AI Drafter 
TaxTMI 
TaxTMI 
2024 (10) TMI 286
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...., Adv. Ms. Aditi Jain, Adv. Ms. Shrishti Agarwal, Adv. Mr. Rohit Agarwal, Adv. Ms. Tuhina, Adv. Ms. Priyanka Rathi, Adv. Ms. Ashwini Chandrasekaran, Adv. Ms. Shubhangi Gupta, Adv. Mr. Pallav Mongia, AOR Mr. Abhishek A Rastogi, Adv. Mr. Nikhil Jain, AOR Ms. Pooja M Rastogi, Adv. Ms. Meenal Songire, Adv. Ms. Divya Jain, Adv. Ms. Divyasha Mathur, Adv. Mr. Sujit Ghosh, Sr. Adv. Ms. Mannat Waraich, AOR Ms. Anshika Aggarwal , Adv For the Respondent : Mr. N.Venkatraman,ASG Mr. Arijit Prasad,Sr.Adv. Mr. Sonu Bhatnagar,Adv. Mr. Indrajit Prasad,Adv. Ms. Ankita Singh,Adv. Mr. Deepak Kumar,Adv. Mr. Gurmeet Singh Makker, AOR Mr. Mukesh Kumar Maroria, AOR Mr. Abhratosh Majumdar, Sr. Adv. Mr. S. Sukumaran, Adv. Mr. Avra Mazumdar, Adv. Mr. Ramesh Patodia,Adv. Mr. Anand Sukumar, Adv. Mrs. Megha Kapoor, Adv. Mr. Bhupesh Kumar Pathak, Adv. Mrs. Ruche Anand, Adv. Ms. Meera Mathur, AOR Mr. Suvendu Suvasis Dash, AOR Mr. Prasenjeet Mohapatra, AOR Mr. D. L. Chidananda, AOR Mr. Naresh Jain, Adv. Mrs. Arti Agrawal, Adv. Mr. Mahaveer Jain, Adv. Mrs. Neha Anchlia, Adv. Mr. Alok Kumar, Adv. Mrs. Ujjawala Chaturvedi, Adv. Mr. Rishabh Jain, Adv. Mr. Rameshwar Prasad Goyal, AOR Mr. Abhratosh Majumdar, Sr. Adv.....
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....ts in the shopping mall attracts CGST based on the rent received by the first respondent since it amounts to the supply of service under the CGST Act. Therefore, the first respondent was desirous of availing the Input Tax Credit (ITC) accumulated against the rental income received by it upon letting out the mall premises. According to the first respondent, when it approached the concerned authorities, it was advised to deposit GST on rent without deducting ITC because of the exception carved out by Section 17(5)(d). 3. The first respondent filed a writ petition before the High Court of Orissa seeking a declaration that Section 17(5)(d) of the CGST Act and the corresponding provisions of the Orissa Goods and Services Act, 2017 do not apply to the construction of immovable property intended for letting out on rent. A prayer in the alternative was made that in the event it is held that the bar under Section 17(5)(d) is applicable even to the construction of immovable property intended for letting out, a declaration be issued that Section 17(5)(d) is violative of Articles 14 and 19 (1)(g) of the Constitution of India. A consequential prayer was made to issue a writ of mandamus to en....
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.... the clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act; and f. Writ Petition (C) No. 1030 of 2022 containing similar prayers SUBMISSIONS ON BEHALF OF ASSESSEES 6. Very detailed submissions have been made by the parties to the civil appeals, intervenors and parties to the writ petitions. We find that the submissions made by the learned counsel for the assessees and the intervenors are repetitive. There are a large number of decisions relied upon, whether relevant or irrelevant. Brevity is the hallmark of good advocacy. It would be ideal if parties on one side file joint written submissions. The Judges and lawyers are humans. Sometimes, bulky compilations and submissions can be counterproductive. 7. Assessees have submitted that clauses (c) and (d) and sub-section (5) of Section 17 are violative of Articles 14, 19(1)(g) and 300A of the Constitution of India. The submissions concerning the challenge to constitutional validity can be summarised as follows: a. Section 17(5)(d) is violative of Article 14 since it classifies assessees engaged in the business of constructing immovable properties and then renting/leasing/letting out etc. premi....
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....ion of the twin test can be said to be satisfied; c. Break in the credit chain is also not a differentia, since, in the assessees' case, unlike in the case of assessees selling immovable properties, there is no break in the credit chain. The break arises when the recipient uses the supplier's output to make non-taxable transactions for which GST is not payable by the recipient. In such a case, credit cannot be utilised in the subsequent leg of the transaction from where the break in the chain took place. Several illustrations have been given in support of this submission. It was submitted that there is no break in the chain at any of the levels, starting from the subcontractor to the main contractor and the petitioner, since all three entities are liable to output GST, and therefore, in such a case, denial of credit cannot be justified; d. It is submitted that even assuming that coming into existence of an immovable property is an intelligible differentia, it has no nexus with the objects of the CGST Act. The reason is that denying credit in such cases essentially perpetuates and continues the cascading effect of tax, contrary to the very object of the CGST Ac....
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....as placed on various decisions, including those in the case of R.K Garg v. Union of India and Ors. (1981) 4 SCC 675, Twyford Tea Co. Ltd. and Anr. v. State of Kerala and Anr. (1970) 1 SCC 189, Union of India and Ors. v. Nitdip Textile Processors Pvt. Ltd. and Anr. (2012) 1 SCC 226. Varying standards of review under the doctrine of classification are typically applied to economic and non-economic legislation, with the rational basis test being applied to economic legislation. Various decisions were relied upon dealing with the wide latitude doctrine in relation to economic legislations. Reliance was placed on the Government of Andhra Pradesh and Ors. v. P. Laxmi Devi (2008) 4 SCC 720, Assistant Commissioner of Urban Land Tax and Ors. v. Buckingham and Carnatic Co. Ltd., Etc. (1969) 2 SCC 55, Jindal Stainless Ltd. and Anr. v. State of Haryana and Ors. (2017) 12 SCC 1 and State of Tamil Nadu and Anr. v. National South Indian River Interlinking Agriculturist Association (2021) 15 SCC 534. The true import of the legislative provision is to be understood from the plain reading of the provision and not on the basis of affidavits or submissions of the State. A decision in the case of Sanje....
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....enditure, results in the cascading effect of taxes and denial of credit for business expenditure, which is in direct contradiction of the objects of GST Law as elaborated previously. It is submitted that ITC cannot be denied solely because immovable properties are created in the assessee's business. The primary condition for availing of ITC is the nexus between the assessee's input and output business activities, which exists in the assessee's case. Direct corelation with input services or output services is not necessary to avail of the benefit of ITC. c. It is submitted that the phrase "on its own account" should be read down and given a purposive construction instead of a myopic one. The phrase should be deemed to mean when construction is done for personal use and not for services, i.e., credit should be denied only when goods and services are utilised for the construction of immovable property for his own purposes, like an office building or factory building. In such a case, no further GST on the sale of such a building occurs and, therefore, a chain of taxability breaks. However, when such immovable property is not being used by the assessee itself but is used fo....
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.... as follows: * Section 17, being an exception to the general rule under Section 16, must be construed strictly. The expression "plant and machinery" has been used at least ten times in Chapters V and VI of the CGST Act, and the expression "plant or machinery" occurs only once in Section 17(5)(d). Therefore, the intention of the legislature to treat the expression "plant or machinery" differently from the expression "plant and machinery" is apparent. * In the model GST law, which the GST Council Secretariat circulated in November 2016 for inviting suggestions and comments, the expression "plant and machinery" was used both in clauses (c) and (d) of Section 17(5). However, while enacting the law, the legislature has advisedly used the expression "plant and machinery" in clause (c) and "plant or machinery" in clause (d) of Section 17(5). Therefore, the intention of the legislature cannot be brushed aside by contending that the use of the word "or" in Section 17(5)(d) is a mistake of the legislature. * The expression "plant or machinery" has not been defined under the CGST Act. The definition of "plant and machinery" provided in the explanation to Section 17 ....
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....ried on. However, if it merely serves as a setting in which business is carried on, it will not qualify as a 'plant'. * Since buildings have been specifically excluded from the definition of "plant and machinery" in the explanation to sub-section (5) of Section 17, the word 'plant' in the expression 'plant or machinery' must be taken in its natural sense, which will include buildings. * In support of the submission that a shopping mall could be treated as a plant, which will fall in the exception carved out to Section 17(5)(d), reliance was placed on the decision of this Court in the case of CIT, Trivandrum v. Anand Theatres (2000) 5 SCC 393 wherein it was held that when a building is specially designed and constructed with some special features to attract the customers, the building could be treated as a plant. In the case of Commissioner of Income Tax, Karnataka v. Karnataka Power Corporation (2002) 9 SCC 571, this Court held that an electricity power generating station building would have to be treated as a plant as it would satisfy the functional test or test of essentiality. This Court further held that the judgment in the case of Anand Theatr....
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....chever is earlier. Therefore, ITC accrued on construction of immovable property can be availed against these services. Miscellaneous Submissions 10. It is submitted that even though sub-Section (5) of Section 17 starts with the non-obstante clause, it cannot be said that the legislature intended to override Section 16(1) in its entirety. It is submitted that the non-obstante clause in Section 17(5) cannot cut down the construction or restrict the scope of operation of Section 16(1). Reliance was placed on a decision of this Court in the case of R.S. Raghunath v. State of Karnataka & Anr. (1992) 1 SCC 335; 11. It is pointed out that Section 17(5)(c) carves out an exception only for works contracts, assuming that this is the only category of service where there is no breakage in the chain of taxable supplies. It is submitted that while Section 17(5)(c) allows ITC on works contracts for contractors, ITC has been blocked for other developers; 12. The classification sought to be invoked by the Revenue leads to invidious discrimination within the provision in as much as credit has been allowed for the construction of immovable plant and machinery during the execution of a wor....
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....Pvt. Ltd. v. Commercial Tax Officer, now upgraded as Assistant Commissioner (CT) & Ors. (2019) 13 SCC 225 and in particular, what is held in paragraphs 34, 37, 38 and 40. c. In response to the principles for examining the constitutional validity of taxation statutes, he submitted that the test of vice of discrimination in a taxing statute is less rigorous. He submitted that the Parliament is entitled to make policy choices and adopt appropriate classifications given the latitude that our Constitutional jurisprudence allows in the matters involving tax legislation. The principle of equality does not preclude the classification of property, credit, profession and events for taxation. He submitted that it is settled law, as held in the case of Hari Krishna Bhargav v. Union of India & Anr (1966) 2 SCR 22 that a taxing statute is not open to challenge on the ground that the tax is harsh or excessive. He refuted a submission that clauses (c) and (d) of Section 17(5) are fraud on the Constitution or that they are manifestly arbitrary. He invited our attention to a decision of the Constitution Bench in the case of Joseph Shine v. Union of India (2019) 3 SCC 39 and, in particular, ....
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....ions under the Income Tax Act as the same have no relevance. There is no concept of ITC in the Income Tax Act. The scheme of the Act is completely different. He further submitted that if the assessee's submission that a shopping mall or warehouse is treated as a plant is accepted, it would amount to hostile discrimination. c. Tax on goods cannot be extended to immovable property. However, taxation on services can be raised even on using immovable properties for rendition of services. He submitted that when it comes to sales tax or VAT on goods, a consistent view taken by this Court is that the sale would include the sale of goods and not the sale of immovables. He submitted that malls, hotels, office buildings, etc., are immovable properties; therefore, GST cannot be levied. He relied upon the earlier decisions of this Court arising out of the Central Excise Act, 1944. According to him, those plants and machinery which are deeply rooted in the earth and cannot be relocated without sufficient damage are immovable goods. However, he accepted that renting an immovable property amounts to a supply of service, which is taxable under the CGST Act. d. While dealing with ....
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....ax and work contracts in the pre-GST regime. Relying upon the definition of "works contract" in Article 366 (29A)(b) of the Constitution, he submitted that what is taxed cannot be a taxation on the immovable property. GIST OF REJOINDER 17. By way of rejoinder, the learned counsel representing assessees submitted that the legislature intentionally used the expression "plant or machinery" in only one place, and the legislative intention has to be adhered to. 18. It was submitted that in certain cases, CENVAT credit was allowed for the construction of buildings. That is the view taken by the Tribunals/High Courts. 19. Concerning the apprehension of misusing GST expressed by the learned ASG, it was submitted that even if the argument of the assessees is accepted, the ITC on goods or services used to construct a warehouse or mall is only to a limited extent of GST payable on rental activity. It was, therefore, submitted that the definition of "plant or machinery" will not apply to "plant and machinery". 20. The learned counsel submitted that there is no conflict between Section 17(5)(d) and Section 16(3). He submitted that Section 16(3) applies to "plant and machinery" an....
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.... Datar, Senior Advocate. His submission is that the expression "capital goods" is intended to include "plant and machinery". He submitted that what emerges from steel, cement, etc., are immovable goods, which would be excluded from GST. Since no GST is payable on immovable property, ITC is not available. BROAD ISSUES FOR CONSIDERATION 24. Considering the submissions made by the parties, the following main questions arise for consideration: (i) Whether the definition of "plant and machinery" in the explanation appended to Section 17 of the CGST Act applies to the expression "plant or machinery" used in clause (d) of sub-section (5) of Section 17? (ii) If it is held that the explanation does not apply to "plant or machinery", what is the meaning of the word "plant"? and (iii) Whether clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act are unconstitutional? RULES REGARDING THE INTERPRETATION OF TAXING STATUTES 25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation sta....
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....f interpretation of the relevant statutory provisions. To deal with the first question, we must analyse the provisions of the CGST Act. The charging Section is Section 9, which reads as follows: "9. Levy and collection.- (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel Civil Appeal No.2948 of 2023 etc. Page 35 of 91 shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or ....
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.... (4) of Section 9 are applicable, the recipients of goods, services, or both are liable to pay tax as if they were the suppliers. 27. Section 16 deals with ITC, which reads thus: "16. Eligibility and conditions for taking input tax credit-(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in Section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services 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; (aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have....
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....d tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier: Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under Section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under subCivil Appeal No.2948 of 2023 etc. Page 40 of 91 section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019. (5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to th....
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.... Section 2(62). In relation to a registered person, it means Central, State, Integrated or Union Territory tax charged on the supply of goods or services or both made to him. It includes the tax payable by him on a reverse charge basis under sub-sections (3) and (4) of Section 9. Further conditions for the use of ITC are prescribed by sub-section (2) of Section 16. 28. Sub-section (3) of Section 16 is of some relevance as it provides that if a registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, he is disentitled to ITC on the said tax component. In short, a registered person will not be entitled to ITC on the tax component of the cost of capital goods and plant and machinery if he claims depreciation on the said tax component under the Income Tax Act. The object is that a registered person does not take advantage of both depreciation and ITC. 29. Now we come to sub-Section (4) of Section 16. Before the amendment made by the Finance Act, 2022, the sub-section read thus: "16. .. .. .. .. .. .. .. .. .. (4) A registered person shall not be entitled....
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....e following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa) vessels and aircraft except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged- (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general i....
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....sed for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of Section 74 in respect of any period up to Financial Year 2023-24. (6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed. Explanation.-For the purposes of this Chapter and Chapter VI, the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes- (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises." (emphasis added) Section 17(5) begins with a non-obstante clause. A nonobstante clause is a device used by the legislature that is usually employed to give an overriding effect to certain provisions over some contrary provisions that may be found in the same or some other enactments. Such....
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....of Clause (d). The first exception is where goods or services or both are received by a taxable person to construct an immovable property consisting of a "plant or machinery". The second exception is where goods and services or both are received by a taxable person for the construction of an immovable property made not on his own account. Construction is said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out. However, construction cannot said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 33. Section 17(5) incorporates an explanation which provides that the word "construction" used in clauses (c) and (d) includes reconstruction, renovation, additions, alterations or repairs, to the extent of capitalisation, to the immovable property. Thus, a very wide meaning has been assigned to the expression "construction" by the said explanation. 34. There is hardly a similarity between clauses (c) and (d) of Section 17(5) except for the fact that both clauses apply as an exception to su....
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....services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or viceversa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (1-A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as ....
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....ier. Explanation.-For the purposes of this clause- (1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of nonrequirement of such certificate from such authority, from any of the following, namely:- (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and ....
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....ccupation, whichever is earlier, the sale transaction will not amount to the supply of service. However, no such distinction has been made in the case of lease, tenancy, or licence concerning land or letting of buildings. Even if the entire consideration for lease, tenancy or a licence to occupy land or a lease of a building is paid after the issuance of the completion certificate or its first occupation, whichever is earlier, it continues to be a supply of service. 41. It is also necessary to bear in mind the philosophy of the GST regime, which is discussed in the case of Mohit Minerals14. This Court held that the philosophy of the GST is to incorporate a consumption and destination-based test. The emphasis is on taxing supplies of goods and services. If we apply the well-settled principles on the interpretation of taxing statutes, as discussed in the earlier part of this judgment, there is no scope to give any meaning to clause (c) of Section 17(5) other than its plain and natural meaning. The expression "plant and machinery" has been specifically defined in the explanation of Section 17. Works contract service has been defined under the CGST Act. We cannot add anything to cla....
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....nd machinery" used in Chapter V and Chapter VI. In Chapter VI, the expression "plant and machinery" appears in several places, but the expression "plant or machinery" is found only in Section 17(5)(d). If the legislature intended to give the expression "plant or machinery" the same meaning as "plant and machinery" as defined in the explanation, the legislature would not have specifically used the expression "plant or machinery" in Section 17(5)(d). The legislature has made this distinction consciously. Therefore, the expression "plant and machinery" and "plant or machinery" cannot be given the same meaning. It may also be noted here that the expression 'plant or machinery' is used in dealing with a peculiar case of goods or services being received by a taxable person for the construction of an immovable property on his own account, even when such goods or services or both are used in the course of furtherance of business. Therefore, if the expression "plant or machinery" is given the same meaning as the expression "plant and machinery" as per the definition contained in the explanation to Section 17, we will be doing violence to the words used in the statute. While interpreting tax....
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....ment defines immovable property in Section 3(26), which is an inclusive definition which includes land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. This Court considered the definition of the expression "attached to the earth" in Section 3 of the Transfer of Property Act, 1882. In the facts of the case, it was held that the plants subject matter of the case, were not per se immovable property as the same cannot be said to get attached to the earth. This Court applied the movability test by holding that the setting up of the plant itself is not intended to be permanent at a given place. The plant can be removed or is indeed removed after the road construction or repair project is completed. The issue that we were called upon to decide about the meaning of the plant did not arise in this case. 48. Another decision of this Court in the case of Taj Mahal Hotel^18 was pressed into service. The assessee was running a hotel. The issue arose in a cognate enactment in the sense in the enactment providing for levy of income-tax. The issue referred to the opinion of the High Court was whether sanitary fittings a....
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.... and earn larger profit by charging higher rates for the use of rooms if the bathrooms have sanitary fittings and similar amenities. We are unable to see how the sanitary fittings in the bathrooms in a hotel will not be "plant" within Section 10(vi)(b) read with Section 10(5) when it is quite clear that the intention of the legislature was to give it a wide meaning and that is why, articles like books and surgical instruments were expressly included in the definition of "plant". In decided cases, the High Courts have rightly understood the meaning of the term "plant" in a wide sense. (See CIT v. Indian Turpentine and Rosin Co. Ltd. [(1970) 75 ITR 533]. 9. If the dictionary meaning of the word plant were to be taken into consideration on the principle that the literal construction of a statute must be adhered to unless the context renders it plain that such a construction cannot be put on the words in question - this is what is stated in Webster's Third New International Dictionary: "Land, buildings, machinery, apparatus and fixtures employed in carrying on trade or other industrial business...." ( emphasis added ) 49. The next decision in the line is in the....
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....l fittings or controlling equipments are attached for the purpose of carrying on hotel business, it will not take it out of the category of building and make it a plant. In our view special fittings or equipments to control atmospheric effects would be plant, but not the building which houses such equipments. 62. Further for running almost all industries or for carrying on any trade or business building is required. On occasions building may be designed and constructed to suit the requirement of a particular industry, trade or business. But that would not make such building a plant. It only shelters running of such business. For each and every business, trade or industry, building is required to carry on such activity. That means building plays some role and in other words, its function is to shelter the business, but it has no other function except in some rare cases such as dry dock where it plays an essential part in the operations which take place in getting a ship into the dock, holding it squarely and then returning it to the river. Building is more durable. If the contention of the assessee is accepted, virtually all such buildings would be considered to be a plant ....
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....erated as an essential part in the operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. The dock as a complete unit contained a large amount of equipment without which the dry dock could not perform its function. (5) Even in England, courts have repeatedly held that the meaning to the word "plant" given in various decisions is artificial and imprecise in application, that is to use the words of Lord Buckley, "it is now beyond doubt that the word 'plant' is used in the relevant section in an artificial and largely judge-made sense". Lord Wilberforce commented by stating that "no ordinary man, literate or semi-literate, would think that a horse, a swimming pool, moveable partitions, or even a dry dock was plant". (6) For the hotel building and hospital in the case of Carr v. Sayer [65 TC 15 : 1992 CLY 2470 : 1992 STC 396 (Ch D)] it has been observed that a hotel building remains a building even when constructed to a luxury specification and similarly a hospital building for infectious diseases which might require a special layout and other features also remains a premises and is not a plant. It is to be....
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....e cable duct system, which were specifically designed for the purpose. The case of the assessee, therefore, was that all these were part of the special engineering works that were an essential part of a generating plant and, therefore, it was entitled to have the same treated as a plant for the purposes of investment allowance. The Commissioner accepted the correctness of the assessee's case. He held that it was clear that the generating station buildings had to be treated as a plant for the purposes of investment allowance. These buildings could not be separated from the machinery and the machinery could not be worked without such special construction. He, therefore, allowed investment allowance on the generating station building, as claimed. The Tribunal affirmed this finding, as, indeed, did the High Court. 6. We, therefore, have before us a finding of fact recorded by the fact-finding authority that the generating station building is an integral part of the assessee's generating system. 7. Our attention has been drawn by learned counsel for the Revenue to the judgment of this Court in CIT v. Anand Theatres [(2000) 5 SCC 393 : (2000) 244 ITR 192] . He s....
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....This Court held that if it is found on facts 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. The word 'plant' used in a bracketed portion of Section 17(5)(d) cannot be given the restricted meaning provided in the definition of "plant and machinery", which excludes land, buildings or any other civil structures. Therefore, in a given case, a building can also be treated as a plant, which is excluded from the purview of the exception carved out by Section 17(5)(d) as it will be covered by the expression "plant or machinery". We have discussed the provisions of the CGST Act earlier. To give a plain interpretation to clause (d) of Section 17(5), the word "plant" will have to be interpreted by taking recourse to the functionality test. 53. One of the submissions of the learned ASG is that as the Union legislature cannot levy tax on land and buildings, the chain is broken once a building comes into existence by using goods and services. As discussed earlier, Schedule II of the CGST Act recognises the activity of renting or leasing buildings as....
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....oper may construct a mall predominantly to sell the premises therein after obtaining an occupation certificate. Therefore, it will be out of the purview of clause 5(b) of Schedule II. Each case will have to be tested on merits as the question whether an immovable property or a building is a plant is a factual question to be decided. CONSTITUTIONAL VALIDITY CHALLENGE 57. Now, we turn to the issue of constitutional validity challenge. While dealing with the issue of the constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act, it is necessary to consider the law laid down by this Court in paragraphs 104 to 110 of the decision in the case of VKC Footsteps26 which read thus: "104. As a matter of first principle, it is not possible to accept the premise that the guiding principles which impart a measure of flexibility to the legislature in designing appropriate classifications for the purpose of a fiscal regime should be confined only to the revenue harvesting measures of a statute. The precedents of this Court provide abundant justification for the fundamental principle that a discriminatory provision under tax legislation is not per se invalid. A ....
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.... regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc. for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this Court on the matter have permitted the legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. 47. But, with all this latitude certain irreducible desiderata of equality shall govern classifications for differential treatment in taxation laws as well. The classification must be rational and based on some qualities and characteristics which are to be found in all the perso....
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....ons of executive pragmatism, the judicature cannot rush in where even the legislature warily treads. All these operational restraints on judicial power must weigh more emphatically where the subject is taxation. Discrimination resulting from fortuitous circumstances arising out of particular situations, in which some of the taxpayers find themselves, is not hit by Article 14 if the legislation, as such, is of general application and does not single them out for harsh treatment. Advantages or disadvantages to individual assessees are accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line." 106. The principles governing a benefit, by way of a refund of tax paid, may well be construed on an analogous frame with an exemption from the payment of tax or a reduction in liability (CCT v. Dharmendra Trading Co. [CCT v. Dharmendra Trading Co., (1988) 3 SCC 570 : 1988 SCC (Tax) 432]). 107. In Elel Hotels & Investments Ltd. v. Union of India [Elel Hotels & Investments Ltd. v. Union of India, (1989) 3 SCC 698] , M.N. Venkatachaliah, J. (as the learned Chief Justice then was) hel....
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....pt certain classes of property from any taxation at all and impose different specific taxes upon different species which it seeks to regulate. The Court held : (Spences Hotel case [Spences Hotel (P) Ltd. v. State of W.B., (1991) 2 SCC 154] , SCC p. 171, para 27) "27. 'Perfect equality in taxation has been said time and again, to be impossible and unattainable. Approximation to it is all that can be had. Under any system of taxation, however, wisely and carefully framed, a disproportionate share of the public burdens would be thrown on certain kinds of property, because they are visible and tangible, while others are of a nature to elude vigilance. It is only where statutes are passed which impose taxes on false and unjust principle, or operate to produce gross inequality, so that they cannot be deemed in any just sense proportional in their effect on those who are to bear the public charges that courts can interpose and arrest the course of legislation by declaring such enactments void.' 'Perfectly equal taxation', it has been said, 'will remain an unattainable good as long as laws and government and man are imperfect.' 'Perfect uniformity and perfect equality of taxation'....
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....lised ITC. It is merely the case that the practical effect of the formula might result in certain inequities. The reading down of the formula as proposed by Mr Natarjan and Mr Sridharan by prescribing an order of utilisation would take this Court down the path of recrafting the formula and walk into the shoes of the executive or the legislature, which is impermissible. Accordingly, we shall refrain from replacing the wisdom of the legislature or its delegate with our own in such a case. However, given the anomalies pointed out by the assessees, we strongly urge the GST Council to reconsider the formula and take a policy decision regarding the same." At this stage, it will be also necessary to consider the decision of this Court in the case of Nitdip Textiles ^8. In paragraph 66, this Court held thus: "66. To sum up, Article 14 does not prohibit reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends. To satisfy the test of permissible classification, it must not be "arbitrary, artificial or evasive" but must be based on some real and substantial distinction bearing a just and reasonable relation to the....
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....e done to ensure the object of not encroaching upon the State's legislative powers under Entry 49 of List II. Therefore, it is not possible to accept the submission that the difference is not intelligible and has no nexus to the object sought to be achieved. Moreover, to decide why transactions covered by clauses (c) and (d) are separately classified, the Court will have to go into complex questions involving fiscal adjustments of diverse elements. The Court has no experience or expertise to embark upon the said exercise. 60. We fail to understand the argument that the classification is underinclusive and creates discrimination. In this case, equals are not being treated as unequals. The test of vice of discrimination in taxing law is less rigorous. Ultimately, the legislature was dealing with a complex economic problem. By no stretch of the imagination, clauses (c) and (d) of Section 17(5) can be said to be discriminatory. No amount of verbose and lengthy arguments will help the assessees prove the discrimination. In the circumstances, it is not possible for us to accept the plea of clauses (c) and (d) of Section 17(5) being unconstitutional. 61. Though, violation of Art....
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....better manner or more articulately is not sufficient to attract arbitrariness. 64. As we are upholding the constitutional validity of clauses (c) and (d) of Section 17(5), and as held earlier, its plain interpretation does not lead to any ambiguity, the question of reading down the provisions does not arise. 65. Some of our conclusions can be summarised as under: a. The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act is not established; b. The expression "plant or machinery" used in Section 17(5)(d) cannot be given the same meaning as the expression "plant and machinery" defined by the explanation to Section 17; c. The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression "plant or machinery" used in Section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business. If the construction of a building was essential for carrying out the activity of supplying services, such as rent....