TMI Blog2023 (5) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... d structures alone. The dismantling of the floor, which is the most important component of the PFS , is not possible without substantial damage to the foundation. Section 17(5)(d) bars any taxpayer to avail the benefit of Input Tax Credit in case where the goods or services or both received by the said person are used for the construction of an immovable property even if it is in the course or furtherance of business - the contention of the applicant that the very reason why PFS is preferred over conventional building is that it offers movability doesn t make him eligible for availing ITC as per Section 17(5) of the CGST/TGST Act 2017. This is because when a PFS is assembled in a place the intention is definitely not to make it a movable structure but rather to conduct the business permanently beneath it i.e. on the RCC platform to which it is attached. PFS has more flexibility than the conventional structures in facilitating hassle-free shifting based on changing business requirements but that doesn t make it a movable structure as the intention of establishing shed or PFS is to continue business permanently on the RCC platform to which it is attached. The pre-fabr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such property being constructed is a pre-fabricated shed system. They made the following submissions in their application: Submission-1: It is fixed by anchor bolts to a low RCC platform embedded to the ground, and it is the only civil structure. Submission-2: The rest of the structure, like columns, beams, rafters, wall sheets, roof shed etc. are all joined with one another by nuts and bolts, and can be easily dismantled and restructured at another location. Submission-3: The low-rising RCC platform is, of course, permanently embedded to the ground. However Shed system built thereon, can be dismantled, and thus reduces repeated capital expenses in the event of a shift of location. Submission-4: Shed is nothing more than an assembly of the System, which is pre-fabricated and pre- engineered components, fixed together in a modular form with nuts and bolts and without welding so that it can be easily unfixed. Submission-5: The utility of the RCC platform on which the System is being fixed is limited to allowing the Shed to be set up and no further. It is the System that is beneficially enjoyed, not the RCC structure. They further submitted that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructed. It is seen from the Sirpur Paper Mills Ltd case that the facts of the case pertains to assembling of a machine from its components and attaching the same to the earth for the operational efficiency of that machine. Therefore the attachment made was not for the beneficial enjoyment of the land to which it was attached. Hence, the law laid down by the Hon ble Supreme Court of India in this case is not applicable to the facts before this Authority for Advance Ruling. It is seen from the Solid Correct Engineering Works case that the Hon ble Supreme Court of India has observed that a hut is also a immovable property even if it is sold with the option to pull it down. A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, create an interest in immovable property, for it is permanently attached to the ground on which it is build . Thus the Court was of the opinion that the attachment in order to qualify the expression attached to earth, must be for the beneficial enjoyment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property or a movable property. The applicant relies on the Hon ble Apex Court s orders in the case of Solid Correct Engineering Works [(2010) 252 ELT 481 (SC)] and Sirpur Paper Mills Ltd [97 ELT 3 (SC)]. 9.1.4 The applicant is engaged in construction of prefabricated shed (PFS). They procure goods and services from various contractors for fitting out the prefabricated shed (PFS). They discharge the GST liability with regard to such procurement. The applicant also submitted that the PFS can be detached and reused. He stated that PFS are not considered to be permanent civil affects. The PFS are pre-fabricated structures that are erected at the site by way of joining to bolts. The foundation is made of concrete and it rests on the earth, and is the only part in PFS which is embedded in the earth, for permanent beneficial enjoyment. The applicant seeks ruling with regard to the availability of Input Tax Credit against the procurements pertaining to construction of PFS . 9.2 It is important to discuss some of the relevant provisions contained in the CGST/ TGST Act, 2017 to clarify the contentions of the applicant. Section 2(52) defines goods as every kind of movab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context, (26) 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 . (36) movable property shall mean property of every description, except immovable property;] As per this to qualify as immovable property those things should be attached to the earth, or permanently fastened to anything attached to the earth. Whereas, Section 3(36) defines movable property as property of every description, except immovable property. 9.7 As per this definition, any property which does not qualify to be immovable property, is a movable property. This definition of immovable property under the General Clauses Act is affirmative in nature. 9.8 Definition of attached to the earth is not given in General Clauses Act 1897 but provided by Section 3 of the Transfer of Property Act, 1882. Section 3 of the Transfer of Property Act, 1882 is produced below: Interpretation-clause. In this Act, unless there is something repugnant in the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve definition of the immovable property . 9.10 As per the definition of immovable property contained in the General Clauses Act and the Transfer of Property Act, it is clear that things attached to the earth or permanently fastened to anything attached to the earth is immovable property. Anything imbedded in the earth or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached, qualifies to be attached to the earth. 9.11 As far as the contention of the applicant regarding procurement of PFS and subsequent fitting to be in the course of business is concerned, it is admitted that the same is in course of business but the question is whether the applicant is eligible to ITC in light of the provisions contained in section 17(5)(d) of the CGST/ TGST Act. The applicant shall be eligible to ITC only if it is so established that the PFS , which is constructed by joining pre fabricated structures, qualifies to be a movable property. 9.12 The Hon ble Supreme Court in respect of Triveni Engineering Industries Ltd. Anr. V. Commissioner of Central Excise 2000 (120) ELT 273 (SC) observed that in order to determine whether an arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered permanently fastened to anything attached to the earth. The structure, even if it is merely placed on land, enables beneficial enjoyment of the land on which it is being built. 9.14 Further, when any object is said to be imbedded in earth, it does not mean that a part of it is to be inserted/ put deep beneath the earth by digging the earth for several meters. For laying any foundation especially in case of area of considerable dimension as in case of a PFS , the top soil has to be removed, surface has to be levelled and some part of foundation stone always rests with in the earth. So the support base of the PFS is attached to and imbedded in the earth. 9.15 As regards the issue of the non-permanent nature of the PFS structure is concerned, it has already been discussed that the degree and nature of annexation is vital to the decision whether a property is a movable property or an immovable property. In the case of applicant, the PFS are meant for the purpose of conducting business. These PFS cover considerably large area and caters to the need of business which in turn requires permanence and stability. So, it cannot be said that the PFS constructed/ e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut necessary intent to making it permanent cannot be an immovable property. The emphasis is on the intention of the party. The Apex Court observes that the machine in question can be moved and has indeed been moved after the road construction and repair project, for which it was installed, is completed. However, if a machine is intended to be fixed permanently to a structure embedded in the earth, the moveable character of the machine, according to the Supreme Court, becomes extinct. 9.18.2 A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, create an interest in immovable property, for it is permanently attached to the ground on which it is build . Thus the Court was of the opinion that the attachment in order to qualify the expression attached to earth, must be for the beneficial enjoyment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. 9.18.3 PFS is attached to the RCC platform with an inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the PFS , is not possible without substantial damage to the foundation. 9.24 The essential character of immovable property , as emerges from the above discussion and relevant to the present context is that it is attached to the earth, or permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply. 9.25 Now, section 17(5)(d) bars any taxpayer to avail the benefit of Input Tax Credit in case where the goods or services or both received by the said person are used for the construction of an immovable property even if it is in the course or furtherance of business. 9.26 The contention of the applicant that the very reason why PFS is preferred over conventional building is that it offers movability doesn t make him eligible for availing ITC as per Section 17(5) of the CGST/TGST Act 2017. This is because when a PFS is assembled in a place the intention is definitely not to make it a movable structure but rather to conduct the business permanently beneath it i.e. on the RCC platform to which it is attached. PFS has more flexibility than the conventional structures in facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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