TMI Blog2022 (4) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... e intention of the Legislature in framing this expression, is to limit the vast definition of plant and machinery for the exclusive purpose of availability of Input Tax Credit on such plant and machinery and thereby the Parliament consciously prohibits the availability of the Input Tax Credit on pipelines laid outside the factory premises. The said exclusion applies to all such pipelines laid outside the factory be it small distance of 4 KM as contended by the Authorized Representative or long distance. When the exclusion has been explicitly provided in the Act, there is no need to borrow the definition from other acts including the subsumed Acts and accordingly the definition of factory as per Central. Excise Act or Factories Act, does not apply to this issue. As the transfer pipelines would not fall under Plant and Machinery, the appellant is not eligible to avail input tax credit on the goods and services used for transfer pipelines, the foundations and structural support related to pipelines would also not eligible for ITC on the goods and services used for foundations and structural support related to pipelines. With regard to lease deed for Right of Way, the same is for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. The subject appeal is filed under Section 100 (1) of the Tamilnadu Goods Services Tax Act, 2017/Central Goods Services Tax Act 2017 by M/s. SHV Energy Private Limited (herein after referred as the Appellant), having their registered office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hydraulics is based on ship pump head of 120 mlc (meter of liquid column). Two 16 pipelines and two 6 precooling lines with necessary insulation are considered. In order to reduce the ambient heat ingress and fire protection of the unloading, pipeline, 80mm thick Polyurethane foam (PDF) inner insulation and 50 mm thick Cellular glass outer insulation are recommended. For pre-cooling, the unloading lines, one insulated 6 pipeline is considered. Liquid propane and Butane are admitted into the respective unloading line to affect a slow cooling down of the unloading pipeline (approx. 3-5 C per hour). During the pre-cooling process, gas compressors will have to run continuously. Propane and Butane shall be received in refrigerated ship tankers with their own refrigerated system in parcel sizes of 22,500 MT at Port jetty of Tuticorin. The refrigerated liquid cargo shall be pumped by ship's pumps at a rate of 500 MT/h of Propane and Butane in each loading arm. This will be done through two marine unloading arms of 12 diameter and transferred to the storage tank via 16 diameter pipelines each having a total length of about 4.0 to 4.7 kms. The above mentioned is the process of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the tanks will be used for direct fire extinguishing, cooling down surrounding structures equipment as water curtain to complete cut-off of fire zones. Thus, water reservoir (tank) is integral part of firefighting system which is connected with Hydrant lines sprinklers and water curtain. As part of existing safety system at Terminal, the system has a firewater system with tire following facilities:- 2 Nos of Firewater Pumps 2 Nos of Jockey Pumps 2 interconnected Firewater reservoirs with the total capacity of 2817m3. Firewater ring main with single and double headed hydrants, monitors and deluge spray systems for Compressor, LPG Pumps, Heaters Condensers, Tank Truck Gantry and Transformers are available. Due to proposed Terminal expansion and to meet the fire water demand new water tanks are to be constructed. The minimum fire protection measures envisaged and to be constructed for the terminal expansion are firewater pump house with firewater main pumps and jockey pumps, firewater storage tanks and firewater main ring. Firewater system shall be integrated with the existing facility. Firewater demand shall be calculated for a single largest fire scenario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant is eligible for availment of input tax credit of GST paid on goods and services for setting up of Fire Water reservoir (tank and input credit on goods and services used for foundation and structural support for such reservoir? 4. AAR pronounced the following rulings: 1. The appellant is not eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for unloading propane/butane from the vessel/Jetty to the Terminal. 2. The appellant is eligible for availment of input tax credit of GST paid on goods and services used for setting up refrigerated storage tank including the structural support thereon as per the Purchase Order No.4500405026 dated 11.3.2020 subject to the condition that the tanks are capitalized in their books of accounts as plant and machinery and not as immovable property and the appellant are not eligible to avail input credit of goods and services used for pile foundation as per the purchase order no.4500401679 dated 10.02.2020 3. The appellant is eligible for availment of input tax credit of GST paid on goods and service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to any conflict between the Factories Act and GST law. Thus, unless a conflicting intention is shown between the two legislations, meaning of factory can be understood from factories act. Having concluded that the Appellant's reliance of definition of factory from Factories Act is not tenable, the LA has failed to define what a factory would mean as per the Ld. Authority. The Ld. Authority has merely proceeded to reject the contention of the Appellant stating that the pipeline is outside the factory. This is clearly erroneous and the Impugned Ruling therefore merits to be set aside on this ground. In any case, they would like to place reliance on the definition of 'factory' provided under Section 2(e) of the Central Excise Act, 1944. The definition is reproduced below for reference:- (e) factory means any premises, including the precincts there-of wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; Central Excise law has been subsumed into GST and GST law is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oading Propane/ Butane from ship tankers and transfer it to the storage tanks. Once such transfer is done, the other end of the pipelines at the jetty is disconnected. Thus, it lies disconnected once the transfer has been completed. This fact pattern clearly indicates that the transfer pipes work as a part of the factory itself. Consequently, the impugned ruling holding that the pipelines are laid outside the factory premises is erroneous and is liable to be set aside. They further rely on the interim relief granted by Chhattisgarh High Court in the matter of NMDC Limited Versus Union Of India [WPT No. 77 of 2021]. In this matter, the Hon ble High Court has issued a stay order against the revenue order in a similar matter for allowance of input tax credit on goods and services used for laying of pipelines considering the provisions of Section 16 of the CGST Act. The transfer pipelines are an important part of the complete manufacturing process in their business. Thus, such pipelines should be considered as part of the plant and machinery. Reliance can also be placed on the judgment of the Hon'ble Supreme Court of India in the case of State of Bihar Ors. Vs. Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them should be eligible to them. Based on the decision in the case of Commissioner v. GSPL India Transco Ltd [2016 (43) S.T.R. J23 (Guj.)] by the Hon Hole High Court, it can be concluded that even in their case, transportation of Propane/Butane is not possible without laying of pipeline for transport. Therefore, laying of pipelines is an integral part of their business operations and hence used in course of furtherance of the business. Thus, it can be concluded that laying of pipeline for transport of Propane/ Butane from Jetty to Terminal is eligible for input tax credit under Section 16 of CGST Act and credit should not to be restricted under Section 17 of CGST Act. The Impugned Ruling has not disputed this ground, and this means that the Ld. Authority has accepted that the transfer pipelines are used in the course or furtherance of business. The exclusion from credit eligibility applies only to the pipelines laid outside the factory premise which is used for making outward supply of goods. Having considered the factual background, they wish to highlight specific provision in this regard. Section 17(5) of the CGST Act in its explanation has specifically described the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural support for an equipment/ apparatus. The Authority has not analysed or provided any observations for rejecting the submissions made by the Appellant that pile foundation is essential to bear the load of the tanks and therefore they form foundation of the storage tanks. This represents a flamboyant and prejudiced attempt of the Authority to frivolously deny the credit without any application of mind. Such order cannot be held to be sustainable in law. It is a settled principle of law that the order has to be passed by the Authority by providing a proper reasoning. Reliance in this regard can be placed on the following decisions:- Tata Engineering Locomotive Co. Limited V. Collector of Central Excise, Pune reported in 2006 (203) E.L.T. 360 (SC) State of Punjab v. Bhag Singh reported in 2004 (164) E.L.T. 137 (SC) The ratio of the above-mentioned judgments is fully applicable in the facts and circumstances of the present case. The Authority has however completely ignored the submissions made by them and has also not given any findings or reasoning for rejecting the submissions made by them. Accordingly, following the principles of natural justice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and machinery also specifically includes the foundation and structural support. Hence, the Impugned Ruling rejecting the credit of taxes paid on goods and services used for such pile foundation is erroneous and is liable to be set aside. 'Pile foundation' should be covered in the definition of plant and machinery and not in the exclusion part of such definition The definition of plant and-machinery excludes:- (i) Land, building or any other civil structures (ii) Telecommunication towers; and (iii) Pipelines laid outside the factory premises It is clear that the foundation and structural support and construction of storage and water tank will not fall under the purview of clause (ii) or (iii) above. Therefore, clause (i) which provides for land, building or other civil structure is examined here. The exclusion is for land, building or any other civil structure. Since, pile foundation will not fall under land and building, the term 'any other civil structure' must be evaluated. In the absence of any specific definition of the term civil structure the meaning of the word must be understood in context of the two of the previous words u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts. Such an observation by the Ld. Authority is clearly without any foundation and the impugned Ruling therefore merits to be set aside on this ground alone. Ld. Authority has in Para 10.5 of the impugned Ruling has contended that Rile foundation is more aligned to 'land , which stands excluded, than the 'structural support for an equipment which is stated as 'plant and machinery' in the Explanation to Section 17 of the CSGT Act. In this regard, they submit that the Ld. Authority has grossly erred in understanding the meaning and purpose of the pile foundation by drawing this conclusion. Based on the discussions above, it has been clearly explained that this pile foundation is made solely for the purpose of providing support to the storage tanks and water reservoir tanks and works as a foundation for these. The pile foundation cannot be held to be akin to land' at all. In any case, such a conclusion is whimsical and without any basis and therefore such an observation of the Ld. Authority is erroneous and is liable to be set aside. Pile foundation is essential for the storage and water tanks. Reading all the above provisions together, it can also be inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pth, once the depth has been achieved a reinforcement cage is placed inside the borehole and then filled up with concrete. These piles are finished at ground level. Since the refrigerated tanks need an elevated base, the piles are further extended to another 1.5m above the ground level upon which a pile cap/ concrete foundation is made joining all the piles together to form a load bearing platform. The foundation of water reservoir tanks is also similar to that of the refrigerated storage tanks. The only difference being that the foundation is at ground level. Fire water tank being a smaller structure than the refrigerated storage tank, the diameter of the piles and the number of piles is lesser. The above process depicts that pile foundation is built as per the specifications of the tanks and therefore the same is customised according the requirements. The number of piles, the depth of piles, the elevation of the piles etc are dependent on the requirement as per the tanks to be made above them. The tanks are embedded on such pile foundation. It is therefore clear that the pile foundation is an essential foundation for the tanks (plant and machinery). The Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance pipelines and not pipes running for short distance. In their case, these transfer pipes are running for a short distance from the jetty to terminal. In light of the above, they are eligible to credit of the taxes paid on transfer pipeline and the impugned ruling therefore merits to be set aside. Personal Hearing: 6. The Appellant was granted Virtual Personal Hearing as required under law before this Appellate Authority on 28.01.2022. The Authorized representatives of the Appellant Shri. K. Sivarajan and Ms. Khushboo Gupta reiterated their submissions made along with their appeal applications and their paper-book submitted earlier. They stated that the issue is on the eligibility of input tax credit on the pipeline laid from jetty to the factory premises and the pile foundation laid for storage tanks/water tanks. They further stated that the lease is for the factory area and they have obtained the 'Right of way leave' enabling the laying of pipeline and therefore the pipelines should not be considered as laid outside the factory. The pipelines are running through the port area and therefore no GST Registration can be obtained for the pipeline area which is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that as per Honble Supreme Court in Suo Motu Writ Petition (Civil) No.3/2020 dated 23-03-2020 and 27-4-2021, wherein the period of limitation, as prescribed under any general or special laws in respect of judicial or quasi- judicial proceedings, whether condonable or not, shall stand extended till further orders. This has been examined and the Hon'ble Supreme Court in order No. Misc. Application No.21/2022 in Misc. Application No.665/2021 in Suo Motu Writ petition No.3 of 2020 dated 10- 01-2022 has directed that the period from 15-3-2020 to 28-02-2022 shall be excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of judicial or quasi- judicial proceedings. Accordingly, the appeal filed before this appellate forum is within the said extended period and the application is taken for advance ruling. 8.1 The first issue raised before us is,- Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for Unloading propane/Butane from the vessel/Jetty to the Terminal? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NMDC Limited Versus Union Of India. [WPT No. 77 of 2021] also, the Chhattisgarh High Court, has issued a stay order against the revenue order in a similar, matter for allowance of input tax credit on goods and services used for laying of pipelines considering the provisions of Section 16 of the CGST Act. In their additional submission the appellant has also submitted copies of lease deed entered for Right of way for pipeline and relied on the orders of the Appellate authority for advance ruling, Chhattisgarh in the case of NMDC limited. 8.2 The averments made by the appellant are examined at length with reference to the provisions of the CGST Act and Rules made thereunder. The relevant provision of the CGST Act,2017 is extracted hereunder for the purpose of reference:- 17 (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 contract service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identical circumstances which needs to be proved. Further the appellant relied on the judgment of Hon'ble High Court of Gujarat in the case of GSPL India Transco Ltd. (2016 [43] S.T.R.J23 (Guj). This judgment related to the capital goods under the Central Excise and the definition of capital goods under the Central Excise and GST is not pari-materia and hence the judgment relied on by the appellant would not be useful for the appellant. 8.3 It is pertinent to note that this pipeline is not used for making outward supply as found in the explanation to section 17(5) of the CGST Act,2017 as averred by the appellant. The contention that the transfer pipelines laid outside the factory premises for inward supply whereas the exclusion provided in the said explanation would be applicable for outward supply is not tenable. The exclusion provided therein reads as pipelines laid outside the factory premises and it would be applicable for both outward supply and inward supply. As the transfer pipelines would not fall under Plant and Machinery, the appellant is not eligible to avail input tax credit on the goods and services used for transfer pipelines, the foundations and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while defining the term 'plant and machinery', specifically includes the foundation of such plant and machinery. The Explanation is produced below for ready 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) Telecommunication towers; and. (iii) Pipelines laid outside the factory premises. 9.3 The appellant pleaded that it is clear from the above that where a machinery is fixed to earth by foundation, such foundation is included in the definition of 'plant and machinery; Since the storage and water reservoir tanks have been held to be plant and machinery by the Ld. Authority and thus eligible for input tax credit, the pile foundation which is a foundation essential for the same plant and machinery should also be allowed in accordance with the provisions of the GST law. In light of the above, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice over many decades. Broadly, piles transfer axial loads either substantially by friction along its shaft and/or by end bearing. Piles are used where either of the above load transfer mechanism is possible depending upon the subsoil stratification at a particular site. 10.4 From the above, it is understood that the storage tanks require pile foundation based on soil condition as a part of structure to withstand the load. However, such pile foundation made of Cement, coarse aggregate, fine aggregate, lime, Surkhi, steel, timber and other materials and therefore it is basically a civil structure.. The lower advance ruling authority have ruled that storage tanks are falling under the definition of plant and machinery for which the jurisdictional authority have not raised objection by way of filing of appeal, such ruling attained finality. The foundation has been defined in National building code, 2016 as That part of the structure which is in direct contact with and transmits loads to the ground. . Here in question is whether foundation is eligible for input tax credit on the goods and services used for such foundation as part and parcel of plant and machinery even though i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the words of the explanation above, Plant and Machinery are apparatus, equipment, machinery fixed to earth by foundation or structural support and includes the foundation and such structural supports by which the machinery is fixed to earth. 11.4 In the case at hand, the 'Pile foundation' is the foundation made to strengthen the earth, upon which the tanks are installed, with necessary structural supports. The Pile foundation is made to strengthen the project site though the piling intervals may depend on the location of the Tanks. This docs not make the 'Pile Foundation' as the foundation by which the apparatus, equipment and machinery are fixed to earth. In the case at hand, it is clearly seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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