TaxTMI 
TaxTMI 
2025 (9) TMI 731
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....nt by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as the Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Shibaura Machine India Private Limited, No. 65, (P.O Box No 5), Chennai-Bangalore Highway, Chembarambakkam, Poonamallee Taluk, Thiruvallur, Chennai - 600123 (hereinafter called as the "Applicant") are registered under the GST Act with GSTIN 33AAACL6155E1ZU. The Applicant has made a payment of application fees of Rs. 5,000/- each under sub rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017. 2. The applicant has sought advance ruling on the following questions, viz., 1) Whether Input Tax Credit (ITC) is eligible on steel reinforcements for expansion of factory for manufacturi....
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......." 2. The Applicant states that any acquisition of capital goods and services in connection with commencement of business is very much a business activity. When this definition is read with the provisions of Section 16(1) of the CGST Act, it can be understood that such procurements which are intended to be used in the course of furtherance of 'business' is eligible for availment of ITC. Based on the above provisions, the Applicant submits the following : - i) That the Applicant is engaged in the manufacture of injection moulding machinery and accessories which can certainly be qualified under clause (a) of definition of term 'business.' ii) The Contract entered is for supply, fabrication and erection of steel column, rafters & frames in the new factory commissioned for expansion of business activity. That the Applicant should hence be eligible for input tax credit on the inputs & input services used in the course or furtherance of business. 3. Further, the Applicant submits that they have also satisfied the other conditions for availing ITC as laid down in Section 16(2) of CGST Act such as possession of tax invoice, receipt of goods/services/both, payment ....
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....es directly relate to the operations of the plant and machinery deployed at the factory premises. The Applicant enclosed certain images relating to structural steel works with their application to give an understanding of the purpose of the said steel structures. Further, the Applicant enclosed the declaration provided by the Supplier apportioning the value related to secondary steel structures with their application, those assist the plant and machinery. 5. The Applicant submits that the Immovable property is not defined in GST Law. Section 3(26) of the General Clauses Act, 1897, provides for an expression as below: ""immovable property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth." The term "attached to the earth" has not been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression: "(a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is so imbedded for the permane....
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.... 3. any system or systematic organization of activities, functions, processes, etc., directed toward a specific goal; the apparatus of government; espionage apparatus. 4. Physiol, a group of structurally different organs working together in the performance of a particular function: the digestive apparatus" Accordingly, a group of instruments, tools, materials etc., having a particular function or intended for a specific use at the Plant. Therefore, the secondary steel structures get covered under the definition of plant and machinery. 9. The steel structures commissioned in the new factory assists the operations of plant and machinery deployed in the said factory. This would qualify as foundation and structural support to the apparatus, equipment and machinery; hence, ITC would be eligible on the same. Accordingly, the Applicant submits that Input Tax Credit on the transaction under question does not fall under any of the categories of Section 17(5), and hence not blocked. Further, the Applicant submits that these items are duly categorized as "Plant and Machinery" in its books of accounts. These are currently parked in the "Capital Work-In-Progress" and would be ....
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....dit is eligible insofar as it pertains to item railway track material used for handling raw materials, process goods. The Applicant further refers the ruling by Allahabad High Court in the case of M/s. Commissioner of Income-tax V/s. Opal Construction [2004 136 Taxman 628 (Allahabad)]. Wherein it had been held that Structural steel and tubular structure fall within definition of 'plant and machinery'. Considering the above, it is the submission of the Applicant that the ITC must be eligible for the Applicant on the subject transaction. 12. Regarding the Invoicing method adopted by the Supplier, relating to payment of advance, the Applicant submits that as per the clause 8 of Contract, the Applicant has paid the Supplier an amount equal to 10% of the Contract price as an advance, upon issuance of Letter of Award. The Supplier has issued tax invoice for receipt of this advance payment ('first invoice'). However, there will be no actual supply of goods or services or both at that specific point in time when such first invoice was issued. 13. The Applicant wishes to state that while it has fulfilled most of the conditions specified in Section 16(2) of the CGST Act, for availment ....
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....ll on 30 November 2023. On the contrary, the Applicant would not have fulfilled the conditions to avail such ITC as the receipt of goods or services or both would fall after the above-said time limit. 15. As per the doctrine of Harmonius Construction, a provision of the statute should not be interpreted or construed in isolation but as a whole, so as to remove any inconsistency or repugnancy. Moreover, it may be noted that the Section 16(2) contains a non-obstante clause overriding other provisions of Section16. Given the same, the provisions of Section 16(2) shall prevail in case of any conflict between Section 16(2) and other sub-sections of Section 16. Basis the above provisions, the right to avail ITC arises after the last date of availing the said credit as per as per Section 16(4). Further, the Applicant places its reliance on ruling of Hon'ble Allahabad High court in the case of M/s. Century Laminating company V/s. Commissioner of Central Excise, Meerut [2015 (3) TMI 130 - Allahabad High Court], wherein it has been held as follows: "when certain goods based on the invoice was received during the period of six months but the last and final lot was received after t....
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....ndia Private Limited. The AR reiterated the submissions made in their application for advance ruling. 6.2 They explained that the applicant is engaged in the business of manufacture of injection moulding machinery and its accessories. They further stated that they are expanding its business operation and have constructed a new factory adjacent to its existing factory and has incurred capital expenditure towards procurements in relation to setting up of the new facility. The procurement under this contract, involves fabrication and erection of structural steel works and sheeting works. While the AR acknowledges that the ITC involved in 'sheeting work' of vertical pillars is ineligible, they stated that the structural steel work is secondary in nature and erected with horizontal pillars with a view to support the cranes for movement of goods, and accordingly are eligible for availment of ITC. When the Members enquired about the capitalization aspect, the AR explained that while the portion relating to civil work is capitalized as building, the structural steel work is capitalized as 'Plant and Machinery' in their books of accounts. Likewise, when the members enquired about the mod....
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....d a new factory adjacent to their existing factory, whereby they have incurred capital expenditure towards procurements in relation to setting up of this factory. We further take note of the fact that in the instant case, they have entered into a separate contract with the Supplier M/s. SMCC Construction India Ltd., for "Design and Construction Works" for the new industrial building project. 7.3 The Contract is broadly classified into four categories as given below :- Sl.No. Particulars Amount (Exclusive of GST) Remarks 1 Civil Works 49,30,65,532 Site Grading and all Civil works related to factory building 2 Pre-Engineered building (PEB) Works 27,29,21,237 Supply, fabrication and erection of structural steel works and sheeting works 3 Fire-Fighting System (FFS) 4,65,36,401 Supply, installation, testing and commissioning of fire pump equipment, hydrants, sprinkler system, alarms, extinguishers, and etc. 4 Public Health Engineering (PHE) 1,74,81,313 Sanitary fixtures & fittings, sewage system, water supply system, rain water harvesting system pumps, etc. While the Applicant admits and acknowledges that ITC on SI.No.1 i....
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....on 18, input tax credit shall not be available in respect of the following, namely; (a) motor vehicles------------ (b)-------------------- (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. 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 capitalization, to the said immovable property:' Accordingly, it becomes clear that the embargo in relation to availment of ITC in the instant case revolves very much around clauses (c) and (d) of Section 17(5) of the Act, ibid, and both the clauses restricts ITC availment on receipt of Works Contract service, or on receipt of any goods or service or both, when made for 'construction o....
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....nstrued as a reference to "plant and machinery",'.' 7.8 With these aspects in mind, we now proceed to examine the transaction involved and its purpose, in order to determine the ITC eligibility or otherwise in the in the instant case. Accordingly, the crucial aspects that are to be discussed and decided in the instant case of the applicant, are:- (i) Whether the execution of project in the instant case results in the creation of an immovable property or not? (ii) Whether the execution of the project qualifies as 'Works Contract' or not? (iii) Whether the execution of Pre-Engineered Building (PEB) Works' for the factory gets categorised as Plant and Machinery' or not? 7.9.1 In this regard, we note that the applicant has entered into a Contract Agreement with M/s. SMCC Construction India Limited, New Delhi for execution of 'Construction of New Factory Project', at Chembarambakkam, Chennai. Therein, the 'Scope of Work' has been specified as "Construction works including Civil, Electrical and Mechanical Works". Further, under clause (3) to 'Article 1. General Principles' of the General Conditions of Contract, we observe the following remarks, viz., ....
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....as foundation and structural support to the apparatus, equipment and machinery and hence, ITC would be eligible on the same. Accordingly, the Applicant submits that Input Tax Credit on the transaction under question does not fall under any of the categories of Section 17(5), and hence not blocked. Further, the Applicant submits that these items are duly categorized as "Plant and Machinery" in its books of accounts. These are currently parked in the "Capital Work-In-Progress" and would be capitalized in the books of accounts once the factory premises is commissioned. 7.9.4 From the scope of the contract entered into between the parties, it could be seen that the agreement is not just for installation/commissioning of Civil, Electrical & Mechanical works, and it is a composite one of Works Contract' Service involving "Supply, fabrication and erection of steel column, rafters & frames including crane gliders and cat-walkers", as indicated in the table above, under the Annexure IB-2 forming part of the 'Cost Abstract - PEB Works' of the Contract. Apart from the same, on perusal of the Bill of Quantities for PEB Works (R1b)', forming part of the contract, it is seen that I. Structura....
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.... are naturally bundled and supplied in conjunction with each other, as in the instant case, gets covered as a 'composite supply' as defined under Section 2(30) of the CGST Act, 2017, which is reproduced below :- "(30) 'composite supply' means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;" When the said composite supply involves a contract for building, construction, erection, installation or commissioning of any immovable property, wherein the transfer of property in goods is involved in the execution of such contract, it becomes a classic case of 'works contract' service, which is defined as under Section 2(119) of the Act, ibid, i.e., "(119) 'works fabrication, contract' means completion, erection, a contract for building, installation, fitting construction, out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whe....
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.... a Machinery' as such, or as 'Plant or Machinery'. For reference, the expression "plant and machinery" as defined in the explanation under Section 17 of the CGST Act, 2017, is extracted as below :- 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. Accordingly, the expression "plant and machinery" as defined in the explanation under Section 17 of the CGST Act, 2017, is taken to mean an - (a) apparatus, equipment or a machinery; (b) which are fixed to earth either by foundation or by structural support; (c) which are used for making outward supply of goods or services or both; (d) and includes such foundation or structural support. 7.11.2 At this juncture, we take cognizance of the fact that the terms 'Appara....
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....tures directly relate to the operations of premises." 7.11.3 Under the facts and circumstances of the instant case, we observe that Cranes get covered under chapter heading 84 which deals with Machinery, and that they fall under HSN 8426. Accordingly, it becomes clear that Cranes are nothing but a Machinery' which is commissioned to perform the useful function of moving objects/materials within the factory premises. As Crane is a machinery used for making outward supply of goods or services or both, it becomes clear that they get categorised as 'Plant and Machinery'. Likewise 'HVAC machines' which stands for Heating, Ventilation and Air-conditioning machine falls under HSN 8415, and the same is a machinery commissioned to perform a useful function of maintaining the requisite temperature within the factory premises. Here again, it gets categorised as Plant and Machinery'. It is to be noted here that though the ITC eligibility or otherwise of 'cranes', or the 'HVAC machines' is not the bone of contention in the instant case, its relevance to the issue in question is of immense significance as the secondary steel structural work provides the structural support for the crane moveme....
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....ther query raised by the applicant, viz., "What should be the basis to arrive the timeline to avail ITC on tax invoice raised by Supplier to bill "Advance Component" of the Contract and Subsequent Adjustment of Advance in the Service Bills showing both Gross and Net amount.". Regarding this issue, we find that the applicant is of the view that availment of ITC on an invoice issued by the supplier for receipt of advance amount towards a contract is hit by the condition stipulated in Section 16(2)(b) of the CGST Act, 2017, which states that the recipient should have received the goods or services or both. They have stated that as per the Doctrine of Harmonious Construction', a provision of the statute should not be interpreted or construed in isolation but as a whole, so as to remove any inconsistency or repugnancy. 7.12.2 Accordingly, we note that Section 16(1) of the CGST Act, 2017, runs as - (1) Every registered person shall, subject to 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 c....
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....ment, i.e., paras 118 and 119 are reproduced hereunder for appreciation, i.e., "118. In the aforesaid context, we may also observe that sub-section (1) of Section 16 inter alia makes a person 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. Thus, the entitlement to take credit of input tax charged on any supply of goods or services is in regard to such components "used" or "intended to be used in the course" or ""furtherance of his business", is the basic requirement for the amount to be credited to the electronic credit ledger of such person. Although sub-section (1) is conditional upon the fulfillment of the requirements as contained in sub-section (2), in our opinion, the incorporation as contained in sub-section (2)(b) being one of the conditions, namely that the person has received the goods or services or both would also be required to be read, to further the intention as to what is provided for in sub-section (1) of Section 16, namely credit to be ma....
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...., the liability to pay tax on services would arise, and not in respect of specific incidents as provided for under sub-section (2). This would create a complete dichotomy, disturbance or friction in the interplay between Section 13(2) and Section 16 of the CGST Act. In our opinion, this can never be the intention of the legislature. Thus, there needs to be a harmonious interpretation of provisions of Section 13 read with the provisions of Section 16. The intention underlying sub-section (1) of Section 16 is not only required to be effected but safeguarded by a meaningful and purposive reading of the provisions of Section 13(2), so as to apply the provisions of sub-section (2)(b) of Section 16, as it stands and intended by the legislature. Any interpretation otherwise in our opinion would cause deleterious effect and a disharmony in the working of these GST provisions. For these reasons, the petitioner was entitled to the input tax credit under the provisions of Section 16 as in the present peculiar facts, merely referring to the provisions of Section 16(2)(b), it could not have been denied to the petitioner." 7.12.4 The applicant has stated in the applicant that the Supplier had....