2024 (10) TMI 1242 - HC - GST

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 ... Input Tax Credit - Section 17(5)(c) and (d) of the CGST Act - functionality test for 'plant' under Section 17(5)(d) - requirement of factual determination and documentary proof - remedy by statutory appeal - maintainability of writ after adjudicationMaintainability of writ after adjudication - remedy by statutory appeal - Writ petition seeking quashing of show-cause notice/impugned proceedings dismissed as the adjudicating authority had passed a final order and statutory remedy by appeal exists. - HELD THAT: - The Court declined interim relief and admission because the adjudicating authority had already passed a final adjudication order on 30.9.2024 and the petitioner has the statutory remedy of appeal against that order. Having an effective alternative remedy of appeal rendered the writ petition inappropriate for interference at this stage. The petitioner was therefore directed to avail the appellate remedy and the writ petition was dismissed while leaving the petitioner free to file an appeal and place necessary documents before the appellate forum. [Paras 6, 10, 11]Writ petition dismissed with liberty to file appeal against the adjudication order.Input Tax Credit - Section 17(5)(c) and (d) of the CGST Act - functionality test for 'plant' under Section 17(5)(d) - requirement of factual determination and documentary proof - Entitlement to ITC on inputs and services used in construction could not be summarily admitted; factual satisfaction whether the building qualifies as a 'plant' under Section 17(5)(d) was required and the petitioner failed to place documentary evidence or appear before the authority. - HELD THAT: - The Court noted the petitioner claimed ITC on goods and services used in construction of a building to be leased and relied on the Apex Court's decision in the Safari Retreats matter. However, the Apex Court requires a case-specific factual enquiry whether the immovable property qualifies as a 'plant' for exclusion under Section 17(5)(d). The adjudicating authority had recorded that the petitioner did not appear for personal hearing and did not furnish documents such as lease deeds to establish the factual matrix. Consequently, entitlement to ITC could not be upheld in the writ without the necessary factual and documentary foundation, and the petitioner was directed to pursue the issue before the appellate authority where such evidence and the Safari Retreats precedent can be relied upon. [Paras 4, 8, 9, 10]Petitioner's claimed entitlement to ITC not sustained in this petition for lack of factual proof; petitioner may place documents and rely on the Apex Court's law in appeal.Final Conclusion: The writ petition challenging the show-cause notice/impugned proceedings is dismissed; the petitioner is left free to file an appeal against the adjudication order and to produce requisite documents and rely on the Apex Court's decision regarding Section 17(5)(c)/(d) in the appellate proceedings. 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.