TaxTMI 
TaxTMI 
2026 (2) TMI 648
X X X X Extracts X X X X
X X X X Extracts X X X X
....ST Act and OGST Act] by M/s. Gail (India) Limited having Principal Place of Business at Flat No 612, Utkal Signature, Pahala, Bhubaneswar, Khordha, Odisha, 752101, against the Advance Ruling ORDER No. 6/ODISHA-AAR/2025-26 dated 23.07.2025 pronounced by the Odisha Authority for Advance Ruling (AAR). The date of receipt of the physical appeal application is 21.08.2025. The Appeal application was filed in the time limit as per the provisions of Section 100 (2) of the CGST Act, 2017. 1.1. The Appellant M/s. GAIL (India) Limited, having GSTIN No. 21AAACG1209J1Z8 is a Private Limited Company is a Maharatna Public Sector undertaking of Govt. of India, is engaged in transmission of natural gas. The Appellant Company owns and operates a network of approx. 16421 km of natural gas pipeline across the country and command about 66% market share in gas transmission and over 54% share in gas trading in India. The Appellant Company gets authorization from Petroleum & Natural Gas Regulatory Board (PNGRB) for laying cross-country pipeline. For completing the said task, the Appellant Company engages different contractor/supplier for procuring pipes, pipe fittings and services for laying of undergr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a taxable person to construct immovable property on his own account. Both the clauses are with an exception of plant and machinery. So, goods, service or both qualifying as plant and machinery of immovable nature is not covered by the blocked ITC provisions of Section 17(5). An immovable property can still qualify for ITC benefit in case the property can be considered as "plant and machinery" in the popular sense. 2.3 However, as per explanation mentioned in Section 17 of the Act, Plant & Machinery' excludes pipelines laid outside the factory premises. The Appellant submitted that the explanation does not exclude pipeline in every case from the ambit of plant and machinery. The pipeline installed inside the factory premises of manufacturer and also pipeline installed by a service provider engaged in transportation of natural gas by pipeline or other conduit, are not excluded from the ambit of plant and machinery. It is only those pipeline which are laid outside the factory premises of a registered person/manufacturer running the factory, are excluded from the ambit of 'plant and machinery'. However, the term factory' has not been mentioned under the GST Laws. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y laid by the Appellant in the past. For the expressions "moveable property" and "immovable property", the Appellant cited provisions of General Clauses Act, Transfer of Property Act. Further, the Appellant cited the case of M/s. Bharti Airtel Ltd. Vs. CCE, Pune passed by Hon'ble Supreme Court and stated that the tests emphasized by the Supreme Court are duly satisfied by the Appellant w.r.t. underground pipelines laid by the Appellant for transmission of natural gas from one place to another. In case of detoriation of corrosion protection level, the remedial measures including replacement of apparatus used for desire level of external corrosion protection is undertaken to maintain safety & integrity of pipeline system. Thus, pipeline system are not rooted to earth nor embedded to earth. The pipeline so laid below the earth can be removed or relocated without causing damage to it. This is indication that the pipeline is movable property. The intention of Appellant in laying pipeline is not to make permanent addition to the land or any other immovable property and for that reason, the pipelines are no longer be treated as "immovable property". The functionality test in the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....planation to Section 17 of the Act and read out as below: 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- o (i) land, building or any other civil structures; o (ii) telecommunication towers; and o (iii) pipelines laid outside the factory premises. • Shri Kamra stated that pipelines are parts of Plant & Machinery but ITC is not available in respect of pipes laid outside factory. • Factory is not defined in GST law. However, the same is defined in other laws such as Factories Act, 1948, Central Excise Act, 1944, Industries (Development & Regulation) Act, 1951 etc. • Factory is said to be where manufacturing is done by the way of transformation of product to a new one. The appellant is not into manufacturing rather into distribution of gas. • Shri Kamra cited different case laws that are already available in his submissions. â....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he case, the written submissions made by the Petitioner and submission made by the authorized representatives of the Petitioner during the personal hearing through virtual mode on 26.09.2025 and additional submissions made vide letter dated 22.10.2025. 5.2 The AAR order was communicated on 24.07.2025. The date of receipt of the physical appeal application is 21.08.2025. Therefore, the Appeal Application is filed within 30 days of communication of the AAR order, which is within the time prescribed for filing Appeal. 5.3 On going through the submissions and personal hearing, we find that, the issue before us is to decide on the following aspects: a. Whether ITC under section 16 is available to the Appellant on procurement of Pipelines and payment made on works contract services for construction / laying of underground cross-country pipeline b. Whether ITC is blocked/inadmissible u/s 17(5)(c) of CGST Act in respect of works contract service supplied for construction of underground pipeline. c. Whether ITC is available in respect of goods (pipes and its components accessories or fittings) for construction of underground pipeline on his own account keepi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turns on the purpose of attachment. Intention of attachment is to be seen as to whether to treat an article as chattel or as a part of freehold. A pipeline for distribution of natural gas will be considered as immovable property for the following reasons: • Attached to the Earth - The primary determinant is whether the item is "attached to the earth". The pipeline is laid under the ground with the intention of permanent annexation to the land and beneficial enjoyment of land. Pipelines laid underground across cross-countries meet this criterion. • Intention of permanence - The intent behind laying a large scale natural gas distribution network is clearly a permanent infrastructure for long-term beneficial enjoyment and use rather than a temporary fixture that can be easily dismantled easily and moved. Thus, it meets the "two-fold test" of the degree and object of annexation. • Governing Legislation - The Petroleum & Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 provides for acquiring the "right of user" in land for laying pipelines acknowledging their permanent nature and attachment to the land. The preamble of the sai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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;" Since the statute specifically bars availment of ITC on works contract services when supplied for construction of immovable property and the cross-country pipeline being an immovable property, the appellant is not entitled to avail ITC on works contract services provided for construction of such pipeline for transportation of natural gas. Further, clause (d) of Section 17(5) bars entitlement to ITC in respect of goods or services used for construction of immovable property on assesse's own account. The relevant portion of the provisions thereof is extracted herewith as follows: "(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business." The cross-country pipeline being an immovable property, the appellant is not entitled to avail ITC on goods or services received for construction and laying of such pipelin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any process undertaken on the flow of gas from the original point to the delivery point. However, the Appellant remained silent regarding the procurement of the gas. The data available in their own website (www.gailonline.com), describes that natural gas come in 4 basic forms such as: (i) Liquefied Natural Gas (LNG) - Natural Gas which has been liquefied at - (Minus) 160 degree Centigrade. Natural Gas is liquefied to facilitate transportation in large volumes in cryogenic tankers across seas /land. (ii) Re-gasified Liquefied Natural Gas (RLNG) - LNG Re-gasified at import terminals before transporting it to consumers through Pipelines. (iii) Compressed Natural gas (CNG) - Natural Gas compressed to a pressure of 200-250 kg/cm2 used as fuel for transportation. CNG decreases vehicular pollution on the virtue of being cleaner fuel than liquid fuels. (iv) Piped Natural gas (PNG) - Natural Gas distributed through a pipeline network that has safety valves to maintain the pressure, assuring safe, uninterrupted supply to the domestic sector for cooking and heating / cooling applications. So, it is evident that the natural gas has to be re-gasified at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nderstand it. Thus, in common parlance, a pipeline cannot be treated as an apparatus, equipment or machinery. When a specific description is available, it is not justified to bring a pipeline within a meaning of "apparatus, equipment or machinery" by quoting convenient meanings just in order to avail ITC. The appellant incorrectly placed reliance on the rulings of the Maharashtra Authority for Advance Ruling in GST-ARA, Application No.94 dated 26.11.2018 in case of Western Concessions Private Limited (formerly known as H-Energy Gateway Private Limited) wherein ruling has been passed in favour of the Revenue. The relevant portion of the said ruling is extracted herewith: "The second contention of the applicant is that the pipeline would be otherwise covered under 'apparatus, equipment', or 'machinery since it is fitted with Valves, metering system, pressure regulating system, bends, fittings, flanges, gas leak detection system, gauges, transmitters etc. and hence qualify as 'plant and machinery under explanation to Section 17(5). We are also not in favour of this contention because every pipeline is fitted with these equipments and the pipeline in question i....