2022 (12) TMI 509 - AAR - GST

ITC denied for connector pipeline construction outside factory premises under GST Act Sections 17(5)(c) and 17(5)(d)

In Re: M/s. Mumbai Aviation Fule Farm Facility Private Limited

AAR Maharashtra ruled that ITC on goods and services used for constructing a connector pipeline outside factory premises is not available under GST Act ... Input Tax Credit - inputs are consumed in the construction of an immovable property outside MAFFFL's licensed premises which are meant and intended to be for the provision of taxable output services - HELD THAT:- As per the explanation to Section 17, Plant and Machinery does not include a pipeline laid outside the factory premises. As a consequence, the ITC of goods and services used for construction of a pipeline laid outside the factory premises is not available in terms of Section 17(5) (c) and 17(5) (d) of the GST Act. As per the applicant, connector pipeline connecting the storage tanks to the refueller, which is immovable in nature, forms Plant and Machinery, which contention does not hold merit. Their key activity is providing the services, for supply to aircraft, which inter alia includes delivery in a form and manner which is consumable, usable and saleable. Hence, as per applicant, the provision of the ATF to the nearest practical delivery point i.e. refueller, is an integral and essential part of the economic activity being carried out by the applicant. Therefore, as per the applicant, the connector pipeline connecting the storage tanks to the refueller, which is immovable in nature, forms Plant and Machinery. The sole issue involved in the present case is regarding entitlement of ITC with regard to the said pipeline. The applicant has failed to establish how it is entitled to ITC in the presence of the express legal bar to claim such ITC. Apart from the entitlement of ITC, in respect of said 90% of the pipeline outside their premises, there is no other issue involved in the present case. Issues Involved:1. Eligibility of Input Tax Credit (ITC) for inputs consumed in the construction of an immovable property outside the licensed premises of MAFFFL intended for taxable output services.Issue-Wise Detailed Analysis:1. Eligibility of Input Tax Credit (ITC) for Inputs Consumed in Construction:Applicant's Contention:- MAFFFL is engaged in providing fuel infra services, including the construction of a Connector Pipeline for a Fuel Hydrant System at CSIA, Mumbai.- The pipeline is essential for supplying fuel to airlines, with 10% of the pipeline within MAFFFL's licensed premises and 90% outside.- Section 16 of the CGST Act entitles a registered person to ITC on goods and services used in furtherance of business.- Section 17(5) restricts ITC for construction of immovable property except for plant and machinery. However, the explanation to Section 17 excludes pipelines laid outside the factory premises from the definition of plant and machinery.- The applicant argues that the connector pipeline should be considered as plant and machinery integral to their business, citing the Orissa High Court ruling in Safari Retreats Private Limited v/s Chief Commissioner of GST, which allowed ITC for immovable property used for furtherance of business.Officer's Submission:- The officer argues that under Section 17(5) of the CGST Act, ITC is not available for goods or services used in the construction of an immovable property, other than plant and machinery.- The officer emphasizes that pipelines laid outside the factory premises are explicitly excluded from the definition of plant and machinery.- Therefore, ITC for the construction of the connector pipeline outside MAFFFL's licensed premises is not allowable.Authority's Observations and Findings:- The applicant's key activity is providing fuel infra services, including the construction of a connector pipeline essential for their operations.- The pipeline, being immovable and partly outside the licensed premises, does not qualify as plant and machinery under the CGST Act.- Section 17(5) clearly restricts ITC for pipelines laid outside the factory premises.- The applicant's argument that the pipeline is integral to their business does not hold merit against the explicit legal provisions.- The authority concludes that the applicant is not entitled to ITC for the construction of the pipeline outside their licensed premises.Conclusion:- The sole issue is the entitlement of ITC for the pipeline outside the licensed premises.- The authority rules that ITC is not available for inputs consumed in the construction of an immovable property outside MAFFFL's licensed premises, as per Section 17(5) of the CGST Act.Order:- The question regarding the availability of ITC for inputs consumed in the construction of an immovable property outside MAFFFL's licensed premises is answered in the negative.