TMI Blog2019 (11) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... equipment and machinery. The break water wall constructed on the sea to protect the ship from high waves can hardly be called machinery or apparatus or equipment. Neither in common parlance nor in technical parlance would one associate a civil structure like a breakwall to be plant and machinery or machinery, apparatus or equipment. Machines are something which employ power to achieve. Equipment and apparatus mean tools for a particular purpose. The term tool here is very important. It is meant to be a device or implement, especially one held in the hand, used to carry out a particular function. The breakwater wall does not remotely fall under any of these description. The break water not only comprises piling of Accropods on top of each other but involves extensive civil work and foundation laying in order to build the break water wall and the Accropods is only a part of it. It is therefore an immoveable structure though not plant and machinery. It is seen from the explanation that land, building and civil structures are specifically excluded from the scope of plant and machinery . Therefore even though assuming that the structure is a plant and machinery (which it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the high waves and tide to touch the jetty and cargo/ ships of LNG and thereby important for the safety for the jetty as well as the ship from the risk of damage. 5. That, although having the break water was absolute necessity, the existing break water was not complete and requires immediate reconstruction in order to keep the jetty and cargo safe during the LNG unloading process. 6. That due to existing incomplete Break water facility, the NSPC, the authority for the clearance of jetty, provides only provisional clearances for the berthing and unloading of the LNG cargo and therefore does not allow the berthing of the cargo unless the height of the wave (swell) is less than 0.5 meters. Thus the performance of the jetty is much below its potential/ capacity and that too has always suffers the risk of damage due to of high tides and waves. 7. That, due to the above mentioned operational technical restriction, the appellant has invited the tender where the scope of work are as follows - Basic design, detail engineering and physical model test, surveys, temporary work, development of quarries, supply of material , construction of balance portion of break water and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has rightly appreciated the function of the breakwater when it has stated that in the subject case the breakwater will, if any, be facilitating the receipt of raw material i.e. LNG by the applicant . However it has misinterpreted and has taken a myopic view, when it says that It is not going to be used for rendering outward supply of goods or services or both . 13 . Because on the facts and circumstances of the case, the learned ARA has failed to appreciate section 17 (5) (d) read with explanation when it stated that breakwater being an immovable property cannot be considered as plant and machinery whereas the position of law is otherwise. The foundation or structural support of the plant machinery, even though it is an immovable property, will be considered as an integral part of plant machinery. Therefore, all immovable structures are not disqualified from being covered in the term plant machinery. 14. Because on the facts and circumstances of the case, the learned ARA has relied on the theory of the essentiality test when it mentions that to qualify for inclusion in the term plant , it must be established that it is impossible for the regasification plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he doubts, whether the breakwater wall will be treated as immovable property or a plant, an advance ruling has been sought. 18.2 In the Grounds of law, submitted along with the application, at point no. 3 the applicant has quoted that the applicant is not covered under the exclusion clause of section 17(5)(d) of the Goods and Service Tax Act (CGST/MGST) (hereinafter referred to as GST Act) . Whereas section 17(5)(d) of the GST Act states that 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. Here the applicant assumes that the proposed break water wall is plant and machinery. But in the Section 17(6) of the GST Act explanation has been given for the expression Plant and Machinery as Plant and Machinery means apparatus, equipments 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 support but excludes- i) Land, Building or any other Civil Struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to function without breakwater wall. Also the applicant has shown total outward supply of ₹ 335,82,08,218/- in the GST return form GSTR 3B, filed for the period From April 2018 to January 2019, which reveals that his activities are efficiently carrying on. Hence the activity of construction of breakwater wall falls under the section 17 (5) (d) of the GST ACT, on account of being a civil structure and an immovable property. And under this section the applicant becomes ineligible to avail input tax credit on the proposed construction of breakwater wall . 19. Submission before the Hon ble Appellate Authority- 19.1 The applicant, M/s. Konkan LNG Pvt. Ltd., is planning to build a breakwater wall beyond the existing operational captive jetty , which (the breakwater) applicant says is a part of existing plant and wants to avail input tax credit of it. In order to clear the doubts whether the breakwater wall will be treated as plant machinery or an immovable property (civil structure) an advance ruling had been sought. 19.2 As per the order passed by the Advance Ruling Authority, the proposed breakwater wall is a civil structure and falls under the exclusion cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of his ITC claim on breakwater wall, wherein the Hon. Court has stated that, In order for a building or concrete structure to qualify for inclusion in the term plant, it must be established that it is impossible for the equipment to function without the particular type of structure . 19.6 In the grounds of law of appeal at the point no.3 the applicant has questioned the essentiality test and quoted that no such essentiality test provided in the explanation to section 17 of the CGST/MGST Act. But the essentiality test is a logical and substantial test to consider any structure to be a part of plant and machinery, hence the above ruling cannot be neglected. Further, the applicant has shown total outward supply of ₹ 4110838049/- in the GST return form GSTR 3B filed for the period from April 2018 to August 2019, which reveals that his activities are efficiently carrying on, which proves that it is not impossible for the applicant to function without the breakwater wall. Hence the activity of construction of breakwater wall falls under the section 17(5)(d). 19.7 Details of visit conducted on 07.03.2019:- An official visit was conducted on 07-03-2018 at 10.30a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May-18 109993273 9899394 9899394 25000 0 2250 2250 Jun-18 20637375 1857364 1857364 48610 8749 0 0 Jul-18 21875653 1968809 1968809 0 0 0 0 Aug-18 20920120 1882812 1882812 1347527 206555 18000 18000 Sep-18 82748704 7447384 7447384 0 0 0 0 Oct.18 673061220 2331 60574344 60574344 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53802 53802 Personal Hearing 21. A personal Hearing in the matter was conducted on 04.11.2019, wherein Shri Ajay Kumar (Advocate), Prakash Sinha (C.A), Alok Jain, representatives of the Appellant, reiterated their written submissions. Shri Amol S. Shedbale, State Tax Officer (Rat-Vat-C-006), Ratnagiri, appearing as jurisdictional officer, reiterated the submissions, which had been made earlier before the Advance Ruling Authority. Discussions and Findings 22. We have gone through the facts of the case, documents on record and submissions made by both appellant as well as the jurisdictional officer. The appellant having a LNG regasification plant at Dabhol, Maharashtra are engaged in the regasification of the LNG therein. The LNG which is raw material reaches plant through the jetty where it is unloaded from various ships/cargos adjacent to the jetty breakwater wall which is in incomplete stage of construction. The captive jetty is situated in sea and the length is around 300 meters and is about 1.8 km from the tanks farm area. In order to protect the jetty from the high tide and the forceful sea there is a partly construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; Explanation :- For the purposes of this Chapter and Chapter VI, the expression plant and machinery means apparatus , equipment and machinery fixed to the earth by foundation or structural support that are used for making outward supply of goods and services or both and includes such foundation and structural support but excludes :- (i) Land, building or any other civil structures (ii) Telecommunication towers: and (iii) Pipelines laid outside the factory premises. A reading of the above section shows that plant and machinery though immovable are eligible for ITC. The meaning of plant and machinery is given in the explanation. Thus, in order to come in the explanation to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plant is large machinery that is used in industrial processes. ...investment in plant and equipment. Oxford Dictionary a factory or place where power is produced or an industrial process takes place a nuclear power plant a processing/manufacturing plant Japanese car plants a water treatment plant a chemical/steel/coal plant 26. A reading of the above makes it clear that plant generally means and includes a place where industrial activity takes place or a factory where certain material is produced or big machinery used to carry out certain processes of production. The term plant and machinery is used in conjunction with each other and by the application of the principle of ejusdem generis , it is clear that the meaning to be given to the term machinery should take its color from the word plant . The term plant and machinery therefore should be interpreted to mean a place where certain commercial /manufacturing activities/ processes of production are carried out with the help of inputs. In the present case, the breakwater wall or the Accopods that are an essential part of it certainly do not qualify as plant and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and handling facility. 6.6 Quarrying of required rock core and underlayer armours. 6.7 Testing, sorting and screening of rock material. 6.8 Production of balance ACCROPODE units required to complete the breakwater as per license holder s specifications (refer clause 8.2 regarding use of existing ACCROPODE units at old casting yard). 6.13 Dredging and removal of silt/sand deposits on the sides of the existing partly completed submerged breakwater as well as in the virgin area. Disposal of the dredged material in the offshore dumping site about 15 km offshore the site indicated by the Owner. 6.14 Reshaping of existing core material within the theoretical profile in partially build breakwater as per drawings and specifications. 6.16 Construction of balance portion of breakwater, after dredging of soft material: placing of core material, rock and ACCROPODE units (as per license holder s specifications and requirements including supervision) and approved drawings and documents. The above clauses shows that break water not only comprises piling of Accropods on top of each other but involves extensive civil work and foundation laying in order to build th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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