9911796707
TMI Blog2020 (10) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of India. It is owned by the Government of India and is under the administrative control of the Ministry of Steel. II. It is India's largest iron ore producer and exporter producing about 30 million tons of iron ore from 3 fully mechanized mines in Chhattisgarh and Karnataka. It also operates the only mechanized diamond mine in the country at Panna in Madhya Pradesh. III. Since inception it is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, beach sands etc. IV. Operating Mines of NMDC includes the following - * Bailadila Iron Ore Mine, Kirandul Complex, Distt. South Bastar, Dantewada (Chhattisgarh) * Bailadila Iron Ore Mine, Bacheli Complex, Distt. South Bastar, Dantewada (Chhattisgarh) * Donimalai Iron Ore Mine, Donimalai, Distt. Bellary (Karnataka) * Diamond Mining Project, Majhgawan, Panna (Madhya Pradesh) V. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and economical mode of transporting liquids like petroleum, petroleum products, natural gas, water, milk, etc. Even solids can also be transported through pipelines after converting them into slurry. The Appellant uses pipelines to transport water from the nearest water source to its factory. 3. That, the project was initiated in the pre-GST regime, under which pipes were exempt from Excise duty. However, plant and equipment. to the extent it qualifies as 'capital goods. were eligible even if the same were installed outside the factory as the definition of 'capital goods' under CENVAT Credit Rules, 2004, specifically included capital goods used outside the factory for pumping of water for captive use in the factory. 4. That, as per Section 16(1) of CGST Act. "Every registered person shah, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person." 5. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of the final product whether directly or indirectly. In the present case, inputs which are used in relation to the manufacture even directly would be regarded as an input for the purpose of Rule 57A. Sub-rule (1) of Rule 57A does not, in any way, specify that the inputs have to be utilised within the factory premises. The explanation contained in Rule 57A is merely meant to enlarge the meaning of the word "input" and does not in any way restrict the use of the input within the factory premises nor does the said Rule 57A require the inputs to be brought into the factory premises at any point of time." 12. That, based on above, it can be concluded that pipelines are an integral part of the manufacturing process and therefore is rightly eligible for credit in terms of Section 16 of CGST Act, 2017. Pipelines need not be necessarily utilized within the factory premises. If the usage of inputs/input services is at some distance away from factory, credit cannot be denied on the ground that they were not used as inputs within the factory. 13. That, in the case of Union of India v. Hindustan Zinc Ltd. [2002 (142) E.L.T. 289 (Raj.)], at para 10 it was held that "Extraction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of Appellant's mining activity. 19. Further contended that pipelines laid outside the factory for transporting water from outside the factory into factory for manufacture of final product is to be considered as used within the factory. Activities for manufacturing of final products in the factory is for furtherance of business of Appellant's mining activity. 20. The Appellant contended that the expression used for the purpose of exclusion is "Pipeline laid outside the factory premise". Therefore, one can infer that pipeline laid anywhere other than outside factory should be eligible for credit. Also, credit of taxes paid can be allowed when pipeline is considered as a part of the Appellant's factory. 21. That, in the current case, the pipeline is not completely laid outside the factory of the Appellant. A part of the pipeline is well within the factory of the Appellant and therefore, the restriction contemplated in the section should not restrict the Appellant from claiming credit of taxes paid. 22. Therefore, emphasis has to be given to the word "factory" used in Section 17(5) and the exclusion shall be applied only to pipeline laid outside factory. By the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the factory when one end of the pipeline is within the factory and the same being used for drawing water and transporting to the factory. Therefore, the portion of pipeline lying outside the factory is also to be considered as part of pipeline inside the factory and hence cannot be considered as pipeline laid outside the factory. 28. That, in the case of Commissioner Vs GSPL India Transco Ltd [2016 (43) S.T.R.123 (Guj.)], Hon'ble High Court held that: "The Appellate Authority in its impugned order had held that transport of gas was not possible without pipeline, except with help of tankers which would be highly uneconomical. Further definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004, does not exclude services in laying of pipeline for transport of gas as said service is different from construction of new building or civil structure as per erstwhile Section 65 (25b) of Finance Act, 1994. This service is also not covered by other exclusion clause of said Rule regarding use in laying foundation or constructing support structure for capital goods. It was accordingly held that Appellant was eligible to avail Cenvat credit of Service Tax paid by service pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input service received by the Appellant from EPC contractors and others is not for laying of foundation or making of structure for support of capital goods, same does not fall under the exclusion clause, as above." Based on above it can be concluded laying of pipeline for transport of water to factory is eligible for input tax credit under Section 17 of CGST Act, 2017. 30. That, the restriction under section 17 (5) of the CGST Act, 2017 should be construed only to apply to pipelines laid outside the factory premises for provision of outward supply of goods and not pipelines laid outside the factory premises for inward supply of raw material necessary for manufacture of steel. 31. The relevant extract of Explanation under Section 17 (5) of CGST Act is extracted below for reference: 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) Telecommunicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant further draws attention to Sec 17 (5) wherein while denying the credit on motor vehicles u/s 17 (5) (a), the provisions also specifically mention in 17 (5) (a)/(b), the services of operating the motor vehicle are also denied for input tax credit as under: "(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa)...... (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): ..........." 40. The Appellant therefore submits that as given above for motor vehicles where even repairs and maintenance are not allowed for input tax credit, no specific restriction is provided for insurance, repairs and maintenance for pipeline. Therefore, in the absence of such restriction u/s 17 (5), the Appellant is eligible fore credit u/s 16 (1) as the mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maintenance Services (O & M Services') obtained by the Applicant for the maintenance of the facility? 5.1 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 with GSTIN 22AAACN7325A3Z3, against the AAR (Authority of Advance Ruling) order No. STC/AAR/09/2019 dtd. 12.03.2020 passed by AAR, Raipur Chhattisgarh. 5.2 NMDC Limited (hereinafter 'the Appellant' or 'NMDC') 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. 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 Chhattisgarh state with an estimated outlay of Rs. 20,000 Cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years for NISP to a consortium lead by M/s Megha Engineering and Infrastructure Limited. The scope of work is categorized into 3 categories which are as under: i. Construction of intake well and pump house along with supply of associated motors and electrical equipment's ii. Construction of pipeline, erection, installation and commissioning iii. Operation and Maintenance Service for five years 5.4 Section 16(1) of CGST Act stipulates that: "Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. As per "Section 2(59) "Input" means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; As per Section 2(19) "capital goods" means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 5.8 Aforesaid explanation to section 17 (5) of CGST Act, 2017 categorically excludes pipelines laid outside the factory premises from the scope of plant and machinery, besides restricting 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 construction activity is eligible for Input Tax Credit if done in respect of plant and machinery. As already discussed supra, "plant and machinery" stand defined as any equipment, apparatus attached to earth by foundation or structural support used for supply of goods or services and at the same time specifically excluding therein land, building or any other civil structures, telecom towers and pipelines laid outside the factory premises. Works contract inter-alia include construction of any immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery" it also fulfills the conditions of being an immovable property. 5.10 We also find that the AAR in their impugned order appealed against, have also cited reference to 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 (167) E.L.T. 501 (S.C.) in Appeal (civil) 10911 of 1996, 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 existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 same 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 that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show that the purpose for which these machines were embedded was to use the plant as a factory for the manufacture of fertiliser at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted." 5.11 The inference drawn by the AAR that there being no visible intent on the part of Appellant to dismantle the said project of laying of pipe lines as these projects are being conceptualized for a fairly long period of time on the basis of the scope of work itself as forthcoming from the documents supra issued by M/s NMDC, the said project of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 etc. of CETA, 1985. In the case in hand, pipe lines laid outside the factory premises (that too as far as even 50Km away from the factory premises) stands excluded from the scope of plant and machinery as discussed in the preceding para. Thus the said case laws cited by the appellant are distinct and distinguishable to the facts and circumstances in hand in as much the pipelines here are for transporting water from sources far away from the factory premises of Appellant. 5.13 Now coming to the second point on which the Appellant have sought ruling regarding eligibility of input tax credit on taxes paid on annual operation and maintenance services for the aforesaid pipeline laid outside the factory premises. It has been the contention of the Appellant that the contractor (supplier) is required to maintain the facility for about five year from the commencement of the facility and that for the operation and maintenance services (O & M services) of the supplier, the Appellant pays a considerable sum and is, therefore, required to pay a considerable sum of taxes under the GST law and that Input tax credit of taxes paid on the operation and maintenance should be available as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odernization, renovation and repair of plant and machinery, which is definitely not the case here in as much as such pipelines laid outside the factory premises stand excluded from the definition of 'plant and machinery'. Here it is not the case that 'Pipelines laid , outside the factory premises' are being used for providing any output service of transport of liquids/gases. The appellant have also furnished a copy of certificate of licence to run a factory issued by the Government of Chhattisgarh to bring home their point of contention that these pipe lines (laid outside the factory) are 'factory' in itself. Perusal of the said certificate reveals that this licence has been granted by the Deputy chief Inspector of Factories, Government of Chhattisgarh for the very specific purpose of water treatment and pumping of water to the consumers by employing workers not more than nineteen on any one day during the year. This certificate in no way comes to their rescue for the claimed Input Tax Credit under the provisions of section 16 (1) of CGST Act 2017, in as much as the said certificate is for treatment of water and its pumping from the said source of water whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business. No nexus whatsoever could be made of the "outward supply", with the pipe lines laid outside the factory premises of Appellant for water supply on which ITC is being claimed. We also agree with the findings of 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 Appellant. The Appeal filed by the Appellant is thus found to be devoid of any merits. Having regard to the facts and circumstances of the case and discussions as above, we dispose of the instant appeal filed by M/s NMDC, the Appellant by passing the following order:- ORDER (Under Section 101(1) of the CGST Act, 2017 and Chhattisgarh Goods and Services Tax Act, 2017) No. STC/AAAR/05/2020 Raipur, Dated 15/10/2020 The ruling so sought by the Appellant is accordingly answered as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
