TMI Blog2021 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into a work order for supply, installation, erection and commissioning (SITC), maintenance and warranty of HVAC worksin the Building comprising the Factory building, assembly building, the Admin Building and Canteen Building - all the parts of Air conditioning and cooling system get assembled at the site and fitted on the wall and roof and the floor of the building. All the different parts of Air conditioning and cooling system after being fitted in the building loose their identity as machines or parts of machines and become a system, namely Air conditioning and cooling system . This AC System is in nature of a system and not machine as a whole. It come into existence only by assembly and connection of various components and parts. Though each component is dutiable to GST, the air conditioning plant as such is not a good under HSN (customs Tariff Heading). We note that Air conditioning unit , however, is dutiable as per HSN but not Air conditioning plant . Whether the air conditioning plant is a movable or immovable property? - HELD THAT:- The supply of centralised air conditioning plant is covered at Section 17(5)(c) CGST Act - section 17(5) CGST Act is a N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g works Piping with insulation-supported on fabrication. Plant Area-Non Movable 4. Ducting Insulation work Supported from ceiling or on fabrication structure-so there is no vibration. Plant Area-Non Movable 5. HVAC related ELE-work Cables on cable trays and control panel are fixed at location. Plant Area-Movable 6. Process Water System Chiller+Pumping system for cooling process equipment-so that it can provide better efficiency. Plant Area-Movable 7. Moulding Area Exhaust System Supported from ceiling or on fabrication structure-so that there is no vibration. Plant Area-Movable 8. GF-Assembly Area Exhaust System Supported from ceiling or on fabrication structure-so that there is no vibration. Plant Area-Movable 9. HVAC B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For maintaining Oxygen level. Plant Area-Non Movable 5. Canteen Area Fresh Air System For maintaining Temperature. Administration facility-Non Movable 6. Admin Area Fresh Air System Only controller and PC. Administration facility-Non Movable 2. The applicant seeks Ruling on admissibility of input tax credit of GST paid on the procurement of the above including the service of installation and commissioning of the same, in terms of the provisions of Section 16 and 17 of the CGST Act, 2017. 3. The applicant submitted as follows: (i) General provisions of ITC under GST: Section 16(1) of the CGST Act, 2017 provides for the eligibility of input tax credit on supply of goods or services used or intended to be used in the course or furtherance of business. However, as per Section 16(2), this eligibility of input tax credit is subject to certain restrictions and conditions like payment of tax by supplier, filing of returns etc. Relevant extract of Sections 16(1) and 16(2) of the CGST Act read as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are used in the course or furtherance of business. Thus, it may be inferred that tax paid on goods or services used in the course or furtherance of business is eligible for ITC except if they are procured for construction of immovable property. However, the above exception is not applicable in case of plant or machinery. The term construction has been defined in Explanation to clause(d) to Section 17(5) in an inclusive manner and states that 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. (iii) Applicability of Clauses(c) and (d) of Section 17(5) on Plant and Machinery: The term plant and machinery has been defined in Explanation to Section 17(5) in an exhaustive manner and states that: The term 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. Tele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and things attached to the earth, or permanently fastened to anything attached to the earth; Things attached to earth is defined under Section 3 of Transfer of Property Act, 1882 as under: It means- (a) Rooted in the earth, as in the case of trees and shrubs; (b) Imbedded in the earth, as in the case of walls or buildings; or (c) Attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached. (viii) Judicial Precedents: There are a plethora of judgements of the Hon ble Supreme Court and High Courts which help understand the term immovable property . Few of them are mentioned hereunder: (a) In CCE, Ahmedabad vs. Solid Correct Engineering Work s[2010 (4) TMI 15-SC, 2010(252) ELT.481 (SC), 2010 (4) SCR 476, 2010 (5) SCC 122, 2010 (3) JT 575, 2010 (3) SCALE 598, the Hon ble Supreme Court observed and held that in the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the latter part is in the positive then it would be treated as permanently attached to the earth. (e) In Quality Steel Tubes(P) ltd. vs. Collector of Central Excise, U.P. [1995 (75) ELT.17 (SC)-1995 (2) SCC 372], Hon ble Supreme Court had to consider the question whether the tube mill and wielding head erected and installed by the appellant for the manufacture of tubes and pipes out of duty paid raw material were assessable to duty under residuary Tariff Item No.68 of the Schedule, being excisable goods within the meaning of Central Excise Act. While re-stating the test, namely, first the article must be goods and secondly that it should be marketable or capable of being brought to market, it was held that goods which are attached to the earth and thus become immovable did not satisfy the test of being goods within the meaning of the Central Excise Act nor can be said to be capable of being brought to the market for being sold. It was found that both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 372:(1995) 75 ELT 17]-1994 (12) TMI 75-SUPREME COURT OF INDIA and Mittal Engg. Works(P)ltd.[(1997)1SCC203:(1996) 88 ELT 622]-1996(11) TMI 66-SUPREME COURT OF INDIA as also the earlier judgement of this Court in Sirpur Paper Mills ltd. vs. CCE [(1998) 1 SCC 400 (1998) 97 ELT 3]-1997 (12) TMI 109 109-SUPREME COURT OF INDIA. In this case the Apex Court clearly laid down that after assembly, when the item continues to be goods, only then it can be held to be excisable goods. However, on completion of process of erection, if the item becomes immovable property, then it is not excisable. The observations made in above judgements are very useful in determining when a property can be considered as immovable property. (ix) Further, CBIC has issued Order No.58/1/2002-CX dated 15.01.2002 under Section 37B of the Central Excise Act in order to clarify the term immovable property. The para 5 of the order is reproduced below: 5. Keeping the above factors in mind the position is clarified further in respect of specific instances which have been brought to the notice of the Board. (i)........... (ii).......... (iii) Refrigeration/Air conditioning plants. These are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Tool room process water HVAC BMS. Photographs of the same are submitted. The applicant has stated that it is used in plant as a part of production process in injection moulding machine; that plastic granules used in the machines is being melted and put in the mould to make the plastic part; that this plastic part is very hot and can t be taken out of the machines unless the temperature of the machine/ part is brought down. The process water system is used to bring down the temperature so that the part can be cooled down and can be taken out. (3) The Exhaust system is used in the plant so that sufficient ventilation is maintained and it includes moulding area exhaust system and GF-Assembly area exhaust system. (4) As regards VRF work, it is just like split AC with the exception that multiple indoor units are connected with single outdoor unit and it is installed at admin/plant. It includes VRF work-Admin and VRF work-plant building. (5) The Ventilation system is used to provide sufficient ventilation/fresh air to plant/admin area and includes factory toilet plant room ventilation, admin area toilet kitchen ventilation work, utility building ventilation work, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of cost of materials, labour, machineries etc. and that GST will be payable extra at actual as per the statutory norm at the time of billing. The contract value is for the entire scope of supply.The work order also contains, inter alia, the following terms: (1) SKAI Air will provide free of charge 1 or 2 operators depending on load-at Wago site for initial 12 months(after commissioning), who will operate chiller/train wago people. (2) During the entire 18 months of warranty-Mitsubishi shall send their Technical person twice a month for check up of chillers and VRF system. (3) Wago will provide BMS Controller to SKAI Air and SKAI Air will not charge any margin and bill-back to back on same cost. Wago will provide service and technical back up for this controller as and when required to SKAI air. (4) Comprehensive Maintenance contract charges of entire plant and office (chillers, VRF units, AHU, DHU, Pumps) will be 148 lacs for entire 10 years after 18 months of warranty. Further, an Advance Bank Guarantee and Contract Performance Bank Guarantee is required to be executed by the SKAI along with one year maintenance service. It has also been specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The invoices for goods include items such as air cooled scroll chiller, spring isolator, air handling unit, compact cassette unit, expension tank, hydraulic separator, valves, pressure gauge, pumps, M.S. structure, expension bellow, MS/SS/PVC pipes, SS elbow, flanges, sockets, end caps, clips, GI ducting and insulation works, anchor fastener, threaded rod, temperature gauge, strainer, drain pipe, electrical panel, AHU panel, cables, GI cable tray, control panel, air cooled condensing unit, refrigerant piping, drain pipe, flot switch, hydraulic separator etc. for their air conditioning system whereas the items/goods obtained for their ventilation system comprises of fresh air fans, exhaust fans, electrical panel, GI ducting, threaded rod with PU coating, beam clamp, piping support for copper pipe and drain pipe, drain pipe U clamp, brid screen and cowls, grill, MS structure, regulators, suitable PU coated GI perforated cable trays with cover with necessary structural supports, Anchor Fastener, insulated PVC pipe, SITC of sheet metal ducts(factory fabricated ducts) with accessories like veins, flanges, guide vens as per technical specification, flexible duct for equivalent connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd commissioning (SITC), maintenance and warranty of HVAC worksin the Building comprising the Factory building, assembly building, the Admin Building and Canteen Building. We note that the applicant in his additional submission has divided the Air conditioning and cooling system into 4 sub categories as follows: Air conditioning and cooling system, Process water system, the Exhaust system and VRF work. On examination of the work order, invoices raised and also all the pictures submitted in respect of the above, we find that they are invariably part and parcel of the air conditioning and cooling system as such and the single work order has been awarded for the installation and commissioning of HVAC system. In the work order no separate clauses has been mentioned for all the 4 categories as applicant bifurcated. The copies of Invoices raised are for the parts and components for the HVAC system and for labour work of such system. Even the Invoice do not contain the description of different systems. The applicant in the personal hearing has stated that the process water system is attached to the moulding machine. However, we find no specification of moulding machine to be fitted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place , if the answer to the former is in the positive it must be a movable property but if the answer to the later part is in the positive then it would be treated as permanently attached to the earth. We note the applicants submission that only after the system is dismantled and individual parts of the air conditioning system are removed they can be transported. AC system as a whole cannot be transported from one place to another. We find the test of permanency laid down by the Apex Court has been answered in subject case as the System cannot be taken as such to the market for sale and cannot be shifted from one place to another as such. It can be shifted only after dismantling the plant which cannot be called Air conditioning system after it is dismantled. Further, Air Conditioning system once installed and commissioned in the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) with accessories like veins, flanges, guide vens as per technical specification, flexible duct for equivalent connecting fresh air ducting and cassette ac indoor units fresh air connection, fabrication and erecting structure steel for support etc. All the different parts of Ventilation system after being fitted in the building loose their identity as individual goods and become Ventilation system . We find that the Ventilation system fitted in the building cannot be taken as such to the market for sale and cannot be shifted from oneplace to another as such to erect at another site. It can be shifted only after dismantling the said system which cannot be called Ventilation system after it is. The Ventilation system once installed and commissioned in the building is transferred to the building owner and this involves the element of transfer of property, thereby Ventilation system supply merits to be classified as work contract supply as the system per se is an immovable property. Further as per cited Govt. of India Order No. 58/1/2002-Cx dated 15-1-2002, the relevant extract is reproduced as follows and we hold that its rationale and concept is relevant under GST scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court. Further, the decisions of CCE, Ahmedabad vs. Solid Correct Engineering Works as well as that of Sirpur Paper mills ltd. vs. Collector of Central Excise, Hyderabad are also not applicable since it pertains to machines fixed by nuts and bolts to a foundation or attaching of the machine to a concrete base for preventing wobbling whereas the issue in the present case pertains to installation of air conditioning cooling system and ventilation system and not machines. The decision in the case of CCE, Chennai vs. Kone Elevators India ltd. [2006 (6) TMI 142-CEGAT, Chennai-2001 (138) ELT. 638(Tri-Chennai) is also not applicable as it pertains to installation of lifts in the building which is an issue different from the present case. We find that the decisions in the case of Triveni Engg. Industries ltd. vs. CCE, Municipal Corporation of Great Bombay Ors. Vs. Indian Oil Corporation ltd. as well as CBEC s order No.58/1/2002-CX dated 15-1-2002 referred to by the applicant are squarely applicable in the present case. 14. In Conspectus of aforementioned findings, we issue the Ruling: RULING Input tax credit is not admissible on Air-conditioning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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