TaxTMI 
TaxTMI 
2019 (9) TMI 1412
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.... Facts of the case:- (I) The Appellant NMDC Limited holding GSTIN 22AAACN7325A3Z3 is a State-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. It is India's largest iron ore producer and exporter producing about 30 millions of tons of iron ore from 3 fully mechanized mines in Chhattisgarh. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacity Greenfield Integrated Steel Plant based on HiSmelt technology in Nagarnar, located 16 km. from Jagdalpur in the State of Chhattisgarh with an estimated outlay of Rs. 20,000 Crore. NMDC has entered into a con- tract agreement with M/s. Bajaj Electricals Limited for lighting of plant road, boundary and watchtower. It includes various inputs and input services like design and engineering supply of plant and equipment and erection of such plant and equipment including steel, lighting tubular poles, fittings, aviation lamps, switchbox, pipes, for laying the cables. To serve the said plant and enable NMDC for round the clock manufacturing operations,....
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.... Bombay High Court's decision in Bharti Airtel case [2014 (35) S.T.R. 865 (Bom.)] and refused to follow the decision of the Delhi High Court in the Vodafone case cited by the Appellant [2019 (27) G.S.T.L. 481 (Del.)] when the correctness of the former decision was doubted by the Delhi High Court in the latter case? (6) Whether the impugned order fails to appreciate the scope of Section 16 of the CGST Act, 2017, which allows credit of taxes on supply of goods or services or both used or intended in the course or furtherance of one's business? (b) That, the impugned order concludes that the items in question are nothing but immovable property and cannot be considered as goods in any way for the simple reason that these are attached to earth. The impugned order also places on the definitions of the term "immovable property" under General Clauses Act, 1897 and Section 3 of the Transfer of Property Act, 1882 to explain the term "immovable property". Certain case laws also were relied upon by the Authority in support of its conclusion. (c) That, on bare perusal of Section 17(5)(c) and (d) of the CGST Act, 2017, it is understandable that the test of mova....
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....perty. It is submitted that even any immovable property, once qualifies as 'plant & machinery', they stand excluded from the restriction and the credit is eligible not only for plant and machinery but includes their foundation and supporting structures. (f) That, it is evident from para 5.14 of the impugned order, the scope of work under the agreement dated 10-3-2017 with M/s. Bajaj Electricals Ltd. is completely misunderstood and misappreciated by the AAR. The Appellant submits the observations of the AAR in the impugned order are incorrect for the following reasons:- * It is settled law that clauses in the agreement should be read as a whole and not in isolation to understand the tenor and intention of the contracting parties. * The civil work in the contract is to provide to foundation and structural support to the structures and equipment in question and nothing more. The foundation and structural support is given to the lighting equipment in order to ensure their stability and wobble - free operation. In fact, the explanation in Section 17 of the CGST Act, 2017 defines 'plant and machinery' to include structural support and foundation....
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.... can be regarded as supporting structures and foundation of plant and machinery. (j) That, the term' "plant", the Supreme Court in Scientific Engineering House Private Limited v. Commissioner of Income Tax, AP, 2002-TIOL-665-SC-IT, observed as below:- "In other words, plant would include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for. mechanical operations or processes or is employed in mechanical or industrial business. In order to qualify as plant, the article must have some degree of durability, as for instance, in Hinton v. Maden & Ireland Ltd. [1960] 39 ITR 357 (HL), knives and lasts having an average life of three years used in manufacturing shoes were held to be plant. IN CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC) = 2002-TIOL-642-SC-IT the respondent, which ran a hotel, installed sanitary and pipeline fittings in one of its branches in respect whereof it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of plant given in section 10(5) of the 1922 Act....
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....s as under: "Apparatus - It is a collection or set of materials, instruments, appliances or machinery designed for a particular use (Mav. Web. Dic.). A compound instrument designed to carry out a specific function. (McGraw Hill Dic. of Sc. & Tech. Terms)." (m) The Appellant further wishes to quote further on the meaning of apparatus from the Webster's Encyclopedic Unabridged Dictionary of the English Language which reads as under:- "a group or aggregate of instruments, machinery, tools, materials etc., having a particular function or intended for a specific use. 2. any complex instrument or machine for a particular purpose. 3. any system or systematic organization of activities, functions, processes, etc., directed toward a specific goal; the apparatus of government; espionage apparatus. 4. Physiol, a group of structurally different organs working together in the performance of a particular function: the digestive apparatus." (n) The Appellant also wishes to rely on the definition cited in various case laws. As per the P. Ramanatha Aiyar's Legal Lexicon: "The word apparatus would certainly mean the compound instrument or chain of....
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....t, tubes/glasses and allied fixtures as they necessary for illumination and enable round the clock operation of the assessee's factory. According to the Tribunal, since the light structures are classifiable under Chapters 84, 85 and 9405 of the Central Excise Tariff, the fact that these fixtures become part of the civil structure/immovable property was no basis to deny credit of taxes paid. * CCE v. India Cement, 2017 (3) G.S.T.L. 144 (Tri. - Hyderabad) (paras 2 and 4) : The CESTAT allowed credit of taxes paid on lighting works as they are related to the business of manufacture. * In Commissioner of Central Excise v. Jawahar Mills Limited, 2001 (132) E.L.T. 3, the Supreme Court, having regard to the normal conditions prevailing in the industry, held capacitors, control panels, cables distribution boards, switches and starters and air compressors would qualify as capital goods under Rule 57Q of the erstwhile Central Excise Rules, 1944. The Apex Court held the 'capital goods' can be machines, machinery, plant, equipment, apparatus, tools or appliances and any of these used in the factory for manufacture shall be eligible for credit. * In Commiss....
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....n both the above matters was the same but the AAR has rejected the contention on the Appellant on one hand while relying on a similar issue to support their stand. (x) That, the Delhi High Court had allowed credit of taxes paid on telecom towers holding the same to be essential for provision of telecommunication service. Likewise, when illumination is required and essential for the round the clock operation of the plant, credit of taxes paid thereon should be allowed by this Authority. (y) That, the AAR also relied on the decision of the Supreme Court in Triveni Engineering India Ltd. v. Commissioner of Central Excise, 2000 (120) E.L.T. 273 (S.C.) to support its conclusion that if anything is attached to earth, both the factum as well as the intention of fastening has to be ascertained from the facts and circumstances of the each case. (z) That, it is submitted that any reliance on the decision in Triveni Engineering is incorrect for several reasons. The decision in Triveni Engineering was rendered in the context of central excise law, where the movability or otherwise of the items in question was integral to determine the excisability of goods. In Triven....
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....nput/input service, even if remotely essential, should be considered as eligible for credit. * Also, unlike under the pre-GST law, inputs/input services were to be used "in or in relation to the manufacture" or "in the factory by the manufacturer", Section 16 of the CGST Act, 2017 allows credit of taxes paid on inputs/input services "used or intended to be used in the course of furtherance of business." The said expression is of the widest possible import and is in keeping with the spirit of the GST law to allow seamless flow of credit. (ae) The Appellant relied upon the following case laws, although under the erstwhile indirect tax regime to support their submissions:- * In CCE v. Solaris Chemtech Ltd., 2007 (214) E.L.T. 481 (S.C.), examining the phrase "in relation to manufacture", the Supreme Court observed that the said phrase has been used to widen the scope and contents of the expression "inputs' and allowed credit of taxes paid on Low Sulphur Heavy Stock (LSHS) and furnace oil used in generation of electricity, which was further used in the manufacture of caustic soda. * In Oblum Electrical Industries Private Limited v. Collr. of Cus.,....
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....garh GST Act, 2017 (hereinafter referred to as "the CGST Act and CGGST Act") are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the instant appeal filed by the Appellant along with the provisions applicable in the present case. The present appeal has been filed under Section 100(1) of the Central Goods and Services Tax Act, 2017 and the CGGST Act, 2017 by the Appellant M/s. NMDC Ltd., having their registered office at Khanij Bhavan, 10-3-311/A, Castle Hills, Masab Tank, Hyderabad, Telengana and works/administrative office at ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh and GSTIN 22AAACN7325A3Z3, against the Advance Ruling Order No. STC/AAR/02/2019, dated 24th April, 2019. 5.2 The Appellant NMDC Limited is a State-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. It is India's largest iron ore producer ....
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....indispensable and in this regard NMDC has awarded the project of Lighting of Plant Road, Boundary & Watchtower (Package 33) to M/s. Bajaj Electricals Limited. The lighting system works are used for illuminating the plant area, lighting arterial roads, boundary wall and watch tower which are essential to carry the manufacturing operations as the steel plant it is a continuous process plant which will run round the clock. We also find that the scope of impugned work can be summarized as comprising of three major parts viz. Design & Engineering, Supply of Plant & Equipment and Erection of such Plant & Equipment. The Appellant has further contended that the lighting installed at their Plant Road, Boundary Wall and Watchtower can be dismantled without substantial damage and can be reassembled at another place without substantially damaging it and therefore may be considered as movable property and accordingly they are eligible for credits of tax paid on inputs and input services used for Lighting of Plant Road, Boundary & Watchtower should be eligible. Without prejudice to above it was also M/s. NMDC's contention that if such lighting is treated as an immovable property, then credit....
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....f input tax credit in respect of goods and services used for construction of immovable property (other than plant and machinery). 5.9 "Works contract" has been defined under Section 2(119) of the CGST Act, 2017 as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. The above definition thus stipulates 'only' certain works performed on immovable property as works contract. Further, it is only when there is involvement of transfer of property in goods that would make the contract as works contract i.e. there must be a supply of goods along with supply of service by the supplier (contractor). 5.10 "Construction" is defined under explanation to Section 17(5)(c) and (d) for the purpose of these provisions to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property. 5.11 The relevant sub-cl....
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....ty will not qualify as works contract if there is no transfer of property in goods involved i.e. the contractor is supplying service only without any supply of goods. Works contract may or may not be a construction. 6. For the work in question viz. Lighting for Plant Road, Boundary and Watch Tower, the Appellant, M/s. NMDC Ltd., (the employer) had entered into a Contract agreement dated 10-3-2017 with M/s. Bajaj Electricals Ltd., Mumbai (Contractor), bearing Contract No. HO(Contracts)/NISP/PI/52 to install Lighting for Plant tower, Boundary & Watch tower (Package-33) at 3.0 MPTA Integrated Steel Plant at Nagarnar, Chhattisgarh, as M/s. Bajaj Electricals Ltd., the contractor has valuable and specialized knowledge and expertise for the work for lighting for plant road, boundary & watch tower. 6.1. It has been categorically specified in the aforesaid Contract agreement that the scope of work shall also include any and all work, supplies and services for construction and completion of all works as described in Bill of Quantities and Technical Specification and that the contractor M/s. Bajaj Electricals Ltd., shall also execute all such works which, in the opinion of the Employer ....
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....9 numbers of Foundations for Compact Transformer sub-stations complete with supply of all erection materials for civil work, Fencing materials, Gate etc. confirming to TS, 1170 numbers of Foundations for 8m/10m height Street Light Poles complete with supply of erection material for Civil works confirming to Technical Specifications, 10 numbers of Foundations for 30m height Lighting High Mast complete with supply of erection materials for Civil work, with rail guard/channel fencing for protection against heavy vehicle confirming to technical specification, 105 numbers of Foundations for 20 m height Lighting High Mast complete with supply of erection materials for Civil work, with rail guard/channel fencing for protection against heavy vehicle confirming to technical specification, 15 numbers of Foundations for outdoor feeder pillar with platform & fencing, gate, cable trench, conduit inserts, plate inserts etc. complete with supply of all erection materials for Civil works confirming to technical specification, one number of Foundations for outdoor feeder pillar cum PDB with Platform & fencing and gate, cable trench, conduit inserts, plate inserts etc. complete with supply of all er....
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....ct, goes to show that the said project of lighting of Plant Road, Boundary and Watchtower awarded to the Contractor by the Appellant is not as simple or movable. The work consists of an entire system comprising a variety of different structures which are installed after a lot of prior work which involves detailed Designing, Engineering, Supply, Civil work, Civil engineering, Ground work, Foundation work, Fabrication, Erection of Building Steel Structures & Sheeting and Erection of Electrical items etc. The magnitude of work done is enormous and these are tailored specifically to fit the dimensions and orientation of the needs of the project. It does not appear prudent or for that matter viable to move these items from one place to the other. Thus, the project fulfills the conditions of it being an immovable property. 6.7. In the aforesaid context, Hon'ble Supreme Court Judgment in the case of M/s. T.T.G. Industries Ltd. v. Collector of Central Excise, [decided] on 7 May, 2004 in Appeal (Civil) 10911 of 1996 [2004 (167) E.L.T. 501 (S.C.)], wherein the contract was for the design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole ....
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....ttal Engineering Works, the issue was whether mono vertical crystallisers is goods (in which case it would be excisable or immovable property). The mono vertical crystallisers is fixed on solid RCC Slab. It consists of bottom plates, tanks, coils, drive frames, supports etc. It is a tall structure rather like a tower with a platform. It was decided by the Court that the said product has to be assembled, erected and attached to the earth by a foundation and therefore not goods but immovable property. 6.9. In the case of Duncans Industries Ltd. v. State of U.P. & Ors. on 3 December, 1999 Hon'ble Supreme Court had to decide whether the 'plant and machinery' in the fertilizer is 'goods' or 'immovable property. The Apex Court held that the same is immovable property and observing as under:- "The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such embedment was intended to be temporary or permanent. A careful....
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....icted. The restriction of ITC is only on the telecom towers, pipelines which are not treated as plant and machinery by virtue of explanation to Sec. 17(5)(c) and (d). 7.1. As already discussed in the preceding paras, Input Tax Credit provisions restrict ITC credit of works contract services for works to be performed on immovable property and also restrict the credit of construction, related activity of immovable property even when construction activity do not fall into the scope of works contract. However, works contract and construction activity is eligible for Input Tax Credit if done in respect of plant and machinery. 7.2. Thus, Section 17(5)(c) and (d) would not apply if the expenditure is in relation to a Plant & Machinery. Term 'Plant & Machinery' is defined in explanation to Section 17 as under: 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 - (i) land, building o....
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....er can in no way be related to the outward supply of goods. As per Section 2(83) of CGST Act, 2017 "outward supply" in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed, to be made by such person in the course or furtherance of business. Not acceding, but if assuming for the sake of discussion that these are apparatus/equipment as contended by the Appellant then too it is implausible and far-fetched to imagine that these items which eventually are used for lighting of Plant Road, Boundary wall and watchtower, are used for making any "outward supply". To apply the term "used for" in the definition for plant and machinery, there should be a nexus between the impugned items on which ITC is being claimed and "outward supply". In the present case the project of lighting of plant Road, Boundary wall and watchtower will render such nexus tenuous. 7.7. We affirm with the findings by the AAR that "the provisions facilitating availment of Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespe....
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....are not for making any "outward supply", as discussed in the preceding paras. Thus the case of M/s. Nipro Corporation Pvt. Ltd. supra, cited by the Appellant does not in any way relate to the present case. It is also worth mentioning here that as per Section 103(1) of CGST Act, 2017, the advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. 8.3. Citing reference of the case of Vodafone Mobile Services Limited v. Commissioner of Service Tax (Delhi High Court) dated 31-10-2018 the Appellant's contention was that Credit of taxes paid on telecom towers have been allowed. In this context, it is seen that the case of M/s. Vodafone Mobile' Services Ltd. and Other such providers of Telecommunication service providers are distinct and distinguishable from the facts and circumstances of the case in hand, inasmuch as in the cited case such towers are being used for providing the "output service", viz. Telecommunicatio....