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TMI Blog2020 (9) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the guidelines of Central Pollution Control Board (CPCB) and Karnataka State Pollution Control Board (KSPCB). They obtained the land on leas from the Government and constructed land filling pit for processing and disposal of solid waste. They have given a detailed brief on the construction of the land fill pit. On completion of filling landfill pit, it is closed and sealed as per the environmental guidelines and it is maintained for further 30 years without doing any activity on that particular landfill pit. The applicant contends that the landfill pit is plant and machinery and they have capitalised the same in their books of accounts. Further, they have claimed depreciation under the income tax excluding the GST paid thereon. 3. In view of the above, the applicant has sought advance ruling on the following question: Whether the term "other civil structure" used in the definition of "Plant and Machinery" restricts the Land filling Pit from considering it as Plant & Machinery and thereby restricts ITC to be availed on it. 4. Admissibility of the application: The question is about admissibility of input tax credit of tax paid or deemed to have been paid and hence is adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to section 41 of CGST Act, the tax charged in respect of such supply has been actually paid to the credit of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply [section 41 of CGST Act allows taking input tax credit in electronic credit ledger on self-assessment basis]. (d) Entity has furnished the return under section 39 [every taxable person is required to file electronic return every month as per section 39 of CGST Act]. "Entity is in the possession of tax Invoice. It has made payment for the services availed within 180 days and the counterparty has also uploaded the invoice in Form GSTR 1 which is reflected in form GSTR 2A of the assesse. It has also filed Form GSTR 3B". This makes the assesse eligible to claim ITC. As per Sec 2(19) Capital Goods means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business. As per Sec 16(1) ITC can be availed on goods and services which are used in the course of furtherance of business. Since the words 'goods' have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or both are used in the course or furtherance of business. 5.7 "On a plain reading of Section it is clear that what it contemplates and provides for is a situation where inputs are consumed in the construction of an immovable property which is meant and intended to be sold. The sale of immovable property post issuance of completion certificate does not attract any levy of GST. Consequently, in such a situation, there is a break in the tax chain and, therefore, there is full justification for denial of input tax credit as, on the completion of the transaction, no GST would at all be payable and, therefore, no set-off of the input tax credit would be required or warranted or justified. But the position is totally different where the immovable property (Plant and Machinery) is used in course and furtherance of business, because, in that event, the tax chain is not broken and, on the contrary, the construction of the Plant and Machinery will result in a fresh stream of GST revenues to the Exchequer on the services offered. The denial of input tax credit in such a situation would be completely arbitrary, unjust and oppressive and would be directly opposed to the basic rationale of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where the Plant and Machinery in question is constructed for the purpose of sale services, thereby terminating the tax chain, and by not applying Section 17(5)(d) to cases where the Plant and machinery in question is constructed for the purpose of sale of services and where the tax chain is not broken. It is further submitted that if this interpretation of Section 17(5)(d) is not accepted, then there would be no alternative except to declare that provision as unconstitutional and illegal and null and void. 5.11 The interpretation of Section 17 (5) (d) of both CGST Act and SGST Act which leads to the conclusion that on the facts and circumstances of the present case the client is not entitled to avail the benefit of taking input tax credit while paying CGST and SGST on services offered, clearly goes against the intention of the Legislature and also frustrates the object sought to be achieved by the Legislature in enacting the said CGST Act and SGST Act. It is an undisputed fact that CGST Act and SGST Act are implemented to obviate the cascading effect of various indirect taxes and to reduce multiplicity of indirect taxes. Therefore, when there is no break in supply of services, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17(5)(d) in the present case where also there is no break in the tax chain, is highly arbitrary and discriminatory. In the case of the client even the business is a continuous one without a break in the tax chain, yet it has been placed under Section 17(5) (d) of the CGST Act and SGST Act and the benefit of taking input tax credit has been denied and therefore on that ground alone and by itself Section 17 (5) (d) of CGST Act and SGST Act requires to be struck down as it violates Article 14 of the Constitution if the said clause (d) of sub-section (5) of Section 17 is not read down as submitted earlier. 5.13 Schedule II Paragraph 5 (b) inter alia provides that sale of a building to a buyer before issuance of a completion certificate etc. is a supply of service for the purpose of imposing CGST and SGST. Here the legislature used the phrase 'intended for sale' whereby the intention of the builder was made the decisive factor by the Legislature. Precisely the same approach should have been adopted in the present case also. Otherwise, it would be highly arbitrary and discriminatory application of the provision. Therefore, two different categories of builders were mentioned one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the legislature should be avoided and that interpretation which advances the legislative intent will have to be accepted. 5.16 To conclude the client is into the business of Treatment, Storage and Disposal of Common Hazardous Waste and for the purpose of same has to construct a land fill Pit (Plant and Machinery). It shall use such land fill pit for offering services to its customers and thereby shall be liable to discharge GST on the service charges collected. The client is of the opinion that since plant and machinery is not covered u/ s 17(5)(d) it is eligible to claim input tax credit on inputs and input services used for construction of such plant and machinery. In this instant situation there is no break in the chain of Input Tax Credit which fulfils the very objective of GST (Tax on value addition) to prevent the cascading effect. Further the client will be aggrieved of his fundamental right if he is denied the input tax credit on inputs and input services used for construction of plant and machinery, there would also be discontinuance in the credit chain. The client fulfils all the further stated criteria's which makes it eligible to claim input tax credit. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out certain processes of production. The term 'plant and machinery' therefore should be interpreted to mean a place where certain manufacturing activities/ processes of production are carried out with the help of inputs. 6.4 However, in this case, once landfill pit is filled with waste, this pit will be covered and closed permanently (and it will become part of land itself which is clearly excluded for availing ITC). Further once waste is buried inside the pit, there is no control over the actual activity undergoing inside pit which is a natural decomposition process. Hence time taken by this process and final outcome is not certain, whereas, in case of plant and machinery viz. apparatus, there is a controlled and mechanized process/ activity wherein inputs are known and final outcome is certain. 6.5 Taxpayers' submission that Landfill Pit is used towards supply of services & hence eligible as plant and machinery (e.g. apparatus) can be discussed by applying the same analogy in the case of providing services of - Renting of building or Storage services. During supply of these services, whether ITC is allowed on construction of building or godown considering them as plant and mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both are used in the course or furtherance of business. Explanation.-For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; Further another Explanation is provided for the purpose of Chapter V (Section 17 falls under Chapter V of CGST Act, 2017) which is given below: 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 12. The applicant, in their submissions, basically emphasized on three aspects, i.e. denying the ITC on landfill pit which is used for outward taxable supply is against the spirit of the Act and would result in cascading effect. Secondly, land filling plant is an apparatus fixed to earth with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, we go to the brief submitted by the applicant regarding construction of the landfilling pit. Components of Landfill Design are: * A liner system at the base and sides of the landfill, which prevents migration of leachate or gas to the surrounding soil. * A leachate collection and treatment facility, which collects and extracts leachate from within and from the base of the landfill and then treats the leachate to meet standards, notified under EP Act 1986. * A gas collection and treatment facility (optional), which collects and extracts gas from within and from the top of the landfill and then treats it or uses it for recovery. * A final cover system at the top of the landfill, which enhances surface drainage, prevents infiltration of water and supports surface vegetation. * A surface water drainage system, which collects and removes all surface runoff from the landfill site. * An environmental monitoring system, which periodically collects and analyses air, surface water, soil-gas (option) and ground water samples around the landfill site. * A closure and post-closure plan which lists the steps that must be taken to close and secure a landfill site once ..... 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