TMI Blog2019 (11) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... contention put forth by the Appellant in so much as they have advocated for the adoption of the meaning of the factory as understood in the common parlance, for which they have relied upon the meaning of the term factory provided in the various dictionaries. - As regards the AAR interpretation of the term factory, wherein they have adopted the definition provided under the Factories Act, 1948 in absence of the definition of the impugned term factory , it is opined that Hon ble Supreme Court, vide its judgment in the case of MSCO PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [ 1984 (10) TMI 44 - SUPREME COURT] , which has been cited and relied upon by the Appellant in their defense, has abundantly clarified against the adoption of the definition or meaning of any term, which has not been defined under a particular statute with which the impugned matter is concerned, from another statute containing the definition or meaning of that very term. The AAR interpretation of the term factory , on the basis of the definition provided under the Factories Act, 1948 is contrary to the afore said Supreme Court ruling, and hence not tenable. On perusal of the dictionary meaning of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned and pass the order by holding that the Appellant is not entitled to avail the ITC of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid as per the provision laid out in section 17(5)(c) and 17(5)(d) of the CGST Act, 2017. - MAH/AAAR/SS-RJ/09/2019-20 - - - Dated:- 7-10-2019 - SMT. SUNGITA SHARMA, AND SHRI RAJIV JALOTA, MEMBER PROCEEDINGS (Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, 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 MGST Act. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Western Concessions Private Limited(herein after referred to as the ( Appellant ) again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the length of the pipeline would be approximately 60 KMs. The sample photographs of FSRU and the pipeline to be constructed from FSRU to the grid are enclosed in the appeal paper-book. Further, the approval obtained by the appellants from various authorities such as Ministry of Environment and Forest, Maharashtra Pollution Control Board, Petroleum and Natural Gas Regulatory Board, etc. are collectively enclosed. K. Section 16 of the CGST Act deals with the eligibility of taking input tax credit ( ITC ) and the conditions to be fulfilled by the registered person. Section 16(1), inter alia, states that a registered person shall be entitled to take ITC on goods and services used or intended to be used in the course or furtherance of his business. Section 16(1) is reproduced hereunder for ready reference: 16. (1) 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 cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature, forms Plant and Machinery for the querist. Further, the re-gasification activity would be undertaken by the appellants at the FSRU, which is not a factory per se. Application for Advance Ruling P. The appellants filed an application for Advance Ruling before the Learned Authority for Advance Ruling, Maharashtra (hereinafter referred to as Ld. AAR ) for obtaining an Advance Ruling on the issue as to whether the appellants would be eligible to avail the ITC of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid. Advance Ruling passed by Ld. AAR, Maharashtra Q. The Ld. AAR, considered the application filed by the appellants and passed Advance Ruling No. GST-AAR-94/2018-19/B-22 dated 22.2.2019 = 2019 (6) TMI 761 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA denying the ITC of GST paid on goods and services used for construction of the tie-in pipeline and held as follows - i. Since the term factory is not defined under the CGST Act, a definition given in another statute can always be relied upon. As per the Ld. AAR, the FSRU is covered under the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract service, Clause (d) of Section 17(5) bars ITC in respect of goods or service used for construction of immovable property on assessee s own account. 1.4 However, the above restriction on availment of input tax credit will not apply if the immovable property constructed is plant and machinery. The term plant and machinery is defined in the explanation to section 17 as apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply but, inter alia, excludes pipelines laid outside the factory premises. The relevant portion of section 17(5) is extracted as under: (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:- (c) works contract services when supplied for construction of an immovable property ( other than plant and machinery ) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property ( other than plant or machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of statue would apply with great force to the GST legislation, especially to a provision which restricts the availability of ITC in the hands of the supplier. 2.2 The appellants submit that it is a settled law that a taxing statute has to be strictly construed and no additional meaning shall be given to the plain wordings used by the legislation. Reliance is placed on the decision of Supreme Court in case of Sales Tax Commissioner v. Modi Sugar Mills reported at AIR 1961 SC 1047 = 1960 (10) TMI 65 - SUPREME COURT wherein the Supreme court observed as under- In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions . The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed it Cannot imply anything which is not expressed it cannot import provisions in the statutes so as to supply any assumed deficiency. 2.3 Similar view was given in the decision of Supreme Court in case of A.V. Fernandez v. State of Kerala reported at AIR 1957 SC 657 = 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... glish Language pl. An establishment devoted to the manufacture of something, including the building or buildings and machinery necessary to such manufacture; a manufactory. (iv) Cambridge International Dictionary of English A building or set of building where large amounts of goods are made using machines. Dictionary meaning of terms premises - (i) Illustrated Oxford Dictionary 2. (in pl.) a House, building, with grounds and appurtenances. (ii) The New International Webster s Comprehensive Dictionary of the English Language 4. pl. A distinct portion of real estate; land or lands; land with its appurtenances, as buildings: (iii) The Chambers Dictionary (in PI) the aforesaid (property; law); hence, a building and its adjuncts, esp. a public house or place of business; (iv) Black s Law Dictionary. V Edition Premises . In estate and property. Land and tenements; an estate, including land and buildings thereon; the subject-matter of the conveyance. F.F. Proctor Troy Properties Co. v. Dugan Store, 191 App.Div.685, 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the general meaning and cannot be stretched to cover FSRU, which is a vessel capable of navigating in oceanic waters. 2.9 The Ld. AAR, in the impugned ruling, has held that the a pipeline outside the factory means a pipeline used to transport some product from factory to end user and hence the tie-in pipeline which is outside the FSRU i.e. a factory , would be covered by the said exclusion clause. 2.10 The appellants submit that the aforesaid finding of the Ld. AAR is not correct as the Ld. AAR has stretched the meaning of the exclusion clause to cover FSRU which is a vessel, within the meaning of a factory. The appellants place reliance on the decision of Tribunal in case of Sri Chaitanya Educational Committee Vs. C.C., C. E. S.T., Guntur reported at 2016 (41) S.T.R. 241 (Tri. - Bang.) = 2015 (6) TMI 627 - CESTAT BANGALORE (LB) . In the said case, while interpreting the definition of Commercial Training or Coaching Centre under Section 65(27) of Finance Act, 1994, the Tribunal held that the exclusion clause of a definition must be strictly interpreted and the exclusion clause cannot be stretched to give a wider meaning. The relevant portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined under explanation to section 17(5). The following two conditions have to be fulfilled for the Tie-in pipeline to be regarded as plant and machinery in terms of explanation to Section 17 of CGST Act: The pipeline should be an apparatus, equipment or machinery used for making outward supply; and It should not be covered by the exclusion clause pipeline laid outside the factory premises 3.2 In the present case, the appellants are constructing a Tie-in pipeline to deliver the re-gasified LNG to the cross-country pipeline/National Grid for further transportation to the customers. The said pipeline will be laid under the ground and the length of the pipeline would be approximately 60 KMs. 3.3 For the reasons mentioned in the foregoing part of this appeal, the tie-in pipeline qualifies to be a plant and machinery as per explanation to section 17 of the CGST Act. 3.4 Further, the term factory has not been defined under the CGST Act. Therefore, the term factory shall be given the same meaning by which it is understood in common parlance. In common parlance, a factory is understood to be a building or similar structure c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the term factory has not been defined under CGST Act. Thus, in view of the ratio laid down by the aforesaid judgment, it is incorrect to adopt the meaning of factory given in the Factories Act 1948 to interpret the term factory premises used in Explanation to Section 17(5) of the CGST Act. 3.11 The appellants submit that the Ld. AAR has not given any specific finding on the aforesaid submission made by the appellants. The Ld. AAR has merely made a passing remark that in absence of a specific definition in the CGST Act, the definition of factory given under other statute (Factories Act) can be always relied upon. The Ld. AAR has not produced any case law to support the aforesaid finding. 3.12 Thus, the definition of factory given under Section 2(m) of the Factories Act 1948 cannot be applied to interpret the term factory premises used in Explanation to Section 17(5) of the CGST Act. 3.13 The appellants further place reliance on the decision of Supreme Court in case of P.C. Cheriyan Vs. Barfi Devi reported at 1980 AIR 86 = 1979 (10) TMI 77 - SUPREME COURT . In the said case, the Supreme Court was concerned with the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition given in Factories Act, 1948 is relied upon, the FSRU which is vessel would not qualify as a factory. 4.1 Without prejudice to the submissions made in the preceding paragraph, even if the definition of factory given under the Factories Act is borrowed, the FSRU would not be covered under the said definition. Section 2(m) of The Factories Act, 1948 which defines the term factory reads as under- 2. (m) factory means any premises including the precincts thereof- (i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or (ii) Whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,- but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952)] or a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, the Ld. AAR has held that even factory should not be given a restricted meaning. Considering the development in trade and commerce, factory should not only mean a building situated on land but would also include a vessel (FSRU in the present case) if any manufacturing activity is undertaken onboard such vessel. 4.9 The appellants submit that the reliance placed by the Ld. AAR on the aforesaid decision to state that FSRU shall be considered as a factory is not correct in law. The appellants submit that the said decision is rather in favor of the appellants. 4.10 In the aforesaid case, the question for consideration before the Supreme Court was whether the dryer felt manufactured by the appellant-assessee would qualify as textile , to fall under Item 30 of Schedule B of Punjab General Sales Tax Act, 1948 (hereinafter referred to as Punjab Sales Tax Act ), and thereby eligible for exemption from payment of sales tax. The term Textile was not defined anywhere under the Punjab Sales Tax Act. 4.11 In that case, the Supreme Court held that where a word used in a Taxing statute has a scientific/technical meaning and an ordinary meaning u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re conditioned by old and antiquated notions of what are textiles and, therefore, it may sound a little strange to regard dryer felts as textiles . But it must be remembered that the concept or textiles is not a static concept. ..emphasis supplied 4.12 Even in the present case, the word factory has not been defined under the CGST Act. Thus, in view of the aforesaid decision of Supreme Court relied upon by the Ld. AAR, the term factory used in Explanation to section 17(5) should be understood in accordance with the meaning given to it in common parlance and should not be interpreted in light of the technical definition given under the Factories Act, 1948. 4.13 The appellants submit that Ld. AAR has selectively relied only on a portion of the aforesaid judgment, without appreciating the ratio laid down by the Supreme Court, which in the present case supports the contention of the appellants. Thus, the finding given by the Ld. AAR is incorrect to that extent. 4.14 Thus, the impugned ruling dated 22.2.2019 is liable to be set aside. 5. The tie-in pipeline being created by the appellants indeed qualifies as a plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various components, equipment and devices forming part of the pipeline. i. Pipes - These comprises of the hollow pipes laid underground from the Jaigarh Terminal to the National grid. ii. High pressure Un-loading Arm - The high pressure unloading arm installed at the Jaigarh terminal is a special equipment for unloading the high pressure Gas from FSRU into the Tie-in Pipeline. iii. Isolation valves Check valves- Check valves are installed to ensure that the flow of Gas is unidirectional. Isolation Valves are installed on the pipeline for controlling flow (to restrict the flow or allow the flow). iv. Metering System - The metering system is installed to measure the quantity of gas supplied. This system is installed at the Jaigarh Terminal i.e. the starting point of pipeline and at Dabhol Terminal i.e. the end point of pipeline before it is connected to National Grid. v. Pressure Regulating System - This system is installed at Dabhol Terminal to control the pressure at which such gas is supplied vi. Gas Chromatograph - Chromatograph is a special equipment fitted near the metering devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AAR in the impugned ruling has held that the pipeline is not a apparatus, equipment or machinery since every pipeline is fitted with various equipment and the pipeline constructed by appellants is not an exception. The Ld. AAR has further held that since a specific description of pipeline is available, it cannot be brought under the meaning of apparatus , equipment , or machinery . 5.8 The appellants submit that the aforesaid finding of Ld. AAR is incorrect and not sustainable in law. The appellants submit that the various parts mentioned above are highly sophisticated equipment which are designed and installed for the purpose of transportation of high pressure gas. The pipeline constructed by the querist cannot be compared with a typical pipeline for carrying water, which would not contain the aforesaid equipment. 5.9 Further, the appellants submit that an exclusion clause of a definition can only exclude something which is already covered by the main body of the provision. Therefore, the fact that pipelines laid outside factory premises is excluded from the definition of plant and machinery given under explanation to Section 17(5), would itself mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a part from the whole, which, but for the exclusion, continues to be part of it. .emphasis supplied 5.12 Thus, in view of the above, the appellants submit that the exclusion clause to Section 17(5) would itself mean that a pipeline would be otherwise covered under apparatus , equipment , or machinery and hence qualify as plant and machinery under explanation to Section 17(5). 5.13 Thus, the appellants submit that the impugned order of AAR is liable to be set aside. Personal Hearing 6. We had granted personal hearing to the Appellant, in the present matter, on 04.10.2019. Accordingly, the letter informing the Appellant about the date and time of the personal hearing to be conducted, had been issued on 27.09.2019. The said letter informing the schedule of the personal hearing was also communicated to the Appellant through e-mail, and the receipt of the same was also confirmed telephonically from them. 7. However, the Appellant sought adjournment in the matter vide their letter sent via e-mail dated 03.10.2019. Here, it is pertinent to mention section 101(2) of the CGST Act, 2017, which provides as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional grid, will be construed as factory or otherwise. (ii) In case the same is held as factory, whether the tie-in pipeline which is to be laid can be construed to be the pipeline laid out side the factory premises or otherwise. 13. It is a matter of fact that the factory has not been defined anywhere in the CGST Act. Therefore, we proceed to explore the meaning of factory as understood in the ordinary parlance. Accordingly, we will resort to the meaning provided to the term factory in the various dictionaries. In this way, we concur with the contention put forth by the Appellant in so much as they have advocated for the adoption of the meaning of the factory as understood in the common parlance, for which they have relied upon the meaning of the term factory provided in the various dictionaries. As regards the AAR interpretation of the term factory, wherein they have adopted the definition provided under the Factories Act, 1948 in absence of the definition of the impugned term factory , it is opined that Hon ble Supreme Court, vide its judgment in the case of M/s. Msco. Pvt. Ltd vs Union Of India, 1985 AIR 76 = 1984 (10) TMI 44 - SUPREME COURT , whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of the factory provided under the abovementioned dictionaries, it is revealed that for any structure to be considered as factory, the following two parameters needs to be met with: (i) First, it should be building, a set or range of buildings, a business premises, or an establishment; (ii) There should be some manufacturing activities being carried out at these places. 17. Now, to decide what constitutes building, a set or range of buildings, a business premises, or an establishment, we will again resort to the dictionary meaning of the terms building, business premises, and establishment, as the same are also not defined under the CGST Act. Dictionary meaning of the term Building : As per the Cambridge Dictionary: A structure with walls and a roof, such as a house or factory. As per Merriam Webster Dictionary: a usually roofed and walled structure built for permanent use (as for a dwelling) 18. Thus, on perusal of the above dictionary meaning of the term Building , it is abundantly clear that any structure with the walls and roofs would be considered as Building. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The New International Webster s Comprehensive Dictionary of the English Language 4. pl. A distinct portion of real estate; land or lands; land with its appurtenances, as buildings: (iii) The Chambers Dictionary (in PI) the aforesaid (property; law); hence, a building and its adjuncts, esp. a public house or place of business; (iv) Black s Law Dictionary, V Edition Premises . In estate and property. Land and tenements; an estate, including land and buildings thereon; the subject-matter of the conveyance. F.F. Proctor Troy Properties Co. v. Dugan Store, 191 App.Div.685, 181 NYS 786. The area of land surrounding a house, and actually or by legal construction forming one enclosure with it. A distinct and definite locality and may mean a room, especially building or other definite area, or a distinct portion of real estate. Land and its appurtenances. (v) Cambridge International Dictionary of English (in PI) the land and building owned by someone, esp. by a company or organization. (vi) The American Heritage Dictionary of English Language, Ill Edition 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 18, input tax credit shall not be available in respect of the following, namely:- (c) works contract services when supplied for-construction of an immovable property ( other than plant and machinery ) except where it is an input service for further supply of works contract service; (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 including when such goods or services or both are used in the course or furtherance of business. 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. 26. Now, it is a well settled principle in law that any legislation must be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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