TMI Blog2022 (5) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 structural support needs to be exclusively for fixing the plant and machinery on it. Allowing input tax credit on construction of foundation cannot be decided in isolation without deciding as to whether items to be fixed on it falls within the definition of plant and machinery and further the same would be used for making outward supply of goods or services or both. The appellant is not before us seeking ruling on allowing input tax credit on any plant and machinery including its foundation that will be used for making outward supply of goods or services or both - LNG Jetties are nothing but civil structures and civil structures are excluded from the definition of foundation and structural supports. The foundation that is allowed in the definition of plant and machinery is that which fixes the plant and machinery to the earth making it immovable. If certain portion of LNG jetties is used for directly fixing plant and machineries then it will not make jetties foundation for plant and machineries but they are only in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictions 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. - ... ... ... ... ... ... (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; (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. Explanation . For the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 plinths. Thus, the GAAR is of the view that the jetty, in itself, being civil structure and immovable property, cannot be considered or covered under the definition of foundation . [Para 10.3 of Ruling refers] c) After going through the aforementioned Explanation to Section 17, the GAAR found that it excludes : (i) land, building or any other civil structures. (ii) telecommunications towers; and (iii) pipelines laid outside the factory premises. Condition (iii) specifically states that pipelines laid outside the factory premises shall be excluded from the definition of plant and machinery , which means that pipelines laid inside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 Act, 2017. 7. M/s. Swan LNG Pvt. Ltd. has filed an appeal with us against the aforesaid Ruling under the provisions of Section 100 of the CGST and GGST Act, 2017. The appellant has quoted the text of Section 16(1) and contended that it entitles every registered person to take input tax credit ( ITC ) of tax charged on supply of goods or services or both, which are used or intended to be used in course or furtherance of business. They have also quoted the provisions of Section 17(5)(c) (d), under which restrictions on availment of input tax credit have been prescribed. The appellant furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 types of Piles foundation with pictures and submitted that pile foundation consists of both piles (which are vertical and generally cylindrical) and pile cap (which is horizontal and sit on top of piles). The pictorial representation of pile foundation is as follows: According to the appellant, the Ld. Authority in the impugned order has ruled that only the piles are the foundation, however the said foundation are not capable of providing a solid base for installation of plant and machinery all by itself, rather it needs a horizontal supporting structure as well to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 indispensable. (iii) Whether this project included machinery and equipment for unloading imported LNG also; and whether ITC was being claimed for such equipment and their foundation as well as supporting structures? Yes. (iv) Whether all and entire civil structures would be included under the ITC Scheme? If such civil structure is in nature of foundational structural support for plant and machinery, and such civil structure was specifically erected for installation or commissioning of plant and machinery, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 input service for further supply of works contract service; (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. Explanation . For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Unloading Platform of size 75m x 67.5m, 12 nos Mooring Dolphin 10 nos of Breasting Dolphins; (b) Design and Construction of Jetty 2 consists of Approach Trestle 95m long as per Topside Load Data, Unloading Platform of size 50m + 15m x 15m, 8 nos Mooring Dolphin 5 nos of Breasting Dolphins; (c) Design and Construction of One Tug Berth of size 116m x 10m (d) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.connect-lng.com/articles/construction-of-anlng-jetty , which is as under: Breasting and mooring dolphins Dolphins are marine constructions that extends above water level. They are used to extend the berth of the ship by providing extra mooring points. Together with the jetty trestle and the jetty head, the dol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 constructed on jetties. So, their foundation is not covered under the application for Advance Ruling. 23. The equipments like Gangway towers, Fire monitor towers and Jetty substations are civil structures and therefore not covered under plant and machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature 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 structural support needs to be exclusively for fixing the plant and machinery on it. The following three elements need to be fulfilled when input tax credit on goods and services is to be allowed for construction of any foundation: i) The founda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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