TaxTMI 
TaxTMI 
2020 (10) TMI 1313
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....e Appellant") is a state-controlled mineral producer of the Government of India. It is owned by the Government of India and is under the administrative control of the Ministry of Steel. II. It is India's largest iron ore producer and exporter producing about 30 million tons of iron ore from 3 fully mechanized mines in Chhattisgarh and Karnataka. It also operates the only mechanized diamond mine in the country at Panna in Madhya Pradesh. III. Since inception it is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, beach sands etc. IV. Operating Mines of NMDC includes the following - * Bailadila Iron Ore Mine, Kirandul Complex, Distt. South Bastar, Dantewada (Chhattisgarh) * Bailadila Iron Ore Mine, Bacheli Complex, Distt. South Bastar, Dantewada (Chhattisgarh) * Donimalai Iron Ore Mine, Donimalai, Distt. Bellary (Karnataka) * Diamond Mining Project, Majhgawan, Panna (Madhya Pradesh) V. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacit....
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.... suited to transport the liquid and gases from distant locations to the factory at a very low energy consumption. Pipelines are the most convenient, efficient and economical mode of transporting liquids like petroleum, petroleum products, natural gas, water, milk, etc. Even solids can also be transported through pipelines after converting them into slurry. The Appellant uses pipelines to transport water from the nearest water source to its factory. 3. That, the project was initiated in the pre-GST regime, under which pipes were exempt from Excise duty. However, plant and equipment. to the extent it qualifies as 'capital goods. were eligible even if the same were installed outside the factory as the definition of 'capital goods' under CENVAT Credit Rules, 2004, specifically included capital goods used outside the factory for pumping of water for captive use in the factory. 4. That, as per Section 16(1) of CGST Act. "Every registered person shah, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which ar....
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.... of Central Excise, M.P. [2001 (133) E.L.T. 3 (S.C)] at para 10 it was held that "Reading of Rule 57A clearly shows that the notification is to specify the goods used in or in relation to the manufacture of the final product whether directly or indirectly. In the present case, inputs which are used in relation to the manufacture even directly would be regarded as an input for the purpose of Rule 57A. Sub-rule (1) of Rule 57A does not, in any way, specify that the inputs have to be utilised within the factory premises. The explanation contained in Rule 57A is merely meant to enlarge the meaning of the word "input" and does not in any way restrict the use of the input within the factory premises nor does the said Rule 57A require the inputs to be brought into the factory premises at any point of time." 12. That, based on above, it can be concluded that pipelines are an integral part of the manufacturing process and therefore is rightly eligible for credit in terms of Section 16 of CGST Act, 2017. Pipelines need not be necessarily utilized within the factory premises. If the usage of inputs/input services is at some distance away from factory, credit cannot be denied on th....
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....rt. 18. That, based on above, it can be concluded that pipeline usage for the manufacturing process is an important element for determination of eligibility of credit. It is therefore, intended to be used in the course of furtherance of business of Appellant's mining activity. 19. Further contended that pipelines laid outside the factory for transporting water from outside the factory into factory for manufacture of final product is to be considered as used within the factory. Activities for manufacturing of final products in the factory is for furtherance of business of Appellant's mining activity. 20. The Appellant contended that the expression used for the purpose of exclusion is "Pipeline laid outside the factory premise". Therefore, one can infer that pipeline laid anywhere other than outside factory should be eligible for credit. Also, credit of taxes paid can be allowed when pipeline is considered as a part of the Appellant's factory. 21. That, in the current case, the pipeline is not completely laid outside the factory of the Appellant. A part of the pipeline is well within the factory of the Appellant and therefore, the restriction contemplated in t....
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....the ratio of above judgements to Appellant's case, it can be inferred that pipeline laid outside the factory (being part of pipeline inside the factory) is part of manufacture of final product. Distance is immaterial to determine whether pipeline is inside or outside the factory when one end of the pipeline is within the factory and the same being used for drawing water and transporting to the factory. Therefore, the portion of pipeline lying outside the factory is also to be considered as part of pipeline inside the factory and hence cannot be considered as pipeline laid outside the factory. 28. That, in the case of Commissioner Vs GSPL India Transco Ltd [2016 (43) S.T.R.123 (Guj.)], Hon'ble High Court held that: "The Appellate Authority in its impugned order had held that transport of gas was not possible without pipeline, except with help of tankers which would be highly uneconomical. Further definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004, does not exclude services in laying of pipeline for transport of gas as said service is different from construction of new building or civil structure as per erstwhile Section 65 (25b) of Finance A....
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....cope of "input service" are to be used for support of capital goods. There is no doubt that the subject goods i.e. pipes and valves, are capital goods but the input service to be rendered by the Appellant is not for support of pipes and valves i.e. "capital goods" but for laying of pipeline for transport of gas. As input service received by the Appellant from EPC contractors and others is not for laying of foundation or making of structure for support of capital goods, same does not fall under the exclusion clause, as above." Based on above it can be concluded laying of pipeline for transport of water to factory is eligible for input tax credit under Section 17 of CGST Act, 2017. 30. That, the restriction under section 17 (5) of the CGST Act, 2017 should be construed only to apply to pipelines laid outside the factory premises for provision of outward supply of goods and not pipelines laid outside the factory premises for inward supply of raw material necessary for manufacture of steel. 31. The relevant extract of Explanation under Section 17 (5) of CGST Act is extracted below for reference: Explanation.- For the purposes of this Chapter and Chapter VI, the expres....
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....roperty, there is no credit restriction. 38. That, the AAR erred in not appreciating the fact that the Appellant sought ruling on credit eligibility of input service (maintenance of pipeline) whereas the AAR has applied the explanation containing the restriction applicable for goods (pipeline) and held that credit on maintenance services is not eligible. 39. The Appellant further draws attention to Sec 17 (5) wherein while denying the credit on motor vehicles u/s 17 (5) (a), the provisions also specifically mention in 17 (5) (a)/(b), the services of operating the motor vehicle are also denied for input tax credit as under: "(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa)...... (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referre....
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....involved in the instant appeal filed are discussed hereunder:- The appellant sought advance ruling to the points as under, before the Authority of Advance Ruling, Chhattisgarh:- i. Whether input tax credit of GST paid on goods and services used for laying of cross-country pipeline nearby river till the boundary wall of the Factory can be taken by the Applicant? ii. Whether input tax credit can be availed on Operation and Maintenance Services (O & M Services') obtained by the Applicant for the maintenance of the facility? 5.1 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 with GSTIN 22AAACN7325A3Z3, against the AAR (Authority of Advance Ruling) order No. STC/AAR/09/2019 dtd. 12.03.2020 passed by AAR, Raipur Chhattisgarh. 5.2 NMDC Limited (hereinafter 'the Appellant' or 'NMDC') is a ....
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....tside the factory for pumping of water for captive use in the factory. 5.3 NMDC Limited, the Appellant as part of the above plan, NMDC is setting up Intake Well & Pump House and Cross Country Pipeline System at 3.0 MTPA Integrated Steel Plant at Nagarnar, Chhattisgarh. As discussed NISP has been awarded contract for setting up of Intake well and Pump House and for laying of Cross Country Pipeline System, including operation and maintenance for five years for NISP to a consortium lead by M/s Megha Engineering and Infrastructure Limited. The scope of work is categorized into 3 categories which are as under: i. Construction of intake well and pump house along with supply of associated motors and electrical equipment's ii. Construction of pipeline, erection, installation and commissioning iii. Operation and Maintenance Service for five years 5.4 Section 16(1) of CGST Act stipulates that: "Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or i....
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....ther 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 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. 5.8 Aforesaid explanation to section 17 (5) of CGST Act, 2017 categorically excludes pipelines laid outside the factory premises from the scope of plant and machinery, besides restricting 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 i....
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....r of "immovable property", relevant to the present context is that it is attached to the earth, or permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply. The project of laying pipe lines covers a large area, tailored specifically to fit the dimensions and orientation of the needs of the project. Dismantling and shifting the said pipeline project appears neither to be prudent nor a viable option. Thus, besides pipelines being laid outside the factory premises outside the scope of "plant and machinery" it also fulfills the conditions of being an immovable property. 5.10 We also find that the AAR in their impugned order appealed against, have also cited reference to 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.C.) in Appeal (civil) 10911 of 1996, 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....
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....'ble Apex Court held that the same is immoveable property 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 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 same 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....
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....r pipeline is inside or outside the factory when one end of the pipeline is within the factory and the same being used for drawing water and transporting to the factory. The Appellant have also cited reference to the case of Commissioner Vs GSPL India Transco Ltd [2016 (43) S.T.R. J23 (Guj.)], Hon'ble High Court in their defense. It is observed that the cited case laws either pertain to the erstwhile Cenvat / Modvat regime stipulating therein the provisions for availment of credit wherein the chapter heading/ subheading of the items which qualified being termed as "capital goods", were specifically covered under the definition viz. items falling under chapter 84, 85 etc. of CETA, 1985. In the case in hand, pipe lines laid outside the factory premises (that too as far as even 50Km away from the factory premises) stands excluded from the scope of plant and machinery as discussed in the preceding para. Thus the said case laws cited by the appellant are distinct and distinguishable to the facts and circumstances in hand in as much the pipelines here are for transporting water from sources far away from the factory premises of Appellant. 5.13 Now coming to the second point on ....
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....finition of 'input service'. The cited case laws either pertain to the erstwhile Cenvat / Modvat regime stipulating therein the provisions for availment of credit wherein the chapter heading/ subheading of the items which qualified being termed as "capital goods", were specifically covered under the definition viz. items falling under chapter 84, 85 etc. of CETA, 1985. In the case in hand, pipe lines laid outside the factory premises (that too as far as even 50Km away from the factory premises) stands excluded from the scope of plant and machinery as discussed in the preceeding para. The case law cited by the appellant relates to cenvat credit on services used for modernization, renovation and repair of plant and machinery, which is definitely not the case here in as much as such pipelines laid outside the factory premises stand excluded from the definition of 'plant and machinery'. Here it is not the case that 'Pipelines laid , outside the factory premises' are being used for providing any output service of transport of liquids/gases. The appellant have also furnished a copy of certificate of licence to run a factory issued by the Government of Chhatt....