TMI Blog2019 (9) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... comprising of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, Erection of Building Steel Structures, sheds, Block cabin, Railway allied works, Signaling telecommunication works, Construction of Railway Staff quarters, Station building etc.. The magnitude of project 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, the project of construction of Private Railway siding fulfills the conditions of it being an immovable property. Works contract, covers in its ambit only certain works performed on immovable property, we in affirmation with the findings of the AAR and more so with no visible intention to dismantle the said project of construction of private Railway siding, these being intended to be used for a fairly long period of time and on the basis of the scope of work itself as forthcoming from the documents supra issued by the Appellant M/s. NMDC, we come to the considered con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork, supply, Foundation work, Fabrication, Erection of Building Steel Structures, sheds, Block cabin, Railway allied works, Signaling telecommunication works, Construction of Railway Staff quarters, Station building etc. will render such nexus tenuous. There is no merit in the appeal filed by the Appellant M/s. NMDC against the Advance Ruling Order passed by the AAR, Chhattisgarh and accordingly the said order is upheld. - STC/AAAR/02/2019/76-Raipur, - - - Dated:- 3-9-2019 - Smt. Reena Babasaheb Kangale, Member (SGST) and Shri Vinod Kumar Saxena, Member (CGST) ORDER Proceedings : The appellant M/s. P.K. Mahapatra, Assistant General Manager (Finance) NMDC Limited, ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh GSTIN 22AAACN7325A1Z5 has filed this appeal u/s. 100 of the Chhattisgarh Goods Services Tax Act, 2017 requesting advance ruling in respect of the following questions :- (1) Whether input tax credit can be availed for civil and railway allied works in connection with the laying of private Railway Siding? (2) Whether input tax credit can be availed on signaling telecommunication syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant for NMDC Ltd. (IV) Each of the above packages is divided into 3 namely, civil works, supplies and erection with separate values identified for supplies made within each part. M/s. NMDC has applied for advance ruling on the following issues : (1) Whether Input Tax Credit can be availed for civil and railway allied works in connection with the laying of private railway siding? (2) Whether Input Tax Credit can be availed on signaling telecommunication system, mechanical and structural works in relation to Railway Siding? (3) Whether Input Tax Credit can be availed on execution of P-way, civil, overhead electrification, general electrical and signaling telecommunication works for the proposed block station yard in relation to private railway siding? On all of the above question, the AAR has ruled that the Appellant is not entitled for Input Tax Credit on the inward supplies pertaining to the activities brought about by the Appellant in their application relating to laying of the said private railway siding located at a site outside the premises of the Appellant, in view of the exclusions stipulated under Section 17( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods or services or both used or intended in the course or furtherance of one s business? (c) That, the impugned order concludes that railway siding works are nothing but immovable property and cannot be considered as goods in any way for the simple reason that these are attached to earth. The impugned order also places on the definitions of the term immovable property under General Clauses Act, 1897 and Section 3 of the Transfer of Property Act, 1882 to explain the term immovable property . Certain case laws also were relied upon by the Authority in support of its conclusion. (d) That, on bare perusal of Section 17(5)(c) and (d) of the CGST Act, 2017, it is understandable that the test of movability/immovability is immaterial to determine the eligibility of credit once the items in question qualify as plant and machinery . Once the items in question qualify as plant and machinery , they stand excluded from the meaning of immovable property . As a matter of fact, under the CGST Act, 2017, even if the items in question are attached to earth, they will qualify as plant and machinery . The relevant extracts of the Section 17(5)(c) and Section 17(5)(d) ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is settled law that clauses in the agreement should be read as a whole and not in isolation to understand the tenor and intention of the contracting parties. The Appellant had explained in their application about the civil works on which the Appellant does not intend to claim credit. The Appellant further made submissions that it is only Package III rail network that is outside the factory which has been duly recorded in Para 4 of the Order. The Appellant draws attention the scope of work given package-wise in their submissions dated 13-3-2019. Denial of credit only on the ground the contract involves civil work is unsustainable. Basis the above table, it is clear that the contract is for railway siding works and apart from the civil works involved in the contract, the Appellant is eligible to take credit of taxes paid by it. (h) That, the Hon ble Supreme Court in the case of Jayaswal Neco Ltd. [2015 (319) E.L.T. 247 (S.C.)] has held that Railway track was handling system for raw material and processed material. Their use inside plant formed process of manufacturing. It was integral part of process as without activity for which railway tracks are used, manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has rightfully claimed for Modvat credit in respect of this item which credit is wrongly reversed by the authorities below. To that extent, order of the Commissioner as well CEGAT is set aside and the present appeal is allowed in the aforesaid terms. (k) That, the Appellant would also like to quote decision of Hon ble High Court of Rajasthan in case of Aditya Cement [2008 (221) E.L.T. 362 (Raj.)] wherein in Para 20 it was held that : So far as the claim to Railway Track material is concerned, it is common ground that the same has been used for transporting of coal and product of cement. Apparently, though the coal is not end product of the appellant but used as essential adjunct of plant for feeding it with fuel, the essential element of production process for manufacture of cement. Without supply of fuel the plant does not function. Therefore, the Railway Track used for one of the essential activity of running the plant itself cannot be kept out of consideration for availing Modvat credit though which is not being used directly for the purpose of manufacture of cement. But if as an integral part of manufacturing cement bringing of coal directly to the mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t plea regarding the use of MBC sleepers within the factory. It is used for transportation of raw material and finished product. The use as explained by the Learned Counsel makes it clear that these are essential and integrally connected to the process of manufacture. In addition, the judgments relied by the appellant and stated supra have held that credit is admissible on railway tracks/sleepers used within the factory for transportation of raw materials and finished goods. Following the ratio laid in these judgments, I hold that the appellant has established a case on merits and that credit is admissible on MBC sleepers. (n) In the case of Orient Cement Ltd. v. CCE, Hyderabad-I - 2017 (51) S.T.R. 459 (Tri. - Hyd.), Railway siding laid outside the factory premises were held to be part and parcel of facility for transportation provided inside the factory premises and the assessee was held eligible for Cenvat credit. The Appellant wishes to quote Para 7 and 8 of the said decision for reference : 7. From the discussions and observations made in the above judgments as well as the facts presented before us, we are of the view that the credit availed on service tax paid on ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that this was covered by the heading Machinery and plant under Rule 8. (s) Based on the above citations, it can be concluded that even as per Companies Act and Income-tax Act, Railway Siding is construed as Plant and Machinery and therefore credit on the same is eligible. (t) Without any reference to the decision of the Delhi High Court in Vodafone Mobile Services Limited v. Commissioner of Service Tax, Delhi, CEAC 12/2016, dated 31-10-2018 [2019 (27) G.S.T.L. 481 (Del.)], the reliance on the decision of the Bombay High Court in the Bharti Airtel (case) [2014 (35) S.T.R. 865 (Bom.)], is completely erroneous and misplaced. (u) In the Vodafone Mobile Services Limited case, the Hon ble Delhi High Court had expressly recorded its dissent with the decision of the Bombay High Court in the Bharti Airtel case and held the credit of taxes paid of telecom towers is eligible. According to the Delhi High Court, the Bombay High Court s decision in the Bharti Airtel case goes against the law laid down by the Apex Court in Commissioner of Central Excise v. Solid and Correct Engineering Works, 2010 (5) SCC 122 = 2010 (252) E.L.T. 481 (S.C.). The relevant extracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout substantial damage to its components, then the items cannot be considered as movable and will, therefore, not be goods. (aa) That, the Appellant, reiterates that the test of immovability/movability is irrelevant under the GST law and that under the GST law, the explanation in Section 17 of the CGST Act, 2017 clearly allows items to be assembled to earth by foundation/structural support. (ab) That, under Section 17 of the CGST Act, 2017, the expression plant and machinery is defined as apparatus, equipment and machinery fixed to earth by foundation or structural support used for making outward supply of goods or services or both and includes such foundation and structural support. (ac) The Appellant submits that they are entitled to input credit for the following reasons : (a) Large part of the railway are intended to bring the raw material, unload them in the material handling plant area, move the molten metal in the Torpedo Laddle to the Pig iron plant, load the finished goods for further transportation and they are integrally connected with the operations. (b) The expression plant and machinery does not merely include only mechanical ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IOL-1018-HC-AHM-VAT] observed as below :- 26. The word plant , though an ordinary English word, is not altogether an easy word to construe. It may have a more or less extensive meaning according to its context. It has come up for interpretation before various courts on numerous occasions in the context of different statutes and the catena of judicial decisions shows that it is a word of wide and varied import susceptible of diverse meanings depending upon its setting in the scheme of the statute. Almost all cases bearing upon the interpretation of the word plant decided in England and in this country were cited before us and the following enumeration would show as to what an amazing variety of articles, objects or things have been held to be plant or not plant : PLANT (i) Horse, Yarmouth v. France; (ii) knives and lasts used in manufacture of shoes, Hinton v. Maden Ireland Ltd.; (iii) aircraft engine which was being dismantled, Watts v. Enfield Rolling Mills (Aluminium) Ltd.; (iv) moveable office partitions, Jarrold v. John Good Sons Ltd.; (v) concrete dry dock, Inland Revenue Commissioner v. Barclay, Curle Co. Ltd.; (vi) electrical fans and other office applianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the railway siding in question having a particular function or intended for a specific use of transport of materials can get rightly covered under the definition of plant and machinery . (aj) That, the railway siding in question does not definitely qualify as land/building. The exclusion is for land, building or any other civil structure. Applying the principle of ejusdem generis, it needs to be understood that the phrase any other civil structures has to be read in conjunction with land and building. Any civil structure in the nature of land and building will ordinarily be a place from where the business is being carried on and not a structure used in the process of manufacture or forming part of factory premise for making inward and outward supply of goods/services. Therefore, it can be safely inferred that facilities in question used will not be a civil structure and falls within the definition of plant and machinery. (ak) That, it is submitted that the Hon ble AAR never examined and confined their analysis to Sec. 17(5) of the Act and never proceeded to examine the definition of plant and machinery given in the Explanation. (al) That, the explanation proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes paid on railway siding should be construed for use in the course or furtherance of business and used for making outward supply. It is to be kept in mind that the words used in the explanation are used for making outward supply and not directly used in making outward supply . Any input/input service, even if remotely essential, should be considered as eligible for credit. Also, unlike under the pre-GST law, inputs/input services were to be used in or in relation to the manufacture or in the factory by the manufacturer , Section 16 of the CGST Act, 2017 allows credit of taxes paid on inputs/input services used or intended to be used in the course or furtherance of business. The said expression is of the widest possible import and is in keeping with the spirit of the GST law to allow seamless flow of credit. (ar) The Appellant relied upon the following case laws, although under the erstwhile indirect tax regime to support their submissions :- In CCE v. Solaris Chemtech Ltd., 2007 (214) E.L.T. 481 (S.C.), examining the phrase in relation to manufacture , the Supreme Court observed that the said phrase has been used to widen the scope and conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019. They furnished a written submission dated 3-8-2019 along with a paper book and reiterated the same, which has been taken on record. 5. Legal position, analysis and discussion :- 5.1 At the very outset, we would like to make it clear that the provisions for implementing the CGST Act and Chhattisgarh GST Act, 2017 (hereinafter referred to as the CGST Act and 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 reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the instant appeal filed by the Appellant along with the provisions applicable in the present case. The present appeal has been filed under Section 100(1) of the Central Goods and Services Tax Act, 2017 and the CGGST Act, 2017 by the Appellant M/s. NMDC Ltd, having their registered office at KhanijBhavan, 10-3-311/A, Castle Hills, Masab Tank, Hyderabad, Telengana and works/administrative office at ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh and GSTIN 22AAACN7325A3Z3, against the Advance R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Appellant has filed the instant appeal under Section 100(1) of the Central Goods and Services Tax Act, 2017 and the CGGST Act, 2017, seeking an order under Section 101 ibid., as regards Appellant s (NMDC s) eligibility to take Input Tax Credit on GST paid towards : (i) Civil and railway allied works in connection with the laying of private railway siding. (ii) Signaling telecommunication system, mechanical and structural works in relation to railway siding. (iii) Execution of P-way, civil, overhead electrification, general electrical and signaling telecommunication works for the proposed block station yard in relation to private railway siding. 5.5 M/s. NMDC s project of laying railway siding is being implemented by M/s. IRCON International Ltd., to be used for transportation of input materials inside the factory and to carry finished goods outside the factory. The issue being raised is the eligibility or otherwise of ITC on items/services used for laying such railway siding under the provisions of CGST Act, 2017. The scope of work constituting three packages viz. Package-I, Package-II and Package-IV respectively consists of :- (i) Civil and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, Supply of BG Mono-block Pre-Stressed Concrete (PSC) Sleeper for straight, curve tracks including special sleepers, Welding of rails, Fixing of check rails on level crossings, curves and other location as per the drawings as per direction of Engineer-in-charge, Fabricating, supplying fixing fouling blocks, gradient post, curve post, Engineer stop whistle board, level crossing warning board etc., laying and linking all permanent way elements of work including rails at site including all lead and lift and safe custody and handling at site etc. 5.7 The relevant Tender Enquiry No. TS No. AA/904/14-15/Pkg-2/Rev-II, dated 2nd August, 2014 in respect of aforesaid Package-II, issued by NMDC, the Appellant specifies the Scope of Work as under :- Civil works : Construction of Service buildings for Solid State Interlocking cabin, Block cabin, Crew-guard rest, Commercial officer, Rolling hut, Weighbridges, Loco shed, Carriage and wagon shed, C W office at HSM area and at sick lines etc., Construction of Foot over bridge in the in-plant yard, Construction of Road over bridge in the in-plant yard. Railway allied works : Signaling and telecommunication works in the in-plant yard a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be eligible as railway siding satisfies the definition of plant machinery. 5.10 In the instant Appeal, the Appellant seeks addressal on the primary issue as to whether the AAR was right by holding that the items in question merit treatment as a civil structure/immovable property and not as plant and machinery and whether the order of AAR dated 24-4-2019 failed to appreciate the scope of Section 16 of CGST Act, 2017. 5.11 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 intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. As per Section 2(59) Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; As per Section 2(19) capital goods means goods, the value of which is capitalised in the books of account of the person claiming the input tax credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. 5.16 The listed works are works contract service on a immovable property involving transfer of property in goods : 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 does not fall into the scope of works contract. However, works contract of construction activity is eligible for Input Tax Credit if done in respect of plant and machinery. Plant and machinery has been specifically defined as any equipment, apparatus attached to earth by foundation or structural support used for supply of goods or services. Plant and machinery specifically excludes land, building any other civil structures, telecom towers, pipelines etc. As per the definition of works contract, the works contract inter alia include construction of any immovable property wherein transfer of property in goods (whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges, construction of railway crossing gates, construction of loading platforms, installation and commissioning of In-motion weighbridges, installation and commissioning of static weighbridges, construction of drains along the track at the required locations, installation of barbed wire fencing along the forest boundary etc. Similarly railway allied works comprises of rails, supply of BG Mono-block Pre-stressed (PSC) Sleeper, supply of fastenings, fish plates, fish bolts, welding of rails, supply of all materials and fabrication dead ends, supply of all materials and construction of rail road level crossings, fixing of check rails on level crossings, curves and other locations etc. Similarly it is seen from the documents furnished by the Appellant viz. Tender document dated 2-8-2014 that, Package-II is for execution of civil, general electrical, signaling telecommunication and mechanical equipment for loco shed works in connection with the construction of Private Railway Siding for the proposed 3.0 MTPA Integrated steel plant which consists of civil and railway allied works which includes construction of service buildings for solid state interlocking cabin, bloc cabin, foot o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral Clauses Act, 1897 to include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth. As per Section 3(36) of General Clauses Act, 1897, movable property shall mean property of every description, except immovable property. Section 3 of the Transfer of Property Act, 1882 stipulates that unless there is something repugnant in the subject or context immovable property does not include standing timber, growing crops or grass. The Section however, defines the term attached to the earth to mean (a) rooted in the earth, as in the case of trees and shrubs. (b) embedded to earth, as in the case of walls or buildings and (c) attached to what is so embedded for permanent beneficial 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. 7.1 Thus from above discussion it gets established that the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of the CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as goods within the meaning of the Excise Act and exigible to excise duty. 8.1 Hon ble Supreme Court in the aforesaid case took note of the fact regarding the volume and weight of these machines are such that there is nothing like assembling them at ground level and then lifting them to a height of 25 feet for taking to the case house floor and the to then platform over which it is mounted and erected. It observed that the machines cannot be lifted in an assembled condition and after taking note of these facts, it concluded that the same is immovable property. The Court further held that it cannot be disputed that such Drilling Machine and Mudguns are not equipment which are usually shifted one place to another nor it is pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as could be found also show that the purpose for which these machines were embedded was to use the plant as a factory for the manufacture of fertiliser at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted. 8.3 In view of the discussions supra and as works contract, covers in its ambit only certain works performed on immovable property, we in affirmation with the findings of the AAR and more so with no visible intention to dismantle the said project of construction of private Railway siding, these being intended to be used for a fairly long period of time and on the basis of the scope of work itself as forthcoming from the documents supra issued by the Appellant M/s. NMDC, we come to the considered conclusion that the said project of private Railway siding, consists of civil structures with foundations and are immovable in nature. 9. Now coming to the other issue raised by the Appellant, viz. whether credit of the taxes paid on various items will be eligible if the said laying of private railway siding satisfies the definition of plant and machinery and that the rail network, signaling system and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a include construction 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. On the other hand Construction has been defined under explanation to Section 17(5)(c) and (d) as reconstruction, repairs, renovation, additions etc. to an immovable property the cost of such work is capitalized. Thus, Construction activity will not qualify as works contract if there is no transfer of property in goods involved i.e. the contractor is supplying service only without any supply of goods. Works contract may or may not be a construction. 9.5 On discussion of the above definition, it can be seen that Plant and Machinery means (i) apparatus, equipment, and machinery, which is (ii) fixed to earth by foundation or structural support, that are (iii) used for making outward supply of goods or services or both and includes such foundation and structural supports (iv) but excludes - (a) land, building or any other civil structures; (b) telecommunication towers; and (c) pipelines laid outside the factory premises. Accordingly, if a structure resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified therein that ITC will not be available as railway siding is not plant and machinery as defined in Section 17 of CGST Act, 2017. This FAQ has also been referred to by the AAR in the instant issue. 10.1 We also agree with the findings by the AAR 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 Appellant. These railway siding towers, allied works of signaling, telecommunication located outside the premises of M/s. NMDC by their very nature appears to be nothing but independent civil structures, having no relationship whatsoever with outward supply . 10.2 The Appellant in their defense have cited reference to the case law of Jayaswal Neco Ltd. v. CCE, Raipur, 2015 (319) E.L.T. 247 (S.C.), Aditya Cement [2008 (221) E.L.T. 362 (Raj.)], CCE, Raipur v. Vimla Infrastructure Private Limited - 2018-TIOL-556-HC-Chhattisgarh-ST = 2018 (13) G.S.T.L. 57 (Chhattisgarh), Ultratech Cement Ltd. v. Commissioner of Central Tax, Bangalor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for providing the output service , viz. Telecommunication service, whereas in the instant case the impugned items involved here required for the said project of laying of private railway siding on which ITC is being claimed lack having the necessary nexus with the outward supply . In the cited Vodafone case, Capital goods are the items under specified Tariff headings or parts, components, spares or accessories thereof and these are Base Transmission System (BTS), which enables the telecom company to transmit mobile signals for rendering telecom services. Appellant have also given reference to other case laws as well, all of which in view of the above stated reasons are distinct and distinguishable from the issue in hand. As already discussed it is of utmost importance for availing credit, that the nexus test gets established. Thus, the cited case laws do not help Appellant s cause in any way. 10.5 It has also been the Appellant s contention that in Schedule XIV to the Companies Act, 1956, the rates of depreciation has been provided for Railway Siding , categorized under the head plant machinery . This notion of the Appellant is misplaced inasmuch as in the Companies Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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