TaxTMI 
TaxTMI 
2021 (3) TMI 1380
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.... input credit on goods/services received for construction of hotel building is available; b) Whether input credit on work contract service received for construction of hotel building is available; c) Whether input credit on goods/services received for construction of banquet hall which is rented further to customer is available; d) Whether input credit on work contract service received for construction of banquet hall which is rented further to customer is available; e) Whether the expression "plant & machinery" would include hotel/banquet building' under section 17 and accordingly input credit on work contract service or any goods/service received for construction of such hotel/banquet hall is available; f) Whether specified goods viz. lifts, sanitary items, underground cables etc. fall under the expression "plant & machinery" & whether input credit on the same and freight paid to GTA on such items under RCM, Repair & maintenance of aforesaid specified goods and Architect services etc. is available. 3. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on q....
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....2020 rejected the application of the applicant being the matter sub-judice. 9. Being aggrieved with the above order, the applicant preferred an appeal before the Appellate Authority for Advance Ruling for the State of Uttarakhand Goods & Service Tax on 14.08.2020 on following grounds:- a. The impugned ruling dated 08.07.2020 of the Authority for Advance Ruling of the State of Uttarakhand is a non-speaking order and violates the principles of natural justice. The Authority for Advance Ruling has passed impugned ruling without any discussion regarding applicability of submission made by the appellant and without appreciation of facts and law including the judicial precedents quoted relied upon by the appellant. b. Appellant contended that the only ground on which the application can be rejected is when proceedings are pending or decided, as the case may be, in case of the Applicant, which means Appellant and no other person. That, in the impugned order, the Authority for Advance Ruling gravely erred in interpreting the expression 'an applicant'. c. That entire concept of Advance Ruling is Taxpayer/ assessee specific and the expression 'an app....
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....he said writ. In fact, in spite of being pointed out by the appellant about the show cause notice mentioning only two issues in common with the writ, it appears that the applicant was summarily rejected without in depth scrutiny. We, therefore, are of the view that the Learned AAR are required to examine referred cases and all the six issues individually on merits and pass a detailed speaking order If they are not sub-judice." 11. Thus in view of above findings Appellate Authority for Advance Ruling has passed the following order vide Ruling no.02/2020-21 dated 11.11.2020: The Ruling no. 03/2020-21 dated 08.07.2020 is set aside and the matter is remanded for fresh consideration. 12. On a careful reading of the Ruling of the Appellate Authority for Advance Ruling, we find that in the said Ruling it was observed that in the earlier Ruling, this Authority had not discussed anywhere about having gone through the referred writ application of M/s Rosewood Hospitality (P) Ltd. and the basis of their inference that the issues raised by the appellant are covered by the said writ and it was required from this Authority to examine referred cases and all the six issues ....
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....n the course or furtherance of business. The Petitioner also procures multiple goods and services including the works contract service from various suppliers during construction of immovable property. The services so procured are used directly by the Petitioner in completion of construction of the immovable property. Petitioner also procures numerous goods and Services likely to be used by them in relation to construction i.e. to make the room ready for occupation. The immovable property so constructed and completed as per standards the Petitioner is required to maintain, is then used by the Petitioner in course or furtherance of his business. The Petitioner is specifically concerned with Section 17(5)(c) and Section 17(5)(d) of the CGST and UKGST Acts (Impugned Provisions). By virtue of the restrictions contained in Impugned Provisions under the CGST and UKGST Act, the input tax credit available on procurement of goods and services or both including works contract service used for the construction of immovable property by the Petitioner stands denied. This denial of credit disregards the fact that the inputs/ input services procured by the Petitioner and....
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....ogic, unreasonable, irrational and against the established tenets of law. The restriction applies to construction undertaken on own account even when used in course or furtherance of business. A developer of a real estate project is permitted to avail credit of the GST paid on inputs and input services as the construction is undertaken on account of others. The notification prescribes a reduced rate of tax where no ITC is availed. However, construction when undertaken on own accord qualifies under the Impugned Provisions restricting the input tax credit on inputs and input services used in course or furtherance of business. Comparing both the above mentioned situations, it could be said that the basis provisions contained in the Impugned Provisions one person (developer) is eligible for input tax credit whereas the other is restricted. Consequently, it could be said that such restriction is ambiguous and vague and without any intelligible differentia. Accordingly, the Impugned Provisions fail at the essential test laid down under Article 14 which guarantees non arbitrariness of state action. Article 14 of the Constitution exemplifies the principle of 'non-discriminatio....
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....ling input tax credit. In the present case there is no rationale brought out by the Respondents behind denying input tax credit to the Petitioner. It is submitted that input tax credit is available on works contract services utilized as an input for further provision of output service i.e. works contract services. In a similar vein, the Petitioner too utilizes works contract services and provides an output of hospitality services. The Petitioner wishes to highlight that the Impugned Provisions denying the input credit make an arbitrary distinction between Plant and machinery and Civil works and installations therein, even though both these are used for furtherance of business and generating taxable revenue in business, and neither of these are held for sale as such. The Impugned Provisions allow ITC for one asset i.e. Plant & Machinery and deny ITC for the other asset i.e. Civil works used in construction resulting in immovable property. Such differential treatment is a result of the specific wording contained in the Impugned Provisions reading as "immoveable property (other than Plant and Machinery). The Petitioner submits that such distinction is arbitrary, with....
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....'hotel/banquet building' under section 17 and accordingly input credit on work contract service or any goods/service received for construction of such hotel/banquet hall is available; f) Whether specified goods viz. Lifts, sanitary items, underground cables etc. fall under the expression "plant & machinery" & whether input credit on the same and freight paid to GTA on such items under RCM, Repair & maintenance of aforesaid specified goods and Architect services etc. is available. Here we find that first four questions are similar to the points as mentioned by M/s Rosewood Hospitality (P) Ltd. in their writ petition. Last two questions are not the part of that petition. 17. To proceed further the applicant was again granted an opportunity of personal hearing on 28.01.2021. During the course of hearing, the authorized representative Shri Ashwarya Sharma, Advocate has requested that their original application dated 06.02.2020 filed vide ARN no. AD050220000991R may be considered before deciding the matter. Contention of the applicant: 18. M/s Vardhan Holidays whose place of business is located at Vill. Shivlalpur Pandey, Kashipur Road, Ramnagar (Uttarakhand....
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.... customers from such property as there is no break in the supply chain and receipt of consideration for output services and the tax payable thereon are the direct and inevitable consequence of the construction of the property and installation of plant and machinery and the payment of GST on inputs goods and services which have been consumed and utilized for the construction of the property is admissible to the Applicant. As per section 17(5)(c) and (d) it is clear beyond doubt that Input Credit of goods or services is blocked only when the same are used for construction of immoveable property by the registered person on his own account and not otherwise. Thus, the important words are 'on his own account'. The words 'on his own account' used in section 17(5)(d) are of utmost importance in order to understand the scope of blocked credit in the current context as Input Credit of only those goods or services are blocked which are used for construction of immoveable property by the taxable person on his own account. In this regard, reliance is placed on the decision of the Apex Court in the matter of Grasim Industries Ltd vs. Collector of Customs, Bombay-2002-TIOL-....
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....tuations wherein the benefits of immoveable property are enjoyed by the person himself who builds the immoveable property and to no other case. In other words, where the immoveable property is constructed for enjoyment by the third person i.e. other than the person who builds the property, then the benefit of Input Credit shall not be denied to such person who build or constructs it as he is not enjoying the benefit of immoveable property and thus didn't constructed the said property on his own account. This view is clear in terms of Press Releases issued by the Government in this regard on 8th Dec, 2018. The text of the same is reproduced below: Press Release dated. 8th December, 2018 Effective tax rate on complex, building, flat etc. It is brought to the notice of buyers of constructed property that there is no GST on sale of complex/ building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority. GST is applicable on sale of under construction property or ready to move-in flats where completion certificate has not been issued at the time of sale. Extending the intent of the above press release ....
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....ut Credit, and as per which there is no doubt regarding the eligibility of Applicant to take Input Credit on all goods or services which are used or intended to be used in the course or furtherance of its business. It is only due to the interpretation of section 17(5) that there arises a doubt on eligibility of taking Input Credit on goods or services or both which are used for construction of immoveable property. In this regard, it is submitted that though section 17 (5) starts with a non-obstante clause over section 16(1), yet it does not imply that it would override section 16 in all conditions. It is submitted that the interpretation of a non-obstante clause used in a particular provision is no more res-integra and has been settled by the Court in a catena of cases. In this regard, reliance is placed on the below mentioned cases:- 1. In Dominion of India vs Shrinbai A. Irani-AIR 1954 SC 596 2. Aswini Kumar Ghosh vs Arabinda Bose-AIR 1952 SC 369 3. PEK Kalliani Amma vs K. Devi-AIR 1996 SC 1963 Applying, the ratio of the above-mentioned cases to the facts of the present case, it can be seen that section 17(5) and more particularly 17(5)(c) and (d)....
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....credit on the GST, which is required to pay under Section 17(5)(d) of the CGST Act." A similar petition is also filed in the Punjab and Haryana High Court in the matter of DLF Cyber City Developers Ltd vs Union of India And Others-2019-TIOL-2770-HC-P&H-GST seeking for similar relief. The said petition is admitted by the Hon'ble High Court and the matter is currently sub-judice. It is submitted that in the above judgement the High Court has clearly made a distinction between immovable property retained for self-use and immovable property let out and used by others and has accordingly allowed Input Credit of GST paid on construction of the immovable property that is let out and used by the person, other than the person who has undertaken the construction. The ratio of the decision in Safari Retreats supra is squarely applicable to the facts of the current case in as much in the said case the Petitioner was providing renting of immoveable property services i.e. providing space in mall constructed by it on rental basis to various shop owners and in the Applicant's case the banquet hall and hotel rooms are rented out to the customers to be used by them for which they pa....
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....refore, in the facts of the current case and the context of business operations involved, one can safely arrive at the conclusion that said building is cleanly covered by the expression 'equipment', 'machinery' and 'apparatus'. Reliance is also placed on the meaning of the term 'plant and machinery' provided under Notification F. No. 2(2)/2017-SP8 dated 23-Apr-2018 issued to provide Industrial Development Scheme for Himachal Pradesh (HP) & Uttarakhand 2017 issued by the Government of India to boost industrialization in the said states. As per para 4.4 of the said Scheme, the term plant and machinery is defined to include interalia cost of construction of building. The relevant porn is reproduced below. ... 4.4 Plant and Machinery for the service sector industrial unit shall include cost of construction of building and all other durable physical assets basic to the running of that particular service industry but exclude cost of land and consumables, disposables or any other item charged to revenue. It is submitted that the above Scheme is also issued by the Government of India and the same recognizes building as plant and machinery for the....
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....unds, firstly these goods or services are not used for construction of any immoveable property and secondly they are very well covered under the meaning of the term "plant and machinery" and these not hit by the bar Imposed under section 17(5)(c) and/or (d) or the Central Act. That the term 'Immovable property' is not defined under the Central Act, therefore, the definition of Immovable property an given in section 3 clause (26) of the General Clauses Act, 1897 has to be taken as per which 'Immoveable property' is defined to include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. Further, the term 'attached to earth' is defined under the Transfer of Property Act, 1882 an follows:- "attached to the earth" means - (a) rooted in the earth, us in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. The fact that the Specified Goods would be capable of being dismantled and re-erected at any ....
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....ly covered by the expression 'equipment', 'machinery' and 'apparatus' used in the definition of the expression plant and machinery'. Contention of the Concerned Officer (Mrs. Preeti Manral, Dy. Commissioner, SGST): 19. Applicant M/S VARDHAN HOLIDAYS (GSTIN-05AAOFV8927H1ZL) is primarily engaged in the hospitality sector and carries on business inter-alia of supply of accommodation, restaurant and renting of immovable property (banquet hall) services to its customers. Applicant has filed application seeking Advance Ruling on admissibility of input tax credit on goods and/or services received for construction of Hotel Building, Banquet hall etc. In this regard it is submitted that Section (17) (5) (d) bars a taxable person, from taking input tax credit for construction of immovable property (as in the subject case) which is on his own account, even when such goods or services or both are used in the course or furtherance of business. The immovable property in the subject case is neither a plant nor a machinery. Section 17 (5) (d) provides that no ITC is available in respect of any goods or services received by a taxable person for construction of a....
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....Section 17. Apportionment of credit and blocked credits.- (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (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), the expression-construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; 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 ....
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....Ltd. Vs State of Bihar (TS-347-SC-2017-VAT] while dealing with the issue of set off of VAT against entry tax, the court held that,- "...no assessee can claim set off as a matter of right and levy of Entry Tax cannot be assailed as unconstitutional only because set off is not given". In view of the above, the taxpayer cannot claim credit accumulated due to supply of inputs (goods as well as services) used by them for construction of their project as a vested right for payment of GST on the output taxable supply of Renting of their said property. Powers to restrict flow of credit also exist under Section 16(1) of the CGST Act which empowers the Central Government to impose conditions and restrictions on availing input tax credit. This shows a Legislative intent that input tax credit may not always be allowed partially or fully. Input tax credit provisions do not provide for that all the tax paid on inputs should be available as credit. Some credits have been denied under Section 17 in the Act itself and to allow flexibility, the Act provides that restrictions can be placed on availability of credit. In this regard, reliance is also placed on the recent judgment of Hon&....
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....(iv) is arbitrary, unreasonable and violative of Articles 14 and 19(1) (9) of the Constitution of India- if right to availment of CENVAT credit itself is conditional and not restricted or absolute, then the right to pass on that credit cannot be claimed in absolute terms- there cannot be a estoppel against a statute- transitional arrangements that have been made have clear nexus with the object sought to be achieved and cannot be struck down as having no such relation or nexus-Petitions fail." Hon'ble Supreme Court, in its judgment in the case of Indian Oil Corporation Ltd. Vs State of Bihar (TS-347-SC-2017-VAT) while discussing the applicability of Article 14 to taxing statutes, held that: "When it comes to taxing statutes, the law laid down by this Court is clear that Article 14 of the Constitution can be said to be breached only when there is perversity or gross disparity resulting in clear and hostile discrimination practiced by the legislature, without any rational justification for the same". The right to practice any profession, or to carry on any occupation, trade or business, conferred by Article 19(g) of the Constitution is not absolute right and the Go....
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....in the law in this respect. One of such condition is prescribed vide Section 17(5)(c) & (d) of the said Act. Moreover, there are catena of judgments of the Hon'ble Courts which have underlined the fact that ITC is not a right of the taxpayer as discussed in para 21 above. Article 14 of the Constitution of India reads as "the State shall not deny to any person equality before the law or equal protection of the laws within the territory of India"' Section 17(5)(c) & (d) is not violative of the Article 14 of the Constitution of India as it is applied equally to all the taxpayers of India if they are covered by the condition and restriction imposed by virtue of the power given under section 16(1) of the said Act. The input tax credit, for construction of immovable property is only available for those taxpayer who are engaged in supply of construction service and not for any other taxpayers who are beneficiaries of the output of such construction activity. The allegation of discrimination falls short of any substance as reasonable classification has been adopted by the legislature in demarcating eligibility for availment of such input tax credit. 23. We further find tha....
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....rakhand on the similar issue. Further, Hon'ble High Court of Odisha's decision in case of Safari Retreats (supra) has also been challenged before the Apex Court which is still pending decision. Section 98(2) of the CGST Act, 2017 prescribes that- "(2) The Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application: Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act:" Above provision does not say that proceedings must be stayed by the higher court. The word used are 'pending' or 'decided' i.e. even if the issue is pending in any proceedings in the case of an applicant then the Authority shall not admit the application. In the case of Safari Retreats (supra), proceedings are pending before the Apex Court and in case of M/s Rosewood Hospitality (P) Ltd., proceedings are pending before the....
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.... Bohra Community v. State of Maharashtra -(2005)2 SCC 673 has observed that, "The law laid down by this Court in a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or co-equal strength". The Hon'ble Apex Court in "Megh Singh v. State of Punjab [AIR 2003 SC 3184]" has held that, "circumstantial flexibility, one additional or different fact may make a world of difference between conclusion in two cases or between two accused in the same case. Each case depends on its own facts and a close similarity between one case and another is not enough because a single significant detail may alter the entire aspect." 24. Now to discuss the judicial discipline we first go through the following judgments: The Hon'ble Supreme Court in the case of Hari Singh v. State of Haryana, reported in 1993 (66) E.L.T.23 (S.C.), it was held that, "It is true that the system of the justice which is being administered by the Courts, one of the basic principles which has to kept in view, is that Courts of coordinate jurisdiction, should have consistent opinions in respect of an identical set of facts or on question of law. If....
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.... own account i.e. for self use. Since there is no service recipient of the said property till it comes into its complete shape, hence no credit is allowed. After completion of construction of hotel/banquet hall, the applicant is not going to sell it but using it for earning money by way of supplying services of room accommodation, restaurant and renting of banquet hall. The applicant cannot say that he is not retaining the property for his own purpose. He got the hotel or banquet hall constructed by availing the services of a works contractor so that he could run his business of hotel accommodation, restaurant and renting of banquet hall. Therefore, we are also not in agreement with the findings of the Odisha High Court in the matter of M/s Safari Retreats(supra) that- "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". Here in case of M/s Safari Retreats(supra), we find that the appellant are also earning rent from the shops rented by them therefore it cannot be said that they are not using the shopping mall for the....
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....idering the cost of construction of building in the Plant & Machinery. It doesn't mean definition of Plant & machinery has been generalized by the legislature. Definition of Plant & Machinery changes according to the statute laid down as is explained under Section 17 ibid. Therefore civil structures viz. hotel/banquet hall are not plant & machinery for the sake of Section 17 ibid. 28. The applicant has also queried whether specified goods viz. Lifts, sanitary items, underground cables etc. fall under the expression "plant & machinery" & whether input credit on the same and freight paid to GTA on such items under RCM, Repair 8b maintenance of aforesaid specified goods and Architect services etc. is available. As per explanation appended below Section 17 of the Act, 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. We are of the considered view that in case of a building which is constructed through a works contractor, a lift, sanitary items, underground cables etc. are also an integra....
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....not so qualify". Further, a lift comprises of components or parts (goods) like 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 these components/parts with immense skill is rendition of service and without installation in the building, there is no lift. Lifts are assembled and manufactured to suit the requirement in a particular building and are not something sold out of shelf and, in fact, the value of goods and the cost of the components used in the manufacturing and installation of a lift are subject to taxation while the element of labour and service involved cannot be treated as goods. Parts of the lift are assembled at the site in accordance with its design and requirement of the building which may include the floor levels and the lift has to open on different floors or otherwise depending upon the requirement. It has to synchronize with the building and each door has to open on the level of each floor. The lift therefore becomes part of the building and is not a separate thing per se. A lift does not have an identi....
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.... observed that,- "Having heard the rival contentions and having examined all the citations referred to hereinabove, we are clearly of the opinion that the same shall apply to the facts of this case in full force and item in question being immovable property cannot be subjected to excise under the tariff heading claimed by the Revenue. The case sought to be made out by the petitioner is also covered by the decision of Government of India in reference, Otis Elevator company (India) Ltd. 1981(3) ELT 720(GOI), wherein it was clearly held that if an article does not come into existence until it is 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.' In the view of the above we have no doubt that the lift would become an immovable property after being erected and installed as it is attached to the building itself. The lift after erection and installation is an immovable property that is a building. In other words it is to be considered as an integral part of the building itself It is not a separated part of the building like storage water tank etc. ....
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..... (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 ELT 720(GOI). Further, this aspect was also a subject matter of C & AG's Audit Para No.7.1(b)/98-99[DAP NO 186] which has since been settled by the C & AG accepting the Board's view that such lifts and escalators are not excisable goods. Also refer CCE vs Elevators India Ltd reported In 2001(45) RLT 676 (CEGAT-Chen). Further this Authority for Advance Ruling vide Ruling No. 03/2018-19 passed on 04.05.2018 considering a question raised by M/s. Bahl Paper Mills Ltd. has held that,- (c) Whether credit will be available in GST of office fixtures & furniture, A.C. plant & sanitary fittings on newly constructed building on its own account for furtherance of business and accounting entry is capitalized in books of account. Held: As per explanation to the Section 17 of CGST Act, 2017 credit is not availa....