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TMI Blog2022 (5) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression 'plant and machinery' as foundation to equipment, apparatus, machinery to be installed on it? (2) Whether as per Section 16 read with Section 17 of the said Acts, the applicant can accordingly avail 'input tax credit' of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties? 3. Before starting discussion, we reproduce extracts of Section 16 and 17 of the CGST Act, 2017, which are relevant to this appeal: SECTION 16. Eligibility and conditions for taking input tax credit. - (1) 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. ... ... ... ... ... ... SECTION 17. Apportionment of credit and blocked credits. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or tower 5. The Gujarat Authority for Advance Ruling ['GAAR'] in its Ruling No. GUJ/GAAR/R/46/2020 dated 30.07.2020 ['Ruling' for short'] gave the following findings: a) The construction of the above jetties is nothing but a civil structure or an immovable property constructed on pillars or plinths extending from the sea shore to the deep sea. [Para 10.1 of Ruling refers] b) The GAAR referred the dictionary meanings of the term 'foundation' and observed that foundations are structures which are located below the ground and support the structures/buildings built above it. The primary condition for a structure to be a 'foundation' is that it is required to be a concrete structure made of stones, bricks, cements etc., which should be located below the ground and give support to the structure/building constructed above it. The GAAR found that the jetties are just civil structures or immoveable property, which are akin to a building wherein the only difference being that buildings are located on foundations below the surface of the ground, whereas a jetty is a civil structure which is constructed high above the sea shore and extending into the deep sea, stationed on pillars or plin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refers]. h) Thus, GAAR concluded that the apparatus, equipment and machinery proposed to be installed by the applicant are not covered under the definition of 'plant and machinery' in terms of the Explanation to Section 17 [Para 11.7 of Ruling refers]. 6. In view of the above discussion, the GAAR held that the Jetties proposed to be constructed by applicant is civil structure and cannot be treated as 'foundation'; and not covered under definition of 'plant and machinery' as defined in the Explanation to Section 17. [Para 12 of Ruling refers]. Thus, the Gujarat Advance Ruling Authority has answered the questions raised by applicant, as under: Answer to Question 1: The LNG jetties proposed to be built by the applicant are not covered within the expression 'plant and machinery' as foundation to equipment, apparatus, machinery to be installed on it in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017. Answer to Question 2: The applicant cannot avail 'input tax credit' of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties in terms of Section 16 read with Section 17 of the CGST Act, 2017 read with GGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arms / HP gas unloading arms * Gang way towers * Cold drain tanks * Nitrogen Buffer Vessel * Fire monitor tower / Ground monitor * Air receiver * Dry Chemical Powder (DCP) Skid / AV / DV Skids * Jetty Substation / Instrument Rack Room ('IRR') Positioning of some of the above equipments/structures has been shown in the layout/picture given in Para 4 hereinabove. 10. The appellant submitted that the Authority for Advance Ruling had compared such foundation jetty to foundations of building; and pointed out that a foundation is a structure which is located below the ground on which a civil structure i.e. Building, is built; and similarly in their case held that the jetty is the civil structure like a building built on a foundation. The appellant submitted that the Ld. Authority for Advance Ruling has erred in comparing the foundation of building to the appellants case because a building is a civil structure which has purposes different than that of a jetty; that a building may be used as commercial/residential premise however, the jetty in appellant's case has been built predominantly for installation of plant and machineries. 11. The appellant has described various t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough video conferencing. Thereafter, the appellant submitted further written submission dated 28.12.2020 regarding queries raised during the personal hearing. Gist of the same is as under: (i) Whether the LNG Jetty in question could be used for any other purpose like loading, unloading or handling of any other cargo, in case it was not used for regasification of LNG? * The answer is "No". The Jetty in question cannot be used for such other purpose mainly due to its design and layout. (ii) Whether the Jetty in question is inevitable for regasification plant, or regasification could be done at shore also where foundation and supporting stuctures in nature of LNG Jetty may not be required? * Theoretically, a re-gasification plant could be installed on landmass also, where foundation and structural supports in nature of jetty would not be required. But, in the present case, the re-gasification equipment and plant being installed and commissioned by the appellant at a particular place, from where taxable supply of 're-gasification service' would be provided. For the re-gasification plant and machinery in question, the jetty in question is not only necessary but inevitable and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omic Zone Ltd Vs. CCE & Cus. [2015(39)STR 726 (Guj.)]; and Andhra Pradesh High Court in the case of CCE, Visakhapatnam Vs. Sai Sahmita Storages (P) Ltd., [2011 (270) ELT 33 (A.P.)]. FINDINGS: 16. We have carefully considered the written as well as oral submissions made by or on behalf of the appellant viz. M/s. Swan LNG Pvt. Ltd. We find that the issue is related to admissibility of input tax credit in respect of construction of LNG jetties with reference to clause (c) and (d) of Sub-section (5) of Section 17; as well as the definition of the expression "plant and machinery", as per the 'Explanation' of Section 17 of the CGST / GGST Act, 2017. The said provisions, being crucial, are reproduced below at the cost of repetition (emphasis supplied): SECTION 17. Apportionment of credit and blocked credits. - ... ... ... ... ... ... (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is relevant to the present appeal. The appellant has given the work of construction of jetties on EPC Contract basis to M/s. Afcons. In other words, the work of Engineering, Procurement, Construction and Commissioning is being done by M/s. Afcons. Under this situation, it appears that the material and services for construction are to be purchased/procured by M/s. Afcons and input tax credit on them, if admissible, would to available to M/s. Afcons, not to the appellant. The appellant is getting Works Contract service from M/s. Afcons, which is covered under clause (c) of Sub-section (5) of Section 17. 19. In the Contract Agreement dated 29.09.2018 for Engineering, Procurement, Construction & Commissioning of Package I Works entered by and between M/s. Swan LNG Pvt. Ltd. ('Employer' or 'Appellant') and M/s. AFCONS Infrastructure Ltd. ('Contractor'), the Scope of Package I Works & Progress has been described as under: "2.1 Scope of Package I Works & Progress (i) Major scope of the Package I Works shall include but is not limited to the following: (a) Design and Construction of Jetty 1 consists of Approach Trestle 390m long with Expansion Loops as per Topside Load Data, U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance walkways, Piping loading and Road furniture such as Kerb, Handrail etc. are assessed individually under the Superimposed Dead load." Thus, we find that the Approach Trestles are being constructed to accommodate piping, cable and also to be used as a roadway for personnel access and small vehicles. There is no mention about installation of any plant and machinery on the Approach Trestles of Jetty-1 and Jetty-2. In view of the above, it is clear that no plant & machinery are to be installed or fixed on Jetty Approach Trestles. When pipeline laid outside the factory premises is excluded from the definition of "plant and machinery" under the 'Explanation' Section 17, the Approach Trestle accommodating such pipeline cannot be termed as foundation to plant and machinery. So, we hold that RCC Pile foundation of the said Approach Trestles cannot be termed as foundation of plant and machinery. Mooring dolphins and Breasting dolphins (Not mentioned separately in Annexure-1) The EPC contract with AFCONS further includes design and construction of Mooring Dolphins and Breasting Dolphins on both jetties. The use of these two items has been described on a webpage viz. 'https://www.conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and structural support is also to be treated as 'plant and machinery' by virtue of the statutory 'Explanation' to Section 17 of the CGST Act, 2017. Fire Water Tanks 2 Nos. (Sr.No.4 of Annexure-1) These Fire Water Tanks of total 11,000 cubic meter storage capacity, are to be constructed to shore, not on LNG jetties. Hence the said foundation is not covered under the application for Advance Ruling. Pump room with shed (Sr.No.5 of Annexure-1) Pump room with shed does not appear to be constructed on LNG jetties. So, its foundation, as mentioned in the Annexure-1, is not covered under the application for Advance Ruling. Foundation of gas and water pipeline on jetty and on RCC platform and Jetty in the Arabian sea (Sr.No.6 of Annexure-1) Pipelines laid outside the factory premises are clearly excluded from the expression of 'plant and machinery'. So, its foundation also stands excluded. Foundation of gas and water pipeline on shore (Sr.No.7 of Annexure-1) Gas and water pipeline on shore is not being constructed on jetties. So, its foundation is not covered under the application for Advance Ruling. Offices on shore (Sr.No.8 of Annexure-1) Offices on shore are not being constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble property, which is in nature of 'plant and machinery' including foundation and structural supports thereof, is admissible under the same provisions. 26. The appellant seeks a ruling as to whether LNG Jetties being built by them were in nature of 'plant and machinery' being foundation for equipment, apparatus, machinery for re-gasification to be installed thereon. We find that as per Explanation provided under Section 17 of the CGST Act, 2017 '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. Here the section 17 of CGST Act, 2017 provides for allowing input tax credit in respect of goods or services both received by a taxable person for construction of plant and machinery fixed to earth by foundation or structural supports that are used for making outward supply of goods or services or both. The input tax credit on construction of foundation is allowed if the same is used for fixing on it the plant and machinery and further the said plant and machinery should be used for making outward supply of goods or services or both. The foundation or structu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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