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TMI Blog2025 (4) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... turing plant in Gujarat for making HV/EHV cables using the Vertical Continuous Vulcanization (VCV) process; * that while insulation of cable cores in CCV process happens in horizontal heating tubes, in VCV lines, the process of insulation is done in vertical tubes; * that the VCV manufacturing line is required to be supported by concrete structure in square form on all sides; * that the total height of the VCV line from the ground floor is approximately 152 meters; that each floor inside the VCV tower will be 1.2 meters height upto initial 60 - 70 meters and thereafter, the height of each floor will be changed to 6 meters as per the requirements of the line; * that there will be passenger lifts and material handling lifts installed in this VCV tower; that there will also be a staircase with emergency exit and fire hydrants on each floor. * that this VCV tower will be used exclusively for the purpose of manufacturing HV/EHV cables; * the layout of the VCV line is reproduced below for ease of reference: * that the capstan floor level in the above diagram is 136.6 meters, and the extrusion floor level is at a height of 128.7 meters; * that the pressure vessel is at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are used for foundational & structural support of the VCV lines which are plant & machinery; that ITC is not restricted when supply involves construction or works contract service pertaining to plant & machinery; that in terms of explanation to section 17, supra, plant & machinery includes foundation and structural supports; * that the concrete structure in a VCV tower plays a fundamental role in maintaining stability precision and overall efficiency throughout the manufacturing process of insulated cables; * that they would like to rely on the case of viz ICB P Ltd 1997 (96) ELT 239 (Tri). Ambica Wood Works 1979 43 STC 338 Guj. Sirpur Paper Mills 1998 (97) ELT 3 (SC). 4. In view of the foregoing, the applicant has sought ruling on the below mentioned question viz: Whether the applicant is eligible to avail ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant, for manufacture of EHV cables, in terms of Section 17 (5) (c) and (d) of the CGST Act, 2017? 5. Personal hearing was granted on 04.12.2024, wherein Ms. Priyanka Kalwani, Advocate, Ms. Devanshi Sharma, Advocate, Shri Day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 :- (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices or both and includes such foundation and structural supports but excludes land, building or any other civil structures; telecommunication towers; and pipelines laid outside the factory premises. 3. Ducts and manholes are basic components for the optical fiber cable (OFC) network used in providing telecommunication services. The OFC network is generally laid with the use of PVC ducts/sheaths in which OFCs are housed and service/connectivity manholes, which serve as nodes of the network, and are necessary for not only laying of optical fiber cable but also their upkeep and maintenance. In view of the Explanation in Section 17 of the CGST Act, it appears that ducts and manholes are covered under the definition of "plant and machinery" as they are used as part of the OFC network for making outward supply of transmission of telecommunication signals from one point to another. Moreover, ducts and manholes used in network of optical fiber cables (OFCs) have not been specifically excluded from the definition of "plant and machinery" in the Explanation to Section 17 of CGST Act, as they are neither in nature of land, building or civil structures nor are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The second exception is where goods and services or both are received by a taxable person for the construction of an immovable property made not on his own account. Construction is said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out. However, construction cannot said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 33. Section 17 (5) incorporates an explanation which provides that the word "construction" used in clauses (c) and (d) includes reconstruction, renovation, additions, alterations or repairs, to the extent of capitalisation, to the immovable property. Thus, a very wide meaning has been assigned to the expression "construction" by the 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 mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service; or (ii) it is to be used by the person constructing as a setting in which business is carried out, further stating that construction cannot be said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 13. The Hon'ble Supreme Court, in the case of M/s. Safari Retreats P Ltd, ibid, while further analyzing has held as follows viz 43. ...............As the expression "plant or machinery" appears to be intentionally incorporated, it is not possible to accept the contention of the learned ASG that the word "or" in clause (d) should be read as "and". If the said contention is accepted, there will not be any difference between the expressions "plant and machinery" and "plant or machinery". This will defeat the legislative intent. 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 pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'plant' not having been defined under the Act, its ordinary meaning in commercial terms will have to be attached to it. The Hon'ble Court, thereafter laid down a functionality test, further concluding that if a building qualifies to be a plant, ITC can be availed against 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; that however, if the construction of a building by the recipient of service is for his own use, the chain will break, and ITC would not be available. 15. The appellant has stated that the VCV lines can be termed as apparatus and machinery; that the construction of concrete tower for erection and support of VCV lines are eligible for ITC as they are used for providing foundation and structural support. We find that the aforementioned judgement lays down the law as far as section 17 (5) (d), ibid, is concerned, ITC on services received for construction of immovable property on his own account is blocked subject however, to two exceptions, as listed supra. The Hon'ble Court further explains taxable person's "own account" to be w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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