TaxTMI 
TaxTMI 
2025 (1) TMI 512
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s. GACL-NALCO Alkalies & Chemicals Private Limited, (hereinafter referred to as 'appellant') against the Advance Ruling No. GUJ/GAAR/R/53/2021 dated 18.10.2021. 3. Briefly, the facts are enumerated below for ease of reference: • the appellant is a joint venture between GACL & NALCO; • the appellant during the course of proceedings before the GAAR [Gujarat Authority for Advance Ruling] stated that they intend to set up a caustic soda plant and captive power plant. • GIDC had leased a plot of land to GACL; • GACL requested for sub-division of the said plot; it surrendered 391000 sq mtrs to appellant/GNAL on long term lease for the above green field project; • that the deed of rectification was signed on 8.1.2018; • that the consideration was Rs. 72.79 crores of which the GST amount was Rs. 13.10 crores. 4. In view of the foregoing facts, the appellant had sought Advance Ruling on the following questions, viz: • "Whether GNAL is entitled to claim ITC of the GST paid on the services provided by GACL in the form of agreeing to surren....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ible in terms of section 16 of CGST Act, 2017 as it is used in the course or furtherance of business; • relinquishment of right does not get covered in the ineligible list of input services; • that the service received by the appellant is not a leasing service; • that the acquired land is to be used in the course of furtherance of business & not for the purpose of construction of immovable property; • that it is a trite law that predominant test is to be applied; that as per the chartered engineer's certificate, 99.85% land would be utilized for the purpose of constructing plant and machinery; • that the plants once fully constructed, will be capitalized as plant and machinery; • that they would like rely on the case of 'Bajaj Tempo Ltd 1992 (4) TMI 4' wherein it was held that incentive for promoting economic growth & development should be liberally construed; • that in the absence of definition of land under the GST Act, it should be strictly interpreted; • that the services received by the appellant cannot be equated as land & hence the services received will not fall in the ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h as self-occupied or a non-commercial object; • that after acquiring leasehold right construction of immovable property has taken place in which manufacturing plant is erected which produces taxable goods & GST is charged on the outward supply of goods; • the leasehold right if capitalized will be under 'leasehold right land' & not under 'building block'; that hence leasehold right consideration is not used for construction of the building; 8.2 Likewise, the appellant in the additional submissions, submitted during the course of personal hearing, requested insertion of the following grounds viz; • that the explanation incorporated in the section is an integral part of the statute & has no independent existence; that both are related to the supply of goods & nothing about the supply of services; • that in terms of section 16(1), ibid, GST paid on input supplies during the pre-operative period is available even though appellant is not providing taxable out put supply; • that the leasehold right consideration paid to acquire the rights to the land can never be said to be used for construction of immovable property to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 capitalisation, 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 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. 12. The controversy in this appeal hinges to the aforementioned sub-sections. However, the Hon'ble Supreme Court, in a recent judgement in the case of M/s. Safari Retreats P Ltd, reported at [2024 INSC 756], while examining the above sub-sections has held as follows: ANALYSIS OF CLAUSES (c) AND (d) 31. Now, we analyse clauses (c) and (d) of Section 17(5). Clause (c)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lterations 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 sub-section (1) of Section 16. Perhaps the only other similarity is that both apply to the construction of an immovable property. Clause (c) uses the expression "plant and machinery", which is specifically defined in the explanation. Clause (d) uses an expression of "plant or machinery", which is not specifically defined. 35. Now, what is material is the explanation to Section 17, which reads thus: "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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... possible to accept the contention of the learned ASG that the word "or" in clause (d) should be read as "and". If the said contention is accepted, there will not be any difference between the expressions "plant and machinery" and "plant or machinery". This will defeat the legislative intent. 46. The expression "plant or machinery" has a different connotation. It can be either a plant or machinery. Section 17 (5) (d) deals with the construction of an immovable property. The very fact that the expression "immovable property other than "plants or machinery" is used shows that there could be a plant that is an immovable property. As the word 'plant' has not been defined under the CGST Act or the rules framed thereunder, its ordinary meaning in commercial terms will have to be attached to it. 52. This Court has laid down the functionality test. This Court held that whether a building is a plant is a question of fact. 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' ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eak, and ITC would not be available. 15. We find that the appellant has not denied the fact that construction activity has not been done on the leasehold land acquired from GACL. Though the averment is that the chartered engineers certificate states that 99.85% of the land would be utilized for construction of plant and machinery; that plant building will be constructed on a part of leaseholding premises and the unconstructed area will be used for auxiliary services. The aforementioned judgement lays down the law as far as section 17 (5) (d), ibid, is concerned, ITC on services received for construction of immovable property on his own account is blocked subject however, to two exceptions, as listed supra. The Hon'ble Court further explains taxable person's "own account" to be 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. On examining the applicant's case in light of the above, we find that the ITC of the leasehold land acquired from GACL on which construction is carried out by the appellant on his own account to set up a caustic soda plant, is hit by section 17 (5) ....