TaxTMI 
TaxTMI 
2021 (1) TMI 1254
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.... Rubber Limited, SP 86-88, Industrial Area Bhiwadi, Bhiwadi, Alwar, Rajasthan 301019 (hereinafter also referred to as 'the Appellant') against the Advance Ruling No. RAJ/AAR/2019-20/23 dated 21.10.2019. BRIEF FACTS OF THE CASE 3. M/s Indag Rubber Limited, SP 86-88, Industrial Area Bhiwadi, Bhiwadi, Alwar, Rajasthan 301019 is holder of GST Registration No. 08AAACI0868D1ZS (hereinafter refer as Appellant). The Appellant inter-alia manufactures precured tread rubber, un-vulcanized rubber strip gum, universal spray cement and tyre envelopes for the tyre retreading industry. M/s Elcom Systems Pvt. Ltd (hereinafter referred to as "Elcom") is a private limited company incorporated in India and is engaged in the business of repair, maintenance, overhaul, upgrade and modernization of Unmanned Aerial Vehicles (UAV). Elcom has approached Appellant for taking on lease a Maintenance Repair and Overhaul facility (hereinafter referred to as "MRO"). According to the agreement between the Appellant and Elcom, the Appellant will construct MRO facility at Bhiwadi as per the specifications given by Elcom. The said MRO facility will thereafter be given on lease to Elcom by the Appellant. ....
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....es for setting up the MRO facility on the Industrial Land. The Appellant issues purchase order on M/s Akanksha Contracts Pvt. Ltd for supplying the goods and services for setting up of MRO facility. The goods are procured by M/s Akanksha Contracts Pvt. Ltd on a bill to ship to basis. In the invoice issued by the supplier, the bill to party is M/s Akanksha Contracts Pvt. Ltd. and ship to party is the Appellant. Against the material receipts, the Appellant has paid Rs. 97.37 lacs amount in advance for procuring of goods and services. Further, it has been agreed that M/s Akanksha Contracts Pvt. will raise a consolidate invoice for each month, which will include value of both goods and services so supplied along with adjustments regarding the advance so received. M/s Akanksha Contracts Pvt. Ltd is charging applicable rate of Goods and Services Tax (hereinafter referred to as "GST") on the goods and services being supplied to the Appellant. Further, when the Appellant will lease out the MRO facility to Elcom, it will be paying GST at applicable rate on the amount of rent received for leasing out of MRO facility. 4. The appellant has filed application for advance ruling before the Aut....
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.... and liabilities of the Appellant, the Authority is bound to follow the principles of natural justice. However, the Authority by not considering the submissions (oral as well as written) of the Appellant has violated the said principles (audi alteram partem). 6.1.5. Further, it is submitted that the Authority while passing the ruling has not given reasons and basis for such ruling. It is pertinent to mention that the Authority has merely recorded that the purposive dimension of the provision of Section 17 (5) (d) of the CGST Act is blocking of credit for construction of immovable property. However, the Authority has failed to substantiate this observation with any cogent reasoning. 6.1.6 It is submitted that it is a settled principle of law that non-speaking orders or the orders passed without recording the complete submissions and reasons for passing the final order are non-est in law. Thus, the impugned ruling being devoid of any reason/basis is non-speaking and thus, unsustainable in law. This further, establishes the fact that the impugned ruling is violative of principle of natural justice. 6.1.7. The Appellant submits that the principles of natural justice have been ....
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....udicating / appellate authority must give its specific findings on various submissions made, judgments relied upon and the distinguishing features pointed out by assessee before them, in their final order. It is further submitted that in pursuance of directions given by Hon'ble CESTAT in the case of Commissioner of Customs (Import), Chennai vs. Do Best Infoway reported at 2016 (336) E.L.T. 156 (Tri. - Chennai) to CBEC to Issue appropriate guidelines for the quasi- judicial authorities to discharge their duties keeping in view the spirit of the ratio laid down by Apex Court in the case of Gordhandas Bhanji [1952 AIR 16 SC], the CBIC had issued guidelines vide Instruction F. No. 390/CESTAT/24/2016-JC, dated 13-4-2016. In para 5(d) of the said Instructions, the CBIC has categorically mentioned that the quasi-judicial orders have to be necessarily be the speaking orders recording every fact and reason leading to the final decision in the matter. Non-speaking orders or the orders passed without recording the submissions and reasons for passing the final order is nonest in law. In view of the aforesaid legal position, it is submitted that the impugned ruling has been passed in gross ....
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....vices or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services,- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.] (c) subject to the provisions of section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods agai....
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....not taxable. Thus, in case where the outward activity undertaken by an assessee is not taxable, the provision of Section 17(5)(d) will apply and credit will not be available. In order to further explain the same, reference is made to Entry No. 5 of Schedule III. Schedule III deals with activities which are to be treated neither as supply of goods nor supply of service. 6.2.8. Sale of building inter alia is neither supply of service nor supply of goods by virtue of Entry no. 5 of Schedule III. Thus, on a combined reading of this provision alongwith the earlier paragraph, it can be said that in case if inputs/input services are used for construction of a building which is to be sold, restriction under Section 17(5) (d) will be applicable. 6.2.9. It is pertinent to mention that according to Entry No. 5 of Schedule II, renting of immovable property is a supply of service. Further, lease of building is also supply of service under Entry No. 2 of Schedule II. Accordingly, the Appellant at the time of renting the MRO facility will be liable to pay tax as the same is a taxable supply of service. Hence, the outward activity undertaken by the Appellant is a taxable supply. 6.2.10. I....
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....subject to Section 17(1) and (2). While considering the provisions of Section 17(5)(d), the narrow construction of Interpretation put-forward by the Department is frustrating the very objective of the Act, inasmuch as the petitioner in that case has to pay huge amount without any basis. Further, the petitioner would have paid GST if it disposed of the property after the completion certificate is granted and in case e property is sold prior to completion certificate, he would not e required to pay GST. But here he is retaining the property and is not using for his own purpose but he is letting out the property on which he is covered under the GST, but still he has to pay huge amount of GST, to which he is not liable. 20. In that view of the matter, in our considered opinion the provision of Section 17(5)(d) is to be read down and the narrow restriction as imposed, reading of the provision by the Department, is not required to be accepted, inasmuch as keeping in mind the language used in (1999) 2 SCC 361 (supra),the very purpose of the credit is to give benefit to the assessee. In that view of the matter, if the assessee is required to pay GST on the rental income arising ou....
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....submitted that in the view of the Appellant, the restriction under Section 17(5) (d) of the CGST Act is not applicable in cases where the inputs and input services are used for making a taxable output supply. Rebuttals to the findings of the impugned ruling 6.2.22. The Authority has observed that credit is not available for the construction of an immovable property even when such goods or services are used in the course or furtherance of business. However, no reasoning behind such observation is provided. The Authority has not provided any reason as to why the decision of Safari Retreats(supra) is not applicable. 6.2.23. The Authority has also observed that the interpretation of Section 17 (5) (d) of the CGST Act of the Appellant that it deals with unavailability of credit of inputs/ input services when output is not taxable, is implicit and one dimensional in nature and is not the intentional outcome of the said provision. In this regard, it is submitted that the decision of Safari Retreats (supra) and earlier advance ruling of K.P.H. Dream (supra) substantiates the view of the Appellant. The Authority also recorded that the purposive dimension of the said provision is bl....
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....perty shall not be an issue while deciding the eligibility of credit and application of the provision of Section 17 (5) (d) of the CGST Act. Further, the findings of the Authority is not in conformity with the principle laid down in the cases relied by the Appellant in its application. 6.2.28. It is further submitted that Clause 9.2 of the sub-lease deed between the Appellant and Elcom provides that even if such sub-lease deed is terminated before the predetermined period, Elcom will make good the loss of the rentals till the Appellant finds a new tenant for the MRO facility. Therefore, it can be construed that the ultimate aim behind construction of MRO facility was only to rent it further and nothing else. 6.2.29. It has been observed by the Authority that the following case laws are not relevant in the present case as the facts are different from the facts referred in these cases:- • Tara Exports v. Union of India, 2018 (9) TMI 1474; • Eicher Motors Ltd. v. Union of India, (1999) 2 SCC 361; • Collector of Central Excise, Pune v. Daiichi Karkaria Ltd., (1999) 7 SCC 448. 6.230. In this regard, it is submitted that, the facts of the c....
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....ifferent high courts which were not the jurisdictional high courts in that case. Applying similar analogy, it is submitted that in the instant case as well, though the judgment of Safari Retreats (supra) is not that of a jurisdictional High Court, same was required to be followed by the Authority as there is no contrary decision on this issue by any other High Court (including the jurisdictional i.e. Rajasthan High Court). It is submitted that Jurisdictional officer relying on the decision of Safari Retreats (Supra) submitted that credit is admissible. 6.3.6. It is submitted that reference is also required to be made to the judgment in the case of Shalu Synthetics Pvt. Ltd. v. CCE & ST, Vapi, 2017 (346) ELT 413 (Tri. - Ahmd.), wherein it has been held that the High Court decisions (in this case other jurisdiction) are required to be preferred over the decision of the Larger bench of the Tribunal. 6.3.7. In view of the judgments relied above and the submissions made, it is submitted that the Authority has erred in not relying on the decision in the case of Safari Retreats (Supra), wherein the facts and circumstances are similar to that of the instant matter. It is submitted th....
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.... that the judgments cited would squarely apply to the issue on hand as no stay order has been passed against them even if appealed before the Apex Court. 6.4.7. On the basis of the aforementioned judicial precedents, it is submitted that it is a settled principle of law that till an order is stayed or set aside by the higher court, the order is operative and thus, binding on other judicial/quasi-judicial authorities. It is reiterated that the judgment in the case of Safari Retreats (supra) has not been stayed or set aside by the Hon'ble SC and thus, the Hon'ble AAAR is bound to follow the same. Thus, the impugned ruling is liable to be set aside. 6.5. The appellant has also made additional submissions (supplementary facts and additional grounds of appeal) on 04.11.2020 as under:- 6.5.1. A teaming agreement was signed between Israel Aerospace Industries Ltd. (IAI) and Elcom Systems Pvt. Ltd. (ELCOM) on 15 Jan 2018 for providing maintenance, repair and overhaul (MRO) and training services for the RPVs (Remotely Piloted Vehicles), also known as drones. As per this agreement, MRO activities concerning current UAV(Unmanned Aerial Vehicle) systems and new UAV systems sha....
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....to undertake the construction:- a) RSA Architects, Mr Swarandeep Singh - Owners Engineer b) CPKA - Project Management Consultancy, Architecture Engineering & Design Consultancy 6.5.6. MRO: Facilities Under Construction: As per the contract with IAI following facilities are under construction at the appellant site at Bhiwadi:- a) Main Hangar Block- comprising of Hangar and Annex buildings (both side of hangar) b) Engine Test Room c) Paint Shop d) Warehouse e) Security Office Cum reception f) Canteen, power house, and other utility buildings 6.5.7. Hangar, Paint shop and Engine Test Room:- A brief on hangar, engine test room and Paint shop has been submitted and concluded that Engine test bench is not complete without the supporting infrastructure, specially designed structure of the Hanger is integral part of the repair and test set up of UAV and the complete structure of the paint shop acts as a paint booth in the MRO facility. 6.5.8. Annex Building:- Two Annex buildings (both side of Hangar) are being constructed to house the repair, training and office facilities as per the requirements laid out by I....
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.... ease of movement of repairable to and from various repair shops. 6.5.11. Warehouse is customized to house the spares and material required for Field Service as well as MRO. Apart from the general area of storage, there are rooms with required environmental control to house aircraft electronic components, rubber parts, battery and inflammable stores. It also has a separate room with access control to store classified material (Locked end user room). Warehouse is customised for storage of spare parts of specific RPVs. Even the rack layout with weight capacity is specified by the OEM (IAI). 6.5.12 Training facility and Simulator rooms are built as per FRD of IAI. Every details of the training facility down to the location of electrical points have been specified by IAI for this facility. Building plays an important role in the simulator setup. Building infrastructure to include room layout, acoustic walls, one way glasses, electrical blind as essential part of the simulator. Only the simulator equipment will not complete the setup and it can't be housed in an ordinary building to complete its desired function. 6.5.13. Customised MRO Infrastructure:- Complete MRO Infrastr....
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.... above, which defines "plant and machinery". The AAR has not considered this definition nor whether the structures being constructed by the appellant satisfy the definition of plant for the purpose of section 17(5)(d). 6.6.5. It should be noted that clauses (c) and (d) of section 17(5) excludes immovable properties for blocked credit and the parenthesis excludes from this exclusion "plant and machinery" in clause (c) and "plant or machinery" in clause (d). It is not clear why in one "and" is used and in the other, "or". Thus, input tax credit for construction of plant and machinery is not blocked. In the Explanation to section 17(5), "plant and machinery" has been defined as "apparatus, equipment, and machinery fixed to earth by foundation or structural support". That means all these three expressions are referring to immovable properties only. This Explanation excludes from the definition of "plant and machinery" buildings and civil structures. 6.6.6. In different laws, there are differential treatments for plant and building. It may so happen that a building may also be regarded as plant. A building is not a plant when it is used as a setting or shelter in which business is....
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....e held to be plant. In Taj Mahal Hotel's case {supra) the respondent, which ran a hotel, installed sanitary and pipeline fittings in one of its branches In respect whereof it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of 'plant' given in section 10(5) of the Indian Income-tax Act, ('the 1922 Act') which was similar to the definition given in section 43(3) of the 1961 Act and this Court after approving the definition of plant given by Lindley U. in Yarmouth's case {supra) as expounded in Jarrold v. John Good & Sons Ltd. [1962] 40 TC 681 (CA) held that sanitary and pipeline fittings fall within the definition of plant. 12. In IRC v. Barclay, Curie & Co. Ltd., (1970) 76 ITR 62, the House of Lords held that a dry dock since it fulfilled the function of a plant must be held to be a plant. Lord Reid considered the part which a dry dock played in the assessee-company's operations and observed:- "...It seems to me that every part of this dry dock plays an essential part.... The whole dock is I think, the means by which, or plant with which, the operation is per....
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.... reasons:- '4. It is not in dispute that if these ponds are 'plants', then they are eligible for depreciation at the rates applicable to plant and machinery and case would be covered by the provisions of Section 32 of the Act. It is not even necessary to deal with this aspect in detail with reference to the various judgments, inasmuch as judgment of this Court in Commissioner of Income Tax, Karnataka v. Karnataka power Corporation [2002(9) SCC 571] clinches the issue. Therein the Court has taken into consideration the earlier judgments on which some reliance was placed by the learned counsel for the Revenue and are suitably dealt with. The relevant portion of the said judgment reads as under: "5. It was the case of the assessee that it was entitled to investment allowance as applicable to a plant in respect of its power generating station building. In a note filed before the Commissioner (Appeals) it stated that it had included for the purpose the value of its Potential Transformer Foundation. Cable Duct System, Outdoor Yard Structures and Tail Race Channel. It explained that the process of generation started from letting in water from the reservoir in....
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....dered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant. We must add that the Court said, "To differentiate a building for grant of additional depreciation by holding it to be a plant in one case where a building is specially designed and constructed with some special features to attract the customers and the building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable." This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. 9. In the instant case, there is a finding by the fact finding authority that the assessee's generating station building is so constructed as to be an integral part of its generating....
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....led in the run-up room. Provision in the ceiling structure has been made to support the crane. (d) Acoustic Isolation: Sound proofing of the building has been done to ensure reduction of noise level from 115 db to 70 db outside the room and to 63 db in the control room. (e) Window: A shatter proof window has been built in the structure, between the control room and the engine run-in room (Dimensions: height from the floor - Im, height - 1.5 m, width - 2.5m). The window has been designed to withstand any type of failure, burst, explosion within the Engine Run-In Room. It would be evident from above that the civil infrastructure is integral to the functioning of Engine Test Facility. The Engine test bench is not complete without the supporting infrastructure. 6.6.13. Hangar: A hanger (dimensions: width - 50 m, length - 33m) is being constructed for the purpose of repair, assembly and calibration of RPVs (Remotely Piloted Vehicle). A few important features of the Hangar are as under:- (a) Span/ width of the hanger (50 m), unsupported, is designed to facilitate movement of assembled RPV to and from RPA. (b) Crane: An underslung crane with loadi....
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....d in order to take the load of the machinery. This way, the building takes part in the operation for repair of the drones. Similarly, the engine testing building is specially designed to allow draughts of air coming from the atmosphere and going back when the engine would be tested. From behind a glass partition an operator would switch on and run the engine to test its capability to function under different conditions. In the paint shop the walls would be lined with filters and the whole building would be designed to handle paint fumes. 6.6.16. The whole complex, for which the appellant is constructing the structures, is not just conglomeration of buildings, wherein business is to be conducted. To the structures, further additions would be made by ELCOM by installing machinery and equipment. All the structures together would constitute the MRO facility, like structures in a factory. Every element of the complex would contribute to the repairing of drones. The structures are designed specifically keeping the technical requirements in mind. The buildings are peculiarly designed to complement the equipment and participate in the desired activities, not merely shelters in which the....
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....t ruled that it is the dominant intention of the document which must guide the construction of its content. Similarly, in Phatu Rochiram Mutchandani v. Karnataka Industrial Areas Development Board, (2015) 5 SCC 244, it held that while construing an agreement it is not the nomenclature but the substance thereof that needs to be looked into. Therefore, mainly because the agreement in question is termed as "Lease Agreement" that by itself will not be the sole determinative factor. 6.6.20. In Sundaram Finance Ltd. v. State of Kerala, AIR 1966 SC 1178, the Supreme Court has held that the true effect of a transaction may be determined from the terms of the agreement considered in the light of the surrounding circumstances. In each case, the Court has power to go behind the documents and to determine the nature of the transaction, whatever may be the form of the documents. In this case, the Court ignored the sale letter and held that the transaction was one of loan transaction. 6.6.21. In Mangala Kunhimina Umma v. Puthiyaveettil Paru Amma, (1971) 1 SCC 562, the Supreme Court has explained that the circumstances and the conduct of the parties are always a very useful guide in ascerta....
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....ion Ltd. at Bhiwadi. Of this, vacant land of approximately 1,50,000 sq.ft, is lying unused for nearly 12 years. It has proposed to enter into a sub-lease agreement with ELCOM. ELCOM wants to run an MRO facility for drones. For this, it wants the appellant to construct hangar and other specialised buildings and then give it on lease at monthly rent of Rs.36 per sq.ft. The lease is for 9 years 6 months, with lock-in period for 9 years. The amount is to be increased by 12% compound rate after every 3 years. The appellant will spend about Rs.30 crore on construction of the structures and operation. Thus, the building structures are constructed keeping in mind the machinery and equipment that would be installed by ELCOM. 6.7.2. The arrangement militates against the deal being considered as a lease simpliciter. The Explanatory Statement to the shareholders for approval of the transaction states that the appellant will spend about Rs.30 crore on construction and external developments. It will receive Rs.54,00,000 per month. This will be increase by 12% after 3 years. Again, on the enhanced base it will be increased by 12% after 3 years and once more after 3 years. There is lock-in peri....
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....ofit after meeting lease rent, cost of construction and operational expenses. But it does not have money to invest on construction upfront. It wants the appellant to have the basic structural construction and site development made as per ELCOM's requirement. ELCOM would pay a fixed sum per month which would include lease rent for the open space and installment for price of construction. 6.7.8. In the arrangement, the appellant would be able to use vacant space for getting rental income. ELCOM would pay lease rent and construction expenses out of its income from MRO service. The appellant is ready to receive the construction money over 9 years. The installments would cover lease of land, construction and development expenses, profit and inflation. Even though the bare buildings would remain standing on the plot after 9 years, the appellant is not interested in the value of the structures as it would have recovered the entire investment with acceptable profit during the lease period. Thus, the amount to of money receivable by the appellant from ELCOM is partly for lease rent of the land and partly for installment of remuneration for construction of the structures. 6.7.9. Th....
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....team and clarification received from them on the construction drawings (developed by CPKA), updated drawings were sent to IAI for further vetting. With email dated 12 Feb 2018 from Mr Swarandeep Singh, flowing updated drawing were sent to IAI for approval:- • Site plan • Hangar Phase 1 & 2 • Warehouse Phase 1 • Engine Room • Paint Shop 6.7.14. Email from Mr Swarandeep Singh dated 22Jan would establish that even the door width required for hangar to annex buildings were customised to suite the requirement/ specification laid down by IAI. Email from Mr Rami Cohen dated 31stJan 2019 giving specifications required for hangar flooring, Power requirement of CPA. Email from Mr Rami Cohen dated 13thFeb 2019 gives clarification on CPA, Layout Plan, and Paint shop. Email dated 14thFeb 2019 from Mr Swarandeep Singh establishes that even road width and turning radius required were specified by IAI. During the entire planning and execution phase, weekly conference calls were made between IAI and ELCOM team. CPKA team also joined the call on as required basis. 6.7.15. Email from Mr Rami Cohen dated 07 Mar 2019 has given detai....
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..... IAI has guided the construction of the MRO facility which would be operated by ELCOM. 6.7.19. Section 17(5)(d) blocks credit for construction of immovable property, only when the same is undertaken by the taxable person "on his own account":- 17. Apportionment of credit and blocked credits ....................................... (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- ................................. (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 clauses (c) and (d), the expression "construction" includes reconstruction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; From the above submissions, it is clear that the appellant is not constructing the structures on its own account, bu....
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....can be adduced are:- (i) the court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted, [clause (a) of sub-rule (1)], or (ii) the party seeking to produce additional evidence, established that notwithstanding the exercise of due diligence, such evidence was not within the knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed, [clause (aa), inserted by Act 104 of 1976], or (iii) the appellate court requires any document to be produced or any witness to be examined to enable it to pronounce Judgment, or for any other substantial cause, [clause (b) of sub-rule (1)]. ii. [Hindustan Petroleum Corporation Ltd. vs. R.P. Agarwalla & Brothers (P) Ltd., AIR 1986 Cal 403, 413] [Ambuja vs. Apadurai, (1915) ILR 38 Mad 414; Muniyappa v. Rama Kr. AIR 1956 My 47; Wasawa v. Jagir, AIR 1965 Pu 494]. iii. [Radhamma v. Lakshmana K. murthy, 1996 AIHC 2921, 2924 (Kant)] iv. [Krishan v. Narain Dass, AIR 1989 Punjab 267, 269] v. CCE, B'lore vs. S.P. Flavours Pvt. Ltd., 2012 (283) ELT 3 (Kar.) vi. ....
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....th goods and services so supplied along with applicable rate of GST on the goods and services being supplied to the appellant. Further, when the appellant will lease out the MRO facility to Elcom, it will be charging GST at applicable rate on the amount of rent received for leasing out of MRO facility. 8.4 The appellant had filed application for advance ruling before Authority for Advance Ruling, Rajasthan whether he is eligible to claim credit of the GST charged by vendor at the time of supply of goods and service to it, service to it, which are used for carrying out the following activities for setting up of MRO facility to be rented out.- a. Civil work b. External Development works 8.5 Authority for Advance Ruling, Rajasthan has observed that the provisions of Section 17(5)(d) of the CGST Act, 2017 is clear that if the goods or services are used for the construction of an immovable property, the ITC shall not be available irrespective of use of the said property and issued Ruling that the applicant is not eligible to claim credit of the GST charged by vendor for supply of goods and services to it. 8.6.1 Aggrieved by the Ruling, the appellant came befor....
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....thority or, as the case may be, the Appellate Authority; or (C) where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal; or (d) where the adjudicating authority or, as the case may be, the Appellate Authority has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal." 8.6.4 From the records placed before the appellate authority, it would emerge that the appellant, nowhere in their appeal memo, could bring forth any evidence of availability of any such contingencies as enumerated above for producing substantial additional documents at the appellate stage. Given the fact that the appellate authority, like us, neither has been empowered to entertain these additional facts nor, in absence of an specific provision, have the right to remand the case back to the original authority, we find ourselves not able to take up these additional evidences despite of several case laws having been cited by the appellant in their favour which pertain....
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....urse or furtherance of his business. Such entitlement is subject to fulfillment of certain conditions such as possession of invoice, receipt of goods/service, payment of tax to Government etc. as provided under section 16(2) of the GST Act, 2017. However, the availability of credit is subject to the restrictions as stipulated under Section 17(5)(d) of the GST Act, 8.9 The relevant portion of sub-section 5 of Section 17 of CGST Act, 2017 in is regard is reproduced below:- (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (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 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 clauses (c) and (d)....
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....use of credit, does not arise and restriction on availment itself is quite justifiable. 8.12 It is admitted by the appellant that they are getting civil work and external development works from the contractor and that the ownership of the property shall remain with them. On perusal of fact submitted by the appellant, we find that the appellant has constructed hangar, paint shop, engine Run-up test bench, training room, warehouse, road and office building on the land of his factory for leasing the same to Elcom. All the civil construction undertaken by the appellant is certainly an immovable property in the first place in terms of Section 3(26) of the General Clauses Act, 1897 which reads as under- "Immovable Property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth." 8.13 Secondly, the civil construction so undertaken can't be covered by the term 'plant & machinery'. The argument that has been put forth by the appellant is that, if not entirely covered under 'plant & machinery', these can be covered under the definition of 'Plant'. The appellant ha....
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....on. A definition is an explicit statement of the full connotation of a term. - See Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer [(1990) 3 SCC 682] and P. Kasilingam v. P.S.G. College of Technology [1995 Supp (2) SCC 348] rendered relying on Gough v. Gough [(1891) 2 QB 665: 65 LT 110]. As noticed in S.N. College, the Legislature has the power to define word even artificially. When a statute says that a word or phrase shall "mean a particular thing, certain things or acts, that definition is a hard-and-fast one and no other meaning can be assigned to the expression than is put down in that definition. That definition is an explicit statement of the full connotation of a term." 8.15 Regarding contention of the appellant the term "plant and Machinery" and not "plant" or -machinery" have been defined in the explanation below section 17 of the CGST Act, 2017. I find that the Appellate Authority for Advance Ruling, Karnataka had the occasion to discuss this issue in their ruling passed in respect of an appeal filed by Tarun Realtors Pvt Ltd. = 2020 (3) TMI 981- APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA. The same reads as under- "15. It is th....
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.... but an immovable property, we came to the another argument of the appellant where they claim that construction was under taken on account of Elcom and not on their own account and therefore the bar in section 17(5)(d) does not apply to such immovable property, we observe that at the time of construction, every structure is constructed with a special purpose in the supervision of his own or other. The fact remained that appellant is the owner of the said immovable property -and it has not been sold to any other person. In future, it may be used for other than specific purpose related to his own and/or other without change of a brick. In future, the appellant's construction may also be used many other but quite different purposes by the appellant himself or by other with agreement of appellant. To determine the account of construction, it is necessary to determine in whose financial account the said expenditure will be shown. It is a fact that the Appellant has entered into agreement with M/s Akanksha Contracts Pvt. Ltd. for supplying various goods and services for setting UP the MRO facility on the Industrial Land of appellant. The Appellant issues pure ase order on M/s Akanksh....