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2018 (10) TMI 745

l Works’ and ‘Electrical Works should be admissible as such costs pertain to construction of plant and machinery. - Whether on facts and circumstances of the case, the input tax credit of tax paid on costs proposed to be incurred in relation to Mechanical Works’ and ‘Electrical Works’ under the Extension Project can be treated as ‘admissible under the Central Goods and Services Tax Act, 2017? - Held that:- Most of the services were held to be admissible. The credit on following services denied: Structural work, external finishing work, internal finishing work, M and E related civil work - M and E related civil works - Plumbing - Gardening water supply system - dismantling work - Fire protection work - sprinkler works - Extinguishers - fire documentation - relocation work - process waste water supply system (pipelines outside factory premises and civil work even inside factory) - works related to civil construction - demolition work. - Ruling:- CENVAT credit on most services allowed except those mentioned above. - GST-ARA-33/2018-19/B-41 - Dated:- 28-5-2018 - SHRI B.V. BORHADE AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services T .....

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oject are provided in Annexure 4. 1.6. Based on the activities, the costs proposed to be incurred under the Extension Project can be broadly bifurcated into the following categories: i. Costs for Civil Works; ii. Cost for Mechanical Works; and iii. Costs for Electrical Works 2. Questions before the Authority of Advance Ruling: 2.1 The Applicant has approached the Authority of Advance Ruling to determine the admissibility of input tax credit of tax paid on costs proposed to be incurred in relation to activities mentioned in Annexure 4. 2.2 The Applicant believes that input tax credit in relation to Civil Works should be inadmissible under Section 17 (5) (c) and Section 17 (5) (d) of the CGST Act, 2017, because such costs pertain to construction of an immovable property other than plant and machinery. However, the Applicant submits that input tax credit in relation to Mechanical Works and Electrical Works should be admissible as such costs pertain to construction of plant and machinery. 2.3 The Applicant craves leave to submit such further facts at or before the hearing of the application as may be relevant Statement containing the Applicant s interpretation of admissibility of input .....

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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 budding or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises. (emphasis supplied) 1.4 The above provision suggests that no input tax credit would be available in respect of: i. works contract services received for construction of an immovable property; and ii. goods and/or services received for construction of an immovable property. Therefore, the Applicant does not contest a claim to input tax credit on costs of civil works under the Extension Project. However, the provision also suggests that input tax credit would be available where such works contract services, goods and/or services are received for construction of an immovable property in the nature of plant and machinery. 1.5. Therefore, the present application for advance ruling is being filed to determine the eligibility of input tax credit in relation to costs proposed to be incurred for Mechanical Works and Electrical Works under the Extension Project. M .....

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because the products manufactured by the Applicant require purified RO water to adhere to minimum quality requirements, failing which the products manufactured will not be suitable for their required medical purposes. The manufacturing process results into discharge of hazardous waste which is required to be disposed in an environment friendly manner, failing which the Applicant would be in violation of statutory environmental regulations. 1.11. The issue of determining whether goods can be said to be used in the manufacture of goods or not has been dealt with by the Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills co. Ltd. vs. Sales Tax Officer, Kanpur [1997 (91) E.L.T. 34 (S.C.)) =1964 (10) TMI 2 - SUPREME COURT OF INDIA [Enclosed as Annexure 5). In this case, the issue was regarding the eligibility of goods to be included in the registration certificate of the dealer under Section 8 (3) (b) of the Central Sales Tax Act, 1956 ( CST Act ) only if such goods are used in the manufacture of processing of goods. The Supreme Court held that where any particular process or activity is so integrally related to the ultimate manufacture of goods so that without that pro .....

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, the Applicant submits that costs pertaining to Mechanical Works and Electrical Works are intended to be capitalized in the books of accounts under the head plant and machinery 1.14. Basis the above background, in the present case, the Applicant submits that the activities relating to Mechanical Works and Electrical Works should fall under the definition of plant and machinery. Since the same are used for making outward supplies, the input tax credit in relation to costs incurred for such activities should be available. Conclusion: Basis the above submissions, in the current case, the Applicant believes that input tax credit in relation to costs incurred for Mechanical Works and Electrical Works should be admissible as such costs pertain to construction of plant and machinery. Further to above submissions, we most respectfully pray that: Allow us to reiterate all the submissions without prejudice to one another; Grant a personal hearing to put forth our contentions and explain our submissions before passing any order in this regard; Allow us to amend, alter and add to the present application; Allow us to produce additional documents and other material during the time of Personal H .....

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ad appeared and made detailed written submissions in support of their claim for Cenvat Credit. They also orally stated that claims in respect of DMAC yard costs, indirect expenses and design cost may also be allowed to them. No body was present from the side of Jurisdictional Officer, hence his earlier written submission is considered for this issue. 05. OBSERVATIONS We have gone through the facts of the case and various written submissions made by the applicant and jurisdictional officer during the course of the proceeding before us. 1. We find that the Applicant, is a private limited company incorporated under the provisions of the Companies Act, 1956 holding GST registration number ( GSTIN ) AADCN1920C1ZZ with effect from 1st July 2017. The Applicant is engaged in the manufacturing of medical equipment such as dialyzers, blood tubing sets, arterial fistulas, syringes and needles. 2. The Applicant runs a manufacturing facility at Shirwal, Maharashtra. Goods manufactured by the Applicant are sold within India and also exported outside India. The Applicant proposes to undertake an extension of its manufacturing facility ( Extension Project ) located at MIDC, Kesurdi, Khandala, Talu .....

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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. (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; (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 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; (c) subject to the provisions of section .....

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to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. (4) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse: Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year: Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number. (5) Notwithstanding anything contained i .....

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sed for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of sections 74, 129 and 130. (6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed. 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. Thus from Section 16 of the GST Act it is very clear that Every registered person subject to such conditions and restrictions as may be prescribed would be entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in course or furtherance of business. Thus the goods are used or intended to be used in course or furtherance of business. .....

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