TMI Blog2021 (12) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The life span of a landfill ranges from 12 to 40 years. The definition of the expression plant and machinery as given in the Second Explanation to Section 17(5) uses the term means . As per the principles of interpretation of law laid down by higher judicial forums, a definition which uses the term means has to be strictly construed to mean only what is stated therein and nothing more, nothing less. For the land filling pit to be considered a plant , it has to be either an apparatus , equipment or machinery which is fixed to the earth. Foundations and structural supports used to fix such apparatus, equipment and machinery to the earth are also covered within the ambit of the definition of plant and machinery . The definition also has certain exclusions to make it clear that even if they are fixed to the earth, they will not be considered as plant and machinery . The use of the word means indicates that the definition is hard and fast and no other meaning can be assigned to the expression than what is put down in the definition. In the second explanation given in Section 17, while providing the meaning of the term plant and machinery, it has been clearly stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and closed and sealed for 30 years. The land fill pit has been capitalised in their books of accounts as an asset and they have claimed depreciation under Income Tax. 4. In order to obtain a ruling on the classification of the service provided by them, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question: Whether the land filling pit can be considered as Plant and machinery and therefore eligible for input tax credit or; whether the landfilling pit is to be considered as civil structure and therefore become ineligible for input tax credit. 5. The AAR received an opinion from the jurisdictional office of the Principal Commissioner of Central Tax, West Commissionerate, Bangalore wherein it was stated that the landfill pit is an immovable civil structure which is constructed by the applicant on his own account and does not fit into the definition of plant and machinery. Based on the above opinion, the AAR vide its order KAR ADRG No 46/2020 dated 11 th September 2020 held as under: The land filling pit is not a plant and machinery but a civil structure. 6. On receipt of the advance ruling order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical operations; that the land filling pit satisfies the functionality test and can be considered as a plant even though it was embedded in the earth. They submitted that the lower authority has not made any reference or discussion to any of the judicial precedents relied upon by them; that the AAR has only made a plain observation that these cases are not applicable for the specific purpose of Chapter V and VI but made no attempt to discuss or distinguish the cases submitted by the Appellants. 8.3. The Appellant submitted that on the land leased from the Government for purposes of solid waste management, the following structures are proposed to be constructed viz: Land filling pit, Temporary water Storage Tank, Utility / Parking, Green Belt Area, Office and laboratory area, Labour shed and Compound wall; that other than the land filling pit, all other structures involve the use of concrete, bricks or cement; that construction materials like steel, cement and bricks will be sourced from local manufacturers for the purpose of other structures only and not for land filing pit; that no cement, steel or bricks are used in the land filing pit at any time and hence the same cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the observation that the process carried out in a plant must be a controlled/mechanised process/activity is contrary to the position laid down by the Supreme Court in Scientific Engineering House (P) Ltd vs Commissioner of Income Tax, Andhra Pradesh cited supra; that the Hon ble Supreme Court made it clear that the term plant need not be used for mechanical operations. They also submitted that the land filling pit satisfies the functionality test which was explained by Lord Guest in IRC vs Barclay Curie and Co and referred to by the Karnataka High Court in the case of Santosh Enterprises vs Commissioner of Income Tax (MANU/KA/0052/1988); that the services provided by the Appellant include not only disposal of waste but also ensuring that during the period of disposal, any leachate from the waste does not escape; that all precipitation that falls onto an open landfill is absorbed into the waste; that as precipitation leaches through the waste, it picks up contaminants such as metals, nitrogen, silt, salts, volatile organic compounds and oxygen demanding wastes known as leachate; that if not managed and treated properly, the leachate can cause serious damage to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is a plant even though it was embedded in the earth. Some of the decisions relied upon by them in this regard is as follows: a) Commissioner of Income Tax vs Oil India Ltd - (1992) 105 CTR (Cal) 356 b) Tribeni Tissues Ltd vs Commissioner of Income Tax - (1991) 190 ITR 487 (Cal) Therefore, in their case, the land filling pit qualifies to be a plant or machinery as provided under Section 17(5)(d) of the CGST Act. 8.8. The Appellant submitted that the term used in the Second Explanation to Section 17 and the term used in Section 17(5)(d) is not the same; that the Second Explanation to Section 17 explains the term plant and machinery whereas the term referred to in Section 17(5)(d), which is applicable in their case, is plant or machinery ; that the explanation contained in clause (i) to Second Explanation under Section 17 of the CGST Act is applicable only to the term plant and machinery which is mentioned in Section 17(5)(c); that their case is covered under Section 17(5)(d) and not Section 17(5)(c); that the exclusion as contained in the Second Explanation is not applicable to their case as it is respect of the expression plant and machinery and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the waste; that for this purpose, the Appellant has constructed a land filling pit. A query was posed before the lower Authority whether the land filling pit is restricted for input tax credit by virtue of the 2 explanation to Section 17(5) of the CGST Act which excludes civil structures from the definition of plant and machinery . The lower Authority had given a ruling that the land filling pit is a civil structure by considering the opinion received from the jurisdictional officer which was not shared with the Appellant and hence amounted to violation of the principals of natural justice; that the Appellant approached the Hon ble High Court of Karnataka who vide its order dated 7-4-2021 remanded the matter to the lower Authority to pass an order afresh without being influenced by its earlier order. The Advocate submitted that the lower Authority in its denovo order has virtually reproduced its original order and given the same ruling and has failed to take into consideration the fresh submissions made by the Appellant during the denovo proceedings; that the lower Authority has violated the specific direction of the Hon ble High Court to take a fresh decision and hence the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir grounds of appeal, as well as the submissions made at the time of personal hearing and in the additional submissions. 11. Briefly stated the facts are, the Appellant is engaged in providing service of treatment, storage and disposal of hazardous waste which is done as per the guidelines of the Central Pollution Control Board and Karnataka State Pollution Control Board. For the purpose of carrying out this activity, they have obtained land on lease from the Government on which they have constructed facilities such as : a) Land filling pit, b) Temporary waste storage area, c) Utility/Parking, d) Green Belt Area, e) Office Laboratory area, f) Labour shed and g) Compound wall. 12. The Appellant approached the lower Authority for a ruling on whether the land filling pit which is capitalized in their books of account as a capital asset and used for providing their output service of treatment, storage and disposal of hazardous waste, is entitled for input tax credit or is blocked by virtue of Section 17(5) of the CGST Act. According to Section 17(5)(d) of the CGST Act, goods or services or both received by a taxable person for const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng pit or is it hit by the restriction laid down in clause (d) of Section 17(5) of the CGST Act. Before we analyze the provisions of law, let us understand what a land filling pit is and how it is constructed. Contrary to common understanding, a land fill for disposal of hazardous waste is not an open dump. It is an engineered pit in which layers of solid waste are filled, compacted and covered for final disposal. Land filling is the term used to describe the process by which solid waste is placed in the landfill. The purpose of land filling is to bury/alter the chemical composition of the waste so that they do not pose any threat to environment / public health. Landfills are built to concentrate the waste in compacted layers to reduce the volume and monitored for the control of liquid and gaseous effluent in order to protect the environment and human health. It is lined at the bottom to prevent groundwater pollution. Each layer of solid waste is covered with a layer of compacted soil until the capacity of the landfill is reached. It is then covered and sealed. The life span of a landfill ranges from 12 to 40 years. 15. In the Appellant s case, the landfill in question is an eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the following, namely: - .. . . (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. 17. From a reading of the above clause (d) of Section 17(5), it emerges that goods and services received by a taxpayer for construction of immovable property on his own account are not eligible for input tax credit. The exception however, is when the immovable property is in the nature of plant or machinery, then the goods and services received for construction of plant or machinery will be eligible for credit and will not be hit by the restriction under clause (d). The term immovable property has not been defined under GST Acts, therefore reference needs to be taken from General Clauses Act, 1897.Section 3(26) of the General Clauses Act, 1897, reads: immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth . Attached to earth is defined in Section 3 of the Transfer of Proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s its colour from the whole. In other words, the meaning of the individual words plant and machinery will have to be derived from the definition of the expression plant and machinery . Therefore, the terms plant or machinery will have to be understood as 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 would include foundation and structural supports but would exclude (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii)pipelines laid outside the factory premises. We, therefore, dismiss this argument of the Appellant. 19. Having said this, we observe that the definition of the expression plant and machinery as given in the Second Explanation to Section 17(5) uses the term means . As per the principles of interpretation of law laid down by higher judicial forums, a definition which uses the term means has to be strictly construed to mean only what is stated therein and nothing more, nothing less. For the land filling pit to be considered a plant , it has to be either an apparatus , equipment or machinery which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case before us. The context in which the term plant has been defined in the Income Tax Act is not relevant for interpreting the said term under the CGST Act. The Supreme Court in the case of Kohinoor Elastics Pvt Ltd vs Commissioner of Central Excise [2005 (188) ELT 3 (SC) has settled the principle that a statute has to be interpreted in the context in which the words are used in that particular context. The Hon ble Supreme Court has pointed out that it is not permissible to bring in the meaning in another Act for interpretation of certain terms in the Central Excise Act. Applying the ratio of this decision, we hold that when the CGST Act has a clear definition of plant and machinery , there is no necessity of relying on the definition of the word plant as given in the Income Tax Act. Further, the Income Tax Act and the CGST Act are not pari materia and hence the Doctrine of Pari materia in interpretation of statutes will not apply here. Moreover, the explanation which defines plant and machinery in the CGST Act is exhaustive as illustrated by the term means used after plant and machinery vis-a-vis the use of the term includes occurring in the definition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower plants, sewerage systems and other infrastructure . Further, a structure in the context of civil engineering refers to anything that is constructed or built from different inter-related parts with a fixed location on the ground. Accordingly, a civil structure would be any man-made structure which is built by applying the science of civil engineering. The materials used for construction of structures is irrelevant. A civil structure can be built with cement and steel or by means of other materials depending on the purpose of the structure and its feasibility. In the case of a landfill, the purpose is to dispose of hazardous waste and manage the leachate in order to avoid serious damage to the environment. Hence, the landfill is constructed using geo synthetic materials which serve to protect the soil and groundwater. This however, will not disqualify a landfill from being a civil structure. We are therefore of the opinion that the lower Authority was right in construing that the land filling pit is a civil structure. The definition of plant and machinery as given in the Second Explanation to Section 17 clearly excludes a civil structure from being considered as a plant. By ..... X X X X Extracts X X X X X X X X Extracts X X X X
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