Overhead crane fixed in factory qualifies as plant and machinery under HSN 8426, taxable at 18% GST

The AAAR held that an integrated factory building is not plant and machinery, but an overhead crane fixed in factory premises qualifies as plant and machinery under HSN 8426. The crane falls under Chapter 84 dealing with machinery and is taxable at 18% GST. Per Section 17 explanation of CGST Act, plant and machinery includes apparatus fixed to earth by foundation or structural support for making outward supply. Only the structural support erected for the overhead crane qualifies as plant and machinery, making the appellant eligible for proportionate input tax credit on such structural support, subject to conditions under Section 17(5)(c) and (d). Input tax credit is denied for other civil structures like side walls and roof of the integrated factory building.

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Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on steel, cement, and other consumables used in the construction of an Integrated Factory Building.
2. Eligibility of ITC on structures, pre-cast reinforced concrete beams, poles, and other capital goods used in the Integrated Factory Building.
3. Definition and interpretation of "plant and machinery" under Section 17(5) of the CGST Act, 2017.
4. Application of Supreme Court and ARA rulings to the present case.

Summary:

Issue 1: Eligibility of ITC on Steel, Cement, and Other Consumables

The Appellant sought ITC on GST paid for steel, cement, and other consumables used in the construction of an Integrated Factory Building. The Advance Ruling Authority (ARA) denied ITC on these items, stating that they were used for constructing a civil structure, which does not qualify for ITC under Section 17(5)(d) of the CGST Act, 2017. The ARA emphasized that the factory is a building where machines produce goods, and the structural enhancements are to support the plant and machinery, not part of the plant and machinery itself.

Issue 2: Eligibility of ITC on Structures, Pre-cast Reinforced Concrete Beams, Poles, and Other Capital Goods

The ARA did not provide a ruling on the eligibility of ITC for structures, pre-cast reinforced concrete beams, poles, and other capital goods due to insufficient documentary evidence. The Appellant argued that these items are integral to the operation of the overhead cranes and should be considered part of the plant and machinery, thus eligible for ITC.

Issue 3: Definition and Interpretation of "Plant and Machinery"

The Appellant contended that the Integrated Factory Building should be considered as "plant and machinery" under Section 17(5) of the CGST Act, 2017. They argued that the building's unique features, such as strong foundations, pillars, and gantry beams, make it an essential part of their manufacturing process. The Appellate Authority examined whether the Integrated Factory Building qualifies as "plant and machinery" and concluded that only the structural support related to the overhead crane could be considered as such. The rest of the building, including side walls and the roof, does not qualify for ITC.

Issue 4: Application of Supreme Court and ARA Rulings

The Appellant cited the Supreme Court decision in the case of Jayaswal Neco Ltd. and an ARA ruling in the case of SHV Energy Pvt. Ltd. to support their claim. The Appellate Authority found that these rulings do not apply to the present case. The Supreme Court ruling related to MODVAT credit on railway tracks within a plant, which is different from the current issue. The ARA ruling is binding only on the parties involved in that specific case.

Ruling:

1. The Appellant is eligible for ITC proportionate to the extent of structural support erected for the overhead crane, subject to the conditions stipulated in Section 17(5)(c) and (d) of the CGST Act, 2017.
2. The Appellant is not eligible for ITC on the construction of other civil structures like side walls and the roof of the Integrated Factory Building.

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