 crores of which the GST amount was Rs. 13.10 crores. 4. In view of the foregoing facts, the appellant had sought Advance Ruling on the following questions, viz: * "Whether GNAL is entitled to claim ITC of the GST paid on the services provided by GACL in the form of agreeing to surrender/relinquish its right on leasehold property in favour of GNAL?" 5. Consequent to hearing the applicant, the Gujarat Authority for Advance Ruling [GAAR], recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be used in the course of furtherance of business & not for the purpose of construction of immovable property; * that it is a trite law that predominant test is to be applied; that as per the chartered engineer's certificate, 99.85% land would be utilized for the purpose of constructing plant and machinery; * that the plants once fully constructed, will be capitalized as plant and machinery; * that they would like rely on the case of 'Bajaj Tempo Ltd 1992 (4) TMI 4' wherein it was held that incentive for promoting economic growth & development should be liberally construed; * that in the absence of definition of land under the GST Act, it should be strictly interpreted; * that the services received by the appellant cannot be equated as land & hence the services received will not fall in the exclusion of definition of plant and machinery. 8. Personal hearing in the matter was held on 15.10.2024, wherein Shri NB Tripathi, CFO, Shri Dhruvit Shah, Jt. Manager, Shri Anmol Rathi, Manager and Shri Hemant Desai, Advocate appeared on behalf of the appellant. They submitted an amendment in the grounds of appeal and statement of facts along with the below mentioned documents vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insertion of the following grounds viz; * that the explanation incorporated in the section is an integral part of the statute & has no independent existence; that both are related to the supply of goods & nothing about the supply of services; * that in terms of section 16(1), ibid, GST paid on input supplies during the pre-operative period is available even though appellant is not providing taxable out put supply; * that the leasehold right consideration paid to acquire the rights to the land can never be said to be used for construction of immovable property to be blocked under section 17 (5) (d), ibid; * that leasehold right is service; that they will not capitalize nor amortize the GST input in their book & hence, section 16 (3), ibid is not applicable; * that the plant and building will be constructed on a part of lease holding premises & the unconstructed area will be used for auxiliary services; that if leasehold right is partly used for construction of an immovable property & then also GST on the leasehold right in respect of the area on which no immovable property is constructed would be eligible for ITC; * that in terms of the ratio of Safari Retreat P Ltd, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion towers; and (iii) pipelines laid outside the factory premises. 12. The controversy in this appeal hinges to the aforementioned sub-sections. However, the Hon'ble Supreme Court, in a recent judgement in the case of M/s. Safari Retreats P Ltd, reported at [2024 INSC 756], while examining the above sub-sections has held as follows: 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, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" Thus, in the case of works contract services supplied for the construction of immovable property, the benefit of ITC is not available. However, there are exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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), if the construction is of a "plant or machinery", ITC will be available. [emphasis supplied] 12.1 We find that the Hon'ble Supreme Court, while analyzing section 17 (5) (c), ibid, has concluded that in the case of works contract, benefit of ITC is not available in respect of services supplied for the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is a plant is a question of fact. This Court held that if it is found on facts 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. The word 'plant' used in a bracketed portion of Section 17 (5) (d) cannot be given the restricted meaning provided in the definition of "plant and machinery", which excludes land, buildings or any other civil structures. Therefore, in a given case, a building can also be treated as a plant, which is excluded from the purview of the exception carved out by Section 17(5)(d) as it will be covered by the expression "plant or machinery". We have discussed the provisions of the CGST Act earlier. To give a plain interpretation to clause (d) of Section 17 (5), the word "plant" will have to be interpreted by taking recourse to the functionality test. 53. One of the submissions of the learned ASG is that as the Union legislature cannot levy tax on land and buildings, the chain is broken once a building comes into existence by using goods and services. As discussed earlier, Schedule II of the CGST Act recognises the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which business is carried out. On examining the applicant's case in light of the above, we find that the ITC of the leasehold land acquired from GACL on which construction is carried out by the appellant on his own account to set up a caustic soda plant, is hit by section 17 (5) (d), ibid and therefore ITC is not eligible on this count. 16. Now on examining the matter as to whether it would fall within the other exception of 17 (5) (d), ibid, ie construction of an immovable property consisting of "plant or machinery", we find that the Hon'ble Court has laid down a functionality test, holding that if a building qualifies to be a plant, ITC can be availed. However, even on this count, if the construction of a building by the recipient of service is for his own use, the chain will break, and therefore, ITC would not be available. We have already held that in the present dispute, the appellant has not been in a position to prove that it is not on his own account. Going by the rationale of the judgement, supra, we hold that on this ground also, the appellant would not be eligible for ITC. 17. Now, as far as his averments regarding, payment of consideration to GACL for agreeing to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
