2024 (10) TMI 1242 - HC - GST

Building used for school doesn't qualify for ITC under Section 17(5)(d) without proving plant functionality test

M/s. Chirantan Enterprises LLP Through Partner Mr. Prem Sethia Versus Commissioner CGST And Central Excise

The MP HC dismissed a petition challenging denial of ITC on construction goods for a building leased to run a school. The court noted that following the ... Validity of SCN - Input Tax Credit (ITC) availed on construction goods - construction of building for leasing out to M/s Shishukunj Knowledge Society for running school - HELD THAT:- The matter of CHIEF COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX & ORS. VERSUS M/S SAFARI RETREATS PRIVATE LTD. & ORS. [2024 (10) TMI 286 - SUPREME COURT] is relating to the construction of the mall. The Apex Court has held that each mall is different, therefore, in each case fact finding enquiry is contemplated. The High Court has not decided whether the mall in question will satisfy the functionality test of being a plant. The matter has been remanded back to decide, whether, on facts, the mall in question satisfies the functionality test so that it can be termed as a plant within the meaning of bracketed portion in Section 17 (5) (d). The same applies to warehouses or other buildings except hotels and cinema theatres. The Apex Court has held that if the building in which the premises are situated qualifies for the definition of plant, ITC can be allowed on goods and services used in setting up the immovable property, which is a plant. The petitioner was required to satisfy adjudicating authority, whether the building in question qualifies for the definition of plant in order to avail the ITC, but the petitioner instead of submitting all these necessary documents chosen not to appear before the authority and directly approached this Court. Now the final order has been passed, which has not been challenged in this petition. The petitioner is having remedy to file an appeal against the said order. The petitioner is free to file an appeal before the appellate authority, wherein the petitioner may file all the necessary documents and rely on the law laid down by the Apex Court in the case of M/s Safari Retreats Private Ltd. Petition dismissed. 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.