2020 (4) TMI 795 - AAAR - GST

Appellate ruling: Bunds not plant & machinery under GST Act Section 17. Limited ejusdem generis principle applies.

In Re: M/s. Satyesh Brinechem Private Limited.

In Re: M/s. Satyesh Brinechem Private Limited. - TMI Issues involved:1. Admissibility of input tax credit on bunds used in the manufacture of salt and bromine chemicals.2. Interpretation of 'bunds' as plant and machinery or immovable property.3. Application of Section 17(5) of the CGST Act, 2017.4. Definition and scope of 'plant and machinery' under GST Acts.5. Relevance of ejusdem generis principle in interpreting 'any other civil structure.'Detailed Analysis:1. Admissibility of input tax credit on bunds used in the manufacture of salt and bromine chemicals:The applicant, engaged in the manufacture of salt and bromine chemicals, sought an advance ruling on whether input tax credit (ITC) is admissible for bunds used in their manufacturing process. The Gujarat Authority for Advance Ruling (GAAR) initially ruled that ITC on goods and services used to construct bunds is admissible, provided the bunds are used for making zero-rated supplies and fulfill the conditions necessary for treating them as 'plant and machinery.'2. Interpretation of 'bunds' as plant and machinery or immovable property:The appellant (Deputy Commissioner, CGST) argued that the GAAR's ruling was erroneous, contending that bunds qualify as immovable property under Section 17(5) of the CGST Act, 2017, and thus ITC should not be admissible. The appellant cited the case of M/s. Konkan LNG Pvt. Ltd., where a break wall was deemed immovable property and not plant and machinery.3. Application of Section 17(5) of the CGST Act, 2017:Section 17(5) of the CGST Act, 2017, restricts ITC on works contract services and goods/services used for the construction of immovable property, except for plant and machinery. The applicant argued that bunds do not fall under the restrictive clauses of Section 17 and qualify as plant and machinery. However, the appellate authority found that bunds are immovable property and do not qualify as plant and machinery, thus falling under the exclusion in Section 17(5).4. Definition and scope of 'plant and machinery' under GST Acts:The appellate authority examined the definition of 'plant and machinery' under the GST Acts, which includes apparatus, equipment, and machinery fixed to earth by foundation or structural support but excludes land, buildings, and other civil structures. The authority concluded that bunds, constructed using soil, chemicals, and other materials, do not fit the definition of apparatus, equipment, or machinery and thus are not plant and machinery.5. Relevance of ejusdem generis principle in interpreting 'any other civil structure':The applicant argued that the phrase 'any other civil structure' should be interpreted ejusdem generis with land and building, implying it should be restricted to immovable property used as a place for business or manufacturing. However, the appellate authority held that 'any other civil structure' refers to all civil structures other than foundation and structural supports used to fix apparatus, equipment, and machinery to earth. Thus, bunds, being civil structures, fall under the exclusion in Section 17(5).Conclusion:The appellate authority modified the GAAR's ruling, holding that bunds constructed by the applicant are not plant and machinery under Section 17 of the GST Acts. Consequently, ITC on works contract services or goods/services used in constructing bunds is not admissible to the applicant. The decision emphasizes the specific definitions and exclusions provided in the GST Acts and the limited applicability of the ejusdem generis principle in this context.