TaxTMI 
TaxTMI 
2025 (4) TMI 225
X X X X Extracts X X X X
X X X X Extracts X X X X
.... • they are in the process of setting up a new manufacturing plant in Gujarat for making HV/EHV cables using the Vertical Continuous Vulcanization (VCV) process; • that while insulation of cable cores in CCV process happens in horizontal heating tubes, in VCV lines, the process of insulation is done in vertical tubes; • that the VCV manufacturing line is required to be supported by concrete structure in square form on all sides; • that the total height of the VCV line from the ground floor is approximately 152 meters; that each floor inside the VCV tower will be 1.2 meters height upto initial 60 - 70 meters and thereafter, the height of each floor will be changed to 6 meters as per the requirements of the line; • that there will be passenger lifts and material handling lifts installed in this VCV tower; that there will also be a staircase with emergency exit and fire hydrants on each floor. • that this VCV tower will be used exclusively for the purpose of manufacturing HV/EHV cables; • the layout of the VCV line is reproduced below for ease of reference: • that the capstan floor level....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urtherance of business; • that the following test would determine whether a particular product would fall under the category of plant and machinery, viz common parlance test, functional test, durability test and close nexus test; • that the input and input services are used for foundational & structural support of the VCV lines which are plant & machinery; that ITC is not restricted when supply involves construction or works contract service pertaining to plant & machinery; that in terms of explanation to section 17, supra, plant & machinery includes foundation and structural supports; • that the concrete structure in a VCV tower plays a fundamental role in maintaining stability precision and overall efficiency throughout the manufacturing process of insulated cables; • that they would like to rely on the case of viz ICB P Ltd 1997 (96) ELT 239 (Tri). Ambica Wood Works 1979 43 STC 338 Guj. Sirpur Paper Mills 1998 (97) ELT 3 (SC). 4. In view of the foregoing, the applicant has sought ruling on the below mentioned question viz: Whether the applicant is eligible to avail ITC on inputs and input ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....would be prudent to reproduce the relevant sections, notifications, etc. for ease of understanding viz • Section 2. Definitions .- In this Act, unless the context otherwise requires,- (59) "input" means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; (60) "input service" means any service used or intended to be used by a supplier in the course or furtherance of business; • Section 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. • 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant and machinery) except where it is an input service for further supply of works contract service; or ii. 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. Explanation in Section 17 of CGST Act provides that 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 land, building or any other civil structures; telecommunication towers; and pipelines laid outside the factory premises. 3. Ducts and manholes are basic components for the optical fiber cable (OFC) network used in providing telecommunication services. The OFC network is generally laid with the use of PVC ducts/sheaths in which OFCs are housed and service/connectivity manholes, which serve as nodes of the network, and are necessary for not only laying of optical fiber cable but also their....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vice supplied for the construction of immovable property is an input service for further supply of the works contract. 32. Clause (d) of Section 17 (5) is different from clause (c) in various aspects. Clause (d) seeks to exclude from the purview of sub-section (1) of Sections 16 and 18, goods or services or both received by a taxable person to construct an immovable property on his own account. There are two exceptions in clause (d) to the exclusion from ITC provided in the first part 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....] where the works contract service supplied for the construction of immovable property is an input service for further supply of the works contract. 12. Further, while analyzing section 17 (5) (d), ibid, the Hon'ble Supreme Court has concluded that it seeks to exclude from the ambit of sub-sections 16 (1) & 18 (1), ibid, services received by a taxable person to construct an immovable property on his own account subject however, to two exceptions, where goods or services or both are received by a taxable person to [a] construct an immovable property consisting of a "plant or machinery"; and [b] for the construction of an immovable property made not on his own account; The Hon'ble Supreme Court further, explains that 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, further stating that construction cannot be said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 13. The Hon'ble Supreme Court, in the case of M/s. Safari Retreats P Ltd, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g intended for sale is a supply of service if the total consideration is accepted before the completion certificate is granted. Therefore, if a building qualifies to be a plant, ITC can be availed against the supply of services in the form of renting or leasing the building or premises, provided the other terms and conditions of the CGST Act and Rules framed thereunder are fulfilled. Therefore, the argument regarding breaking the chain cannot be accepted in its entirety. However, if the construction of a building by the recipient of service is for his own use, the chain will break, and therefore, ITC would not be available. 14. We find that the Hon'ble Supreme Court while analyzing the expression plant or machinery, held that there could be a plant that is an immovable property; that the word 'plant' not having been defined under the Act, its ordinary meaning in commercial terms will have to be attached to it. The Hon'ble Court, thereafter laid down a functionality test, further concluding that if a building qualifies to be a plant, ITC can be availed against the supply of services in the form of renting or leasing the building or premises, provided the other terms and condition....