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Issues: (i) Whether the appellate authority's failure to address the cited precedent and statutory amendment affected its conclusion; (ii) Whether the resort building and civil structures qualified as plant and machinery under Section 17(5)(d), including under the unamended functionality test; (iii) Whether the resort was constructed on the assessee's own account despite its accommodation, event and photo-shoot activities; (iv) Whether any balance input tax credit fell outside Section 17(5)(d); and (v) Whether the interest and penalty were sustainable.
Issue (i): Whether the appellate authority's failure to address the cited precedent and statutory amendment affected its conclusion.
Analysis: Sections 75(6) and 107(12) of the Central Goods and Services Tax Act, 2017 require reasoned orders that address the points for determination and the basis of decision. The cited precedent, the retrospective amendment and the claim concerning residual credit ought to have been addressed by the appellate authority. However, Section 113(1) permitted complete adjudication of the issues on the existing record after both sides were heard, and all contentions were determined afresh.
Conclusion: The omission did not invalidate the conclusion, and no prejudice was caused to the assessee.
Issue (ii): Whether the resort building and civil structures qualified as plant and machinery under Section 17(5)(d), including under the unamended functionality test.
Analysis: Section 124 of the Finance Act, 2025 retrospectively substituted "plant and machinery" for "plant or machinery" in Section 17(5)(d) from 01.07.2017. Explanation 1 to Section 17 expressly excludes land, buildings and other civil structures from plant and machinery. The resort building and associated civil structures consequently cannot qualify for the exception. Even under the earlier wording, the functionality test did not extend to hotel or resort buildings, which remain premises in which the hospitality business is conducted rather than the business apparatus.
Conclusion: Input tax credit on goods and services used to construct the resort building and its civil structures was blocked, against the assessee.
Issue (iii): Whether the resort was constructed on the assessee's own account despite its accommodation, event and photo-shoot activities.
Analysis: Section 17(5)(d) applies even where construction inputs are used in the course or furtherance of business. Construction on own account includes a building used as the setting for the taxable person's own business, whereas construction intended for sale, lease or licence to another stands differently. The resort was used to provide the assessee's accommodation, restaurant and event services; no evidence identified any portion as constructed for sale, lease or licence to a third party. Section 155 placed the burden of proving credit eligibility upon the assessee.
Conclusion: The resort was constructed on the assessee's own account, and the construction-related credit was blocked, against the assessee.
Issue (iv): Whether any balance input tax credit fell outside Section 17(5)(d).
Analysis: Section 17(5)(d) does not bar credit on every purchase made for establishing a resort; applicability depends on the nature and purpose of each item, rather than its accounting classification. Credit on the invoice-wise items identified by the assessee as electrical equipment, air-conditioners and expensed purchases had already been allowed. No further invoice, supplier, category or evidence established that the remaining credit related to movable assets or qualifying plant and machinery rather than construction of civil structures.
Conclusion: No part of the balance input tax credit was shown to fall outside Section 17(5)(d), against the assessee.
Issue (v): Whether the interest and penalty were sustainable.
Analysis: Under Section 50(3) and Rule 88B(3), interest arises only on wrongly availed and utilised input tax credit, measured by the extent to which the electronic credit ledger balance falls below the disputed credit. Interest was confined to the extent of actual utilisation, with no interest imposed where the ledger balance remained sufficient. Section 73(8) relieved penalty only upon payment of tax and interest within thirty days of the notice; otherwise, Section 73(9) required the prescribed penalty.
Conclusion: The interest and penalty were correctly computed and sustained, against the assessee.
Final Conclusion: The retrospective statutory exclusion of buildings and civil structures from plant and machinery, together with construction on own account and failure to establish any additional eligible item, sustained the denial of the disputed credit and the consequential liabilities.
Ratio Decidendi: From 01.07.2017, Section 17(5)(d) excludes input tax credit on goods and services used to construct a building or civil structure on the taxable person's own account, because such property cannot qualify as defined plant and machinery merely because it is used to provide taxable hospitality services.
Construction-related input tax credit for resort buildings remains blocked despite taxable hospitality use, subject to evidence of separate movable assets.
Input tax credit for goods and services used to construct a resort building and related civil structures is blocked where construction is on the taxable person's own account. The retrospective substitution of "plant and machinery" from 1 July 2017, read with the statutory exclusion of land, buildings and civil structures, prevents such premises from qualifying for the exception, even under a functionality approach. Taxable accommodation, restaurant, event and photo-shoot services do not establish construction for sale, lease or licence to another. Credit remains available only for separately evidenced movable assets or qualifying items. Interest applies only to wrongly availed and utilised credit, and penalty relief depends on timely payment of tax and interest.
Input tax credit on construction of resort building - Retrospective substitution of plant and machinery in blocked credit provision - Construction on taxable person's own account - Proof of input tax credit eligibility - Interest on wrongly availed and utilised input tax credit - Penalty for non-payment after show cause notice Reasoned appellate orders - Failure to consider binding precedent - Effect of the appellate authority's failure to address the cited Supreme Court ruling [2024 (10) TMI 286 - SUPREME COURT], the retrospective amendment and the claim for inputs outside the construction bar - HELD THAT: - A reasoned appellate order ought to address a binding decision specifically cited by a party and state why it applies or does not apply. The appellate authority should therefore have dealt with the cited ruling, the amendment and the claim concerning the residual credit. However, the Tribunal, being the final fact-finding forum, considered the amended provision and the complete record afresh; all the matters had been fully argued and no unresolved factual issue prevented their determination. [Paras 34, 36, 37, 38] The omission was cured by fresh adjudication and caused no prejudice to the appellant. Blocked input tax credit on construction of immovable property - Plant and machinery exclusion for buildings and civil structures - Eligibility of input tax credit on goods and services used to construct the resort building and its civil structures - HELD THAT: - The retrospective amendment requires Section 17(5)(d) to be read from 01.07.2017 with the defined expression plant and machinery, which expressly excludes land, buildings and other civil structures. The resort building, halls, lawns, pathways and compound walls could therefore not fall within that exception. Even under the earlier wording, the functionality test was framed for buildings other than hotels and cinema theatres; as the resort supplied hotel accommodation and restaurant services, its building was in substance a hotel building and could not be treated as plant. [Paras 46, 47, 48, 49, 50] The resort building and its civil structures were not plant and machinery, and the exception to the blocked-credit provision was unavailable. Construction on taxable person's own account - Construction of the resort for supplying accommodation, restaurant and event services as construction on the appellant's own account - HELD THAT: - The words including when the goods or services are used in the course or furtherance of business make clear that business use does not by itself take construction outside Section 17(5)(d). Construction is on the taxable person's own account where the building serves as the setting of that person's own business, as distinct from a building intended for sale, lease or licence to another. The resort was used under the appellant's control and management for its own hospitality and event services, and no material identified any part as having been constructed for sale, lease or licence to a third party. [Paras 51, 52, 53, 54, 56] The resort was constructed on the appellant's own account, and credit on construction of its building and civil structures was blocked. Scope of blocked credit on construction inputs - Burden of proving input tax credit eligibility - Eligibility of residual input tax credit on resort-construction inputs not specifically identified as movable assets or plant and machinery - HELD THAT: - Section 17(5)(d) applies only to goods and services received for construction of an immovable property; the nature of an item and the purpose of its acquisition, rather than its accounting treatment or capitalisation alone, determine its treatment. The authority had allowed every item which the appellant specifically identified for 2019-20 as lying outside the clause. The appellant did not identify any further invoice or category of movable asset, equipment or qualifying plant and machinery, and a general request for verification did not discharge its statutory burden of proving eligibility. [Paras 59, 60, 61, 62, 63] No entitlement to any further credit was established, and the residual credit remained blocked. Interest on wrongly availed and utilised input tax credit - Liability to interest on blocked resort-construction credit actually utilised through the electronic credit ledger - HELD THAT: - Interest under Section 50(3) read with Rule 88B arises only to the extent wrongly availed credit is utilised, which is deemed to occur when the electronic credit ledger balance falls below the disputed credit. The authority applied this test to the actual ledger position, confined interest to the established utilisation and imposed no interest where the ledger balance always covered the disputed credit. [Paras 65] The interest was correctly computed and sustained. Penalty for non-payment after show cause notice - Statutory penalty for failure to pay the determined tax and interest within the prescribed period after the show cause notice - HELD THAT: - The statutory immunity from penalty was unavailable because the tax and interest were not paid within thirty days of the show cause notice. Once the tax liability was sustained, Section 73(9) required imposition of the prescribed penalty; the proceedings did not allege fraud, wilful misstatement or suppression. [Paras 67] The statutory penalty was correctly imposed and sustained. Final Conclusion: The appeal was dismissed. The denial of input tax credit on construction of the resort building, interest for the established utilisation, and the statutory penalty were upheld.