TaxTMI 
TaxTMI 
2021 (8) TMI 736
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....assified & Grouped under "Plant & Machinery") (viii) Architect Service Fees (Charged to Profit & Loss Account) (ix) Interior Designing Fees (Charged to Profit & Loss Account) 2. The applicant has submitted as follows: Section 17 (5) of CGST Act, 2017 deals with "Blocked Credit" in GST. Sub-Section (c) & (d) of Section 17 (5) deal with blocked credit relating to "Works Contract Services" and "Goods & Service" received for construction of Immovable Property respectively. For understanding the Blocked credit for construction of Immovable Property in GST a Conjoint reading of Section 17 (5) (c) & 17 (5) (d) is required. The meaning of "Works Contract" and basics of Section 17 (5) (c) & (d) are reproduced as follows. Definition of Works Contract As per Section 2(119) of GST Act, "Work Contract" means 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 expression "Work Cont....
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....able property or not. As discussed herein above, the contractors will provide various Services. Construction is defined to include reconstruction, renovation additional alteration or repairs only to the extent of capitalisation of Immovable Property excluding Plant and Machinery. 5.1 The applicant has submitted on availability of ITC on the goods and services as mentioned as follows: Sr.No. Nature of Cost/Expenses Head under which Exp. Will be booked Capitalized or Not Remark 1. Central Air Conditioning Plant Plant & Machinery Yes Being Plant not covered under Immovable Property & hence ITC available 2. New Locker Cabinet Locker Cabinets Yes Being Furniture not covered under Immovable Property & hence ITC available 3. Lift Plant & Machinery Yes Being Plant not covered under Immovable Property & hence ITC available 4. Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables material Electrical fittings Yes Being Electrical Fittings not covered under Immovable Property & hence ITC available 5. Roof Solar Plant & Machinery Yes Being Plant not covered under Immo....
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.... Immovable Property. This view is confirmed by AAAR of Maharashtra Bench in the case of M/s. Nikhil Comforts reported in 2020 (41) GSTL 417 (App. AAR - GST - Mah.) and AAR of Uttrakhand Bench in the case of M/s. BAHL Paper Mills Ltd. reported in 2018 (14) GSTL 306 (AAR - GST). (ii) Locker Cabinet: The said Supply will be booked under the head of "Furniture & Fixtures" in the Books of Accounts. Locker Cabinets will be ultimately used for provision of Supply of Taxable Service. The said Supply is "Supply of Goods" which is movable and there is no element of "Works Contract" resulting into "Immovable Property" at all. Further, even though, said "Supply" will be capitalized, it will be classified under "Furniture & Fixture". The "Supply" is of "Movable Goods" and there is no element of "Works Contract", the restriction of Section 17 (5) of the CGST Act, 2017 does not apply and hence the ITC is available without any restriction. (iii) Lift: The said Supply will be booked under the head of "Plant & Machinery" in the Books of Accounts. The Applicant had entered into a contract for "Supply & Erection" of "Lift". To see, whether the Machinery or Equipment after insta....
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....t be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the Lift can be sold in the market and it is seen from record that it can be sold. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. The Supplier will himself buy several items and will complete the machinery. They will purchase a large number of components and fabricate a few and assemble the Lift at site. If it is sold, it has to be dismantled and reassembled at another site. Further, "Plant and machinery" means apparatus, equipment, 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 land, building or any other civil structures, telec....
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....well understood that the "Roof Solar Plant" will be attached to earth for operational efficiency. The whole purpose behind attaching the "Roof Solar Plant" to a concrete base will be to secure maximum operational efficiency and also for safety. Further, it is also seen that the "Roof Solar Plant" will be saleable and observed "if somebody wants to purchase, the whole "Roof Solar Plant" could be dismantled and sold to him in parts". Further, it cannot be prudent to say that the "Roof Solar Plant" assembled and erected at the premises of the Applicant at its Office will be immovable property as something attached to earth like a building or a tree. If the Applicant want to sell the "Roof Solar Plant" it will always be removed / dismantled from its base and sell it. Further, whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference ....
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....orks Contract", the restriction of Section 17 (5) of the CGST Act, 2017 does not apply and hence the ITC is available without any restriction. This view is confirmed by AAR of Maharashtra Bench in the case of M/s. Nipro India Corporation Pvt. Ltd. reported in 2018 (18) GSTL 289 (AAR - GST) wherein the Authority had categorically allowed the ITC on DG Set considering it as "Plant & Machinery". (vii) Fire Safety Extinguishers The said Supply will be booked under the head of "Plant & Machinery" under the Books of Accounts. The Applicant will install "Fire Safety Extinguishers" at their Building to prevent any mishap. For this the Applicant will enter into Contract for Supply with Supply and "Installation of Fire Safety Extinguishers". Any Supply, to get covered under "Work Contract Services", shall first pass the test of "Permanency". To see, whether the Machinery or Equipment after installation is permanently fastened or embedded to the earth, so that the activity would be treated as "Works Contract" under GST. Immovable property has not been defined in the GST Act. Definition of Immovable Property is given in Clause 3 (26) of General Clauses Act, 1897 which says that ....
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....or alterations or repairs, to the extent of capitalization, to the said immovable property. In the instant case, the said expenses is not being capitalized and charged to "Profit & Loss Account" and hence the ITC is admissible. (ix) Interior Designing Fees: The said Supply will be booked under the head of "Profit & Loss Account" in the Books of Accounts. The Applicant has appointed the "Interior Designer" who perform the "Interior Design Development" of Building which will be ultimately used for provision of Supply of Service. As mentioned in the Application, the said expenses will be booked as Revenue Expenditure in the "Profit & Loss Account". As per the Explanation to Section 17 (5), for the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. In the instant case, the said expenses is not being capitalized and charged to "Profit & Loss Account" and hence the ITC is admissible. Revenue's Submission: 7. The revenue vide letter F. No. TECH/ISSUE/32/2020-TECH-O/o COMMRCGST-SURAT dated 22.04.2021 submitted as follow....
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....The Accounting Standards which enumerate the classes of Fixed Assets being land and buildings, furniture and fixtures, etc. does not classify property as movable and immovable property and an asset classified as fixture could still be immovable property within its meaning. In case of any immovable property, if the asset qualifies to be an immovable property but shown as a discrete element in the books of accounts, it still remains an immovable property. Mere declaration of the same under a different class of Fixed Assets does not change its nature being an immovable property. 9. The applicant has submitted that the cost/expenses towards Central Air Conditioning Plant, New Locker Cabinet, Lift, Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials, Roof Solar, Generator, Fire Safety Extinguishers, Architect Service Fees & Interior Designing Fees are for construction of "New Administrative Building" which is in the nature of works contract services and Section 17(5)(c) clearly states that no input tax credit would be available on the tax paid on works contract services when supplied for construction of an immovable property (other than plant....
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....uped under "Plant & Machinery") (ii) New Locker Cabinet (Classified & Grouped under "Locker Cabinets") (iii) Lift (Classified & Grouped under "Plant & Machinery") (iv) Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials (Classified & Grouped under Separate Block namely "Electrical Fittings") (v) Roof Solar (Classified & Grouped under "Plant & Machinery") (vi) Generator (Classified & Grouped under "Plant & Machinery") (vii) Fire Safety Extinguishers (Classified & Grouped under "Plant & Machinery") (viii) Architect Service Fees (Charged to Profit & Loss Account) (ix) Interior Designing Fees (Charged to Profit & Loss Account). Personal Hearing 14. Shri Hardik Shah, C.A. appeared for hearing (Video conferencing) on 30-6-21 and reiterated the contents of the application. Findings 15. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and GGST Act, 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such....
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.... component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods. Air conditioning units, however, would continue to remain dutiable as per the Central Excise Tariff" (iii) Now we have the issue before us whether the air conditioning plant is a movable or immovable property. We find it apt to refer to case law: Municipal Corporation of Greater Bombay & ors. V. Indian Oil Corporation Ltd. [199 Suppl. SCC 18], wherein one of the questions Hon'ble Supreme Court considered was whether a petrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the later part is in the positive then it would be treated as permanently attached to the earth. We note the applicants submission that only after the system is dismantled and individual parts of the air c....
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.... on all courts within the territory of India". (vi) We find supply of centralised air conditioning plant covered at Section 17(5)(c) CGST Act. We note that section 17(5) CGST Act is a Non obstante sub section, overriding the provisions of section 16(1) and Section 18(1) CGST Act. (vii) We find the applicant referred to case law of M/s. Nikhil Comforts and M/s. BAHL Paper Mills Ltd by AAAR and AAR respectively. As per Section 103(1) CGST Act, the said Rulings are not binding on this Authority but binding on their applicants and their concerned officers. We rest on the foundation laid down by the Supreme Court with respect to test of permanency and with respect to terming air conditioning system an immovable property. We are bound by the law of the land, as per Article 141 of our Constitution. 19. Lift i. The applicant has entered into contract for supply and commissioning of Lift in the said Administrative building. We note that a lift comprises of several parts and components- lift car, motors, ropes, rails, etc. and each of them has its own identity prior to installation and they are assembled/installed to create the working mechanism called lift. The installation of t....
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....s fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation of such article when it becomes part of immovable property,........" - 2001 (138) E.L.T. 635(Tri. - Chennai) in case of Kone Elevators India ltd it was held that Lift 'coming into existence only after it is installed along with the building and becomes functional, it is immovable property and not goods' iii. We hold with full force that lift is an immovable property after being erected and is attached to the building itself. We further refer to Government Circular 58/1/2002-Cx dated 15-1-2002 vide F. No. 154/26/99-CX.4. The relevant extracts are reproduced below and we hold that its rationale and concept are relevant under GST scheme of law also: 5 (iv) "Lifts and escalators. (a) Though lifts and escalators are specifically mentioned in sub heading 8428.10, those which are installed in buildings and permanently fitted into the civil structure, cannot be considered to be excisable goods. Such lifts and escalators have also been held to be non-excisable by the Govt. of India in the case of Otis Elevators India Co. Ltd. reported in 1981 (8) E.L.....
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....ing the building a whole set. (ii) We note the case law cited by the applicant -M/s. Nipro India Corporation Pvt. Ltd. reported in 2018 (18) GSTL 289 (AAR - GST). We find that vide referred Ruling, the Authority denied input credit on structural work, mechanical and electrical related civil work, plumbing, gardening water supply system, dismantling work, internal fire hydrant system, sprinkler works, extinguishers, fire documentation, relocation work. We do not find this case law of much help to the applicant. Therefore, We find no merit to dwell on. Even otherwise, We do not find this Ruling binding on us but for M/s Nipro and their jurisdictional officer. 21. Roof Solar Plant (i) The Applicant entered into a comprehensive SITC Contract (Supply, Installation, Testing & Commissioning) with the vendor for installation of Roof Solar Plant. The said Plant will be attached on the concrete base with the nuts and bolts. It is a system specifically to fit the dimensions and orientation of the needs of the applicant. (ii) We cite 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 (167) E.L.T. 501 (S....
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....(v) This supply is 'Composite Supply' which for the purpose of valuation follows the path laid down at explanation inserted to sr no 234 (schedule I) in entry at column (3) to Notification 1/2017- CT ( R) dated 28-6-17 wherein the the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service." (vi) We refer to Sr no 6(a) to Schedule II of CGST Act, wherein the following composite supply shall be treated as a supply of services namely, (a) works contract as defined in clause (119) of section 2 [ CGST Act]. We note that for the purpose of valuation and tax rate, the said explanation to said sr no 234 has been inserted w.e.f 1-1-19. But plain reading of the said Schedule II sr no 6 (a) and the nature of supply at hand, we find this is a composite supply under works contract. The applicant submitted that if resold, the entire system needs to be dismantled and had to be reassembled at another site. Further the said system/ plant has different goods which when assembled....