TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 882
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....under GST with GSTIN. 33AACCS8676D1Z9. The applicant Company (hereinafter referred to as SHV) is registered in India and the primary business comprises of supply of Liquified Petroleum Gas (LPG) in Bulk and in cylinders to domestic/ other Business' segments under the brand name of "SUPER GAS". SHV also supply bulk LPG for Industrial and Auto LPG. SHV is the subsidiary of SHV Energy N.V., a Dutch Multinational Company in Netherlands. They import LPG from outside India and store/ processes the same at various terminals located in India. The terminals are in Tuticorin (Tami) Nadu). Porbandar (Gujarat) and Mumbai (Maharashtra). SHV operates in 16 states in India through 3 terminals. 4 Regional offices, 24 filling plants and 6 depots in India. The applicant has sought Advance Ruling on the following questions:- 1) Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline for transporting Propane/Butane from Jetty to the Terminal. 2) Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for construction of refrigerated storage tank at Terminal. 3) Whether the....
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....C at a temperature of approximately- (-) 450 C in case of propane and (-1) 50 C in pass of Butane these tanks are constructed for specific usage of storage of Propane and Butane. These storage tankers cannot be used for any common storage 3. Construction of water tank which is a part of firefighting system- The current expansion project is proposed to have firefighting system in compliance with Oil Industry' Safety Directorate (OISD) standards 236. Water is stored to meet the requirement of firefighting for 4 hours duration, with pumps of adequate capacity. Hence two tanks of capacity 4oooKL each is proposed. Further, water stored in the tanks will be used for direct fire extinguishing, cooling down surrounding structures & equipment as water curtain to complete cut off of fire zones. Thus, water reservoir (tank) is integral part of firefighting system which is connected with Hydrant lines sprinklers and water curtain. 4. Construction of foundation/structural support through piling- As their Project site is located close to the sea. the soil is filled up with clay with a very high ground water table (<1 m), this would mean that the load bearing capacity (weight per sqm the soil....
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....nsfer pipeline is the unique mode of transportation without which the appellant cannot manufacture LPG which is their outward supply. * The provision under Section 17 (5) restricts pipelines laid outside the factory premise which are used for making outward supply of goods or services not inward supply of goods or services. Hence, they believe that the transfer pipelines laid outside the factory premise for procurement of Propane and Butane is eligible for availing credit. B. Transfer Pipelines are used or intended to be used in the course or furtherance of business. * The Pipelines in question are used in the course or furtherance of business. The main objective and purpose of laying of pipeline is for unloading of Propane/ Butane. Propane/ Butane are the key raw material the process of manufacture of LPG. It is clear from the above that laying of pipeline constitutes an integral and inseparable part in the manufacturing process in as much as without the aforesaid activity of transportation of Propane/Butane for which pipelines are used, there cannot be manufacturing of LPG. Based on above, the applicant has submitted that pipelines are used in course of or furtherance of ....
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.... input services used for construction of refrigerated atmospheric storage tank and foundation and structural support through piling is eligible for Input Tax Credit under CGST Act, 2017 In this regard the Applicant has stated that the main objective and purpose of construction of refrigerated storage tank is for storing, processing and maintaining of Propane/Butane which is for outward transportation of finished product i.e LPG. Storage Tank is integral pan and inseparable in the manufacturing process. Without the aforesaid activity of storing of Propane/ Butane in refrigerated atmospheric storage tank where blenders are installed to blend Propane and Butane in the desired portion to meet varied customer requirements, there cannot be manufacture of LPG. Therefore, refrigerated storage tank used for storage of Propane/ Butane are used in course of or furtherance of business.- * Below are the major components required for construction of refrigerated storage tanker:- * Low Temperature Carbon Steel (LTCS), Rock wool and ceramic fiber insulation * Piles, platforms and staircase * In-tank pumps, level indicator. Transmitters * Pipelines (LTCS) and sprinkle system (MS) * Furt....
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....or a particular purpose' * Further, the meaning of the above term, 'Apparatus*, from different dictionaries as under.- * It is a collection or set of materials, instruments, appliances or machinery designed for a particular use (Mav. Web. Die). A compound instrument designed to carry out a specific function (Mc Graw Hill Die. of Sc. A- Tech. Terms). * 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. * any complex instrument or machine for a particular purpose. * any system or systematic organization of activities. functions, processes, etc., directed toward a specific, goal: the apparatus of government; espionage apparatus. * Physio. a group of structurally different organs working together in the performance of a particular function: the digestive apparatus. * 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 Communicat....
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.... 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 process of manufacture for making outward supply of goods/services. * The concept of input tax credit under GST is identical and wider than die concept of Cenvat Credit Rules, 2004 prevailing in pre-GST regime. The definition of Capital Goods in terms of Rule 2(A) of Cenvat Credit Rules, 2004 specifically included "storage tanks' and therefore was held as eligible for Cenvat Credit It is to be noted that any other immovable property such as factory building/office buildings have not been included in the said definition of Capital Goods whereas storage tank being an integral part of manufacturing process have been brought under the definition of Capital Goods. It infers from this that Storage tanks were not treated as Immovable property even for the purpose of Cenvat Credit under the earlier regime. From the combined reading of definition of Inputs. Input Service and Capital Goods, it is evident that the intention was to restrict credit of Input and Input services used for con....
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....tored in tankers to meet the firefighting requirement for 4 hour duration with pumps of adequate capacity Below are the major components required for construction of Water reservoir:- * Mild steel with good quality paint * Piles, platforms and staircase * Level indicators. Transmitters * Connecting pipelines (MS) * Further, the water reservoirs are constructed as part of firefighting system. Water is stored to meet the requirement of firefighting with pumps of adequate capacity. This will be used for direct fire extinguishing, cooling down surrounding structures & equipment and as waler curtain to complete cut-off of fire zones. Thus, water tanks are integral part of firefighting system which is connected to Hydrant lines sprinklers and water curtain. The main application of water is to use as firefighting and for other miscellaneous purpose, as minimum fire protection measure is required to be taken at the terminal as per the Oil Industry Safety Directorate requirement (OISD) Therefore, water tanker may qualify as an apparatus or an equipment and falls within the definition of plant and machinery. Basing the above submissions, it can be arrived that the inputs used in th....
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....the premises. 3.2 The applicant furnished the submissions shared during the hearing. The applicant apart from the submissions already made has inter-alia, stated that * They crave leave of the Hon'ble Bench to reframe their question on the issues raised in their application as follows:- 1. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for unloading Propane/Butane from the Vessel/Jetty to the Terminal? 2. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services used for setting up refrigerated storage tank and input credit of goods and services used for foundation and structural support for such tanks? 3. Whether the applicant is eligible for availment of input tax credit of GST paid on goods mid services for setting up of Fire Water reservoir (tank) and input credit on goods and services used for foundation and structural support for such reservoir? * As part of proposed expansion, new Propane and Butane unloading arms (one each) shall be installed at jetty and ne....
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....laid outside the factory and on the contrary, they are very much part of factory premises and do not fall under the exclusion given in the explanation of "Plant and machinery" * The main objective and purpose of setting up of refrigerated storage tank is for storing, processing and maintaining of propane / Butane. Storage Tank is integral part and inseparable in the manufacturing process. Without the aforesaid activity of storing Propane/Butane in refrigerated atmospheric storage Lank where blenders are installed to blend Propane and Butane in the desired portion to meet varied customer requirements, without which there cannot be manufacture of LPG * The main objective and Purpose of setting up of water storage reservoir is to follow the Tire protection measure at Terminal. Water is stored to meet the requirement of firefighting with Pumps of adequate capacity. This will be used for - direct fire extinguishing; cooling down surrounding structures & equipment and as water curtain to complete cut off of fire zones. Thus waler tanks are integral part of fighting system which is connected to Hydrant lines sprinters and water curtain. The main application of water is to use as firef....
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....mbai 3. Agreement for Piling works for Tuticorin Terminal Expansion Project with PO No. 4500401679 dated 10.02.2020 on Geo Foundations & Structures Private Ltd 4. Civil ft. Structural works for CCPL with PO Number 4500407286 dated 22.04.2020 on S.R. Selvaraj A Sons. Thoothukudi 5. 2 Nos Fire Water Tanks (EPC) with PO No. 4500405071 dated 11.03.2020 on Sharp Tanks and Structurals Pvt Ltd, Mumbai 6. 6" Pipe, SMLS.LTCS for 3.643 M; 10'Pipe, WLD. LTCS for 12 M: 16' Pipe. WLD,LTCS for 598 M: 16" Pipe, WLD. LTCS for 6.680 M with PO No. 45000407798 dated 08.05.2020 on Maharashtra Seamless Limited, Raigad 4. The State jurisdictional officer has submitted his remarks are no follows: Issue No. 1: ITC on pipe lines: As per item No (iii) of Explanation to section 17 of the TNG ST Act. 2017. pipe lines outside the factory premises are excluded from the definition of 'Plant A Machinery'. Hence, it is opined humbly that. ITC shall not be eligible on the pipelines for transporting propane/butane from jetty. Issue No.2: ITC on refrigerated storage tank at terminal: As per clause (d| to sub section (5) of section 17 of the TNGST Act, 2017, goods or services or both received for construc....
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....r to follow the fire protection measure at Terminal are to be set up. The applicant has sought ruling on the following questions:- 1. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for unloading Propane/Butane from the Vessel/Jetty to the Terminal? 2. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services used for setting up refrigerated storage rank and input credit of goods and services used for foundation and structural support for such tanks? 3. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for setting up of Fire Water reservoir (tank) and input credit on goods and services used for foundation and structural support for such reservoir? 7.1 The applicant in their submissions has furnished the Process Description of LPG processing and Supply after unloading the propane and butane from which it is seen that the process are as under: LPG Unloading Propane & Butane is received in ship tankers of 22,500 MT capac....
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....ozzels & Piping. Completion of Pre-Commissioning activity, Completion of Electrical du Instrumentation Mechanical Completion, Successful demonstration of PG parameter- This PO is issued for undertaking the construction service involving Engineering, supply. Installation, Prefabrication, Erection, etc of 2 nos of refrigerated storage kinks, i.e, the work starts with complete Engineering and covers supply, installation, pre fabrication, erection, completion of E&L. etc and includes successful demonstration of Performance Guarantee parameter. The supply as per this PO is a composite supply of various goods and services and GST is calculated (a 18% on the entire value of the works. 2. PO Number 4500405045 dated 12.03.2020 on Sharp Tanks and Structurals Pvt Ltd. Mumbai for Mech, Elec & Instrumentation work for Bullets; Civil & Structural work for Mounded Bullet with SAC 995442. The service, details under this PO are - * under Mech, Elec & Instrumentation work -Completion of Engineering, Supply of Major Raw materials, Pre-Fabrication. Erection, Fitup, Completion of all nozzels & piping, Completion of Hydrotest, Painting. Completion of Pre-commissioning activity, Electrical & Instrume....
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....e plates, anchor, etc- This PO is issued for the civil A structural works as a composite supply and GST is calculated 18% for the entire value. 5. PO No. 4500405071 doled 11.03.2020 on Sharp Tanks and Structurals Pct Ltd, Mumbai - for 2 Nos Fire Water Tanks (EPC) with SAC 995442. The service details under this PO are Completion of Engineering, Supply of all materials. Erection, fitup, Welding & testing, Completion of all nozzels A piping, completion of painting, completion of Pre-commissioning activity. Hydrotesting. Mechanical completion- This PO is issued for undertaking the construction service involving Engineering, supply, Installation, Prefabrication. Erection, etc of 2 nos of Fire water Tanks, i.e, lite work starts with complete Engineering and covers supply, installation, pre-fabrication, erection & completion. The supply as per this PO is a composite supply of various goods and services and GST is calculated la 18% on the entire value of the works. 6. PC) No. 45000407798 dated 08.05.2020 on Maharashtra Seamless Limited, Raigad- for supply of 6* Pipe, SMLS, LTCS for 3,643 M; 10*Pipe, WLD. LTCS for 12 M; 16" Pipe. WLD, LTCS for 598 M; 16" Pipe. WLD. LTCS for 6.680 M with....
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....achinery" to mean which are used for making outward supply of goods or services or both and hence only such pipelines used for outward supply should be denied credit * In respect of Refrigerated Storage Tanks,- * These are integral part and inseparable in the manufacturing process * Cannot be considered as a 'civil structure' excluded in the definition of 'Plant and machinery' * "Storage tanks" have been specifically included in the definition of "Capital Goods" in the erstwhile Cen vat Credit Rules * In respect of Water Tanks,- * These are integral part of firefighting system; * Minimum fire protection measure is required to be taken at the terminal as per the Oil Industry Safety Directorate Requirement Standards-Standard * Cannot be considered as a 'civil structure' excluded in the definition of 'Plant and Machinery' 8.1 With the above facts, before taking up the contentions of the applicant, the Input Tax Credit provisions relating to the present case are examined as under:- Section 2(59) of CGST Act: 'Input' means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; Section 2(19) of CGST Act....
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.... for construction of an immovable property which is 'Plant and Machinery' or when such works contract service is an input service for further supply of Works Contract Service; * Credit of tax paid on goods or services received on own account, for construction of immovable property is available only when such immovable property is a 'Plant and Machinery' * Plant and Machinery,- * are apparatus, equipment, machinery fixed to earth by foundation or structural support; * are that which are used for making outward supply of goods or services; * includes such foundation and structural supports: * excludes land, building or any other civil structures; * excludes Pipelines laid outside the factory premises 8.3 Applying the above, to the case at hand, it is seen that the applicant sources Pipes on their own account for getting it laid and the said pipes are laid as a 'Works Contract' including the foundation and structural supports; the Storage Tanks and water tanks along with the foundation are sourced as 'Works Contract'; the pile foundation for the entire project site is sourced as 'Works Contract'. It is not in dispute that the Pipelines, storage tanks and water tanks are....
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.... has no merit and we do not agree with this interpretation. The construction of this Explanation is straight in as much as it defines what constitutes 'Plant and Machinery' and what is excluded. While it says that those apparatus, equipment, machinery which are embedded to earth used for providing outward supply are 'Plant and Machinery', it excludes the pipelines laid outside the factory premises. If the intention of the statute is to exclude only those Pipelines laid outside the factory for outward transmission', the explanation docs not reveal the same. 9.4 It is pertinent at this juncture to refer to the discussions of die GST Council meetings GST council is a constitutional body and after discussions, the council recommends the Government on the LAW, rates, etc for implementation of GST. The draft Law was discussed by the council, the minutes of which are available in the council's website www.gstcouncil.gov. Reference to the said minutes provides the intentions of the provisions as the same definitely has a refential value, though not binding. The minuted discussions relevant to extension of Credit to 'Pipelines' as discussed are extracted under: 10th GST council meeting, w....
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....com towers. 9.2.1 Commissioner, GST Council stated that it was difficult to define plant & machinery and that in most of the VAT laws of the world, the terms machinery, equipment and apparatus were used. He explained that the difficulty in giving a chapter wise listing of capital goods eligible for input tax credit would be that the list would become too long. He further stated that in case input tax credit was allowed only for goods falling under certain specified chapters of HSN, then many goods used as plant and machinery but not falling within those specified chapters would become ineligible for input tax credit. He therefore suggested to use generic expression and to list out the items on which input tax credit was not to be given. The Council agreed that the law Committee of officers should re-examine the definition of 'Capital goods'. Minutes of 11th GST Council Meeting given below: 6.2 Shri Upender Gupta, Commissioner (GST policy Wings), Central Board of Excise & Customs (CBEC) broadly explained the changes made in the CGST law between the draft of 26th November, 2016 (which was the most recent version of the draft laws put in public domain)and the draft of 1 March 201....
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....re so when such statute or statutory instrument is not dealing with any congate subject." .....emphasis supplied Also, under GST Law. when the applicant takes registration of the place of business including all the additional place of business, provides the details of the premises and the applicant has not furnished any evidence or claim before us, that the pipelines are being laid within the declared premises and therefore we hold this contention as not substantiated. 9.6 In new of the above, we hold that the applicant is not eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline for transporting propane/Butane from jetty to the Terminal as pipelines laid outside the factory premises as being restricted under Section 17(5) of the act read with the Explanation thereof. 10.1 In respect of Refrigerated storage tanks, it is seen that the stone are sourced as 'Works contract' and the applicant claims that the 'Storage tanks' are 'Plant and Machinery' and therefore the availment of credit on the taxes paid on the putting up of storage tanks along with the foundation and ....
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....0. 468, para 29) In the case at hand, the applicant has stated that the refrigerated storage tanks are built for a specific purpose of safe storage of Propane/ Butane for outward supply on blending in the required proportions. Therefore, we concur with the claim of the applicant that the refrigerated storage tanks may qualify as an apparatus or an equipment, as long as the applicant capitalizes these tanks and accounts these tanks under 'Plant and Machinery' in their books of accounts and not as Immovable property'. 10.4 The applicant has furnished the drawing of the representative Refrigerated Tank with elevated base along with their application, wherein it is seen that a pile foundation is made in the site, on which a concrete foundation is made on which the refrigerated storage tanks are constructed/fabricated. From the Purchase Order, issued to M/s. Sharp Tanks and Structurals Pvt Ltd Mumbai vide PO No. 4500405026 dated 11.03.2020 (copy of which is furnished), it is seen that the entire refrigerated storage tank along with the foundation and structural support are covered under the scope of this PO. Therefore, we hold that the applicant is eligible for availing credit of tax ....
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.... tank including the structural support thereon as per the Purchase Order No. 4500405026 dated 11.03.2020 subject to the condition that the tanks are capitalized in their books of accounts as Plant and Machinery' and not as 'Immovable Property' and the applicant are not eligible to avail input credit of goods and services used for Pile foundation' as per the Purchase Order No. 4500401679 dated 10.02.2020. 11.1 The final issue to be decided is the eligibility of credit of tax paid on construction of water lank to follow the fire protection measure al Terminal. The applicant has stated that water tanks are part of fire fighting system which are required to be maintained as per Draft OISD standard-236(copy enclosed). In Page No. 24 of said standard. 'Fire Water System' is prescribed under 'Fire protection system for LPC Terminal'. Water Storage is stated as main component of 'Fire Water Systems' Thus, we And that the water storage tanks with the necessary tools/equipment are to be maintained in the Terminal as a 'Fire Protection System for LPG Terminal' and therefore they are constructed in the course of business. These Tanks are constructed as 'Works Construct' as seen from the Purch....