GST input tax credit blocked on leasehold-right transfer and industrial installation not qualifying as plant and machinery.

GST input tax credit on leasehold-right transfer was blocked because the inward supply was treated as part of construction of a manufacturing facility on the assessee's own account, with the capitalised cost forming part of the project cost. The term "construction" was read broadly to include re-construction, renovation, additions and alterations to the extent capitalised, so Section 17(5)(d) applied and credit was inadmissible. The Air Separation Plant also did not fall within the statutory definition of plant and machinery: it was an integrated industrial installation on leased land, not detachable equipment satisfying the annexation and object tests. The credit claim therefore failed.

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Issues: (i) whether GST paid on transfer of leasehold rights was hit by the blocked credit provision as consideration for construction of an immovable property on the assessee's own account; (ii) whether the Air Separation Plant qualified as plant and machinery so as to fall outside the credit restriction.

Issue (i): whether GST paid on transfer of leasehold rights was hit by the blocked credit provision as consideration for construction of an immovable property on the assessee's own account.

Analysis: The transaction was not treated as a bare lease of land. It was held to be an inward supply enabling the assessee to secure long-term leasehold rights together with existing shed and superstructures for establishing a manufacturing facility. The expression "construction" in the blocked-credit provision was construed broadly to include re-construction, renovation, additions or alterations to the extent of capitalisation. On that basis, the service received from IPL was found to be integrally connected with construction of the manufacturing facility on the assessee's own account and the capitalised cost formed part of the project cost.

Conclusion: The restriction under Section 17(5)(d) applied, and the credit was not admissible on this ground.

Issue (ii): whether the Air Separation Plant qualified as plant and machinery so as to fall outside the credit restriction.

Analysis: The definition of plant and machinery under the GST law was applied strictly, requiring apparatus, equipment or machinery fixed to earth by foundation or structural support and used for outward supplies, while excluding land, building and other civil structures. The Plant was found to be an integrated industrial installation erected on a long-term leased site, intended for permanent beneficial enjoyment of the land, and not merely detachable equipment fixed for operational stability. The criteria of annexation, object of annexation, intendment and marketability were applied, and the installation was held not to answer the statutory description of plant and machinery.

Conclusion: The Air Separation Plant did not qualify as plant and machinery for the purpose of the blocked-credit exception.

Final Conclusion: Input tax credit on the GST charged for transfer of leasehold rights was held to be blocked under the statutory restriction governing construction of immovable property, and the assessee's claim to avail the credit failed.

Ratio Decidendi: Where a service is received to facilitate construction of a manufacturing facility on the recipient's own account, and the resulting installation does not satisfy the statutory definition of plant and machinery, input tax credit is blocked under the specific exclusion provision.

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