TaxTMI 
TaxTMI 
2022 (4) TMI 1192
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity under Chapter XVII of the Act shall be binding only (a). On the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling; (b). On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or unloading LPG from ships. As part of proposed expansion, new Propane and Butane unloading arms (one each) shall be installed at the Jetty. The new loading arms shall be designed to handle 500 MT/hr each of refrigerated Propane and Butane. The approximate linear length of each new pipeline shall be 4.1 km and shall be installed adjacent to the existing piping corridor. The unloading line 16" size adequacy and hydraulics is based on ship pump head of 120 mlc (meter of liquid column). Two 16" pipelines and two 6" precooling lines with necessary insulation are considered. In order to reduce the ambient heat ingress and fire protection of the unloading, pipeline, 80mm thick Polyurethane foam (PDF) inner insulation and 50 mm thick Cellular glass outer insulation are recommended. For pre-cooling, the unloading lines, one insulated 6" pipeline is considered. Liquid propane and Butane are admitted into the respective unloading line to affect a slow cooling down of the unloading pipeline (approx. 3-5°C per hour). During the pre-cooling process, gas compressors will have to run continuously. Propane and Butane shall be received in refrigerated ship tankers with their own refrigerated s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....compliance with Oil Industry Safety Directorate (OISD) standards 236. To meet the requirements, it is proposed to have provisions for fire tank, fire detection, fire alarm and fire extinguishing facilities to cover entire terminal and jetty. 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. As part of existing safety system at Terminal, the system has a firewater system with tire following facilities:- 2 Nos of Firewater Pumps 2 Nos of Jockey Pumps 2 interconnected Firewater reservoirs with the total capacity of 2817m3. Firewater ring main with single and double headed hydrants, monitors and deluge spray systems for Compressor, LPG Pumps, Heaters & Condensers, Tank Truck Gantry and Transformers are available. Due to proposed Termi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 appellant 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 foundation tanks? 3. Whether the appellant 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? 4. AAR pronounced the following rulings: 1. The appellant 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 which is intended for unloading propane/butane from the vessel/Jetty to the Terminal. 2. The appellant is eligible for availment of input tax credit of GST paid on goods and services used for setting up refrigerated storage tank including the structural support thereon as per the Purchase Or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....278) E.L.T. 178 (Guj.). • Further, the Ld. Authority has held that the definition under Factories Act cannot be relied upon by merely referring to the Apex Court's judgment in the matter of M/s MSCO Pvt. Ltd, supra, without substantiating the applicability of the decision in the present facts. Merely relying on a judgment without providing its applicability to present matter cannot be held to be correct. Also, the Ld. Authority has not pointed to any conflict between the Factories Act and GST law. Thus, unless a conflicting intention is shown between the two legislations, meaning of factory can be understood from factories act. Having concluded that the Appellant's reliance of definition of factory from Factories Act is not tenable, the LA has failed to define what a factory would mean as per the Ld. Authority. The Ld. Authority has merely proceeded to reject the contention of the Appellant stating that the pipeline is outside the factory. This is clearly erroneous and the Impugned Ruling therefore merits to be set aside on this ground. • In any case, they would like to place reliance on the definition of 'factory' provided under Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... • The transfer pipelines under consideration here are short distance pipes as against cross country pipelines which may stretch to over 100 of kms. In many businesses, it is required to lay down long distance pipelines which may pass through many cities or even beyond state boundaries. The pipes to be laid down by them are distinguished from such cross-country pipelines and should be considered more as pipes. As explained above, these pipes are used as unloading arms for unloading Propane/ Butane from ship tankers and transfer it to the storage tanks. Once such transfer is done, the other end of the pipelines at the jetty is disconnected. Thus, it lies disconnected once the transfer has been completed. This fact pattern clearly indicates that the transfer pipes work as a part of the factory itself. Consequently, the impugned ruling holding that the pipelines are laid outside the factory premises is erroneous and is liable to be set aside. • They further rely on the interim relief granted by Chhattisgarh High Court in the matter of NMDC Limited Versus Union Of India [WPT No. 77 of 2021]. In this matter, the Hon'ble High Court has issued a stay order against t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, it is submitted that pipelines are used in course of or furtherance of business. The pipelines constitute an integral part of the manufacture carried out by them; credit of taxes paid by them should be eligible to them. Based on the decision in the case of Commissioner v. GSPL India Transco Ltd [2016 (43) S.T.R. J23 (Guj.)] by the Hon Hole High Court, it can be concluded that even in their case, transportation of Propane/Butane is not possible without laying of pipeline for transport. Therefore, laying of pipelines is an integral part of their business operations and hence used in course of furtherance of the business. Thus, it can be concluded that laying of pipeline for transport of Propane/ Butane from Jetty to Terminal is eligible for input tax credit under Section 16 of CGST Act and credit should not to be restricted under Section 17 of CGST Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Ld. Authority is incorrect for the following reasons:- • The Impugned Ruling has been passed without providing any proper reasoning and accordingly, the impugned Ruling vitiates the principles of natural justice and therefore, is bad in law. They had made detailed submissions to substantiate that pile foundation is essential for the storage tanks to bear the load. The Ld. Authority has, without providing any proper reasoning whatsoever has passed the impugned Ruling holding that pile foundation cannot be attributed as a foundation or structural support for an equipment/ apparatus. The Authority has not analysed or provided any observations for rejecting the submissions made by the Appellant that pile foundation is essential to bear the load of the tanks and therefore they form foundation of the storage tanks. This represents a flamboyant and prejudiced attempt of the Authority to frivolously deny the credit without any application of mind. Such order cannot be held to be sustainable in law. It is a settled principle of law that the order has to be passed by the Authority by providing a proper reasoning. Reliance in this regard can be placed on the following decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h in essence is the foundation of these tanks itself. They place reliance on Maharashtra Sales Tax Tribunal in the case of M/s Priyadarshini Polysacks Vs. The State of Maharashtra wherein it was observed that the foundation work for Wind Turbine would be classified as plant and machinery. In the above judgment also, foundation has been treated as part of the windmill (machinery) itself. Similarly, in the present case also, the pile foundation should be treated as part of the plant and machinery itself (storage and water tanks in this case) and thus, credit should be eligible. • The definition of plant and machinery also specifically includes the foundation and structural support. Hence, the Impugned Ruling rejecting the credit of taxes paid on goods and services used for such pile foundation is erroneous and is liable to be set aside. • 'Pile foundation' should be covered in the definition of plant and machinery and not in the exclusion part of such definition The definition of "plant and-machinery" excludes:- (i) Land, building or any other civil structures (ii) Telecommunication towers; and (iii) Pipelines laid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y them as a separate work and thus, do not form part of the foundation of storage and water tanks is without any basis and is not in consonance to the facts of the case. It is a fact that the pile foundation is intended to be constructed with the objective of providing support and stability to these tanks only. Merely the fact that a separate work order has been issued for such foundation work cannot be used as a valid argument to justify that this is not a foundation of the tanks. The definition of plant and machinery includes its foundation and structural support, irrespective of whether the same is undertaken under the same contact or separate contracts. Such an observation by the Ld. Authority is clearly without any foundation and the impugned Ruling therefore merits to be set aside on this ground alone. Ld. Authority has in Para 10.5 of the impugned Ruling has contended that Rile foundation is more aligned to 'land", which stands excluded, than the 'structural support for an equipment" which is stated as 'plant and machinery' in the Explanation to Section 17 of the CSGT Act. In this regard, they submit that the Ld. Authority has grossly erred in understanding t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....defined as a series of columns constructed into the ground to transmit loads to a hard soil beneath. A pile is a long cylinder made up of a strong material, such as concrete. Piles act as a steady support for structures built on top of them. Piles transfer the loads from structures to hard strata, rocks, or soil with high load bearing capacity. Foundation for the refrigerated tanks are planned with 700mm diameter piles which will be casted on site up to a depth of 10m (this is the depth where there is hard rock beneath). A total 600+ piles are envisaged for both the refrigerated tanks. Once the location of the piles has been identified, a hydraulic rig digs a hole upto the required depth, once the depth has been achieved a reinforcement cage is placed inside the borehole and then filled up with concrete. These piles are finished at ground level. Since the refrigerated tanks need an elevated base, the piles are further extended to another 1.5m above the ground level upon which a pile cap/ concrete foundation is made joining all the piles together to form a load bearing platform. The foundation of water reservoir tanks is also similar to that of the refrigerated storage tanks. The on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pipelines is not restricted under Section 17 of the Central Goods and Services Tax Act, 2017 (CGST Act). In order to further substantiate the said submissions, one arm of the transfer pipeline is always connected to the storage tanks situated within the factory premises whereas the other arm is connected to the vessel (upon arrival). Once the loading/ unloading of Propane/Butane is completed from the vessel to the storage tanks, the transfer pipeline is then disconnected from the vessel. Thus, it is clear that the transfer pipelines are part of factory premises itself. In this background, the expression 'pipeline' in the exclusion from the definition of 'plant and machinery' connotes long distance pipelines and not pipes running for short distance. In their case, these transfer pipes are running for a short distance from the jetty to terminal. In light of the above, they are eligible to credit of the taxes paid on transfer pipeline and the impugned ruling therefore merits to be set aside. Personal Hearing: 6. The Appellant was granted Virtual Personal Hearing as required under law before this Appellate Authority on 28.01.2022. The Authorized representatives o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....structural support for such reservoir? 7.2 Before proceeding into the issue of advance ruling, first we look into the date of filing of appeal before the forum. The appeal has been filed before this forum on 18th August 2021 against the order of the Authority for Advance Ruling, Tamil Nadu in order No. 10/AAR/2021, dated 31-3-2021 which was communicated on 22-4-2021. As per sub-section (1) of section 97 of the CGST Act 2017, appeal has to be filed within 30 days from the date of communication of the order and as per the proviso to above sub- section) 1) of section 97, a further period of 30 days with condonation of delay is granted to file such appeal. The appellant's authorized representative has stated that as per Honble Supreme Court in Suo Motu Writ Petition (Civil) No.3/2020 dated 23-03-2020 and 27-4-2021, wherein the period of limitation, as prescribed under any general or special laws in respect of judicial or quasi- judicial proceedings, whether condonable or not, shall stand extended till further orders. This has been examined and the Hon'ble Supreme Court in order No. Misc. Application No.21/2022 in Misc. Application No.665/2021 in Suo Motu Writ petition No.3 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usal of aforesaid meanings, precinct would mean an area around building or a place. A conjoint reading of the term "factory" and "precincts" makes it abundantly clear that the factory includes the surrounding areas which in the case of the Appellant is the pipes laid from Jetty to Terminal. The appellant has also relied on the judgment of Bombay High Court in the matter of Reliance Industries [TS-226-HC-2017(BOM)EXC]. In this case, MODVAT credit was allowed in respect of 'Single Point Mooring' system situated in the seabed, used for unloading of imported and coastal consignments and pumping of raw materials holding that this should be considered as an extension to the 'factory' and in the case of NMDC Limited Versus Union Of India. [WPT No. 77 of 2021] also, the Chhattisgarh High Court, has issued a stay order against the revenue order in a similar, matter for allowance of input tax credit on goods and services used for laying of pipelines considering the provisions of Section 16 of the CGST Act. In their additional submission the appellant has also submitted copies of lease deed entered for Right of way for pipeline and relied on the orders of the Appellate authori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to the MODVAT credit and therefore the provisions of the Central Excise Act and the CGST Act,2017 are not one and same and hence this judgment will not help the appellant, as the CGST Act,2017 specifically excludes the pipeline laid outside the factory premises for the purpose of determining the eligibility of Input Tax Credit. Further the appellant relied on the Appellate authority for advance ruling, Chhattisgarh, in the case NMDC Ltd. It is to be noted that under the provisions of sub-section (1) of section 103 of the CGST Act 2017, it is binding on the applicant only and not applicable to the appellant. Further even in such case, only stay order has been issued and final decision is still pending and this can be applied only in the identical circumstances which needs to be proved. Further the appellant relied on the judgment of Hon'ble High Court of Gujarat in the case of GSPL India Transco Ltd. (2016 [43] S.T.R.J23 (Guj). This judgment related to the capital goods under the Central Excise and the definition of capital goods under the Central Excise and GST is not pari-materia and hence the judgment relied on by the appellant would not be useful for the appellant. 8.3 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dation. Further they averred that huge quantities of Propane and Butane are stored in the storage tanks and that of water in the water tanks and this makes the tanks even heavier; Hence, a very strong and load bearing foundation is needed to support these tanks. The appellant .added that since the product inside the tank is stored in a refrigerated state, the tank needs to be elevated to allow free air circulation beneath the tank; It is to be noted that such pile foundation is specifically used for the storage and water tanks and other heavy structures and not throughout in the factory and this clarifies that the pile foundation is essential specifically for these tanks. The appellant stated further that explanation to Section 17(5), while defining the term 'plant and machinery', specifically includes the foundation of such plant and machinery. The Explanation is produced below for ready reference:- "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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that deep foundations like pile foundations; and other foundation systems to ensure safety and serviceability without exceeding the permissible stresses of the materials of foundations and the bearing capacity of the supporting soil/rock. and foundation has been defined as "That part of the structure which is in direct contact with and transmits loads to the ground (2.1.5)". Further it has been stated in the said code (8.1 General) that "Piles find application in foundations to transfer loads from a structure to competent subsurface strata having adequate load-bearing capacity. The load transfer mechanism from a pile to the surrounding ground is complicated and is not yet fully understood, although application of piled foundations is in practice over many decades. Broadly, piles transfer axial loads either substantially by friction along its shaft and/or by end bearing. Piles are used where either of the above load transfer mechanism is possible depending upon the subsoil stratification at a particular site. 10.4 From the above, it is understood that the storage tanks require pile foundation based on soil condition as a part of structure to withstand the load. However, such p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....39; and not to be excluded as to be in the genre of 'any other civil structure' excluded from the definition of 'plant and Machinery' for the purposes of ITC 11.2 The appellant has stated that "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 can withstand) is very low. Since the storage tanks as well as water tanks are quite heavy, they need to increase this load bearing capacity. Therefore, the foundation by way of piling is must." 11.3 The Explanation of 'Plant and Machinery' for the purposes of Input Tax Credit is defined 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) Telecommunication towers; and (iii) Pipelines laid outside....