TaxTMI 
TaxTMI 
2019 (11) TMI 399
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....9/B-22 dated 22.02.2019 = 2019 (6) TMI 761 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case A. M/s. Western Concessions Private Limited (hereinafter referred to as "the appellants") having its corporate head office at 12th Floor, Knowledge Park, Hiranandani Business Park, Powai, Mumbai, is, inter-alia, engaged in regasification of Liquified Natural Gas and delivering the same to customers. B. The appellants have obtained registration and holding valid registration certificate issued under Central Goods and Services Tax Act, 2017 ("CGST Act"). C. The appellants are setting up a Liquified Natural Gas (LNG) re-gasification project at Jaigarh port in the state of Maharashtra (hereinafter referred to as "LNG Terminal"). D. The LNG Terminal consists of a Floating Storage Re-gasification Unit ('FSRU') with 4 MMTPA re-gasification capacity moored to jetty and has associated facilities like gas unloading arm, gas pipeline for delivering natural gas from the FSRU to the National Grid. E. The re-gasified LNG is required to be inducted into the cross-country pipeline/national Grid in order to be supplied to the ultimate customer. F. Therefore, the appel....
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....ut tax credit will not be available even if the goods or services are used in the course or furtherance of business. The relevant portion of section 17(5) is extracted as under: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- ... (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. ... Explanation.- For the purposes of this Chapter and Chapter VI, the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes....
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....ii. The Ld. AAR has relied on the decision of Porritts and Spencer (Asia) Ltd. Vs. State of Haryana [1979 AIR 300] = 1978 (9) TMI 72 - SUPREME COURT to state that the meaning of 'factory' should not be restricted only to a building on land, but would also include the FSRU vessel where the activity of re-gasification of LNG takes place in the present case. iv. The various equipment fitted to tie-in pipeline constructed by appellants would not make it an 'apparatus', 'equipment' or 'machinery', as every pipeline would be fitted with such equipment. Hence, it would not qualify as 'plant and machinery' under Explanation to Section 17(5) of the CGST Act and thus the ITC in respect of goods and services used for construction of pipeline would not be available to the appellants. R. Aggrieved by the above ruling passed by the Ld. AAR, the appellants are filing the present appeal, inter alia, on the following grounds which are without prejudice to each other. GROUNDS OF APPEAL 1. The tie-in pipeline constructed by the appellants would qualify as 'plant and machinery'. Further. since the pipeline is not laid outside a 'factory premises', it would not be covered under the ex....
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....utward supply of goods or services or both and includes such foundation and structural supports but excludes- i. land, building or any other civil structures; ii. telecommunication towers; and iii. pipelines laid outside the factory premises." ....emphasis supplied 1.5 Since, the pipeline in the present case is embedded in the earth, it would qualify as an immovable property and thus the construction of said pipeline amounts to a Works contract under Section 2(119) of the CGST Act. Further, for the reason mentioned in the foregoing paragraphs of this appeal, the tie-in pipeline qualifies to be a "plant and machinery" as per explanation to section 17 of the CGST Act. 1.6 Further, since the FSRU which is a vessel would not amount to a 'factory premise', the tie-in pipeline connecting the FSRU to the grid would not be covered under the exclusion clause of the aforesaid explanation. 1.7 Thus, the appellants submit that the restriction provided under Section 17(5)(c) and 17(5)(d) would not be attracted in respect of construction of the said pipeline. Hence the impugned ruling is liable to be set aside on this ground alone. 2. The wordings ....
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....ons of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter..." 2.4 Thus, the appellants submit that the exclusion clause 'pipelines laid outside the factory premises' has to be strictly interpreted. The aforesaid exclusion clause presupposes that there should be a 'factory premises', and in order to be excluded from the definition of plant and machinery, the pipeline should be laid outside such 'factory premises'. 2.5 The contra positive of 'pipelines laid outside factory premises' is not that only pipelines laid inside a factory would be covered under 'plant and machinery' and eligible for availing ITC. The exclusion provided to 'pipelines laid outside factory' only means that if there is a factory premises, then the pipelines laid outside such factory premises would not be a 'plant and machinery'. In case, where there is no factory premise, the exclusion clause (iii) of Explanation to Section 17(5) would not come into....
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.... a. Land and the building on it. b. A building or a part of building on it. (vii) Wharton's Law Lexicon, 1976 Reprint Ed premises' is often used as meaning 'land or houses'. (viii) Cochran's Law Lexicon IV Edition 'Premises' means 'houses or lands'. (ix) Earl Jowitt, Dictionary of English Law 'Premises...from this use of the word, 'premises' has gradually acquired popular sense of land or buildings. Originally, it was only used in this sense by laymen, and it was never so used in well- drawn instruments, but it is now frequently found in instruments and in Acts of Parliament as meaning land or houses, e.g., the Public Health Act, 1875. Sec. 4, where 'premises' includes measures, buildings, lands, easements, tenements and hereditaments, of any tenure... (x) Ballentine. J.A., Law Dictionary with Pronunciation. II Edition 'Premises' - as applied to land, Webster's New International Dictionary defines the word as follows: The property conveyed in a deed; hence, in general, a piece of land or real estate; sometimes, especially in fire insurance papers, a building or buildings on land; the premises insured. 2.7 On....
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....n suggests a very limited purpose to "pre-school coaching and training centre" and any institute or establishment, which issues any certificate or diploma recognized by law. The "coaching or tutorial classes" mentioned in the inclusive part of the definition and it cannot be covered in the exclusive portion of the definition. While interpreting the definition of "Commercial Training or Coaching Centre", the exclusion part must be strictly construed, what is being included in the definition cannot be excluded, unless it is specifically mentioned. In the present case, according to the Appellant, they were offering coaching classes to the students of intermediate standard of their colleges and other colleges for appearing joint entrance examination of IIT, JEE etc. In my considered view, when "coaching classes" have categorically included in the definition, then, it cannot be excluded by stretching the meaning of exclusion clause of the definition." .....emphasis supplied 2.11 In view of the above, the appellants submit that the wording used in exclusion clause of explanation to Section 17(5) must be strictly interpreted. Hence, in absence of a 'factory premise', the ITC on good....
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....essel wherein the regasification activity would be undertaken. 3.7 The Ld. AAR, in impugned order dated 22.2.2019, has held that when the definition of the 'factory' is not available in CGST Act, a definition given in some other statute can always be relied upon. Accordingly, the Ld. AAR has relied on the definition of 'Factory' under Section 2(m) of the Factories Act, 1948. 3.8 The appellants submit that the aforesaid finding given by the Ld. AAR is incorrect. The appellants submit that the definition of the term "factory" given under the Factories Act, 1948 cannot be applied for ascertaining the meaning of the term 'factory premises' used in clause (iii) of explanation to Section 17(5) of the CGST Act. 3.9 The appellants submit that to interpret a word used in a statute by using the definition of said word in other statutes, when they are not dealing with the same subject, is bad interpretation. In this regard, the Hon'ble Supreme Court in the case of M/s. Msco. Pvt. Ltd vs Union of India, 1985 AIR 76 = 1984 (10) TMI 44 - SUPREME COURT, held as under: "But while construing a word which occurs in a statute or a statutory instrument in the absence of any definitio....
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....ifically stated, that in such a case, definition of "manufacture" given under other statutes such as Central Excise Act, 1944 or Factories Act, 1948 cannot be relied upon to interpret the term 'manufacturing purpose' under Transfer of Property Act. The relevant portion of the aforesaid judgment is extracted as under- "The expression "manufacturing purposes" has not been defined in the Transfer of Property Act. It has therefore. to be construed in its popular sense. .... The old tyre retains its basic structure and identity. The courts below were therefore, right in holding that the lease in the present case was not for manufacturing purposes, and the tenancy had been rightly terminated by thirty days notice. Before parting with this judgment, we may sound a note of caution, that definitions of "manufacture" given in other enactments, such as, in the Factories Act or the Excise Act should not be blindly applied while interpreting the expression "manufacturing purposes" in Section 106, of the Transfer of Property Act. In some enactments, for instance in the Excise Act, the term "manufacture" has been given an extended meaning by including in it "re....
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....4.5 The Ld. AAR, in the impugned ruling dated 22.2.2109, has held that "The production or manufacturing process may not be taking place on land but it is place on ship (FSRU) and the same has to be considered as a factory unit in the subject case, as the process leads to production of natural gas . Further, according to the Ld. AAR "it is the production of something that makes a factory, and not the building". 4.6 The appellants submit that the aforesaid finding of the Ld. AAR is incorrect. The appellants submit that the Ld. AAR has overlooked the essential condition of existence of a 'premises' given under Section 2(m) of Factories Act, 1948. The appellants submit that only an establishment or facility on land, where any manufacturing activity takes place, would qualify as 'factory' under Section 2(m) of the Factories Act, 1948. 4.7 The Ld. AAR in the impugned ruling has also relied on the decision of Supreme Court in case of Porritts and Spenser (Asia) Ltd. Vs. State of Haryana reported at 1979 AIR 300 = 1978 (9) TMI 72 - SUPREME COURT. The relevant portion of the said decision which has been relied by the Ld. AAR in the impugned order is reproduced as under- "But ....
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....ule 'B' must be interpreted according to its popular senset meaning "that scene which people conversant with the subject-matter with which the statute is dealing would attribute to it" .......... 6. ....Dryer felts' are, therefore, clearly woven fabrics and must be held to fall within the ordinary meaning of the word 'textiles'. We do not think that the word 'textiles' has any narrower meaning in common parlance other than the ordinary meaning given in the dictionary, namely, a woven fabric. There may be wide ranging varieties of woven fabric and they may go on multiplying and proliferating with new developments in science and technology and inventions of new methods" materials and techniques, but nonetheless they would all be textiles. .............. Where a word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by. the Legislature. The reason is that as pointed out by Story, J., in 200 Chest. (of Tea (supra), the Legislature does "not suppose our merchants to be naturalists, or g....
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.... 'Equipment' is an act of equipping or fitting, or the state of being equipped; to supply with whatever is necessary to efficient action in the way. 'Equipment' is a thing which is used for a particular purpose. Webster Comprehensive Dictionary 'Apparatus' - A complex devise or machine for a particular purpose: an x-ray apparatus. 'Apparatus' - An integrated assembly of tools, appliances, instrument, etc. operating to achieve a specified result. 'Equipment' - Whatever constitute an outfit for special purpose 'Machine' - Any combination of mechanics for utilizing, modifying, applying, or transmitting energy, whether simple, as a lever and fulcrum, pulley, etc. or complex, as a Fourdrinier paper-making apparatus. Black's Law Dictionary 'Equipment' - The articles or implements used for a specific purpose or activity. 'Machine' - A devise or apparatus consisting of fixed or moving parts that works together to perform some function. - Also termed apparatus. 5.3 The appellants submit that the tie-in pipeline being constructed by the appellants is not merely a passive structure, but a machinery for transportat....
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....power or back up power. xii. Filtering- This equipment is located at the start point and end point of the pipeline for filtration of Gas thereby separating any debris or solid contamination. xiii. Gas Detention/ Leak Detection system - The Gas and leak detection systems are used to identify whether any leak has occurred in any part of the pipeline network. xiv. OFC cables - These are laid down alongside the pipeline for collection and transfer of data relating to the tie-in pipeline. xv. Gauges & Transmitters- These instruments are installed in pipeline for measuring and transmitting parameters like pressure and temperature of gas. xvi. Cathodic Protection System - This system is installed in pipeline for controlling the corrosion of pipeline. 5.5 The aforesaid equipment and machineries allow the appellants to induct, control, manage and monitor the flow of gas in the tie-in pipeline and such equipment together comprise the tie-in pipeline, which acts a machinery for transportation of gas to national grid. 5.6 Thus, the appellants submit that the tie-in pipeline qualifies as 'plant and machinery' as defined under Explanation to Sec....
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.... when such cost is separately charged. It will, therefore, have to be held that the exclusion clause does not operate as an exception to the first part of the definition and it merely enact an exclusion out of the inclusion clause and takes out some thing which would otherwise be within the inclusive clause. It has to be held that the exclusion clause can be availed of by the assessee only if the State seeks to rely on the inclusive clause for the purposes of bringing the particular amount within the definition of "sale price"." ...emphasis supplied 5.11 Further reliance is also placed on the decision of Supreme Court in case of Sardar Gurmej Singh Vs. Sardar Partap Singh Kairon reported at AIR 1960 (SC) 122 = 1959 (9) TMI 71 - SUPREME COURT wherein the Supreme court observed as under- "9. To accept this argument is to impute to the Legislature want of precision. The words "revenue officers", in whatever sense they are used, cannot obviously comprehend officers who are not revenue officers, and in that situation there is no necessity to exclude such officers from the group of revenue officers. The Legislative device of exclusion is adopted only to exclude a part from....
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....to avail ITC of the GST paid on goods and services used for the construction of the Tie-in pipeline or delivery of re-gasified LNG from FSRU to the National Grid. The ruling made the AAR was primarily based on the following observations: (a) that the FSRU is factory and that the pipeline under question is to laid outside the factory premises; (b) that the said pipelines does not qualify to be an equipment, apparatus or machinery for the purpose of claiming ITC; (c) hence, the restriction on availment of ITC under Section 17(5)(c) and 17(5)(d) is rightly applicable in the present case. 11. However, the Appellant vide their written submissions, beset with various case laws and contentions in their favor, which they filed before us challenged the ruling pronounced by the Advance Ruling Authority, and has prayed to set aside the impugned advance ruling. 12. On perusal of the entire case records available with us, the moot issues before us are as under; (i) Whether FSRU, where the re-gasification of the LNG is carried out for delivery to the National grid, will be construed as factory or otherwise. (ii) In case the same is held as facto....
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....he Appellant, first we would like to visit the dictionary meaning of the term 'factory' as provided under the various dictionaries. The submission made by the Appellant in this regard is reproduced herein under: Dictionary of the term "Factory" (i) Oxford Encyclopedic Dictionary (The new Oxford Illustrated Dictionary) Building or range of buildings with plant for manufacture of goods. (ii) Collins internet-linked dictionary of Business - Third edition A business premise used by a firm in the production of goods. (iii) The New International Webster's Comprehensive Dictionary of the English Language pl. An establishment devoted to the manufacture of something, including the building or buildings and machinery necessary to such manufacture; a manufactory. (iv) Cambridge International Dictionary of English A building or set of building where large amounts of goods are made using machines. 16. On perusal of the above meaning of the factory provided under the abovementioned dictionaries, it is revealed that for any structure to be considered as factory, the following two parameters needs to be met with: ....
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....dered as building, or establishment. Further, there is no dispute, by the Appellant, over the activities, carried out at the FSRU, where the re-gasification of the LNG is taking place, being in the nature of the manufacturing activity. Therefore, we would not go into the details of the activities carried out at the FSRU, as the same is accepted as manufacturing activities. 22. Thus, the impugned FSRU satisfies both the aforementioned essential conditions of the Factory, and accordingly will be construed as factory. 23. Now, we proceed to the definition of the 'premises' provided under the various dictionaries. The submissions made by the Appellant in this regard is reproduced herein under for discussion: Dictionary meaning of terms 'premises' - (i) Illustrated Oxford Dictionary 2. (in pl.) a House, building, with grounds and appurtenances. (ii) The New International Webster's Comprehensive Dictionary of the English Language 4. pl. A distinct portion of real estate; land or lands; land with its appurtenances, as buildings: (iii) The Chambers Dictionary (in PI) the aforesaid (property; law); hence, a building ....
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....ctionaries. They have also underlined the meaning of the premises as provided under various dictionaries, highlighting that premises will cover the portion of land only, which are in nature of appurtenances to building, real estate etc. 25. Now, before setting out to interpret the term 'premises', we will first take a look into the context into which this term 'premises' has been used. It is pertinent to mention that this impugned advance ruling revolves around the single core issue of interpretation of the exclusion clause i.e. "pipelines laid outside the factory premises" pertaining to the explanation to the Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017, which is being reproduced as under: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- ... (c) works contract services when supplied for-construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for con....