AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 1452
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....19/B-56 Dated 24.05.2019 = 2019 (7) TMI 617 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE 1. That the appellant is the company having its LNG regasification plant at Dabhol, Maharashtra and hereby engaged in the regasification of the LNG. Its GSTIN in the state of Maharashtra is 27AAGCK0390Q1ZO. 2. That, the LNG reaches to plant through jetty where it is unloaded from various ship/cargos. The captive jetty is situated in sea and it is about 1.8 km from the tanks farm area and is well within the plant area. The length of the jetty is around 300 meters and handles presently around 20 LNG Cargo in a year without the breakwater. 3. That, in order to protect the jetty from the high tide and forceful sea waves, there is existing partly constructed break water which was constructed by Dabhol Power Company (DPC). This break water was the part of the original of the approved design itself, meaning thereby, the jetty was not workable at its potential without the existence of break water. 4. That, the Break water was designed to prevent the high waves and tide to touch the jetty and cargo/ ships of LNG and thereby important for the safety for the jetty as....
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.... said order was communicated to us through Email dated 10/07/2019. 10. That the learned ARA, through its order has held that the KLPL is not eligible to claim ITC mainly on the below mentioned three grounds: - a. Construction of Breakwater is only facilitating receipt of raw material i.e. LNG and is not going to be used for rendering outward supply. b. The Breakwater, being an immovable structure, cannot be considered as Plant & Machinery. c. KLPL is already functioning without the complete break water and hence could not able to establish that it is impossible for them to function without Break water. 11. That the appellant being aggrieved by the impugned order has preferred an appeal before the appellate authority for advance ruling under section 100 of the CGST/MGST Act on the following grounds:- GROUNDS OF APPEAL 12. Because on the facts and circumstances of the case, the learned ARA has failed to appreciate the definition of the term "Plant and Machinery" as defined in the explanation to section 17. Although the learned authority has rightly appreciated the function of the breakwater when it has stated that "in the subject case the breakw....
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....ovider. Types of Services: Business Auxiliary Services. Address of Place of Business: - RGPPL, Guhagar Road, At/Post - Anjanwel, Taluka - Guhagar, District - Ratnagiri. Pin Code - 415634. Additional Place Of Business:- No Additional Place of Business registered. Authorised Signatory: - Alok Kumar Jain, Gen. Manager. 18. Written contention given before the Advance Ruling- 18.1 The applicant itself is a service provider, who provides 'service' of regasification of Liquefied Natural Gas (LNG) to the Ratnagiri Gas and Power Private Limited (RGPPL). The Service, mentioned as "Regasification of LNG" in the supply invoice to RGPPL, is covered under HSN Code - 9997 and having GST Tax rate of 18% (CGST 9% and SGST 9%). The Applicant neither makes purchases of LNG nor make sales of it in the original or any other form directly. The dealer is planning to build a 'breakwater wall' beyond the existing operational "Captive etty", which (wall) the applicant says is a part of the existing plant, and wants to take input tax credit f it. In order to clear the doubts, whether the 'breakwater wall' will be treated as immovable property or a plant, an advance r....
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....e applicant has quoted a Supreme Court ruling in the case of Karnataka Power Corporation as reported in (2001) 247 ITR 268 (SC) = 2000 (7) TMI 72 - SUPREME COURT. In this ruling Hon. Supreme Court has stated, "In the instant case, there is a finding by the fact finding authority that the assessee's generating station building is so constructed as to be an integral part of its generating system. It must, therefore, be held that it is a "plant" and entitled to investment allowance accordingly." If we look at the dictionary meaning of "integral Part", as mentioned in the above ruling, it means necessary to make a whole complete or fundamental or without something functioning is impossible. And from rest of the rulings it is crystal clear that any civil construction or building or both in order to treat as a 'plant' has to be an indispensable part of the concerned working unit, and without them basic functioning of that unit is not possible. In view of the above facts and the reasoning given by the applicant in his application, applicant could not establish that it is impossible for him to function without breakwater wall. Also the applicant has shown total outward suppl....
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....grounds of law of appeal at the point no.2 the applicant says that, "because on the facts and circumstances of the case, the learned ARA has failed to appreciate section 17 (5) (d) read with explanation when it stated that breakwater being an immovable property cannot be considered as plant and machinery, whereas the position of law is otherwise. The foundation or structural support of the plant & machinery, even though it is an immovable property, will be considered as an integral part of plant & machinery. Therefore all immovable structures are not disqualified from being covered in the term plant & machinery." Here if we read section 17 (5) (d) with the explanation in section 17 (6) it makes clear that any immovable civil structure attached to the apparatus, equipments and machinery can be treated as plant and machinery whereas the breakwater wall is an independent civil structure. 19.5 In a high court ruling in the case of Mazgaon Dock Limited - reported in 191 ITR 460 = 1991 (3) TMI 114 - BOMBAY HIGH COURT, the same had been quoted by the applicant in his Advance ruling application in support of his ITC claim on breakwater wall, wherein the Hon. Court has stated that, ....
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.... Natural Gas (LNG). The service falls under the HSN Code 9997 having GST rate 18% (9% SGST and 9% CGST). He showed us the "Jetty" beyond which they want to construct a break water wall, a partly constructed wall was laying there, which he said, was built by the Enron Corporation. The Jetty was in operation where the cargo ships dock and from where they transfer LNG through a Pipeline from a cargo ship to the processing unit and further after regasification to the RGPPL. The visit concluded around 12.15 pm. 20. 3B RETURN CONSOLIDATION OF M/S KONKAN LNG PRIVATE LIMITED, GSTIN 27AAGCK0390Q ZO, PERIOD FROM APRIL 2018 TO AUGUST 2019:- INWARD OUTWARD SUPPLY IGST CGST SGST INWARD SUPPLY LIABLE TO REVERSE CHARGE IGST CGST SGST Apr-18 408969219 135 36806993 36806993 0 0 0 May-18 109993273 9899394 9899394 25000 0 2250 2250 Jun-18 20637375 1857364 1857364 48610 8749 0 0 Jul-18 21875653 1968809 1968809 0 0 0 0 Aug-18 20920120 1882812 1882812 1347527 206555 18000 18000 Sep-18 82748704 &nbs....
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....self. The break water was designed to prevent the jetty from erosion of high waves and tide to touch the jetty and ships. As the existing break water was not complete contract was given for completion of the break water facility. In order for the completion of break water a tender was given where scope of the work is as follows:- .."Basic design, detail engineering and physical model test, surveys, temporary work, development of quarries, supply of material, construction of balance portion of break water and removal of temporary works as per the assessment reports, job specification, codes and recommendation of license holder and drawings. 23. The issue of the appellant is whether he will be able to claim the ITC on such construction/reconstruction of the break water. The AAR held that as per section 17(5)(d) of the CGST Act, the appellant is not allowed to take the credit of ITC of the amount paid to the contractors on the basis of the following reasons:- a) Construction of Breakwater is only facilitating receipt of raw material i.e. LNG and is not going to be used for rendering outward supply. b) The Breakwater, being an immovable structure, cannot b....
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....which should be apparatus, equipment and machinery; b) it should be used for outward supply of goods or services; c) it should be neither of the following:- 1) Land, building or any other civil structure; 2) Telecommunication tower; 3) Pipe line laid outside the factory premises. It is seen from the facts presented by the appellant that he provides the services of regasification of LNG to the Ratnagiri Gas and Power Pvt. Ltd. for which LNG is supply to them by transportation in ship which are berth at the captive jetty. LNG is transferred to appellant's unit for regasification. The appellant is getting the break water constructed to ensure safety of the ship that are berth at the jetty and also to allow the ship to jetty at any point of time irrespective of the severity of the waves and tides. At present ships are allowed only at certain time when the intensity of waves is less than certain limit. After the construction of the break water there will be no time restriction on ships entered the jetty. 25. Looking to the above issue, it is a basic question is as whether the break water constructed for the appellant can be consid....
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.... machinery'. The explanation to section 17 (5) (d) says that the term 'plant and machinery' covers apparatus, equipment and machinery. The break water wall constructed on the sea to protect the ship from high waves can hardly be called machinery or apparatus or equipment. Neither in common parlance nor in technical parlance would one associate a civil structure like a breakwall to be 'plant and machinery' or 'machinery, apparatus or equipment. Machines are something which employ power to achieve. Equipment and apparatus mean tools for a particular purpose. The term 'tool' here is very important. It is meant to be a device or implement, especially one held in the hand, used to carry out a particular function. The breakwater wall does not remotely fall under any of these description. The images of the project show that it is essentially a wall or a civil structure meant to protect the jetty from tides and waves. In regard with our finding that the breakwater does not come under the definition of plant and machinery, there seems no purpose in examining whether it is used for making outward supplies. 27. It is seen from the scope of work documents i.e. scope of work given in Clause ....