TaxTMI 
TaxTMI 
2019 (9) TMI 1444
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....hether input tax credit can be availed on execution of P-Way, Civil, overhead electrification, general electrical and signaling & telecommunication works for the proposed block station yard in relation to private Railway Siding? 2. Facts of the case :- (I) The Appellant NMDC Limited having 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 30 million tons of iron ore from 3 fully mechanized mines in Chhattisgarh. (II) 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. To serve the said plant in receiving the raw materials and dispatching the finished products, a railway siding is proposed for the integrated steel plant, which is located on Kothavalsa-Kirandul (K.K.) si....
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....ertaining to the activities brought about by the Appellant in their application relating to laying of the said private railway siding located at a site outside the premises of the Appellant, in view of the exclusions stipulated under Section 17(5) of the CGST Act, 2017". (V) The Appellant preferred an appeal on the questions as mentioned in para V above, before the Appellate Authority for Advance Ruling in Chhattisgarh, Atal Nagar, Raipur. (VI) As per Section 100(1) of CGST Act, appeal against the advance ruling can be presented before the Appellate Authority. 3. Contention of the Appellant : (a) Appellant states that the main objective and purpose of laying railway track is for transporting raw materials inside the factory and for outward transportation of finished product. Taking into account the aforementioned facts it was contended that railway siding is integral part and inseparable in manufacturing process without which steel cannot be manufactured. (b) The Appellant requests for ruling on the following questions by the Hon'ble Appellate Authority for Adva....
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....conclusion. (d) 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", they stand excluded from the meaning of "immovable property". As a matter of fact, under the CGST Act, 2017, even if the items in question are attached to earth, they will qualify as "plant and machinery". The relevant extracts of the Section 17(5)(c) and Section 17(5)(d) are extracted herewith for ease of reference :- "17. (1) ..... (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 construc....
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....t is only Package III rail network that is outside the factory which has been duly recorded in Para 4 of the Order. • The Appellant draws attention the scope of work given package-wise in their submissions dated 13-3-2019. • Denial of credit only on the ground the contract involves civil work is unsustainable. Basis the above table, it is clear that the contract is for railway siding works and apart from the civil works involved in the contract, the Appellant is eligible to take credit of taxes paid by it. (h) That, the Hon'ble Supreme Court in the case of Jayaswal Neco Ltd. [2015 (319) E.L.T. 247 (S.C.)] has held that Railway track was handling system for raw material and processed material. Their use inside plant formed process of manufacturing. It was integral part of process as without activity for which railway tracks are used, manufacturing/commercial production of pig iron was not possible. Hence, railway track was capital goods, on which assessee was entitled to take credit of duty paid by them. The relevant Para is quoted below for your reference : "18. We find from the order of the Commissioner that in spi....
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....appeal is allowed in the aforesaid terms." (k) That, the Appellant would also like to quote decision of Hon'ble High Court of Rajasthan in case of Aditya Cement [2008 (221) E.L.T. 362 (Raj.)] wherein in Para 20 it was held that : "So far as the claim to Railway Track material is concerned, it is common ground that the same has been used for transporting of coal and product of cement. Apparently, though the coal is not end product of the appellant but used as essential adjunct of plant for feeding it with fuel, the essential element of production process for manufacture of cement. Without supply of fuel the plant does not function. Therefore, the Railway Track used for one of the essential activity of running the plant itself cannot be kept out of consideration for availing Modvat credit though which is not being used directly for the purpose of manufacture of cement. But if as an integral part of manufacturing cement bringing of coal directly to the machine from site, railway track is used, it becomes part of plant and of manufacturing process. Similarly, until the end product reaches in deliverable state, it remains part of the manufacturi....
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....t. The use as explained by the Learned Counsel makes it clear that these are essential and integrally connected to the process of manufacture. In addition, the judgments relied by the appellant and stated supra have held that credit is admissible on railway tracks/sleepers used within the factory for transportation of raw materials and finished goods. Following the ratio laid in these judgments, I hold that the appellant has established a case on merits and that credit is admissible on MBC sleepers." (n) In the case of Orient Cement Ltd. v. CCE, Hyderabad-I - 2017 (51) S.T.R. 459 (Tri. - Hyd.), Railway siding laid outside the factory premises were held to be part and parcel of facility for transportation provided inside the factory premises and the assessee was held eligible for Cenvat credit. The Appellant wishes to quote Para 7 and 8 of the said decision for reference : "7. From the discussions and observations made in the above judgments as well as the facts presented before us, we are of the view that the credit availed on service tax paid on maintenance service of railway sidings is eligible. It has also to be pointed out that without t....
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....ness of the assessee. It was held that this was covered by the heading "Machinery and plant" under Rule 8. (s) Based on the above citations, it can be concluded that even as per Companies Act and Income-tax Act, Railway Siding is construed as Plant and Machinery and therefore credit on the same is eligible. (t) Without any reference to the decision of the Delhi High Court in Vodafone Mobile Services Limited v. Commissioner of Service Tax, Delhi, CEAC 12/2016, dated 31-10-2018 [2019 (27) G.S.T.L. 481 (Del.)], the reliance on the decision of the Bombay High Court in the Bharti Airtel (case) [2014 (35) S.T.R. 865 (Bom.)], is completely erroneous and misplaced. (u) In the Vodafone Mobile Services Limited case, the Hon'ble Delhi High Court had expressly recorded its dissent with the decision of the Bombay High Court in the Bharti Airtel case and held the credit of taxes paid of telecom towers is eligible. According to the Delhi High Court, the Bombay High Court's decision in the Bharti Airtel case goes against the law laid down by the Apex Court in Commissioner of Central Excise v. Solid a....
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.... That, reference is also made by the impugned order to C.B.E. & C. Circular No. 58/1/2002-CX, dated 15-1-2002 to state that if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components, then the items cannot be considered as movable and will, therefore, not be goods. (aa) That, the Appellant, reiterates that the test of immovability/movability is irrelevant under the GST law and that under the GST law, the explanation in Section 17 of the CGST Act, 2017 clearly allows items to be assembled to earth by foundation/structural support. (ab) That, under Section 17 of the CGST Act, 2017, the expression "plant and machinery" is defined as apparatus, equipment and machinery fixed to earth by foundation or structural support used for making outward supply of goods or services or both and includes such foundation and structural support. (ac) The Appellant submits that they are entitled to input credit for the following reasons : (a) Large part of the railway are intended to bring the raw material, unload the....
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....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." (ae) That, relying on the above definition of the Apex Court, the Gujarat High Court in Pipavav Defense and Offshore Engineering Company Ltd. [2017-TIOL-1018-HC-AHM-VAT] observed as below :- "26. The word "plant", though an ordinary English word, is not altogether an easy word to construe. It may have a more or less extensive meaning according to its context. It has come up for interpretation before various courts on numerous occasions in the context of different statutes and the catena of judicial decisions shows that it is a word of wide and varied import susceptible of diverse meanings depending upon its setting in the scheme of the statute. Almost all cases bearing upon the interpretation of the word "plant" decided in England and in this country were cited before us and the following enumeration would show as to what an amazing variety of articles, objects or t....
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....uments 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)." (ai) That, the Appellant encloses herewith the interpretation of the expression 'apparatus', 'equipment' , 'machinery' given as a compendium in various dictionaries. In terms of the above definition, it is clear that the railway siding in question having a particular function or intended for a specific use of transport of materials can get rightly covered under the definition of "plant and machinery". (aj) That, the railway siding in question does not definitely qualify as land/building. The exclusion is for land, building or any other civil structure. Applying the principle of ejusdem generis, it needs to be understood that the phrase "any other civil structures" has to be read in conjunction with land and building. Any civil structure in the nature of land and building will ordinarily be a place from where the bus....
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....hinery used for making outward supplies and rather merit treatment as civil structure at a premises not within the precincts of the Appellant. (ap) That, it is also observed that provisions facilitating availment of input tax credit under the CGST Act, 2017 do not extend any blanket or unconditional permission for availment of credit and all items irrespective of its use, place of use and its role in making the outward supply. (aq) That, the conclusion of the AAR is also flawed for the following reasons :- • Section 16 of the CGST Act, 2017 allows credit inputs/inputs services used or intended to be used in the course of furtherance of one's business, unless restricted by Section 17 of the CGST Act, 2017. • Since railway siding is essential/integral for transport of materials for the assessee to carry on its operations, credit of taxes paid on railway siding should be construed for use in the course or furtherance of business and used for making outward supply. • It is to be kept in mind that the words used in the explanation are "used for making outward supply" and not "directly used in making outward supply". An....
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....ai Bench of CESTAT held that towers would qualify as inputs for the passive infrastructure provider. • In J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, 1997 (91) E.L.T. 34 (S.C.), the Supreme Court held if an activity is so integrally connected to the process of manufacture, goods intended for use in the process will qualify as credit. 4. Personal hearing :- In accordance with the established principles of natural justice, personal hearing in the matter was extended to the authorized representative of the appellant and accordingly, Mr. Sanjay Padhy (Finance Manager) appeared for hearing on 11-7-2019 and sought adjournment. Acceding to their request, another hearing in the case was also extended to the Appellant on 5-8-2019, wherein Mr. S. Ananatnarayan and Mr. Krishna Tej from M/s. Price Waterhouse Coopers, Hyderabad and authorized representative, Mr. Sanjay Padhy (Finance Manager) M/s. NMDC, appeared before us for hearing on 5-8-2019. They furnished a written submission dated 3-8-2019 along with a paper book and reiterated the same, which has been taken on record. 5. Legal position, analysis and discussion :- 5.1&e....
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.....429 Km from Kothavalasa Center of station building on Kirundul end. 5.3 The project of Railways Siding is being implemented by M/s. IRCON International Ltd. The project is divided into 3 major packages for laying of private railway siding which are as below : Pkg I - Civil and Railway allied works in connection with laying of private railway siding; Pkg II - Execution of Civil, S&T, Mechanical and Structural works in connection with laying of railway siding for NISP; Pkg IV - Execution of Civil, P-Way, Overhead Electrification, General Electrical and Signalling & Telecommunication works for the proposed block station yard in connection with 3 MTPA Integrated Steel Plant for NMDC Ltd. Each of the above packages is divided into 3 parts namely, civil works, supplies and erection with separate values identified for supplies made within each part. 5.4 On being aggrieved by the Advance Ruling Order No. STC/AAR/03/2019, dated 24th April, 2019 passed by the AAR Chhattisgarh, Raipur, the Appellant has filed the instant appeal under Section 100(1) of the Central Goods and Services Tax Act, 2017 and the CGGST Act, 2017, seeking an order under Section 101 ibid., as....
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....r required width of formation of railway track up to required depth as per drawing and as per direction of Engineer-in-charge. (ii) Disposal of surplus and unserviceable earth/materials outside the work limit/and acquisition limit including transportation, excavation and clearing of site in all respects all complete as per specifications and direction of Engineer-in-charge. Disposal shall be away from working area for any lead outside the premises as per direction of Engineer- in-charge and shall be arranged by contractor. (iii) Execution of Monor Bridges/Culverts, drains, nallah crossings and road bridges (iv) Construction of Pathways (v) Construction of Level Crossing Gates (vi) Dismantling of existing structures if any (vii) Construction of Loading Platforms (viii) Installation & Commissioning of In-motion Weighbridges (ix) Installation & Commissioning of Static weighbridg....
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....dge, Construction of Masonry/ CC drains, Provision of fencing as required, Approach Roads as required, Construction of retaining walls, if required etc. Supply of Railway materials :- Supply of Rails, PSC Sleepers, Laying & linking the track including assembly of points and crossings and sand humps, Fabrication & fixing of check rails on level crossings/curves and guard rails etc., Fabrication & erection of Dead ends, Casting & fixing RCC fouling marks, gradient posts, KM posts, Hectometer posts, Curve Point number of boards, level crossing boards etc., Construction of buildings for TSS, SSP, SP, OHE, Tower wagon shed & PSI Depot, OHE for diversion line etc. 5.9 The Appellant have pleaded in the instant appeal, that perusal of Section 17(5)(c) and (d) of the CGST Act, 2017 reveals that the test of movability/immovability is immaterial to determine the eligibility of credit once the items in question qualify as "plant and machinery". It was their contention that once the items in question qualify as "plant and machinery", they stand excluded from the meaning of, "immovable property". The Appellants contention is that under the CGST Act, 2017, even if the items in qu....
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....xecution 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). 5.14  "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. 5.15 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....
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....seen that the work allotted includes Construction of Pathways, Construction of Level Crossing Gates, Dismantling of existing structures if any, Construction of Loading Platforms, Construction of drains along the track at the required locations, Installation of Barbed wire fencing along the forest boundary, Construction of Service buildings for Solid State Interlocking cabin, Block cabin, Crew-guard rest, Commercial officer, Rolling hut, Weighbridges, Loco shed, Carriage and wagon shed, Extension of Level crossing Gates and construction of gate lodge Buildings, construction of Railway staff quarters, Station building and other ancillary works, dismantling of existing structures, if any, Construction of Platforms, Construction of Foot over bridge, Construction of Masonry/CC drains, Provision of fencing as required, Approach Roads as required, Construction of retaining walls, if required etc. There hardly remains any doubt that the above listed works are nothing but civil work, eventually resulting in civil structures. 6. The large part of the listed works are located outside the premises of the plant area : The aforesaid Tender document, furnished by the Appellant in respe....
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....ck rails on level crossings, curves and guard rails etc., construction of buildings for TSS, SSP, OHE, Tower wagon shed & PSI depot etc. We also find that AAR has also observed in the impugned order that, from the details of contract placed by IRCON through open tender as appearing at the website of IRCON that the OHE work for the said proposed block station yard in connection with the construction of private railway siding at Nagarnar has been awarded to M/s. KAMY India, Nagpur. Similarly it is seen that the work order related to civil work for the said private railway siding has been awarded to M/s. RKTC Group. 6.1 The Appellant in their appeal have also mentioned that the proposed private railway siding for their integrated steel plant, is located on Kothavalsa- Kirandul (K.K.) single line electrified section of Waltair Division of East Coast Railway and that the proposed site is situated approximately 2 Km from K.K. line between Ambagaon and Amagura Railway station. Further that they have accordingly proposed to have one rail connectivity from the proposed new block station at Ch:277.030 km from Kothavalasa Centre of station building on Ambagaon end and one connectiv....
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....f different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, Erection of Building Steel Structures, sheds, Block cabin, Railway allied works, Signaling & telecommunication works, Construction of Railway Staff quarters, Station building etc.. The magnitude of project covers a large area, tailored specifically to fit the dimensions and orientation of the needs of the project. In no case it appears to be prudent or for that matter viable to move these items from one place to the other. Thus, the project of construction of Private Railway siding fulfills the conditions of it being an immovable property. 8. 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 Drilling Machines required for blast furnace and the issue was whether the same is immovable property observed as unde....
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....r 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. 8.2 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 perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of....
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.... 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. 9.2 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 : 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 or any other civil structures; (ii) telecomm....
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.... 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 are eventually used for signaling, telecommunication in a private railway siding, erection of Building Steel Structures, sheds, Block cabin, allied works, Signaling & telecommunication works, Construction of Railway Staff quarters, Station building etc. 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 laying a private railway siding consisting of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground w....
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....rlier Central Excise Rules, 1944 as was in vogue, stipulating therein the provisions for availment of credit of Capital goods under Cenvat credit regime when the chapter heading/ sub-heading of the items which qualified being termed as "capital goods", were specifically covered under the definition of capital goods mention in the statute viz items falling under Chapter 84, 85 etc. of CETA, 1985. Further in almost all the case laws cited by the appellant, the credit of duty was claimed on items used within the factory premises of the claimant, which is not the case here inasmuch as the railway siding is located outside the premises of M/s. NMDC. As regards the case of M/s. Vimla Infrastructures Pvt. Ltd., the said party was a service provider engaged in rendering cargo handling service wherein it was held that railway sidings facilitate provision of cargo handling service. Thus the said case laws are distinct and distinguishable to the facts and circumstances in hand. 10.3 The Appellant have also 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....