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2024 (10) TMI 286

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..... Rathi, Adv. Ms. Ashwini Chandrasekaran, Adv. Ms. Shubhangi Gupta, Adv. Mr. Pallav Mongia, AOR Mr. Abhishek A Rastogi, Adv. Mr. Nikhil Jain, AOR Ms. Pooja M Rastogi, Adv. Ms. Meenal Songire, Adv. Ms. Divya Jain, Adv. Ms. Divyasha Mathur, Adv. Mr. Sujit Ghosh, Sr. Adv. Ms. Mannat Waraich, AOR Ms. Anshika Aggarwal , Adv For the Respondent : Mr. N.Venkatraman,ASG Mr. Arijit Prasad,Sr.Adv. Mr. Sonu Bhatnagar,Adv. Mr. Indrajit Prasad,Adv. Ms. Ankita Singh,Adv. Mr. Deepak Kumar,Adv. Mr. Gurmeet Singh Makker, AOR Mr. Mukesh Kumar Maroria, AOR Mr. Abhratosh Majumdar, Sr. Adv. Mr. S. Sukumaran, Adv. Mr. Avra Mazumdar, Adv. Mr. Ramesh Patodia,Adv. Mr. Anand Sukumar, Adv. Mrs. Megha Kapoor, Adv. Mr. Bhupesh Kumar Pathak, Adv. Mrs. Ruche Anand, Adv. Ms. Meera Mathur, AOR Mr. Suvendu Suvasis Dash, AOR Mr. Prasenjeet Mohapatra, AOR Mr. D. L. Chidananda, AOR Mr. Naresh Jain, Adv. Mrs. Arti Agrawal, Adv. Mr. Mahaveer Jain, Adv. Mrs. Neha Anchlia, Adv. Mr. Alok Kumar, Adv. Mrs. Ujjawala Chaturvedi, Adv. Mr. Rishabh Jain, Adv. Mr. Rameshwar Prasad Goyal, AOR Mr. Abhratosh Majumdar, Sr. Adv. Mr. Avra Mazumder, Adv. Mr. Anand Sukumar, AOR Mr. S. Sukumaran, Adv. Mr. Bhupesh Pathak, Adv. Mrs. Ruche Anan .....

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..... y of service under the CGST Act. Therefore, the first respondent was desirous of availing the Input Tax Credit (ITC) accumulated against the rental income received by it upon letting out the mall premises. According to the first respondent, when it approached the concerned authorities, it was advised to deposit GST on rent without deducting ITC because of the exception carved out by Section 17(5)(d). 3. The first respondent filed a writ petition before the High Court of Orissa seeking a declaration that Section 17(5)(d) of the CGST Act and the corresponding provisions of the Orissa Goods and Services Act, 2017 do not apply to the construction of immovable property intended for letting out on rent. A prayer in the alternative was made that in the event it is held that the bar under Section 17(5)(d) is applicable even to the construction of immovable property intended for letting out, a declaration be issued that Section 17(5)(d) is violative of Articles 14 and 19 (1)(g) of the Constitution of India. A consequential prayer was made to issue a writ of mandamus to enjoin the present appellants, who were respondents in the writ petition, to grant the benefit of ITC to the first and sec .....

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..... S ON BEHALF OF ASSESSEES 6. Very detailed submissions have been made by the parties to the civil appeals, intervenors and parties to the writ petitions. We find that the submissions made by the learned counsel for the assessees and the intervenors are repetitive. There are a large number of decisions relied upon, whether relevant or irrelevant. Brevity is the hallmark of good advocacy. It would be ideal if parties on one side file joint written submissions. The Judges and lawyers are humans. Sometimes, bulky compilations and submissions can be counterproductive. 7. Assessees have submitted that clauses (c) and (d) and sub-section (5) of Section 17 are violative of Articles 14, 19(1)(g) and 300A of the Constitution of India. The submissions concerning the challenge to constitutional validity can be summarised as follows: a. Section 17(5)(d) is violative of Article 14 since it classifies assessees engaged in the business of constructing immovable properties and then renting/leasing/letting out etc. premises within the said immovable properties on the same footing as assessees engaged in the business of constructing immovable properties and then selling the immovable properties o .....

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..... ble properties, there is no break in the credit chain. The break arises when the recipient uses the supplier's output to make non-taxable transactions for which GST is not payable by the recipient. In such a case, credit cannot be utilised in the subsequent leg of the transaction from where the break in the chain took place. Several illustrations have been given in support of this submission. It was submitted that there is no break in the chain at any of the levels, starting from the subcontractor to the main contractor and the petitioner, since all three entities are liable to output GST, and therefore, in such a case, denial of credit cannot be justified; d. It is submitted that even assuming that coming into existence of an immovable property is an intelligible differentia, it has no nexus with the objects of the CGST Act. The reason is that denying credit in such cases essentially perpetuates and continues the cascading effect of tax, contrary to the very object of the CGST Act of eliminating the cascading effect of tax and achieving tax neutrality. For example, if a manufacturer hires a contractor to build a factory building through a works contract, the manufacturer wou .....

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..... Nitdip Textile Processors Pvt. Ltd. and Anr. (2012) 1 SCC 226. Varying standards of review under the doctrine of classification are typically applied to economic and non-economic legislation, with the rational basis test being applied to economic legislation. Various decisions were relied upon dealing with the wide latitude doctrine in relation to economic legislations. Reliance was placed on the Government of Andhra Pradesh and Ors. v. P. Laxmi Devi (2008) 4 SCC 720, Assistant Commissioner of Urban Land Tax and Ors. v. Buckingham and Carnatic Co. Ltd., Etc. (1969) 2 SCC 55, Jindal Stainless Ltd. and Anr. v. State of Haryana and Ors. (2017) 12 SCC 1 and State of Tamil Nadu and Anr. v. National South Indian River Interlinking Agriculturist Association (2021) 15 SCC 534. The true import of the legislative provision is to be understood from the plain reading of the provision and not on the basis of affidavits or submissions of the State. A decision in the case of Sanjeev Coke Manufacturing Company v. M/s Bharat Coking Coal Ltd. & Anr. (1983) 1 SCC 147 is relied upon. 8. Assessees have submitted that clauses (c) and (d) and sub-section (5) of Section 17 must be read down to the extent .....

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..... use immovable properties are created in the assessee's business. The primary condition for availing of ITC is the nexus between the assessee's input and output business activities, which exists in the assessee's case. Direct corelation with input services or output services is not necessary to avail of the benefit of ITC. c. It is submitted that the phrase "on its own account" should be read down and given a purposive construction instead of a myopic one. The phrase should be deemed to mean when construction is done for personal use and not for services, i.e., credit should be denied only when goods and services are utilised for the construction of immovable property for his own purposes, like an office building or factory building. In such a case, no further GST on the sale of such a building occurs and, therefore, a chain of taxability breaks. However, when such immovable property is not being used by the assessee itself but is used for other supplies, such as renting property or supply of hotel accommodation services, etc., the same should not be covered by the expression 'on his own account'. Therefore, when an immovable property Civil Appeal No.2948 of 2023 etc. Page 14 .....

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..... y" occurs only once in Section 17(5)(d). Therefore, the intention of the legislature to treat the expression "plant or machinery" differently from the expression "plant and machinery" is apparent. * In the model GST law, which the GST Council Secretariat circulated in November 2016 for inviting suggestions and comments, the expression "plant and machinery" was used both in clauses (c) and (d) of Section 17(5). However, while enacting the law, the legislature has advisedly used the expression "plant and machinery" in clause (c) and "plant or machinery" in clause (d) of Section 17(5). Therefore, the intention of the legislature cannot be brushed aside by contending that the use of the word "or" in Section 17(5)(d) is a mistake of the legislature. * The expression "plant or machinery" has not been defined under the CGST Act. The definition of "plant and machinery" provided in the explanation to Section 17 will not apply to the expression "plant or machinery". Since the legislature has intentionally used two different expressions in clauses (c) and (d) of Section 17(5), different meanings will have to be assigned to these expressions. * Clauses (c) and (d) of Section 17(5) give u .....

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..... on 'plant or machinery' must be taken in its natural sense, which will include buildings. * In support of the submission that a shopping mall could be treated as a plant, which will fall in the exception carved out to Section 17(5)(d), reliance was placed on the decision of this Court in the case of CIT, Trivandrum v. Anand Theatres (2000) 5 SCC 393 wherein it was held that when a building is specially designed and constructed with some special features to attract the customers, the building could be treated as a plant. In the case of Commissioner of Income Tax, Karnataka v. Karnataka Power Corporation (2002) 9 SCC 571, this Court held that an electricity power generating station building would have to be treated as a plant as it would satisfy the functional test or test of essentiality. This Court further held that the judgment in the case of Anand Theatres19 would be limited to buildings used for hotels or cinemas/theatres. Reliance was also placed on the decision in the case of Commissioner of Income Tax v. Victory Aqua Farm Ltd., (2016) 16 SCC 553 which holds that ponds specially designed for doing business of aquaculture of prawns should be treated as plants for the .....

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..... entirety. It is submitted that the non-obstante clause in Section 17(5) cannot cut down the construction or restrict the scope of operation of Section 16(1). Reliance was placed on a decision of this Court in the case of R.S. Raghunath v. State of Karnataka & Anr. (1992) 1 SCC 335; 11. It is pointed out that Section 17(5)(c) carves out an exception only for works contracts, assuming that this is the only category of service where there is no breakage in the chain of taxable supplies. It is submitted that while Section 17(5)(c) allows ITC on works contracts for contractors, ITC has been blocked for other developers; 12. The classification sought to be invoked by the Revenue leads to invidious discrimination within the provision in as much as credit has been allowed for the construction of immovable plant and machinery during the execution of a works contract and for the construction of a building during the execution of work by the sub-contractor under its work contract with the main contractor; 13. It is submitted that Section 16(1) of the CGST Act is not pari materia with the provisions of the Tamil Nadu Value Added Tax Act, 2006. Therefore, the decisions relied upon by learne .....

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..... He submitted that the Parliament is entitled to make policy choices and adopt appropriate classifications given the latitude that our Constitutional jurisprudence allows in the matters involving tax legislation. The principle of equality does not preclude the classification of property, credit, profession and events for taxation. He submitted that it is settled law, as held in the case of Hari Krishna Bhargav v. Union of India & Anr (1966) 2 SCR 22 that a taxing statute is not open to challenge on the ground that the tax is harsh or excessive. He refuted a submission that clauses (c) and (d) of Section 17(5) are fraud on the Constitution or that they are manifestly arbitrary. He invited our attention to a decision of the Constitution Bench in the case of Joseph Shine v. Union of India (2019) 3 SCC 39 and, in particular, what is held in paragraphs 163 to 165. He submitted that considering the test laid down in the said decision, even assuming that clauses (c) and (d) are discriminatory, they are not manifestly discriminatory. He submitted that English decisions will not apply, as in India, there is a constitutional and statutory distinction between goods that are movables and immova .....

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..... r, taxation on services can be raised even on using immovable properties for rendition of services. He submitted that when it comes to sales tax or VAT on goods, a consistent view taken by this Court is that the sale would include the sale of goods and not the sale of immovables. He submitted that malls, hotels, office buildings, etc., are immovable properties; therefore, GST cannot be levied. He relied upon the earlier decisions of this Court arising out of the Central Excise Act, 1944. According to him, those plants and machinery which are deeply rooted in the earth and cannot be relocated without sufficient damage are immovable goods. However, he accepted that renting an immovable property amounts to a supply of service, which is taxable under the CGST Act. d. While dealing with the case of a shopping mall, he submitted that since a shopping mall is an immovable property, it is excluded from the GST. Therefore, it does not fall in Clause (5)(b) of Schedule II. He submitted that the entire purpose of ITC is to extend the ITC paid at the anterior stage to remove the cascading burden of taxation at a subsequent stage. As there is no GST payable on shopping malls, there is no need .....

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..... lative intention has to be adhered to. 18. It was submitted that in certain cases, CENVAT credit was allowed for the construction of buildings. That is the view taken by the Tribunals/High Courts. 19. Concerning the apprehension of misusing GST expressed by the learned ASG, it was submitted that even if the argument of the assessees is accepted, the ITC on goods or services used to construct a warehouse or mall is only to a limited extent of GST payable on rental activity. It was, therefore, submitted that the definition of "plant or machinery" will not apply to "plant and machinery". 20. The learned counsel submitted that there is no conflict between Section 17(5)(d) and Section 16(3). He submitted that Section 16(3) applies to "plant and machinery" and not to "plant or machinery". He submitted that even assuming that Section 16(3) applies to plant or machinery, the effect of the provision is that if the registered person claims depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, he cannot avail of the ITC on the said tax component. He submitted that there is no conflict between the provisions .....

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..... tion: (i) Whether the definition of "plant and machinery" in the explanation appended to Section 17 of the CGST Act applies to the expression "plant or machinery" used in clause (d) of sub-section (5) of Section 17? (ii) If it is held that the explanation does not apply to "plant or machinery", what is the meaning of the word "plant"? and (iii) Whether clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act are unconstitutional? RULES REGARDING THE INTERPRETATION OF TAXING STATUTES 25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows: a. A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise; b. If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity; c. While dealing with a taxing provision .....

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..... , as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel Civil Appeal No.2948 of 2023 etc. Page 35 of 91 shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as th .....

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..... o the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under Section 37; (b) he has received the goods or services or both; Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are p .....

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..... for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under subCivil Appeal No.2948 of 2023 etc. Page 40 of 91 section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. (5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021. (6) Where registration of a registered person is cancelled under Section 29 and subsequently the cancellation of registration is revoked by any order, either under Section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under sub-section (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax .....

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..... onent of the cost of capital goods and plant and machinery if he claims depreciation on the said tax component under the Income Tax Act. The object is that a registered person does not take advantage of both depreciation and ITC. 29. Now we come to sub-Section (4) of Section 16. Before the amendment made by the Finance Act, 2022, the sub-section read thus: "16. .. .. .. .. .. .. .. .. .. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year .....

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..... hall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged- (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him; (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended .....

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..... used by the legislature that is usually employed to give an overriding effect to certain provisions over some contrary provisions that may be found in the same or some other enactments. Such a clause is used to indicate that the said provision should prevail despite anything to the contrary in the provisions mentioned in the non-obstante clause. It is pertinent to note that in view of the non-obstante clause used at the beginning of sub-section (5), it seeks to override both sub-section (1) of Section 16 and sub-section (1) of Section 18. As noted earlier, sub-section (1) of Section 16 lays down the eligibility and conditions for taking ITC. Subsection (1) of Section 18 deals with the availability of ITC in special circumstances. Therefore, in the cases covered by subsection (5), ITC is not available. In a sense, sub-section (5) of Section 17 carves out an exception to the provisions of subsection (1) of Sections 16 and 18, which confer the benefit of ITC. ANALYSIS OF CLAUSES (c) AND (d) 31. Now, we analyse clauses (c) and (d) of Section 17(5). Clause (c) applies when works contract services are supplied for constructing immovable property. The definition of "works contract" un .....

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..... said explanation. 34. There is hardly a similarity between clauses (c) and (d) of Section 17(5) except for the fact that both clauses apply as an exception to sub-section (1) of Section 16. Perhaps the only other similarity is that both apply to the construction of an immovable property. Clause (c) uses the expression "plant and machinery", which is specifically defined in the explanation. Clause (d) uses an expression of "plant or machinery", which is not specifically defined. 35. Now, what is material is the explanation to Section 17, which reads thus: "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." The explanation defines the meaning of the expression "plant and machinery". However, as stated earlier, the expression "plant or machinery" has not bee .....

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..... ly in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of subsections (1), (1-A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods." ( emphasis added ) 37. In view of clause (a) of sub-section (1) of Section 7, a supply of services such as sale, transfer, licence, rental or lease made for consideration is a supply. Whether the activities or transactions covered by sub-section (1) of Section 7 constitute a s .....

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..... (whether or not for a specified period) for cash, deferred payment or other valuable consideration." 38. Clause 5(b) of Schedule II has to be read with the provisions of Schedule III, which has a title: "Activities or transactions which shall be treated neither as a supply of goods nor a supply of services". Clause (5) of Schedule III reads thus: "5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building." 39. Analysis of the provisions of Section 7 read with Schedule II and III shows that: a. Any lease, tenancy, easement or licence to occupy land is a supply of services. Clause 2(a) is not qualified by the purpose of the use. But the sale of a land is not a supply of service; b. Any lease or letting out of buildings for business or commerce, wholly or partly, is a supply of services. Clause 2(b) will not apply if the lease or letting out of a building is for a residential purpose; c. Renting of an immovable property is a supply of service; d. Construction of a complex, building, civil structure or a part thereof, including a complex, building or civil structure intended for sale to a buyer, wholly or partly, is a supply of service. Ho .....

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..... xclude specific categories of goods or services from ITC. Exclusion of the category of works contracts by clause (c) will not, per se¸, defeat the object of the CGST Act. MEANING OF THE EXPRESSION "PLANT OR MACHINERY" IN CLAUSE (d) OF SECTION 17(5) 42. The question is whether the explanation that lays down the meaning of the expression "plant and machinery" in Section 17 will apply to the expression "plant or machinery" used in Section 17 (5)(d). 43. Learned ASG himself accepted that the expression "plant and machinery" appears at ten different places in Chapters V (Input Tax Credit) and VI (Tax Invoice, Credit and Debit Notes) of the CGST Act. According to him, the expression "plant or machinery" appears only in clause (d) of Section 17(5). His submission is that the use of the word "or" in clause (d) is a mistake of the legislature. To counter this, it was submitted that in the Model GST Law, which the GST Council Secretariat circulated in November 2016 to invite suggestions and comments from the public, the expression 'plant and machinery' was used in clauses (c) and (d). However, while enacting the CGST Act, the legislature has consciously chosen to use the expression .....

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..... rises is what meaning should be given to the expression "plant or machinery". When the legislature uses the expression "plant and machinery," only a plant will not be covered by the definition unless there is an element of machinery or vice versa. This expression cannot be read as "plant or machinery". That is so clear from the explanation in Section 17, which says that plant and machinery means apparatus, equipment and machinery fixed to the earth by foundation or structural support that are used for making outward supply of goods or services or both. The expression includes such foundation and structural support fixed to the earth. However, the definition excludes land, buildings or any other civil structure. 46. The expression "plant or machinery" has a different connotation. It can be either a plant or machinery. Section 17(5)(d) deals with the construction of an immovable property. The very fact that the expression "immovable property other than "plants or machinery" is used shows that there could be a plant that is an immovable property. As the word 'plant' has not been defined under the CGST Act or the rules framed thereunder, its ordinary meaning in commercial terms will h .....

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..... , 1922. The definition of plant in Section 10(5) of the Income Tax Act, 1922 provided that 'plant' includes vehicles, scientific apparatus, surgical equipment, and books purchased for the purposes of business, profession or vocation. The Court considered whether the word plant should be given a broader meaning. In paragraph 6 of the said decision, this Court held thus: "6. Now it is well settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of everyday use. Popular sense means "that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it". In the present case, Section 10(5) enlarges the definition of the word "plant" by including in it the words which have already been mentioned before. The very fact that even books have been included shows that the meaning intended to be given to "plant" is wide. The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, those words and phrases must be construed as comprehending not only such things as they sign .....

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..... pparatus or a tool for running a business so that it can be termed as a plant and depreciation can be allowed on the same under the Income Tax Act, 1961. This Court dealt with Section 32, which provided for granting depreciation to buildings, machinery, and plants. This Court extensively referred to its earlier decision in the case of Taj Mahal Hotel18 and other decisions of this Court and High Courts. This Court decided the question of whether a building used for running a hotel or cinema business could be held to be a plant. This Court considered British decisions on the point. Paragraphs 61 to 63 of the decision are material, which read thus: "61. Further, there are hotels of all kinds and hotel business can be carried on in all kinds of buildings, may be pucca or kuccha constructions. A building intended to be used or in fact used earlier either as a residential accommodation or business purpose can be converted for running hotel business. Section 32 itself contemplates a hotel business being carried on in a residential accommodation including an accommodation which is in the nature of guest house. On occasions hotel buildings may be constructed with a special design and feat .....

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..... that the words "plant" and "building" are not mutually exclusive. "Plant" may include building in a certain set of circumstances and, therefore, applying the functional tests the assessee would be entitled to depreciation under the head "it is more beneficial to it". He submitted that in the modern era, theatre building and hotel building are integral part of operation for carrying out such business and, therefore, such building should be considered as a "plant". Ultimately, in paragraph 67, this Court held thus: "67. In the result, it is held that the building used for running of a hotel or carrying on cinema business cannot be held to be a plant because: (1) The scheme of Section 32, as discussed above, clearly envisages separate depreciation for a building, machinery and plant, furniture and fittings etc. The word "plant" is given inclusive meaning under Section 43(3) which nowhere includes buildings. The Rules prescribing the rates of depreciation specifically provide grant of depreciation on buildings, furniture and fittings, machinery and plant and ships. Machinery and plant include cinematograph films and other items and the building is further given meaning to inclu .....

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..... owance on different heads as provided under Section 32 of the Income Tax Act. (7) To differentiate a building for grant of additional depreciation by holding it to be a "plant" in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable." 50. Another decision on the point is in the case of Victory Aqua Farm Ltd. 21, wherein the issue before this Court was whether a natural pond used by the assessee, which was specially designed for rearing prawns, could be a plant within the meaning of Section 32 of the Income Tax Act, 1961. This Court heavily relied upon the decision of a three-judge Bench of this Court in the case of Karnataka Power Corporation20. In this case, the question was whether a power-generating station building is a plant. In the decision rendered by a Bench of three Hon'ble Judges, it was held that the decision in the case of Anand Theatres19 cannot be read broadly. In paragraphs 5 to 8 of the decision, it was held thus: "5. It was the case of the assessee that it was entitled to investment .....

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..... not to be treated as a plant for the purposes of investment allowance. 8. It is difficult to read the judgment in the case of Anand Theatres [(2000) 5 SCC 393 : (2000) 244 ITR 192] so broadly. The question before the Court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a "plant" and it was in relation to that question that the Court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or a cinema theatre could not be given depreciation on the basis that it was a plant. We must add that the Court said: (SCC p. 430, para 67) "67. (7) To differentiate a building for grant of additional depreciation by holding it to be a 'plant' in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable." This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, b .....

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..... inst the supply of services in the form of renting or leasing the building or premises, provided the other terms and conditions of the CGST Act and Rules framed thereunder are fulfilled. Therefore, the argument regarding breaking the chain cannot be accepted in its entirety. However, if the construction of a building by the recipient of service is for his own use, the chain will break, and therefore, ITC would not be available. 54. One of the arguments of learned ASG was that if different meanings were given to the words "plant and machinery" and "plant or machinery", it could result in discriminatory treatment. Clause (c) of Section 17(5) operates in a completely different field, as it applies only to works contract services supplied for the construction of immovable property. Clause (d) deals with services received by a taxable person for the construction of an immovable property on his own account. As clauses (c) and (d) operate in substantially different areas, the argument of ASG relying on discrimination cannot be accepted. 55. Under the CGST Act, as observed earlier, renting or leasing immovable property is deemed to be a supply of service, and it can be taxed as output su .....

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..... ngrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate. The consistent line of precedent of this Court emphasises certain basic precepts which govern both judicial review and judicial interpretation of tax legislation. These precepts are: 105.1. Selecting the objects to be taxed, determining the quantum of tax, legislating for the conditions for the levy and the socio-economic goals which a tax must achieve are matters of legislative policy. M. Hidayatullah, C.J., speaking for the Constitution Bench in Commr. of Urban Land Tax v. Buckingham & Carnatic Co. Ltd. [Commr. of Urban Land Tax v. Buckingham & Carnatic Co. Ltd., (1969) 2 SCC 55] held : (SCC p. 67, para 10) "10. ... The objects to be taxed, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political c .....

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..... groups or classes of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognised that no precise or set formulae or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience." 105.3. In matters of classification, involving fiscal legislation, the legislature is permitted a larger discretion so long as there is no transgression of the fundamental principle underlying the doctrine of classification. In Hiralal Rattanlal [Hiralal Rattanlal v. State of U.P., (1973) 1 SCC 216 : 1973 SCC (Tax) 307] , K.S. Hegde, J., speaking for a four-Judge Bench observed : (SCC p. 223, para 20) "20. It must be noticed that generally speaking the primary purpose of the levy of all taxes is to raise funds for public good. Which person should be taxed, what transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations. In a democratic set up it is for the legislature to dec .....

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..... of raising money to defray expenses of Government. It is a recognised fiscal tool to achieve fiscal and social objectives. The differentia of classification presupposes and proceeds on the premise that it distinguishes and keeps apart as a distinct class hotels with higher economic status reflected in one of the indicia of such economic superiority. The presumption of constitutionality has not been dislodged by the petitioners by demonstrating how even hotels, not brought into the class, have also equal or higher chargeable receipts and how the assumption of economic superiority of hotels to which the Act is applied is erroneous or irrelevant." 108. In Spences Hotel (P) Ltd. v. State of W.B. [Spences Hotel (P) Ltd. v. State of W.B., (1991) 2 SCC 154] , a two-Judge Bench, speaking through K.N. Saikia, J. revisited the precedents of this Court governing the principles of classification in tax legislation and held : (SCC pp. 168-69, para 24) "24. ... The history of taxation is one of evolution as is the case in all human affairs. Its progress is one of constant growth and development in keeping with the advancing economic and social conditions; and the fiscal intelligence of the .....

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..... aim to refund is governed by statute. There is no constitutional entitlement to seek a refund. Parliament has in clause (i) of the first proviso allowed a refund of the unutilised ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilised ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated on a par on a matter of a refund of unutilised ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive. Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social .....

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..... rse elements. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. Even so, large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the court will be reluctant and perhaps ill-equipped to investigate." ( emphasis added ) Apart from these decisions, there are other binding decisions which hold that the laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. In the present case, the legislature was dealing with a complex issue. Therefore, greater freedom and greater play in the joints has to be allowed to the legislature. 58. Essentially, the challenge to constitutional validity is that, in the present case, the provisions do not meet the test of reasonable classification, which is a part of Article 14 of the Constitution of India. To satisfy the test, there must be an intelligible differentia forming the basis of the classification, and the differentia should have a ration .....

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..... views on the legislature. 63. Now, we come to the challenge to sub-section (4) of Section 16 of the CGST Act, which reads thus: "16. Eligibility and conditions for taking input tax credit.- .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier: Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under Section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019." The wo .....

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..... ht of what we have held earlier, it will have to be decided whether the construction of an immovable property is a "plant" for the purposes of clause (d) of Section 17(5). 66. In the light of what we have held above, by setting aside the impugned judgment in Civil Appeal Nos. 2948 and 2949 of 2023, the writ petitions are remanded to the High Court of Orissa for limited purposes of deciding whether, in the facts of the case, the shopping mall is a "plant" in terms of clause (d) of Section 17(5). Appeals are partly allowed in above terms. 67. While deciding these cases, we cannot make any final adjudication on the question of whether the construction of immovable property carried out by the petitioners in Writ Petitions amounts to plant, and each case will have to be decided on its merit by applying the functionality test in terms of this judgment. The issue must be decided in appropriate proceedings in which adjudication can be made on facts. The petitioners are free to adopt appropriate proceedings or raise the issue in appropriate proceedings. 68. The writ petitions are rejected subject to the interpretation of clause (d) of sub-section (5) of Section 17 of the CGST Act made by .....

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