TMI Blog2022 (1) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, put up administration units, other utilities required for manufacturing of the Industrial and Medical gases with the required foundations and structural supports, i.e., have undertaken 'original' activities of 'construction' - even if only Installation of various components were' made in setting up the manufacturing plant, such installation, commissioning are original works of construction. From the various photographs furnished by the appellant, it is evident that the appellant has set up the manufacturing plant with all the required utilities and therefore, there is no doubt that the appellant has taken lease of the land and have undertaken 'Construction' of the manufacturing Plant. Whether the services received by the appellant from IPL i.e., withdrawing the leasehold rights of the land held in favour of the appellant, thereby facilitating the appellant to enter into lease with SICOT for the remaining period of lease can be construed as services received 'for construction'? - HELD THAT:- The appellants' interpretation is that for construction' is to be read as 'for the purpose of construction' and only those services w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturing Plant, ASP. Also, ASP is an immovable property and not mere 'Plant' or 'machinery' but can be termed as 'Plant and Machinery', the Explanation of which specifically excludes land. Thus, it is clear that intention of law maker is to restrict ITC on services related to land, received for construction - the services received from IPL, the cost of which is capitalised along with ASP, is a service received 'for construction' of an immovable property, and therefore the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017. - TN/AAAR/22/2021(AR) - - - Dated:- 2-12-2021 - THIRU. M.V.S. CHOUDARY, AND THIRU. M.A. SIDDIQUE, MEMBER Represented by : Rohit Jain, Advocate (Passed by Tamilnadu State Appellate Authority for Advance Ruling under Section 101(1) of the Tamilnadu Goods and Services Tax Act, 2017) Preamble 1. In terms of Section 102 of the Central Goods Services Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5569D1ZR. The appeal is filed against the O rder No.25/AAR/2021 dated 30.07.2021 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant. 2.1 The Appellant has stated that they are engaged in the business of manufacture and supply of industrial Medical gases, including oxygen (both Industrial Medical Grade), nitrogen, argon etc. (in both liquid and gaseous form); State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry; INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State of the art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases; INOX and IPL entered into a Memorandum of Understanding for transfer of leasehold rights(MOU) dated 20.11.2020; SIPCOT vide Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction' necessitates that there must be a direct nexus between the goods or service and the activity of construction. In other words, use of the word 'for' before 'construction' emphasizes that the provision must be read in a restricted manner to cover only situations where the goods or services are directly used in the construction of the immovable property. They have relied on the ruling issued by the Hon'ble Supreme Court in,- Sale's Tax Commissioner v. Modi Sugar Mills, 1960 (10) TMI 65 Supreme Court.; Indian Chamber of Commerce and Others v. Commissioner of Income Tax, 1975 (9) TMI 4 - Supreme Court 4.3 The appellant has stated that the entire premise for denial of credit under the Impugned Order is that the services availed by them from IPL is in relation to acquiring the lease of the land. 'Land' being excluded from the definition of 'plant and machinery', services availed and utilized for acquiring such land on lease is also restricted. However, the Impugned Order has failed to appreciate the fact that in order to fall under restriction of Section 17(5)(d), the primary condition to be satisfied is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distillation, refrigeration etc. given this, ASP is indispensable for manufacturing of gases and it has a direct nexus with the outward supply of gases. Further, the ASP once fully set up, will be capitalized as 'plant and machinery' in the Appellant's books of accounts. 4.5 They have submitted that the ASP does not result in construction of any land, building, civil structure and it is also not a telecommunication tower or pipeline, hence it does not fall under any of the exclusion categories stipulated under the definition of plant and machinery'. The LA in the Impugned Order have presumed that the service received by them is a service for construction of an immovable property namely 'land' and since the explanation to Section 17 of CGST Act excludes 'land' from the definition of plant and machinery' the AAR have denied the benefit of ITC. The said finding of the LA is a complete mis-appreciation of the factual matrix involved in the present case. It is required to be appreciated that the exclusion of land from the definition of 'plant and machinery' will apply only in a situation where services are received for any construction acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the definition of 'Plant Machinery' and stated that the 'Foundation' is the only civil work. They stated that the service supplied by IPL is giving away the leasehold rights on the land and there is no construction of land as held by AAR. Therefore, the tax paid is eligible as credit in as much as there is no construction of immovable properly. Discussion: 6. We have carefully considered the submissions of the appellant, the ruling of the Lower Authority and the relevant statutory provisions. The factum of the case is that State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry.; INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State-of-the-art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases.; INOX and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther a chattel annexed would amount to an immovable property. 8. The issue before us for decision is whether the impugned credit is restricted under Section 17(b)(d) of the GST Act i.e., whether the said service is received by the appellant,- for construction; and if so whether it is for construction,- of an immovable property or a Plant and Machinery the ASP, claimed to be a movable property if the entire project is a 'Plant and Machinery', whether the said service being service received for acquiring the leasehold rights of the land is excluded under the explanation of 'Plant and Machinery', which excludes 'Land'. 9.1 Section 17(5) (d) and the relevant explanations under the GST Act and definition of 'Immovable Property' under General Clauses Act is as follows: (5) Notwithstanding anything contained in sub section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;Construction' mentioned in Section 17(5)(c) and (d), is an inclusive definition and includes re-construction, renovation, additions or alterations or repairs to the extent of capitalisation to the immovable property. This inclusive explanation states specific activities covered under the term 'construction' apart from the 'Original' activity of 'Construction', the cost of which is capitalised to the said immovable property. The appellant has Erected, Installed and commissioned the various components of the Air Separation Unit interconnected with Pipes and other necessary components, put up administration units, other utilities required for manufacturing of the Industrial and Medical gases with the required foundations and structural supports, i.e., have undertaken 'original' activities of 'construction'. In as much as 'Construction' is an inclusive explanation in the Act, it definitely covers the Original works of Erection, Installation, commissioning of the manufacturing Plant, to the extent such expenditure is capitalised in their book of accounts. Therefore, even if only Installation of various components were' made in set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said exemption must be given its natural meaning to include materials that are required in order to manufacture the resultant products. On that view, the exemption cannot be confined to materials which are actually used in the manufacture of the resultant product but would also include materials which though not used in the manufacture of the resultant product are required in order to manufacture the resultant product. Crystar beams imported by the appellant are materials, which though not used in the manufacture of H.T. Porcelain Insulators required for Lightening Arrestors, are materials which are required for producing the insulators in the kilns . (emphasis supplied) Thus, the word 'for' do not confine/limit only those goods or services which have a very direct nexus to 'construction'. This view on the ambit of the' word 'for' is endorsed by the Parliament as well in as much as it adopted this contrasting treatment in the context of Notification No. 5/2006 C.E. (N.T.), dated 14.3.2006 issued to effectuate refund under Rule 5 of CENVAT Credit Rules. This Notification originally employed the expression used in and Parliament enacted Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trative offices, other utilities required for the manufacture and outward supply of the Industrial gases constructed. It is without doubt that the entire plant is a manufacturing facility commissioned for manufacturing Industrial gases. In this juncture, the moot point to be decided is whether the ASP is a 'Plant and Machinery' and that it is 'movable', therefore not an 'immovable property'. We find that in a similar situation, in the case of Duncans Industries Ltd. v. State of LLP. Ors. on 3 December, 1999 Hon'ble Supreme Court had to decide whether the 'plant and machinery' in the fertilizer is 'goods' or 'immovable property. The Apex Court held that the same is immovable property and observed as under :- The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the Court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credit of goods or services received for construction other than for construction of 'Plant' or 'machinery'. The intention stands crystalised by the explanation provided wherein the goods/services used for foundation or structural support is included but goods/services received for 'Land, civil structures' is excluded. In the case at hand the impugned services are received by the appellant 'for construction' of the manufacturing plant which is an immovable property and even if the said plant is considerable as 'Plant and Machinery', the restriction on the services received towards the leasehold of the 'Land' is restricted by Section 17(5)(d) of the Act read with the Explanation for 'Construction' and 'Plant and Machinery'. 10. To sum up, we find that ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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