TaxTMI 
TaxTMI 
2025 (2) TMI 723
X X X X Extracts X X X X
X X X X Extracts X X X X
....the "GST Act". The issue raised by M/s HINDUSTAN ZINC LIMITED, YASHAD BHAWAN, 2nd Floor, UDAIPUR-313004, Rajasthan (hereinafter "the applicant") is fit to pronounce advance ruling as they have deposited prescribed Fee under CGST Act and it falls under the ambit of the Section 97 (2) given as under: (d) Admissibility of input tax credit of tax paid or deemed to have been paid A. SUBMISSION OF THE APPLICANT (in brief):- Brief facts of the case: 1. Hindustan Zinc Ltd. ('Applicant'/'HZL' 'Company'), a subsidiary of Vedanta Ltd., is one of the world's largest and India's only integrated Zinc-Lead-Silver producer. The Applicant is engaged in the business of extracting & processing minerals and manufacturing of metals such as zinc, lead, silver etc. It has captive zinc mines located in the state of Rajasthan, including at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Bamnia Kalan, Kayadand Zawar. It is registered under the Rajasthan Goods and Service Tax Act, 2017 ('RGST Act') having GSTIN 08AAACH7354K1ZB. 2. The process undertaken by the Company of converting mineral ores into metals largely involves three stages viz. (a) extracting ore from mines, (b) converting ores....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh pipelines to the dam, enter through active pipelines designated for specific zones. The slurry typically comprises of 55% water and 45% tailing. While in the dam, the tailings are positioned such that the water separates. The separated water is drained into a reservoir through a syphoning system for reuse at the nearby milling plant. The dry tailings remaining after separation of water are then moved to an area near the tailing dam specially demarcated for dry stacking, and are covered with liners to minimize the environmental, social, and economic risks. The emptied area within the tailing dam is then again used for further tailings in slurry form, processing water separation, and drying before removal for dry stacking. 6. Tailings are continuously generated and transported to the tailings dam throughout the beneficiation process. As the volume of tailings in the dam grows, its height needs to be incrementally increased. The height of the dam is increased with the use of materials such as rocks, mud, sand, HDPE sheets, etc., a majority of which is waste material from the mining process itself. 7. To raise the height of the tailing dam, the Applicant employs a contractor, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n (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." 2. The perusal of the above provision clarifies that GST paid on works contract, goods and services received by a taxpayer for construction of immovable property is not eligible for ITC. The exception, however, is when the immovable property is in the nature of plant or machinery, then the works contract, goods and services received for construction of plant or machinery will be eligible for ITC and will not be hit by the restriction under the said clause (c) or (d). 3. Further, the scope of the term 'plant and machinery' for the purposes of interpretation of the said provision has been explained to mean as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for a specific use. In the present case, the Tailing Dam qualifies to be an 'apparatus" as it (a) is a combination of equipment, tools, or machines; and (b) has a particular function or intended for a specific use. 7. The Applicant submits that a tailing dam constitutes more than just an earthen embankment or a simple containment structure. It is, in fact, a complex system that integrates various specialized components and technologies to ensure the safe and efficient management of mining waste. The tailing dam incorporates several critical elements, including • Automated Pipelines: These pipelines are essential for the continuous transport of tailings from the milling plant to the dam. They are often equipped with advanced automation systems to regulate flow rates, pressure, and ensure the controlled deposition of tailings, which is crucial for maintaining the stability and safety of the dam. • Drainage Systems: Effective water management is a key aspect of tailing dam safety. The dam includes an intricate network of drainage systems designed to remove excess water that separates from the tailings. These systems typically involve pumps, filters, and ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hus, decide the question in favour of the assessee and as a consequence, appeals of the Revenue are dismissed and that of the assessee are allowed." 10. Being mindful of the aforesaid position, it is to be noted that the activities undertaken inside the tailing dam do not remotely qualify as a building having a structure with walls, roof, etc. in its natural meaning. In DG Gouse & Co. v. State of Kerala [AIR 1980 SC 271], the Hon'ble Apex Court, in the context of interpreting the Kerala Building Tax Act, 1975, observed that the word 'building' must receive its natural and ordinary meaning as "including the fabric or which it is composed, the ground upon which its walls stand and the ground embraced within those walls" and that is the correct meaning of the word 'building'. Further, the phrase "any other civil structures" should be read ejusdum generis to be restricted to immovable property in the nature of land and building, that is, property which is as such only a "place or property where the business is carried on" and "not a place or property with which business is carried on". In other words, "civil structures" should be restricted to structures which are the "locatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lumes of tailings. If these tailings are not properly managed and disposed of, they can accumulate, leading to space constraints that impede further ore processing and mining activities Moreover, inadequate management of tailings can cause blockages, equipment failures, and inefficiencies within the processing plant, ultimately reducing the overall productivity of the mining operation. Therefore, without effective tailings disposal, a mining facility cannot maintain continuous operations. Thus, disposal of tailings is end or tail of one beneficiation cycle and hence it is clear that the tailing dam is an integral part of the mining and milling plant. 17. Further, construction of a tailing dam is mandated by law for conducting mining operations. The Mines and Minerals (Development and Regulation) Act, 1957 provides the laws in relation to development and regulation of mines and minerals in India. In terms of Section 18 of the Act, the Central Government is obligated to implement measures necessary for the conservation and systematic development of minerals in India, as well as for environmental protection. This includes preventing or controlling pollution resulting from prospecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able intervals and records of the same maintained: 28. Notice of temporary discontinuance of work in mines and obligations of lease holders. (3) During the temporary discontinuation of a mine or part thereof, it shall be the responsibility of the holder of a mining lease to- (d) ensure that all rock piles, over burden piles and stock piles and tailings, and other water impoundment structure are maintained in stable and safe conditions. 32. Types of plans and sections (1) The holder of a mining lease shall keep the following digitally prepared plans and sections, namely:- (a) a surface plan showing location and number of the boundary pillars along with its latitude and longitude values, every surface feature within the mining lease boundaries, such as building, telephone, power transmission line, water pipeline, tramline, railway, road, river, water-course, reservoir, tank, bore-hole, shaft and incline opening, opencast working, dumps and dumping ground, the waste land, forest, sanctuaries, agricultural land and grazing land and subsidence on the surface beneficiation plants, tailing ponds and other workings within the lease; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as they are virtually an integral part of many large-scale mining operations" 20. The above provisions clearly demonstrate that the mining laws mandate the mining lease holder to take adequate steps, including construction of a tailing pond/dam, for disposal of tailing waste generated in the process of mining and milling. 21. Proper disposal of tailings is also crucial for controlling environmental pollution. Tailings often contain hazardous chemicals used in the beneficiation process. Some of these hazardous chemicals, which when exposed to air and water, can create acid mine drainage that can lead to severe environmental damage if not properly contained. Therefore, effective disposal methods, such as secure tailings ponds or dry stacking, are essential to prevent these contaminants from entering the surrounding environment, including soil and water sources. 22. Hence, in view of its integral function for environmentally safe waste disposal, Tailing Dam should be seen as integral part of overall "manufacturing operations", and therefore be regarded as part of plant and machinery. That the meaning of "apparatus" should not be restricted to such apparatus which is actually....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is made of materials like earth fill, or rock fill, sand, geomembranes or clay liners, etc. No cement, steel or bricks are used in increasing the height of tailing dam at any time and hence the same cannot be termed as a civil structure. In any event, assuming that the use of cement is a relevant factor, it is an established principle of law that merely because steel, cement or bricks are used for construction of a structure, it does not cease to be plant or machinery. Reliance in this regard is placed on the following decisions wherein Courts have held that even if cement is used inlaying foundation and erection of manufacturing plant and machinery, it constitutes part and parcel of 'plant'. Ref. J.K. Cement Works v. State of Karnataka [2017 (7) G.S.T.L. 408 (Kar.)], State of Kerala v. Ambuja Cements Ltd [2020 (1) KHC 884). 27. The Applicant submits that while a tailing dam is commonly referred to as "dam", it is not a dam as normally understood. Tailings dams are typically an embankment built from earth and rock materials. They can be raised over time as more tailings are produced, using either the tailings themselves or additional earth materials for stability. Minor constru....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... THE PRE GST ERA TO THE APPLICANT 30. The Applicant submits that a dispute regarding availability of credit in relation to services availed for raising the height of tailing dam also arose in the pre-GST era for the Company. In identical facts, the Tribunal in applicant's own case of Hindustan Zinc Limited v. CCE, Jaipur-II [2017 (7) TMI 387 - CESTAT NEW DELHI] held that the assessee cannot operate their business or manufacturing facility of dutiable / excisable goods without compliance with the directions given by State Pollution Control Board to minimize the pollution under the relevant Pollution Control laws. Compliance with the directions of the State Pollution Control Board if not done by the industry, may result in prosecution of the assessee and its key personnel under the various Pollution Control laws for violation. The CENVAT credit received on the services for raising the height of tailing dam and maintenance service for pipeline work of tailing dam, used for disposal of industrial waste and polluted water in compliance with Environmental laws is an input service within the meaning of Rule 2 (1) of CENVAT Credit Rules, 2004 used by the manufacturer indirectly in or in....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Para-3. No Comments. Para-4. No Comments. Para-5. No Comments. Para-6. No Comments. Para -7. The taxpayer has applied for Advance Ruling on the main issue that the tailing dam is nothing but an integral part of "Plant and Machinery" and should not be classified as "Immovable Property" in terms of Section 17 (5) (d) of the Central Goods and Services Tax Act, 2017. The process of constructing the tailing dam has been suitably defined by the taxpayer in para-5 of Annexure II. Tailing dams are constructed solely using the by-products generated during the second phase of conversion of ore into concentrates at the milling plant, as elaborated by the taxpayer in para-2 of Annexure II. During this second phase of conversion of ore into concentrates at milling plant, hazardous waste, known as tailings, the form of slurry are generated at the tail end of the bifurcation process. These tailings in the form of slurry consist of crushed rock, water, and chemicals. It is binding upon the taxpayer to dispose these tailings in the form of slurry as per environment protection law as detailed in para-3 of Annexure II. The transportation of the tailings ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... produced below: (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. Thus, in the light of this express provision, the Tailing Dam is a civil structure and qualifies the definition of immovable property. Para-10. The taxpayer has submitted that the Tailing Dam consists of Automated Pipelines, Drainage System and Geomembranes or Clay Liners hence, Tailing Dam qualifies the definition of Plant and machinery. This argument cannot be acceptable as these three elements are being utilized almost in all the civil structure. Hence, mere availability of these three elements, does not qualify the definiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... activity of construction of tailing dam is not a part of furtherance of business therefore, it is also not available. Para-15. The term structure is not relevant in this case as the admissibility of credit attracts the term "Immovable property" and "furtherance of business". Hence, the judgment quoted by the taxpayer is not mutatis mutandis applicable in the instant case. Para-16. In view of the comments made in above para, ITC on the construction of tailing dam is blocked. Para-17 to 21. The taxpayer has submitted that the construction of tailing dam is integral part of the milling and milling process on the basis of operational as well as legal perspective. In support they have quoted provisions of Mines and Minerals (development and regulation) Act, 1957 and Mineral Conservation and Development Rules, 2017. CSR Activity is also a legal perspective but it is now established that the ITC is blocked for CSR Activity. Hence, any legal perspective is not having binding effect on the CGST Act, 2017. Also, Mines and Minerals (development and regulation) Act, 1957 and Mineral Conservation and Development Rules, 2017 has not any inbuilt overriding effect on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut use of cement. The applicant has not submitted any evidence such as technical literature in respect of his argument that the cement, building material is not utilised in the construction of tailing dam. Any dust cannot be solidified without the mixing of cement on it. Para-30: Same as 27 & 28. The submission made in para-30 should be thoroughly assessed by an expert with substantial expertise in structural engineering, such as a chartered engineer. It is imperative that the claimant provides a corresponding certificate to support this assessment. The submission of claimant in respect of S. No 4 of the column attached to Para 30 that RCC Garland Drain comprises 7% of the volume of the dam. This 7% incorporates huge amount of ITC involved in it. As this RCC Garland Drain is a drain and not a plant machinery, it falls under the definition of immovable property. Para 31: Considering the fact that majorly there is Earth work in construction of Tailing Dam / Increasing the height of Tailing Dam, the argument of Tax Payer that the same does not fall under the definition of construction of immovable property, is not acceptable in the terms of explanation to se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess. Accordingly, input tax credit ("ITC") of GST paid on works contract services, as well as pure goods and services received towards setting up and developing the tailing dam ought not be denied as it inter-alia qualifies within the definitions of "plant and machinery" or "plant or machinery" under Section 17 (5) (c) and Section 17 (5) (d) of the Central Goods and Services Tax Act, 2017 respectively. II. The Applicant believes that it is entitled to ITC, but as a matter of caution, it has filed the present application to ascertain that Section 17 (5) (c) and Section 17 (5) (d) of the CGST Act will not bar the credit. III. In this regard, kind attention is invited to the recent judgment of the Hon'ble Supreme Court in Chief Commissioner of CGST vs. Safari Retreats Pvt. Ltd. [(2024) 131 GSTR 184] wherein in the context of availability of ITC in relation to buildings (in the nature of shopping mall), which were offered on lease (in furtherance of business), the Supreme Court analyzed the construct of Section 17 (5) (c) and Section 17 (5) (d), including the Explanation thereof. The Supreme Court inter alia held as under: "35. ...It is pertinent to note that clauses (c)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Nursing home business run by a doctor CIT vs. B. Venkata Rao [(2000) 243 ITR 81] 2. Specialized Pond Aquaculture business for breeding of prawns CIT vs. Victory Aqua Farm Ltd. [(2016) 16 SCC 553] 3. Dry Dock Inspection and repair of ships IRC vs. Barclay Curle & Co. Ltd. (1969) 1 WLR 675] 4. Swimming Pool Running an amusement park facility Cooke vs. Beach Station Caravans [1974 1 WLR 1398] 5. Synthetic grass carpet on football fields Provision of outdoor sports facility to football clubs Anchor International Ltd. vs. CIR [(2004) Scot CS 281] V. In the present case of the Applicant, the following undisputed facts qua the tailing dam ought to be noted: a) Function 1: Serves as an integral part of the milling plant: The tailing dam is an integral part of the milling plant to manufacture metal concentrates. During the beneficiation process to extract metal concentrate from the metal ores at the milling plant, tailings are continuously generated and transported to tailing dam throughout the process. In its absence tailings generated in the process would lead to blockages, equipment failures, and inefficiencies within th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reference to the CGST Act would also mean a reference to the same provisions under the RGST Act. 2. The Applicant is engaged in the business of extracting & processing minerals and manufacturing of metals such as zinc, lead, silver, etc. It has captive zine mines located in the state of Rajasthan, including at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Bamnia Kalan, Kayad and Zawar. 3. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant's submission/interpretation of law in respect of question on which the advance ruling is sought. 4. Ongoing through the submissions of the taxpayer, we found that Tailing dams are constructed solely using the by-products generated during the second phase of conversion of ore into concentrates at the milling plant. During the second phase of conversion of ore into concentrates at milling plant, hazardous waste, known as tailings, a form of slurry is generated at the tail end of the benefication process. These tailings in the form of slurry cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess 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. In other words, when the immovable property is in the nature of plant and machinery, then the works contract, goods and services received for construction of plant and machinery will be eligible for ITC and will not be hit by the restriction under the said clause (c) or (d) of Section 17 (5) of the CGST Act, 2017. Further, the scope of the term 'plant and machinery' for the purposes of interpretation of the above provision has been explained to mean as follows: "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." We find that since tailing dams are resting on foundation of natural rock or soil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plicant in their support of the argument that setting up and developing the tailing dam qualifies within the definitions of "plant and machinery" or "plant or machinery" under Section 17 (5) (c) and Section 17 (5) (d) of the Central Goods and Services Tax Act, 2017 made reference of catena of judgement including the recent judgment of the Hon'ble Supreme Court in the case of Safari Retreats Pvt. Ltd. 9. We found that the Hon'ble supreme court in its captioned judgement in Para 65 (b) has ordered that "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 of section 17". It is noted that section 17 deals with apportionment of credit and blocked credits. Section 17 (5) (c) denies ITC in respect of 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. Thus, clearly, ITC is denied when works contract services are supplied for construction of an immovable property barring (i) when it is used as an input service for further sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ery' differently form plant and machinery'. Further had the legislature intended to treat 'plant or machinery' differently from 'plant and machinery', then the legislature would have defined either the phrase 'plant or machinery' or the words 'plant and machinery' in Chapter V and VI or elsewhere in CGST Act. We also observe that there is no such distinction of word 'and'/'or' in the expression used in clause (c) and (d) of sub-section 5 of section 17 of RGST, Act, 2017. The relevant clauses of sub-section 5 of section 17 of RGST Act, 2017 is reproduced as under- 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 and machi....