TaxTMI 
TaxTMI 
2020 (3) TMI 1427
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....e case:- i. NMDC Limited (hereinafter referred to as 'the Applicant' or 'NMDC') is a state-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. ii. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacity Greenfield Integrated Steel Plant based on HiSmelt technology in Nagarnar, located 16 km from Jagdalpur in Chhattisgarh state with an estimated outlay of Rs. 20,000 Crore. iii. 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. 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. iv. The scope of work is categorized into 3 categories which are as under: (a) Construction of intake well and pump house along with supply of associated motors and ....
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....aid immovable property; -----------------------------------" v. Further, as per Explanation to Sec 17, "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" vi. that, as on the date of filing of the advance ruling application, about 95% of the contract is executed. 4. The jurisdictional Assistant Commissioner, Central CST and Central Excise, Division-IV, Raipur under his letter F.No. IV(16) 30-02/Advance Ruling/D-IV/RPR/2019-20/5576 Dated-05.02.2020 in reference to the ruling sought by the applicant was of the opinion that neither the pipeline laid outside the factory premises of the applicant nor the tax paid on Operation and maintenance service of the said pipe line is eligible for Input tax credit. 5. Personal Hearing:- ....
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.....1 The Applicant has awarded the contract for laying of Cross Country Pipeline System, including operation and maintenance for five years for NMDC to a consortium led by M/s Megha Engineering and Infrastructure Limited ("the contractor"). It has been the contention of the applicant that pipelines are ideally suited to transport the liquid and gases from distant locations to the factory at very low energy consumption and that pipelines are the most convenient, efficient and economical mode of transporting liquids like petroleum, petroleum products, natural gas, water, milk, etc. and further that even solids can also be transported through pipelines after converting them into slurry. The Applicant uses pipelines to transport water from the nearest water source to its factory. The applicant also submitted that the project was initiated in the pre-GST regime, under which pipes were exempt from Excise duty and that 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 fact....
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.... restrictions on availment of input tax credit. Clause (c) and (d) of section 17(5) provides for restriction of input tax credit in respect of goods and services used for construction of immovable property (other than plant and machinery). 6.5 "Works contract" has been defined under section 2(119) of the CGST Act, 2017 as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. The above definition thus stipulates only certain works performed on immovable property as works contract. Further, it is only when there is involvement of transfer of property in goods that would make the contract as works contract i.e. there must be a supply of goods along with supply of service by the supplier (contractor). 6.6 "Construction" is defined under explanation to section 17 (5) (c) and (d) for the purpose of these provisions to include re-construction, renovation, additions or alterations or repairs, to the ex....
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....ty wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. On the other hand Construction has been defined under explanation to section 17 (5) (c) and (d) as reconstruction, repairs, renovation, additions etc. to an immovable property the cost of such work is capitalised. Thus, Construction activity will not qualify as works contract if there is no transfer of property in goods involved i.e. the contractor is supplying service only without any supply of goods. Works contract may or may not be a construction. 6.9 The applicant has also submitted that the proposed pipeline is laid for short distance of less than 50 km. from their factory, establishing therein that the location of the proposed pipe line being outside the factory premises of the applicant. 6.10 For the sake of lucidity the aspect relating to immovable property is also discussed herewith. Immovable property has not been defined under the provisions of GST. However Immovable property stands defined under Section 3(26) of the General Clauses Act, 1897 to include land, benefits to arise out of land and things attached to the earth, or permanently f....
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....first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of the CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as "goods" within the meaning of the Excise Act and exigible to excise duty." 6.12 The court also referred to its own judgments in the case of Quality Steel Tubes (P) Ltd. 1995 (75) E.L.T. 17 (S.C.) and Mittal Engineering Works (P) Ltd. 1996 (88) E.L.T. 622 (S.C.). In the case of Quality Steel Tubes (P) Ltd. 1995 (75) E.L.T. 17 (S.C.), Hon'ble Supreme court held that goods which are attached to earth and thus become immovable did not satisfy the test of being goods within the meaning of the Act. It held that tube mill or welding head is immovable property. In the case of Mittal Engineering Works (P) Ltd. 1996 (88) E....
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....the scope of work itself as forthcoming from the documents supra issued by M/s NMDC, we come to the considered conclusion that the said project of laying pipe tines besides not being plant and machinery, are also immovable in nature. Further these pipelines are also embedded to earth. As already discussed express provisions restrict Input lax credit on pipelines laid outside the factory premises which are not treated as plant and machinery by virtue of explanation to sec 17(5) (c) and (d). 6.14 On dissection of the definition supra, it can be seen that "Plant and Machinery" means (i) apparatus, equipment, and machinery, which is (ii) fixed to earth by foundation or structural support, that are (iii) used for making outward supply of goods or services or both and includes such foundation and structural supports (iv) but excludes- a) land, building or any other civil structures; b) telecommunication towers; and c) pipelines laid outside the factory premises. 6.15 Further the said project for laying cross country pipelines outside the factory premises of the applicant can in no way be directly related to the outward ....
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....s paid on annual operation and maintenance services for the aforesaid pipeline laid outside the factory premises. 7.1 It has been the contention of the Applicant that the contractor (supplier) is required to even maintain the facility for about five year from the commencement of the facility. For the operation and maintenance services (O & M services) of the supplier, the applicant pays a considerable sum and is, therefore, required to pay a considerable sum of taxes under the GST law. Input tax credit of taxes paid on the operation and maintenance should be available as input tax credit. Under section 17 (5) of the CGST Act, 2017, there is no restriction on credit availment in as much as O & M services of any immovable property (like the restriction of credit of taxes paid for pipeline laid outside the factory premises) are concerned. 7.2 In the aforesaid context, for the sake of brevity the provisions of Section 17(5) of CGST Act, 2017 are once again re-produced here as under: (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:- ....