TaxTMI 
TaxTMI 
2019 (9) TMI 1412
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....ding 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, lighting is indispensible and in this regard NMDC has awarded the project of ....
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.... 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 movability/immovability is immaterial to determine the eligibility of credit once the items in question qualify as "plant and machinery". Once the items in question qualify as "plant and machinery....
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....hat, 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 thereof. * On a perusal of the contract, in its entirety, it is evident that only an insignificant portion of the contract price is paid towards erection of plant and equipment. Therefore, the fact that there is erection work, (which is insignificant to ensure the operation of the struc....
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.... 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 which was similar to the definition given in section 43(3) of the 1961 Act and this court after approving the definition of plant given by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647, as expounded in Jarrold v. John Good and Sons Ltd. [1962] 40 TC 681 (CA), held that sanitary and pipeline fittings fell within the definition of plant." (k) That, relying on the ....
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....sh 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 series if instruments designed to carry out specific function or for a particular use (Commer. of Customs v. C-NET Communication (1) (P) Ltd., (2007) 12 SCC 72, 82-83, para 36). Apparatus is a compound instrument designed to carry out a specific function or for a particular use. I.C.B. (P) Ltd. v. CCE, 1997 (95) E.L.T. 239 (T)." (o) The Appellant encloses herewith the interpretation of the expression 'apparatus', 'equipment....
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....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 Commissioner of Central Excise, Tiruchirapalli v. Maris Spinners Limited, 2008 (223) E.L.T. 163 (Mad.), following the decision of the Apex Court in Jawahar Mills (cited supra) the Madras High Court allowed credit of taxes paid on light fittings and parts thereof. * GST Advance Ruling in the case of Nipro India Corporation Private Limited [2018 (18) G.S.T.L. 289 (A.A.R. - GST)] by the Maharashtra Advance Ruling Authority where credit of taxes paid on 'electrical works' was allowed to the assessee. (t) Tha....
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....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 Triveni Engineering, the items in question (steam turbine and alternator) were erected on a platform specially constructed for the purpose which made the machine immovable. Under the GST law, the test of movability/immovability is irrelevant and the explanation in Section 17 of the CGST Act, 2017 clearly permits and does not bar "plant and machinery" to be attached to earth by foundation or structural support. (aa) That, reference is also made by the impugned order to C.B.I. & C. Circular No. 58/1/2002-CX, dated 15-1-2002 to state that if items assembled or erected at site a....
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....while 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., Bombay - 1997 (94) E.L.T. 449 (S.C.), the Supreme Court held the expression "material required for manufacture" would also bring within its ambit material (which though not used in the manufacture) is required for the purpose of manufacture. * In Commissioner of Customs, Kolkata v. Rupa and Co. Ltd. - 2004 (170) E.L.T. 129 (S.C.), the SC observed that "goods required for the manufacture of" used in the exemption notification is of very wide import and includes not only the material which directly goes into the manufacturing process but also the material necessary for the act of ultimate manufacture. * In Industrial Machinery Manufacturers Pr....
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....elengana 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 and exporter producing about 30 million tons of iron ore annually 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. Further, NMDC Ltd. has entered into a contract agreement with M/s. Bajaj Electricals Ltd. for Lighting of Plant Road, Boundary & 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 street lighting tubular poles, fitting....
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.... 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 of the taxes paid on various inputs will be eligible if the said lighting satisfies the definition of the "plant and machinery" and that Lighting of plant road comprises of equipment like street poles, fittings, aviation lamps, switch box, pipes for laying the cables and therefore lighting of plant road, boundary & watchtower will qualify as an apparatus or an equipment. 5.5 As regards the exclusions specified in the statute it was their stated position that the phrase "any other civil structures" has to be read in conjunction with land and building and therefore any civil structure in the nature of land and building will ordinarily be a place from where the business is being carried on and not a structure used in the proces....
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....orks 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-clause under Section 17(5) of CGST Act, 2017 reads as under: (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (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 ma....
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.... 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 viz. the Appellant M/s. NMDC are require to be executed for the successful completion of the work and that all such works shall be deemed to have been included in the contract and further that the Contractor, at his own cost is required to undertake modifications/re-construction etc. for completion of work strictly meeting the requirement of Technical Specifications (refer Article 3-Scope of Work). 6.2. Article 5, relating to Contract price for the aforesaid contract agreement specifies that the Employer viz. M/s. NMDC hereby agrees to pay to the Contractor the Total Contract Price in consideration of the completion of the Works and performance by the Contractor of its obligation under the Contract and in accordance with the Contract and that the Contract price shall be INR 19,19,86,000/-. Besides this Article 10 to the impugned contract specifies that the Cont....
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....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 erection materials for Civil works confirming to technical specification and 105 number of Foundations for installation of Structure mounted. Power JBs complete with supply of all erection materials for Civil works. As regards the civil engineering work it has been categorically mentioned in the agreement itself under the general conditions for contract that the Contractor viz. M/s. Bajaj Electricals Ltd., shall be responsible for the construction of all civil foundation for structures and equipment and all other connected civil construction works included in the scope of work as per technical specifications. 6.5. Immovable property has not been defined under the provisions of GST. However Immovable property stands defined under Section 3(26) of the General Clauses Act, 1897 to include land, benefits to arise out of land and things attached to the earth, or permanently....
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....rt 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 Drilling Machines required for blast furnace and the issue was whether the same is immovable property observed as under:- "Keeping in view the principles laid down in the judgments noticed above, and having regard to the facts of this case, we have no doubt in our mind that the mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regar....
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....able 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 perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the some as a fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show that the purpose for which these machines were embedded was to use the plant as a factory for the manufacture of fertiliser at various stages of....
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....lant 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 or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises. 7.3. "Construction" is defined under explanation to Section 17(5)(c) and (d) for purpose of these provisions to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property. 7.4. Thus, Plant and machinery has been specifically defined as any equipment, apparatus attached to earth by foundation or structural support used for supply of goods or services. Plant and machinery to specifically exclude telecom towers, pipelines etc. As per the definition of works contract, the works contract inter alia include construction 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. On the other hand Construction has been defined under e....
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....irm 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 irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been misconstrued by the applicant. These towers, boundary and watch tower by their very nature appears to be nothing but independent civil structures, having no relationship whatsoever with outward supply". 8. The Appellant have cited reference of decisions of Hon'ble Supreme Court's in the case of Scientific Engineering House Pvt. Ltd. v. Commissioner of Income Tax, AP and in the case of Pipavav Defense and Offshore Engineering Co. Ltd. of Hon'ble Gujarat High Court in support of their claim that these items are "plant"/machinery/apparatus/equipment. The case laws cited by the Appellant are distinguishable to the facts and circumstances involved here inasmuch as, these items have no nexus whatsoever with the "outward supply" involved here, as already discussed in the preceding para. 8.1. The Appellant's reliance of the case laws of Hon'ble CESTAT in....