GST input tax credit blocked for underground gas pipeline treated as immovable property outside plant and machinery

A cross-country underground natural gas pipeline laid outside the factory premises was treated as immovable property and excluded from plant and machinery under GST because it was permanently annexed to earth and not an apparatus, equipment or machinery in common parlance. On that basis, input tax credit on goods, pipes, fittings and works contract services used for its construction and laying was blocked: works contract services fell within the restriction on immovable property other than plant and machinery, and goods or services used on own account were also hit by the blocked-credit provisions. The general business-use condition did not override these express restrictions.

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Issues: (i) Whether the cross-country underground pipeline used for transmission of natural gas is an immovable property and falls outside the definition of plant and machinery under the GST law. (ii) Whether input tax credit is admissible on goods, pipes, fittings and works contract services used for construction and laying of such pipeline.

Issue (i): Whether the cross-country underground pipeline used for transmission of natural gas is an immovable property and falls outside the definition of plant and machinery under the GST law.

Analysis: The relevant test is whether the pipeline is attached to earth with the intention of permanent annexation and beneficial enjoyment. The statutory meaning of immovable property, together with the doctrine of fixtures, shows that a large underground cross-country pipeline laid for long-term transport of gas is not a mere movable chattel. The expression plant and machinery under the GST law is confined to apparatus, equipment and machinery fixed to earth by foundation or structural support and expressly excludes pipelines laid outside the factory premises. On the facts, the pipeline is laid outside the factory premises used for processing or regasification and cannot be treated as apparatus, equipment or machinery in common parlance.

Conclusion: The pipeline is an immovable property and does not qualify as plant and machinery for GST input tax credit purposes.

Issue (ii): Whether input tax credit is admissible on goods, pipes, fittings and works contract services used for construction and laying of such pipeline.

Analysis: Section 16 permits credit only subject to the restrictions in Section 17. Once the pipeline is treated as immovable property other than plant and machinery, works contract services used for its construction are hit by clause (c) and goods or services received for its construction on own account are hit by clause (d). The use of the goods and services in the course or furtherance of business does not override the express blocked-credit provisions.

Conclusion: Input tax credit is not admissible on the goods and works contract services used for construction and laying of the underground cross-country pipeline.

Final Conclusion: The appeal succeeds only to the extent that the statutory questions are answered; on merits, the claimed credit is held to be blocked because the pipeline is treated as an immovable property outside plant and machinery.

Ratio Decidendi: An underground cross-country pipeline laid for transmission of natural gas, when treated as an immovable property and as pipeline laid outside the factory premises, is excluded from plant and machinery, and the express blocked-credit restrictions under Section 17 override the general entitlement to input tax credit under Section 16.

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