ITC on construction of immovable property leased for a school requires 'plant' functionality test u/s17(5)(d); petition dismissed

Whether input tax credit (ITC) is allowable on goods/services used in construction of an immovable property leased for running a school: HC applied the Supreme Court's directive that classification depends on fact-specific functionality testing under Section 17(5)(d); the building must satisfy the legal definition of "plant" to permit ITC. Reasoning: factual inquiry required into functionality; HC remanded for adjudicatory determination. Outcome: petitioner failed to furnish requisite evidence before the adjudicating authority, did not challenge the final order here, and was denied relief; petition dismissed with liberty to pursue the statutory appeal and submit documents relying on the SC precedent.

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Issues:
Challenge to show-cause notice validity, Input Tax Credit (ITC) availed on construction goods, Adjudication order challenge, Entitlement to ITC under CGST Act, Requirement to establish building as a plant for ITC eligibility.

Analysis:

1. Challenge to Show-Cause Notice Validity:
The petitioner challenged the validity of a show-cause notice issued by the respondent regarding the reversal of Input Tax Credit (ITC) availed on construction goods. The petitioner contended that they were entitled to the ITC under Section 17 (5) (c) & (d) of the CGST Act.

2. ITC Availed on Construction Goods:
The petitioner, engaged in construction and rental services, had availed ITC on goods used in constructing a building leased to a school. Despite submitting a detailed reply objecting to the recovery of GST, the petitioner failed to establish the building as a plant to qualify for ITC, leading to the reversal of ITC under protest.

3. Adjudication Order Challenge:
The respondent issued an adjudication order demanding penalty and interest on the reversed ITC amount. The petitioner approached the High Court, arguing their entitlement to ITC based on a similar judgment by the Apex Court in another case.

4. Entitlement to ITC under CGST Act:
The petitioner claimed entitlement to ITC under Clause (c) & (d) of sub-section 5 of Section 17 of the CGST Act, citing a precedent involving construction of a mall. However, the petitioner failed to provide sufficient evidence to establish the building as a plant as required for ITC eligibility.

5. Requirement to Establish Building as a Plant for ITC Eligibility:
The High Court emphasized the need to determine whether the building in question qualifies as a plant to avail ITC on goods and services used in setting up the immovable property. The court highlighted the factual nature of this determination and the necessity for a fact-finding inquiry in each case to establish eligibility for ITC.

6. Final Order and Dismissal of Petition:
The High Court dismissed the petition, noting the petitioner's failure to provide necessary documents to establish the building as a plant for ITC purposes. The court highlighted that the petitioner could challenge the adjudication order by filing an appeal before the appellate authority, presenting all essential documents and relying on the legal principles established by the Apex Court.

In conclusion, the judgment underscores the importance of substantiating the eligibility for Input Tax Credit by establishing the building as a plant as required by the CGST Act. The petitioner's failure to provide adequate evidence led to the dismissal of the petition, with the court emphasizing the option to appeal the adjudication order with proper documentation and legal arguments.

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