9911796707
TMI Blog2025 (1) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... GST & Excise, Division I, Jamnagar, Rajkot CGST Commissionerate, [hereinafter referred to as 'appellant'] against the Advance Ruling No. Guj/GAAR/R/57/2021 dated 29.10.2021, passed by the Gujarat Authority for Advance Ruling [GAAR]. 3. The facts briefly leading to the present appeal is that M/s. Sikka Ports & Terminal Ltd., Admin village, MTF Area, Village Sikka, Gujarat 361140 [hereinafter referred [as the 'respondent'] is engaged in the activity of operating a port and terminal handling facility at Sikka Port for receipt of crude oil and other feedstock as well as for evacuation of various finished products of the crude oil refinery set up by Reliance Industries Limited ('RIL') at Jamnagar. They filed an application seeking Advance Ruling before the GAAR. 4. It was the respondent's case before GAAR that they had developed Sikka Port in 1990s as a captive port for RIL's refinery project; that the respondent (then known as Reliance Ports and Terminals Ltd.) entered into a long term contract with RIL on 26.3.2007 under which they were obliged to set up new facilities as described in Schedule 1 to enable it for provision of services described in Schedule 2 of the said long term co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Credit (ITC) on services procured for hiring, and for operation and maintenance of Security Patrol Vessel used by it for supplying port and terminal handling services? 9. The respondent felt that the aforementioned questions ought to be answered in affirmative owing to the following viz * it receives services of hiring the SPVs as well as for operating and maintaining DSVs and SPVs: * that these services are eligible input services for availment of ITC, owing to the following reasons: (a) that they are essential for providing output services of supplying port and terminal handling services and are used in the course or furtherance of the applicant's business; and (b) they are not specifically blocked under any other provision of section 17 of the CGST Act; * that a combined reading of the amendment to section 17 (5) (aa) of the CGST Act, 2017, press-note dated 21.07.2018 & Sr. No. 17 of the annexure to the Agenda makes it clear that the said amendment seeks to only restrict credit in respect of vessels for personal use such as yachts, sailboats etc.: * the use of these services is to enable transportation of goods and therefore the bar under section 17 (5) (aa) ibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of service; that as per section 17 (5) (ab), ibid the ITC on this nature of service is blocked; * that in terms of the proviso to section 17 (5), ibid, the service received by the respondent is with respect to repair and maintenance of vessels however the impugned order enlarged its scope by sensing essence and substance out of the same to confer benefit of ITC; * that the nature of service provided by the contractor to respondent includes service of hiring of vessel along with operation and maintenance of vessel and cannot be considered in isolation without considering entire nature of service involved; * that the SAC of input service received by the respondent is 998717, 996602 & 996609; it is evident that the ITC sought on the services is not falling within the same category of output services to make it available in terms of proviso to 17 (5) (b) (i), ibid: * the respondent it provides output service of port & terminal handling services which includes loading and unloading of cargo transportation of cargo from the vessels berthed in the sea to the port, which was held by the GAAR as a composite supply of port and waterway operation services having SAC code 996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or services which are used for personal consumption; * that a plain and strict reading of 17 (5) (ab) clearly reveals that only services of 'repair and maintenance are blocked under clause (ab); that though there is an averment by Revenue that the services procured were repair and maintenance, there is no factual or legal basis: that in-fact GAAR came to a conclusion that the services in question were operation and maintenance & not repair and maintenance; * that the services procured by the respondent also include hiring of vessel in addition to operation and maintenance; * Proviso to section 17 (5) (b) clearly reveals that the outward supply can be any of the following three types [a] of the same category as the inward supply. [b] an element of a taxable composite supply and [c] an element of a taxable mixed supply; * that merely because the inward & outward supply are not of the same category, ipso facto does not disentitle them from availing ITC; * that in terms of clause 3.1 of the agreement, the scope of services included maintenance and operation of facilities; that facilities' as defined in schedule I includes DSVs; that the operation and maintenance of DSV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services procured for the operation and maintenance of DSV owned by respondent and used for supplying port handing services; and (ii) ITC on services procured for hiring and operation and maintenance of SPV used in supplying port and terminal handling services. 16. Since the appeal deals with eligibility of ITC, sections 16 and 17 of the CGST Act, 2017 [relevant extracts], are reproduced below for case of understanding viz 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.- (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:- [(a)............:- (aa) vessels and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for the operation and maintenance of vessels [both DSV and SPV] is concerned, section 17 (5) (aa) which specifically deals with ITC on vessels [ie goods] would not be applicable in this case. 20. However, since this case pertains to services provided through the vessels, what is applicable is section 17 (5) (ab), ibid, which states that ITC shall not be available in respect of repair and maintenance in so far as they relate to vessels referred to in clause (aa), provided that the ITC in respect of such services shall be available where the vessels referred to in clause (aa) are used for the purposes specified therein. Now, the purpose specified under clause (aa) are for making further supply of such vessels, transportation of passengers, imparting training on navigating such vessels or for transportation of goods. 21. As far as ITC on services procured for the operation and maintenance of vessel is concerned, ruling of GAAR is already mentioned supra. However, while allowing the ITC, the impugned order held that the scope of contract between the respondent an the contractors was for supply of other services also such as operation and maintenance; that the SAC code was 998717 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent since the vessels per se [DSV and SPV] are not being used for transportation of goods. The respondent therefore will not be eligible for availing ITC on input services in respect of repairs and maintenance received by them. ITC in respect of hiring services of SPV 26. Moving on to the second issue ie eligibility of ITC in respect of hiring of vessel ie SPV [special patrol vehicle]. Section 17 (5) (b) (i), ibid states that the ITC shall not be available in respect of the supply of services of hiring of vessels referred to in clause (aa) except when used for the purposes specified therein. The text of the clause (aa) is as under: (aa) vessels and aircraft except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft: (ii) for transportation of goods: It is evident that the vessel in this case [SPV] is not being used for further supply of such vessel; that it is neither used for transportation of passengers nor is it being used for imparting training ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of other transport vehicles nowhere else classified with operator); that the nature of input supply and output supply are altogether different & cannot be corelated as composite supply; that it is also difficult to establish any one supply as principal supply; that it is also not forthcoming form the invoices raised by the respondent as to whether the service they are providing falls under the definition of composite supply. 29. The respondent's counter is mentioned in paragraph 12 above and is not being repeated for sake of brevity. 30. It is a fact that the impugned order in the ruling is silent on the availability of ITC on hiring of SPV though in the finding portion it does advert to the issue. And hence, what needs examination is whether the respondents is eligible for ITC on hiring of vessel, which is blocked under 17 (5) (b) (i), except when used for the purpose specified in clause (aa). As is mentioned supra, the SPV is not being used for these purposes. What is contended by the respondent is that it is used for transportation of goods mentioned in 17 (5) (aa)(ii), ibid. This we have already dealt with in paragraph 25, wherein we have held that the vessels [DSV and SPV] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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