TMI Blog2019 (9) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... r - HELD THAT:- Whether credit of the taxes paid on various items will be eligible if the said lighting project satisfies the definition of plant and machinery and that Lighting of plant road boundary watchtower which comprises of items like street poles, fittings, aviation lamps, switch box, pipes for laying the cables would qualify as an apparatus or an equipment. The test of immovable property is not relevant for plant and machinery as Section 17(5)(c) and (d) exclude plant and machinery from immovable property. Since, plant and machinery are excluded from immovable property, construction and other activity in relation to plant and machinery shall be eligible for Input Tax Credit unless otherwise restricted. The restriction of ITC is only on the telecom towers, pipelines which are not treated as plant and machinery by virtue of explanation to Sec. 17(5)(c) and (d) - Input Tax Credit provisions restrict ITC credit of works contract services for works to be performed on immovable property and also restrict the credit of construction, related activity of immovable property even when construction activity do not fall into the scope of works contract. However, works contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , boundary wall and watch-tower? (3) Whether input tax credit can be availed on Erection of plant and equipment for lighting of plant road, boundary wall and watch-tower? 2. Facts of the case:- (I) The Appellant NMDC Limited holding GSTIN 22AAACN7325A3Z3 is a State-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. It is India's largest iron ore producer and exporter producing about 30 millions of tons of iron ore from 3 fully mechanized mines in Chhattisgarh. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacity Greenfield Integrated Steel Plant based on HiSmelt technology in Nagarnar, located 16 km. from Jagdalpur in the State of Chhattisgarh with an estimated outlay of ₹ 20,000 Crore. NMDC has entered into a con- tract agreement with M/s. Bajaj Electricals Limited for lighting of plant road, boundary and watchtower. It includes various inputs and input services like design and engineering supply of plant and equipment and erection of such plant and equipment including steel, lighting tubul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition and eligible for input credit? (5) Whether the AAR erred in relying on the Bombay High Court's decision in Bharti Airtel case [2014 (35) S.T.R. 865 (Bom.)] and refused to follow the decision of the Delhi High Court in the Vodafone case cited by the Appellant [2019 (27) G.S.T.L. 481 (Del.)] when the correctness of the former decision was doubted by the Delhi High Court in the latter case? (6) Whether the impugned order fails to appreciate the scope of Section 16 of the CGST Act, 2017, which allows credit of taxes on supply of goods or services or both used or intended in the course or furtherance of one's business? (b) That, the impugned order concludes that the items in question are nothing but immovable property and cannot be considered as goods in any way for the simple reason that these are attached to earth. The impugned order also places on the definitions of the term immovable property under General Clauses Act, 1897 and Section 3 of the Transfer of Property Act, 1882 to explain the term immovable property . Certain case laws also were relied upon by the Authority in support of its conclusion. (c) That, on bare perusal of Section 17(5)(c) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. It is submitted that even any immovable property, once qualifies as 'plant machinery', they stand excluded from the restriction and the credit is eligible not only for plant and machinery but includes their foundation and supporting structures. (f) That, it is evident from para 5.14 of the impugned order, the scope of work under the agreement dated 10-3-2017 with M/s. Bajaj Electricals Ltd. is completely misunderstood and misappreciated by the AAR. The Appellant submits the observations of the AAR in the impugned order are incorrect for the following reasons:- It is settled law that clauses in the agreement should be read as a whole and not in isolation to understand the tenor and intention of the contracting parties. The civil work in the contract is to provide to foundation and structural support to the structures and equipment in question and nothing more. The foundation and structural support is given to the lighting equipment in order to ensure their stability and wobble - free operation. In fact, the explanation in Section 17 of the CGST Act, 2017 defines 'plant and machinery' to include structural support and foundation thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery. (j) That, the term' plant , the Supreme Court in Scientific Engineering House Private Limited v. Commissioner of Income Tax, AP, 2002-TIOL-665-SC-IT, observed as below:- In other words, plant would include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for. mechanical operations or processes or is employed in mechanical or industrial business. In order to qualify as plant, the article must have some degree of durability, as for instance, in Hinton v. Maden Ireland Ltd. [1960] 39 ITR 357 (HL), knives and lasts having an average life of three years used in manufacturing shoes were held to be plant. IN CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC) = 2002-TIOL-642-SC-IT the respondent, which ran a hotel, installed sanitary and pipeline fittings in one of its branches in respect whereof it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of plant given in section 10(5) of the 1922 Act which was similar to the definition given in section 43(3) of the 1961 Act and this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular use (Mav. Web. Dic.). A compound instrument designed to carry out a specific function. (McGraw Hill Dic. of Sc. Tech. Terms). (m) The Appellant further wishes to quote further on the meaning of apparatus from the Webster's Encyclopedic Unabridged Dictionary of the English Language which reads as under:- a group or aggregate of instruments, machinery, tools, materials etc., having a particular function or intended for a specific use. 2. any complex instrument or machine for a particular purpose. 3. any system or systematic organization of activities, functions, processes, etc., directed toward a specific goal; the apparatus of government; espionage apparatus. 4. Physiol, a group of structurally different organs working together in the performance of a particular function: the digestive apparatus. (n) The Appellant also wishes to rely on the definition cited in various case laws. As per the P. Ramanatha Aiyar's Legal Lexicon: The word apparatus would certainly mean the compound instrument or chain of series if instruments designed to carry out specific function or for a particular use (Commer. of Customs v. C-NET Communication (1) (P) Ltd., (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures are classifiable under Chapters 84, 85 and 9405 of the Central Excise Tariff, the fact that these fixtures become part of the civil structure/immovable property was no basis to deny credit of taxes paid. CCE v. India Cement, 2017 (3) G.S.T.L. 144 (Tri. - Hyderabad) (paras 2 and 4) : The CESTAT allowed credit of taxes paid on lighting works as they are related to the business of manufacture. In Commissioner of Central Excise v. Jawahar Mills Limited, 2001 (132) E.L.T. 3, the Supreme Court, having regard to the normal conditions prevailing in the industry, held capacitors, control panels, cables distribution boards, switches and starters and air compressors would qualify as capital goods under Rule 57Q of the erstwhile Central Excise Rules, 1944. The Apex Court held the 'capital goods' can be machines, machinery, plant, equipment, apparatus, tools or appliances and any of these used in the factory for manufacture shall be eligible for credit. In Commissioner of Central Excise, Tiruchirapalli v. Maris Spinners Limited, 2008 (223) E.L.T. 163 (Mad.), following the decision of the Apex Court in Jawahar Mills (cited supra) the Madras High Court allowed credit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers holding the same to be essential for provision of telecommunication service. Likewise, when illumination is required and essential for the round the clock operation of the plant, credit of taxes paid thereon should be allowed by this Authority. (y) That, the AAR also relied on the decision of the Supreme Court in Triveni Engineering India Ltd. v. Commissioner of Central Excise, 2000 (120) E.L.T. 273 (S.C.) to support its conclusion that if anything is attached to earth, both the factum as well as the intention of fastening has to be ascertained from the facts and circumstances of the each case. (z) That, it is submitted that any reliance on the decision in Triveni Engineering is incorrect for several reasons. The decision in Triveni Engineering was rendered in the context of central excise law, where the movability or otherwise of the items in question was integral to determine the excisability of goods. In Triveni Engineering, the items in question (steam turbine and alternator) were erected on a platform specially constructed for the purpose which made the machine immovable. Under the GST law, the test of movability/immovability is irrelevant and the explanation in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes paid on inputs/input services used or intended to be used in the course of furtherance of business. The said expression is of the widest possible import and is in keeping with the spirit of the GST law to allow seamless flow of credit. (ae) The Appellant relied upon the following case laws, although under the erstwhile indirect tax regime to support their submissions:- In CCE v. Solaris Chemtech Ltd., 2007 (214) E.L.T. 481 (S.C.), examining the phrase in relation to manufacture , the Supreme Court observed that the said phrase has been used to widen the scope and contents of the expression inputs' and allowed credit of taxes paid on Low Sulphur Heavy Stock (LSHS) and furnace oil used in generation of electricity, which was further used in the manufacture of caustic soda. In Oblum Electrical Industries Private Limited v. Collr. of Cus., Bombay - 1997 (94) E.L.T. 449 (S.C.), the Supreme Court held the expression material required for manufacture would also bring within its ambit material (which though not used in the manufacture) is required for the purpose of manufacture. In Commissioner of Customs, Kolkata v. Rupa and Co. Ltd. - 2004 (170) E.L.T. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the Appellant along with the provisions applicable in the present case. The present appeal has been filed under Section 100(1) of the Central Goods and Services Tax Act, 2017 and the CGGST Act, 2017 by the Appellant M/s. NMDC Ltd., having their registered office at Khanij Bhavan, 10-3-311/A, Castle Hills, Masab Tank, Hyderabad, Telengana and works/administrative office at ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh and GSTIN 22AAACN7325A3Z3, against the Advance Ruling Order No. STC/AAR/02/2019, dated 24th April, 2019. 5.2 The Appellant NMDC Limited is a State-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. It is India's largest iron ore producer and exporter producing about 30 million tons of iron ore annually from 3 fully mechanized mines in Chhattisgarh. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacity greenfield Integrated Steel Plant based on HiSmelt technology in Nagarnar, located 16 km. from Jagdalpur in the State of Chhattisga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich will run round the clock. We also find that the scope of impugned work can be summarized as comprising of three major parts viz. Design Engineering, Supply of Plant Equipment and Erection of such Plant Equipment. The Appellant has further contended that the lighting installed at their Plant Road, Boundary Wall and Watchtower can be dismantled without substantial damage and can be reassembled at another place without substantially damaging it and therefore may be considered as movable property and accordingly they are eligible for credits of tax paid on inputs and input services used for Lighting of Plant Road, Boundary Watchtower should be eligible. Without prejudice to above it was also M/s. NMDC's contention that if such lighting is treated as an immovable property, then credit of the taxes paid on various inputs will be eligible if the said lighting satisfies the definition of the plant and machinery and that Lighting of plant road comprises of equipment like street poles, fittings, aviation lamps, switch box, pipes for laying the cables and therefore lighting of plant road, boundary watchtower will qualify as an apparatus or an equipment. 5.5 As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. The above definition thus stipulates 'only' certain works performed on immovable property as works contract. Further, it is only when there is involvement of transfer of property in goods that would make the contract as works contract i.e. there must be a supply of goods along with supply of service by the supplier (contractor). 5.10 Construction is defined under explanation to Section 17(5)(c) and (d) for the purpose of these provisions to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property. 5.11 The relevant sub-clause under Section 17(5) of CGST Act, 2017 reads as under: (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (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 contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... install Lighting for Plant tower, Boundary Watch tower (Package-33) at 3.0 MPTA Integrated Steel Plant at Nagarnar, Chhattisgarh, as M/s. Bajaj Electricals Ltd., the contractor has valuable and specialized knowledge and expertise for the work for lighting for plant road, boundary watch tower. 6.1. It has been categorically specified in the aforesaid Contract agreement that the scope of work shall also include any and all work, supplies and services for construction and completion of all works as described in Bill of Quantities and Technical Specification and that the contractor M/s. Bajaj Electricals Ltd., shall also execute all such works which, in the opinion of the Employer viz. the Appellant M/s. NMDC are require to be executed for the successful completion of the work and that all such works shall be deemed to have been included in the contract and further that the Contractor, at his own cost is required to undertake modifications/re-construction etc. for completion of work strictly meeting the requirement of Technical Specifications (refer Article 3-Scope of Work). 6.2. Article 5, relating to Contract price for the aforesaid contract agreement specifies that the Emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotection against heavy vehicle confirming to technical specification, 105 numbers of Foundations for 20 m height Lighting High Mast complete with supply of erection materials for Civil work, with rail guard/channel fencing for protection against heavy vehicle confirming to technical specification, 15 numbers of Foundations for outdoor feeder pillar with platform fencing, gate, cable trench, conduit inserts, plate inserts etc. complete with supply of all erection materials for Civil works confirming to technical specification, one number of Foundations for outdoor feeder pillar cum PDB with Platform fencing and gate, cable trench, conduit inserts, plate inserts etc. complete with supply of all erection materials for Civil works confirming to technical specification and 105 number of Foundations for installation of Structure mounted. Power JBs complete with supply of all erection materials for Civil works. As regards the civil engineering work it has been categorically mentioned in the agreement itself under the general conditions for contract that the Contractor viz. M/s. Bajaj Electricals Ltd., shall be responsible for the construction of all civil foundation for structures an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rical items etc. The magnitude of work done is enormous and these are tailored specifically to fit the dimensions and orientation of the needs of the project. It does not appear prudent or for that matter viable to move these items from one place to the other. Thus, the project fulfills the conditions of it being an immovable property. 6.7. In the aforesaid context, Hon'ble Supreme Court Judgment in the case of M/s. T.T.G. Industries Ltd. v. Collector of Central Excise, [decided] on 7 May, 2004 in Appeal (Civil) 10911 of 1996 [2004 (167) E.L.T. 501 (S.C.)], wherein the contract was for the design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace and the issue was whether the same is immovable property observed as under:- Keeping in view the principles laid down in the judgments noticed above, and having regard to the facts of this case, we have no doubt in our mind that the mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty. 6.9. In the case of Duncans Industries Ltd. v. State of U.P. 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 observing 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 along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the some as a fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. However, works contract and construction activity is eligible for Input Tax Credit if done in respect of plant and machinery. 7.2. Thus, Section 17(5)(c) and (d) would not apply if the expenditure is in relation to a Plant Machinery. Term 'Plant Machinery' is defined in explanation to Section 17 as under: 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. 7.3. Construction is defined under explanation to Section 17(5)(c) and (d) for purpose of these provisions to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property. 7.4. Thus, Plant and machinery has been specifically defined as any equipment, apparatus attached to earth by foundation or structural s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich eventually are used for lighting of Plant Road, Boundary wall and watchtower, are used for making any outward supply . To apply the term used for in the definition for plant and machinery, there should be a nexus between the impugned items on which ITC is being claimed and outward supply . In the present case the project of lighting of plant Road, Boundary wall and watchtower will render such nexus tenuous. 7.7. We affirm with the findings by the AAR that the provisions facilitating availment of Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been misconstrued by the applicant. These towers, boundary and watch tower by their very nature appears to be nothing but independent civil structures, having no relationship whatsoever with outward supply . 8. The Appellant have cited reference of decisions of Hon'ble Supreme Court's in the case of Scientific Engineering House Pvt. Ltd. v. Commissioner of Income Tax, AP and in the case of Pipavav Defense and Offshore Engineering Co. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional officer in respect of the applicant. 8.3. Citing reference of the case of Vodafone Mobile Services Limited v. Commissioner of Service Tax (Delhi High Court) dated 31-10-2018 the Appellant's contention was that Credit of taxes paid on telecom towers have been allowed. In this context, it is seen that the case of M/s. Vodafone Mobile' Services Ltd. and Other such providers of Telecommunication service providers are distinct and distinguishable from the facts and circumstances of the case in hand, inasmuch as in the cited case such towers are being used for providing the output service , viz. Telecommunication service, whereas in the instant case there is no nexus between the impugned items required for the said project of lighting of plant Road, Boundary wall and watchtower on which ITC is being claimed and the outward supply of the Appellant. In the cited Vodafone case, 'Capital goods' are the items under specified Tariff headings or parts, components, spares or accessories thereof and these are 'Base Transmission System' (BTS), which enables the telecom company to transmit mobile signals and thereby render telecom services. Appellant have also gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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