2025 (2) TMI 67 - HC - GST

Remand for de novo review: apply SC principles on section 17(5)(d) CGST to decide if building is plant

HC set aside the impugned order dated 30.08.2024 and remanded the matter for de novo reconsideration, directing the tax authority to apply the SC's ... Determination of tax and other liabilities relating to the petitioner as per the provisions of section 73 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Petitioner is engaged in the business of trading, leasing apart from construction of shopping malls. In the decision in Chief Commissioner of Central Goods and Service Tax & Ors. v. M/s Safari Retreats Private Ltd. & Ors [2024 (10) TMI 286 - SUPREME COURT], the Supreme Court had considered the scope and purport of section 17(5) of the CGST Act and held that the expression ‘plant or machinery’ used in section 17(5)(d) of the CGST Act cannot be given the same meaning as the expression ‘plant and machinery’ as defined in the explanation to section 17. It was further observed that the question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression 'plant or machinery' used in section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building has in the said business. As the impugned order has not taken into consideration the impact of the principles of law laid down in Safari Retreat’s case, this Court is of the view that the impugned order is liable to be set aside and a de novo reconsideration should be directed. The question relating to the 8 invoices and the inconsistency in the ITC reported in Table 4D(1) of Form GSTR-3B and Table 7E of Form GSTR-9 and all other contentions raised by the petitioner are left open for consideration again. Hence Ext.P3 order dated 30.08.2024 is hereby set aside and the respondent is directed to reconsider the matter afresh - Petition allowed by way of remand. The core issue in this case is the determination of tax liabilities and the eligibility for input tax credit (ITC) under the Central Goods and Services Tax Act, 2017 (CGST Act), specifically regarding the construction of immovable property by the petitioner, who is engaged in retail trading, leasing, and wholesale trading. The petitioner contested the disallowance of ITC on works contract services used in constructing shopping malls, arguing that the output supply was not works contract service and thus should be eligible for ITC.The legal framework centers on Section 73 of the CGST Act, which deals with the determination of tax not paid or short paid or erroneously refunded, and Section 17(5) concerning restrictions on ITC. The petitioner relied on the Supreme Court's decision in Chief Commissioner of Central Goods and Service Tax & Ors. v. M/s Safari Retreats Private Ltd. & Ors, which interpreted Section 17(5)(d) and the definition of 'plant or machinery.' The Court in Safari Retreats held that buildings essential for carrying out business activities could be classified as 'plant' and thus eligible for ITC if they meet the functionality test.The Court's analysis focused on whether the impugned order considered the principles established in Safari Retreats. The petitioner argued that the order was inconsistent with the statutory instructions and failed to apply the functionality test to determine if the construction of shopping malls qualified as 'plant.' The Court found that the assessment order did not consider the Safari Retreats decision, which was declaratory and applicable to the petitioner's case.The Court concluded that the impugned order was perverse for not applying the legal principles from Safari Retreats, warranting a de novo reconsideration. The Court set aside the order and directed the respondent to reassess the matter, considering the functionality test and the specific instructions related to ITC reporting in Form GSTR-3B and GSTR-9. The Court emphasized that the petitioner should be given a fair opportunity to present its case during the reassessment.Significant holdings from the judgment include the Court's recognition of the declaratory nature of the Safari Retreats decision, which impacts the interpretation of Section 17(5) of the CGST Act. The Court underscored the necessity of applying the functionality test to determine if a building qualifies as 'plant' for ITC purposes. The final determination was to set aside the impugned order and mandate a fresh assessment, ensuring compliance with the legal principles established in relevant precedents.