TaxTMI 
TaxTMI 
2026 (2) TMI 1384
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....efficiency of the applicant. 2. Whether on the facts and circumstances of the case, as per the law and scope of work, the works contract services which the KLPL intends to procure is not predominantly earth work (that is, constituting more than 75 percent. of the value of the works contract) and the services of the works contract by the contractor is covered under item (vii) of serial No. 3 of Table of the Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 as amended by Notification No. 31/2017-Central Tax (Rate) dated 13th October, 2017. The Advance Ruling Authority passed the order dated 22.02.2019 and answered these questions are below: Answered for question no. 1: Answered in the affirmative. Answered for question no. 2: Not answered in view of the fact that the issue involved the supplier of invoices. Aggrieved by this order, said applicant filed an application before the Appellate Authority for Advance Ruling (AAAR). The AAAR decided the matter and, vide order dated 06.11.2019, upheld the order passed by the AAR. The applicant was not satisfied with the decision passed by the AAAR and filed petition before the Hon'ble Bombay ....
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....s due to flow of high strong water waves / tides, particularly in rough monsoon season, the vessel cannot stay at the jetty area and consequently unloading operations cannot take place leading to complete shutdown of the Regasification plant. 1.5 That when break water project was under construction phase, plant was roughly operating for around 7 months in a year. As per Maharashtra Maritime Board (MMB), the port was not an "All Weather Port" but was just a "Fair Weather Port" and hence it did not allow the applicant to operate the plant during the monsoon period (rough weather from May to August every year). Further, it can also be noted that if rough sea conditions are experienced for the entire year due to unpredictable natural conditions, the plant will not be able to operate at all in the absence of break water project. Thus, jetty as well as Break water project are integral parts of the LNG regasification plant of the applicant. 1.6 That with a view to fight against strong sea waves / tides moving during rough weather (monsoon season), the applicant constructed Break water project at a distance of 750 meters from the jetty line. The total length of Break water project is....
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....tor General of Shipping is enclosed with submission. 1.11 That the Maharashtra Maritime Board has recently recognized Dabhol LNG Terminal as full-fledged Terminal / all-weather port for berthing and unloading of LNG cargo at applicant's LNG Terminal jetty at Dabhol during the entire year without any restriction on the business of the applicant. A copy of permission letter dated 22.05.2025 issued by Maharashtra Maritime Board is enclosed with submission. 1.12 ARA Proceedings held in the past in the case of the applicant. 1.12.1 That for the purpose of construction of Break water project to save the jetty and the standing vessel from the impact of strong sea waves / tides flowing during rough weather, the applicant invited tender from the interested parties for the following scope of work: "Basic design, detail engineering and physical model test, surveys, temporary work, development of quarries, supply of material, construction of balance portion of break water and removal of temporary works as per the assessment reports, job specification, codes and recommendation of license holder and drawings assessment reports, job specification, codes and recommendation ....
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....o the one under CGST Act. Moreover, the Explanation below section17(6) of CGST Act defines "plant and machinery" in exhaustive manner as the definition starts with the term "means" while the definition of "plant" u/s 43(3) of Income Tax Act begins with the term "includes" and therefore the decision under Income Tax Act is not applicable in the case of the applicant. The AAAR passed order No. MAH/AAAR/SS-RJ/14/2019-20 dated 06.11.2019. 1.12.6 That the applicant filed Writ Petition No. 313 of 2021 before the Hon'ble Bombay High Court to contest the appellate order dated 06.11.2019 passed by the AAAR Authority. The High Court vide order dated 28.06.2024 dismissed the petition on the following grounds: (a) The term "plant" suggests that it would mean and include a place where an industrial activity takes place and / or factory where certain material is produced and machinery is used to carry out certain process or production. Going by this logic, the Break water project or used in the wall do not qualify as "plant or machinery". (b) Break water project is used for protecting the vessel from tides while unloading the LNG received and not for making outward sup....
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....aves assailing the coast in a stronger manner during rough weather. It is to ensure that swell and wave height is kept at the minimum limit thereby preventing damage to the jetty and other structures on shore. 1.13.3 A copy of Technical Note dated 07.08.2025 on Break water project issued by M/s Engineers India Limited, the Engineer-in-Charge (EIC) is enclosed with submission. 1.14. Admissibility of input tax credit of taxes paid on supply of goods and / or services for construction of Break Water Project. 1.14.1 That it is provided in section 16(1) of CGST Act, 2017 that every registered person shall 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 RI furtherance of his business. The end use of goods or services or both should been the course or furtherance of business of the taxpayer. In case the goods or services are used for personal purposes or non-business purposes, the benefit of ITC is UMBAI not available to the taxpayer. 1.14.2 That the expression "business" is defined in section 2(17) of the CGST Act in an inclusive manner. The definition is....
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....t and will, in all probability, be useless once asset is discarded [CIT v. Insilco Ltd., - (2010) 320 ITR 322]. The phrase 'used for purpose of business' should be interpreted to mean that such plant or machinery must be open to use for business and proof of actual user is not necessary. 1.14.7 That in view of similarity of expressions "used for the purposes of business or profession" under section 32 of Income Tax Act and the expression "used in the course or furtherance of business" under section 16(1) of CGST Act, 2017, the applicant submits that the interpretation placed by the Courts under Income Tax Law is equally applicable in ITC cases regulated by section 16(1) of CGST Act, 2017. 1.14.8 That since in the opinion of the applicant, ITC is lawfully available to the applicant in respect of goods and services used in the construction of Break Water project which is plant and machinery / capital asset, the applicant has capitalized the entire expenditure (excluding ITC portion) under the head "Plant and Machinery" in the books of accounts of the applicant. In support, the applicant encloses a certificate from their Chartered Accountant M/s P.D. Agrawal & Co., N....
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....service is supplied for the construction of immovable property which is an input service for further supply of works contract service. 1.15.3 That clause (d) of section 17(5) is different from clause (c) in various aspects. Clause (d) seeks to exclude goods or services or both received by a taxable person to construct an immovable property on his own account. There is no similarity between clause (c) and (d) of section 17(5) except for the fact that both the clauses apply as an exception to section 16(1) of CGST Act. Secondly, both the clauses refer to construction of immovable property where benefit of ITC is not available to the taxpayer except where goods and services are used for construction of plant and machinery. 1.15.4 That the applicant further submits that works contract services or goods and/or other services received by a taxable person for construction of immovable property are disqualified / blocked from the benefit of ITC. The construction of plant and machinery is excluded from the ambit of clause (c) and (d) of section 17(5) of CGST Act, 2017. Since these clauses are applicable to immovable properties other than plant and machinery, it is not nece....
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....s used for a particular purpose are denoted as "apparatus". As per dictionary meanings, "apparatus" means an implies. (1) A compound instrument designed to carry out a specific function. (2) Set of materials or equipments designed for a particular function. (3) An instrument or appliance designed for a specific operation. 1.16.5 That the word 'apparatus' would certainly mean the compound instrument or chain of series of instruments designed to carry out specific function or for a particular use. [Commer. of Customs v. C-NET Communication (I) (P) Ltd., (2007) 12 SCC 72]. A similar view has been taken by the Tribunal in the case of I.C.B. (P) Ltd. v. CCE, Baroda reported at 1997 (95) ELT 239 (Trib). 1.16.6 That by applying the meaning of the word "apparatus", the Tribunal has held the following items as apparatus: (1) Fibre glass filter mesh used or filtering out the impurities from the molten metal - Escorts Ltd. Vs. CCE - 1993 (68) ELT 682 (Trib-Mad). (2) Bladders, airbags, shaper tubes and curing bags used inside the tyres during vulcanization for giving proper shape to the tyre. (3) Grinding wheels used in cl....
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....r. To give a plain interpretation to clause (d) of Section 17(5), the word "plant" will have to be interpreted by taking recourse to the functionality test." 1.17.2 That the question whether a mall, warehouse or any other building constructed for renting purpose can be classified as a "plant", the Apex Court summarized the legal position in para 65(c) as under:- "The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression "plant or machinery" used in Section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business. If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by clauses (2) and (5) of Schedule II of the CGST Act, the building could be held to be a plant. Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub-section (1) of Section 16. Functionality test....
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....oads of material constituted "plant" within the meaning of section 43(3) of Income Tax Act, 1961. The Rajasthan High Court applied functionality test to check whether structure is used for carrying on business and hence it is a tool of the trade or whether it is only a place of business within which the business is carried on. By examining the nature of the structure on the basis of functional test, the Rajasthan High Court held as under:- "The Tribunal has observed that the blue print of the structure was produced before them and they were satisfied that the structure has been raised to provide support to the gigantic cranes. On the basis of this blue print, the Tribunal came to the conclusion that the structures were raised to make the plant operative which could not have functioned in its absence. It was further observed that it is not a mere structure for location of the plant but the structure which makes the plant operative and workable. There may be a structure which falls within the category of building and plant. Whether the structure is a building or a plant has to be examined on the basis of the functional test. The use of the structure makes the distinction bet....
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....l for the purpose of breeding shrimps or prawns the pond is a must. The breeding of fish cannot be carried on within the ponds. As referred to by the Tribunal, water plays the role of a machine just like a timber merchant. If the timber merchant requires a sawing machine to cut and shape the log such sawing machine constitutes a plant for him. Water in the case of the assessee plays same role. Water has to be stored within the ponds. Therefore, the ponds also constitute part of the machinery in the business of the assessee. Learned counsel for the Revenue submitted that it was only a natural pond. It is not correct. According to us, the decision in CIT v. Victory Acqa Farm Ltd. [2004] 271 ITR 528 (Ker) was presumed to be covered as per the decision of the Supreme Court in CIT v. Anand Theatres [2000] 244 ITR 192. According to us, in the facts and circumstances of the case, the Tribunal was right in holding that the pond is a plant and hence, entitled to statutory depreciation." 1.17.7 CIT Vs. Victory Acqa Farm Ltd. - (2015) 379 ITR 335 (S.C.) That the against the order passed by the Kerala High Court in the case of Victory Acqa Farm Ltd., the Revenue filed appeal before th....
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....activities are carried on. With this finding, the High Court held that the assessee was not entitled to claim development rebate on the warehouse buildings. 1.17.9 That the applicant refers to the latest Advance Ruling passed by Kerala Authority, GST Department, Kerala in the case of M/s Nitta Gelatin India Limited reported in 2025-VIL-112-AAR. In this case the assessee is engaged in manufacturing Gelatin using ossein, which is derived from animal bones. The assessee with a view to enhance operational efficiency at the Koratty facility (producing ossein) constructed a fresh water storage tank of 2000 KL capacity and a guard pond (effluent storage tank) with 7000 KL capacity. These facilities are crucial for maintaining free flow plant operations through proper water storage and effluent management. The applicant approached AAR to determine eligibility for claiming ITC of GST paid on goods and services used in the construction of the water storage tank and guard pond (effluent storage tank). The AAR after examining the definition of "plant and machinery" given in the Explanation below section 17(6) of CGST Act, 2017 held as under: (a) The definition of "plant and m....
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....d supply of extra-high voltage (EHV), medium voltage (MV) and low voltage (LV) cables upto 400 KV. The assessee upgraded its technology to manufacture EHV cables by setting up a new plant in Gujarat by using vertical continuous vulcanization (VCV) process by collaborating with foreign company to upgrade the technology. The assessee procured various inputs goods and input services to construct the outer square structure with concrete columns and concrete foundation to support the erection of the VCV line. The assessee claimed VCV line as "plant and machinery" and accordingly the input and input services procured by the assessee and used in the construction of VCV line are eligible for ITC benefit. The AAR authority held that the assessee was not eligible to avail ITC on input and input services used for construction of concrete tower to BAL support and erect the VCV lines at the factory of the assessee for manufacture of. EHV cables, in terms of section 17(5)(c) and 17(5)(d) of CGST Act, 2017. 1.17.11 Against the order of AAR, the assessee approached the Appellate Authority for advance ruling (AAAR), Gujarat GST law. The appellate authority set aside the AAR order and held ....
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....ir own account. This being the case, we find that the applicant is eligible for availing the ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the appellant for manufacture of EHV cables." 1.17.12 That in view of the functionality test approved by the Hon'ble Supreme Court in the case of Safari Retreats Pvt. Ltd. and applied by several High Courts and the Apex Court on taxation side, the applicant submits that the Break water project constructed adjacent to jetty at Dabhol LNG Terminal have functional role in the business of the applicant. Without Break water project in existence, the intensity of sea water waves / tides during rough season/ monsoon season assailing the coast would damage the jetty as well as the standing ship and consequently halt the activity of regasification of LNG which is the core business of the applicant. The Break water project is a tool or apparatus for the applicant to carry on their business activities without any interruption even during monsoon period and as such the Break water is a "plant and machinery" for the applicant on which the ITC embargo contained in clause (c) an....
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....ope as interpreted by the various courts propounded the following principles:- 1. The definition of "plant" in section 43(3) should be given a wide meaning as it is an inclusive definition. 2. All buildings are not "plant" despite the dictionary meaning which includes buildings; but a building or structure is not per se to be excluded from the ambit of the expression "plant" 3. If the concrete construction or building is used as the premises or setting in which the business is carried on in contradistinction to the fulfilling of the function of a plant, the building or construction or part thereof is not considered a plant. The true test is whether it is the means of" carrying on the business" or the location for so doing. 4. In order, for a building or concrete structure, to qualify for inclusion in the term "plant", it must be established that it is impossible for the equipment to function without the particular type of structure. 5. The particular apparatus or item must be used for carrying on the assessee's business and must not be his stock-in-trade. The matter has to be considered in the context of the particular business of the as....
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.... Applying the principles laid down by the Delhi High Court in the case of RC Chemical Industries (supra), the Bombay High Court held that found that dock acted like a large vice for building ships in position where they were repaired or cleaned. The High Court observed that the dry dock was not mere setting or premises where the ships were repaired. It was different from the factory which housed the machinery for the reason that in the operation of dock, the dock itself plays a part in the control of water and enabled the valves, pumps and electricity generator which are integral part of the construction to perform these functions. As the dock was not a mere shelter or home but itself played an essential part in the operation which took place in getting the ship into the dock, holding it securely and then returning it to the river. As these items were considered as integral part of the plant which could not have worked without these items, the Bombay High Court held that the Tribunal was correct in concluding that the entire expenditure incurred on Kasara Basin Wet Dock constituted a plant eligible for benefit of depreciation and development rebate under Income Tax Act, 19....
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....stead of demolishing the old dams and constructing new ones in their place, what has been done by the assessee by modern scientific technique is that huge expenditure has been incurred as a result of which the lives of the existing dams will be prolonged for a sufficiently long period. This will result in a new plant being installed within the meaning of s. 3 3 of the Act, even though by the incurring of the expenditure, the dams are not having any independent existence apart from the old dams themselves. Thus, by adopting the Coyne method of anchoring the two dams the new plant can be said to have been installed within the meaning of s. 33 of the Act, and the Tribunal was right in allowing the claim of the assessee for development rebate." 1.18.6 That the High Courts have held that the buildings or civil structures as plant entitled to the benefit of development rebate and depreciation under the provisions of Income Tax Act, 1961. A brief account of the High Court judgments is tabulated below:- SI.No. Cause Title Decision 1 Commissioner of Income Tax, Lucknow Vs. Kanodia could storage-(1995) 100 ITR 155 (AII) Building constructed by the assessee engaged ....
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....ty, durability and effectiveness of entire structure to absorb or throw back the energy of maximum sea waves assailing the coast is none-less "plant and machinery" defined in the Explanation below section 17(6) of CGST Act, 2017. Accordingly, the blocked provisions of section 17(5)(c) and 17(5)(d) of CGST Act do not apply to the construction of plant and machinery, whether through the works contractor or by the taxpayer on his own account. In either case, the bar is applicable to construction of immovable property (other than plant and machinery). Since the Break water project is not merely a civil structure or immovable property but it represents plant and machinery used in carrying out business activities of the applicant, the Break water project being plant and machinery is eligible for the benefit of ITC. 1.19 Accropodes laid as uppermost layer of Break water structure are movable apparatus 1.19.1 That as already averred in para 14 that Break water project is not made of cement, sand, stone dust or other civil materials. It is not a simple earthwork or civil of structure. On the other hand, this project consists of Core, Armour layer and Accropodes. The Accropodes a....
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....udgment of the Supreme Court in the case of Bharti Airtel Ltd. Vs. Commissioner of Central Excise, Pune reported in 2025 (391) ELT 3 (S.C.). Para 11.8.1 from the Apex Court judgment is reproduced below:- "11.8.1 We may summarise some of the principles applied by the Courts in the decisions referred to above to determine the nature of the property as follows: (1) Nature of annexation: This test ascertains how firmly a property is attached to the earth. If the property is so attached that it cannot be removed or relocated without causing damage to it, it is an indication that it is immovable. (2) Object of annexation: If the attachment is for the permanent beneficial enjoyment of the land, the property is to be classified as immovable. Conversely, if the attachment is merely to facilitate the use of the item itself, it is to be treated as movable, even if the attachment is to an immovable property. (3) Intendment of the parties: The intention behind the attachment, whether express or implied, can be determinative of the nature of the property. If the parties intend that the property in issue is for permanent addition to the immovable property, it w....
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....n goods or services or both used by a taxable person for construction of immovable property (other than plant and machinery) is not applicable on telecommunication tower which is movable goods. The High Court further held that the exclusion of telecommunication towers from the definition of "plant and machinery" in the Explanation given below section 17(6) would not mean that the telecommunication towers are immovable property. The High Court came to the conclusion that telecommunication towers would not fall within the ambit of section 17(5)(d) of CGST Act and therefore denial of ITC in respect of goods and services used in the construction and installation of telecommunication tower would not sustain for the principal reason that clause (d) is applicable only to the goods and / or services received by the taxable person for construction of an immovable property other than plant and machinery of immovable nature. Goods and / or services used in the construction of movable property are eligible for ITC without application of blocked ITC provisions contained in section 17(5) of the CGST Act, 2017. 1.19.8 That the applicant submits that the Department filed SLP against the j....
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....our rocks are accessories to the accropodes. A structure is created below the sea water level by placing core as the bottom-most layer and thereon armour rocks are placed as the second layer. The structure made of core and armour rocks is itself an accessory for placement of accropodes so that the accropodes can work effectively and discharge functionality test. Since accropodes are movable goods, the core and armour rocks are accessories for placement of accropodes on the armour rocks. As accessories to movable articles, the benefit of ITC on procurement of goods (core and armour rocks) used in the construction of Break water structure is also available to the applicant under the provisions of section 16(1) of CGST Act, 2017. 1.20 That the applicant further submits that Break water project is an integral part of LNG regasification plant at Dabhol. Since LNG is imported by the customer GAIL (India) Ltd. at Dabhol LNG Terminal and delivered to the applicant for regasification of LNG into natural gas (gaseous form), the applicant has constructed jetty in the sea water. The distance of jetty from land area is about 1.8 km. The ship containing LNG tankers is anchored by jetty line f....
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....nding of vessels at the Terminal. Since the definition of "plant and machinery" covers apparatus, equipment and machinery that are used for making outward supply of goods or services or both, the applicant submits that the Break water project satisfies the condition of making outward supply of services (regasification activity) by the applicant. PRAYER That in view of the above submissions, the applicant prays that the Hon'ble Maharashtra Authority for Advance Ruling under GST may be pleased to (a) allow the application and hold that the applicant is eligible to avail Input Tax Credit in respect of CGST/SGST/IGST paid on procurement of goods and / or services for the purpose of construction of Break water project; (b) hold that the Break water project is a plant and machinery forming integral part of the applicant's regasification plant and consequently the blocked provisions of clause (c) and (d) of section 17(5) of CGST Act do not apply in the facts and circumstances of the case; (c) grant personal hearing; (d) pass such other order as the authority may deem fit and proper in the facts and circumstances of the case and in the interest of ....
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.... 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 say to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. ... 2.4 MEANING OF THE EXPRESSION "PLANT OR MACHINERY" IN CLAUSE (d) OF SECTION 17(5) Para 42. The question is whether the explanation that lays down the meaning of the expression "plant and machinery" in Section 17 will apply to the expression "plant or machinery" used in Section 17 (5)(d). 2.5 Para 43. Learned ASG himself accepted that the expression "plant and machinery" appears at ten different places in Chapters V (Input Tax Credit) and VI (Tax Invoice, Credit and Debit Notes) of the CGST Act. According to him, the expression "plant or machinery" appears only in clause (d) of Section 17(5). His submission is that the use of the word "or" in clause (d) is a mistake of the legislature. To counter this, it was submitted that in the Model GST Law, which the GST Council Secretariat circulated in November 201....
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....finition contained in the explanation to Section 17, we will be doing violence to the words used in the statute. While interpreting taxing statutes, it is not a function of the Court. to supply the deficiencies. 2.8 Para 45. Now, the question which arises is what meaning should be given to the expression. "Plant or machinery". When the legislature uses the expression "plant and machinery," only a plant will not be covered by the definition unless there is an element of machinery or vice versa. This expression cannot be read as "plant or machinery". That is so clear from the explanation in Section 17, which says that plant and machinery mean apparatus, equipment and machinery fixed to the earth by foundation or structural support that are used for making outward supply of goods or services or both. The expression includes such foundation and structural support fixed to the earth. However, the definition excludes land, buildings or any other civil structure. 2.9 Para 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 "....
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....uld be held to be a plant. 2.12 Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub- section (1) of Section 16. Functionality test will have to be applied to decide whether a building is a plant. Therefore, by using the functionality test, in each case, on facts, in the light of what we have held earlier, it will have to be decided whether the construction of an immovable property is a "plant" for the purposes of clause (d) of Section17(5)." 2.13 In this regard, it is to be mentioned that section 17 of the CGST Act deals with apportionment of credit and blocked credits. Clauses (c) and (d) of section 17(5) of CGST Act and the relevant explanations to the said section read as under:- "17. .. ... .... ... .. .. .. .. .. (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 ....
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....s supply of goods nor as supply of services. 2.16 The Law committee took a note that that there is a minor difference in the usage of words in clause (c) and clause (d) of sub-section (5) of section 17, i.e. the expression 'plant and machinery' has been used in clause (c) of the said section and the same has been defined in the Explanation to section 17 of CGST Act (reproduced below) and has been used multiple times in the Act, whereas the expression plant or machinery' has been used in the clause (d) of the said section which is only used once in the Act i.e. in the said clause. ".. 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" 2.17 The Law Committee noted that the legislature/ GST Council, on their own, to clear ambiguity reg....
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.... and has left the meaning of the word "plant" in the expression "plant or machinery" in clause(d) of section 17(5) of the CGST Act, to be interpreted on a case-to-case basis, applying the functionality test to the facts of the case. The Law Committee observed that the word "plant" is not defined under the CGST Act or even in the General Clauses Act,1897. The Law Committee felt that the said distinction between "plant and machinery" and "plant or machinery" may also result in unequal treatment on the availability of input tax credit on works contract services for the construction of immovable properties under clause (c) and on goods or services or both, for the construction of immovable properties under clause (d). While one set of taxpayers, who would procure goods or services separately for construction of an immovable property, may become eligible for input tax credit, by qualifying the said property as a "plant", the other set of taxpayers who procure same goods or service through a works contract Service provider for the construction of a similar type of immovable property would continue to be restricted to avail input tax credit, which would get added to their cost, thus creat....
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....mittee also recommended that while making the above amendment through Finance Bill, it may specifically be mentioned that the said amendment is being done notwithstanding anything to the contrary contained in any judgment, decree or order of any court or any other authority. 2.25 Background The Hon'ble Supreme Court in the matter of Union of India v. Bharati Airtel has clarified the criteria for determining the movability or immovability of an object, as per the provisions of the General Clauses Act, 1897. This ruling has direct implications on the classification of property in the context of construction works, specifically in determining whether the breakwater wall constitutes movable property under the Goods and Services Tax (GST) regime. 2.26 Contract Agreement Overview The subject contract ("Agreement") pertains to the construction of the breakwater wall at a designated site between Konkan LNG ("First Party") and M/s. Larsen & Toubro Limited ("Second Party"), detailing the remaining works related to the project. 2.26.1 Scope of Work: The scope outlined in the Agreement includes the following major tasks: (1) Mobilization of Equipment and Personnel: M....
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....utions, hospitals, clinics including veterinary clinics, religious establishments, courts, prisons, museums and other similar buildings 10 995416 Construction Services of other buildings n.e.c 11 995419 Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above. 12 Group 99542 General construction services of civil engineering works 13 995421 General construction services of highways, streets, roads, railways and airfield runways, bridges and tunnels 14 995422 General construction services of harbours, waterways, dams, water mains and lines, irrigation and other waterworks 15 995423 General construction services of long-distance underground/overland/submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works. 16 995424 General construction services of local water & sewage pipelines, electricity and communication cables & related works 17 995425 General construction services ....
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....ecial trade construction services n.e.c. 44 995459 Services involving Repair, alterations, additions, replacements, maintenance of the constructions covered above. 45 Group 99546 Installation services 46 995461 Electrical installation services including Electrical wiring & fitting services, fire alarm installation services, burglar alarm system installation services. 47 995462 Water plumbing and drain laying services 48 995463 Heating, ventilation and air conditioning equipment installation services 49 995464 Gas fitting installation services 50 995465 Insulation services 51 995466 Lift and escalator installation services 52 995468 Other installation services n.e.c. 53 995469 Services involving Repair, alterations, additions, replacements, maintenance of the installations covered above. 54 Group 99547 Building completion and finishing services 55 995471 Glazing services 56 995472 Plastering services 57 995473 Painting se....
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....t tax credit. The argument is centered around whether the breakwater wall is fulfilling a direct role in the outward supply of services related to regasification, as required by the GST provisions. 2.29.1 Definition of "Plant and Machinery" under GST: (1) The GST Act specifically outlines that "plant and machinery" includes apparatus, equipment, and machinery that are fixed to the earth with structural support and are used for making outward supply of goods or services (Sections 16 and 17). However, it excludes civil structures such as land and buildings. This is a crucial point because the breakwater wall is classified as a civil structure, which is explicitly excluded from the definition of "plant and machinery." 2.29.2 Role of the Breakwater Wall: (1) The breakwater wall serves as a protective structure for ships and cargo during the unloading of LNG, as well as protecting the jetty from high tides and the power of sea waves. (2) While it is important for the safety and operational stability of the port, it does not directly contribute to the regasification process or to the outward supply of LNG. The regasification activity continues unaffected ....
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....ix-digit HSN/SAC code, as mandated by Notification No. 78/2020 dated 15.10.2020, effective from 01.04.2021. As per Rule 46 of the CGST Rules, failure to mention the six-digit code renders the invoice non-compliant. (2) This constitutes a violation of the conditions laid down under Section 16(2)(a) of the CGST Act, disqualifying Konkan LNG from claiming ITC on these invoices. Financial Year Larsen & Toubro Ltd. GAIL (India) Limited Bharati Defence and Infra. Ltd Square Port Shipyard Pvt. Ltd. Total Claimed on Reversed on Remarks INR EURO Total FY 2018-19 - - - 1,53,89,512 - - 1,53.89,512 On monthly basis during FY 2018-19 Jan-21 Availed and Reversed FY 2019-20 - - - 36,91,067 - - 36,91,067 On monthly basis during FY 2019-20 Jan-21 Availed and Reversed FY 2020-21 16,8206,167 1,44,10493 18,26,16,660 78,24,911 - - 19,04,41,571 Not availed as the application was pending before AAR FY 2021-22 11,23,65,504 14,74,513 11,38,43,017 79,02,260 - - 19,64,41,571 Not availed as the application w....
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....e above amendment through Finance Bill, it may specifically be mentioned that the said amendment is being done notwithstanding anything to the contrary contained in any judgment, decree or order of any court or any other authority, then after councils amendment to section 17(5)(d) abundantly clear legislature intention regarding the transaction fall under section 17 (5) (c) and (d) to not to allow ITC for the works contract resulted in immovable or goods or services received for the purpose of construction of immovable property except plant and machinery in both the case .. 3. The invoices issued by M/s. Larsen & Toubro Ltd. are deficient and cannot be considered valid for the purpose of claiming ITC. 4. The taxpayer is restricted from claiming ITC for unclaimed invoices from financial years 2020-21, 2021-22, and 2022- 23 due to the provisions under Section 16(4) of the CGST Act. 2.34 Relevant Case Laws (1) M/s. Safari Retreats Pvt. Ltd. v. Chief Commissioner of CGST (SC, 03.10.2025): Clarified that immovable structures do not qualify as plant and machinery for ITC purposes. (2) Union of India v. Kesoram Industries Ltd. (2024): ITC disallowed ....
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....ime of the personal hearing. 5.2 We find that the applicant has constructed a breakwater wall with a view to fight against strong sea waves / tides moving during rough weather (monsoon season). The applicant has constructed Break water project at a distance of 750 meters from the jetty line. The total length of Break water project is 2300 meters inside the sea water area. The primary function and purpose of the break water is to absorb or throw back as completely as possible the energy of the maximum sea waves assailing the coast. It is to ensure that the swell and wave height is kept at minimum with desired limit thereby preventing damage to the jetty and other structures on shore. It is seen that the contract for construction of the Break Water was given to M/s. Larsen & Toubro Ltd., vide LOA dated 8.2.2020. The contractor was required to supply the goods as well as services in the process of completion of the work i.e. construction of Break Water Project. Thus, it is seen that the services provided by the contractor can be treated as works contract. The applicant had filed the Application for Advance Ruling No. 123 dated 23.2.2019 seeking ruling whether they would be entitled....
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.... protects the core layer and is made up of heavy units or large rocks used to stay in place during high energy wave impacts and shield the core and filter layers from direct wave attack. The accropodes are specifically shaped concrete armour units which can be interlocked due their unique shape. We find that the structure, so developed, is called a Break Water and they function unitedly to dissipate the wave energy and protect the shoreline. The Break Water Wall comprises of all these elements, which together performs the function for which it was built and provides stability to the structure. The Break water wall cannot exist or function effectively if one of the three elements are missing, thus giving due importance to each element in carrying out the function for which it was designed. 5.4 From Para 2 of the Bidding Document NO. AK/6724-000-CR-TN-9501/1047) it is seen that the scope of the project includes the following:- i Basic Design, Physical Model Tests, Detailed and construction engineering with calculations and drawings as detailed in design criteria. ii Survey of Armour of constructed part of breakwater prior to detailed design and construction by EC....
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....r (if any) during construction period. xv Removal of old and new temporary works in Owner's provided land, as per directions of Engineer in Charge. xvi Installation of Swell measurement meter as per attached specifications. xvii Any other works required to complete the breakwater as per design requirements and specifications. Thus, it can be seen from the submissions made by the applicant from time to time that the breakwater is a composite structure of 2300 Sq. Meters, constructed approximately 750 meters from the jetty and around 2.5 Km from the land. It is a permanent structure constructed using rocks, boulders and accropodes. 5.5 We find that the applicant has availed works contract services of M/s. Larsen & Toubro for the construction of the breakwater and are seeking a ruling whether they are entitled for availment of input tax credit on the said services received from M/s. Larsen & Toubro. In this regard, the provisions of Section 17 of the CGST Act, 2017, provides the situations in which the Input Tax credit can be restricted. The relevant portion of the said Section is as under:- (5) Notwithstanding anything contained in sub-sectio....
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....same can be considered as plant and machinery, even then the input tax credit would not be available if the said immovable property is a land, building or a civil structure, telecommunication towers and pipelines laid outside the factory premises. Further, if the said plant and machinery is not used for making outward supply of goods or services, the credit can be denied. Keeping in mind the aforesaid legal position, we now proceed to examine the facts of the instant case and determine whether the Input Tax Credit would be available to the applicant. 5.7 We find that it is not a disputed fact that the services provided by M/s. Larsen & Toubro is a works contract service. This fact has been accepted by the applicant as can be seen from their application where in Para 10 of Annexure 1 of the application, they mention that "given the scope of work and award of work to various contractors, the services of contractor will be covered under the services of works contract as defined under Section 2(119) of the CGST/SGST Act". We have examined the entire scope of work and we find that the services provided by the contractor is for construction of an immovable property and since the goods....
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....s a permanent addition designed for the protection of marine structures, serving a protective and functional purpose. iii. The contract envisages the construction of a permanent civil structure, evidenced by the nature and permanence of the structure. iv. The breakwater wall, being a permanent fixture, cannot be dismantled without causing structural damage, fulfilling the criteria of a immovable structure when compared to movable machinery. v. The breakwater wall cannot be relocated without significant damage, and the breakwater wall cannot be brought and sold in the market as goods or shifted to any other place for similar use. 5.9 In the instant case, the applicant is not providing any works contract service and the works contract service received by them is also not for further supply as a works contract. Therefore, we find that all the three basic conditions for denying the benefit of Input tax credit in the instant case is fulfilled. However, the only exclusion in this clause 17(5)(c) is that Input Tax Credit will be available if the so constructed immovable property can be considered as plant and machinery. Therefore, we now proceed to decide whe....
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.... vital role in defining it as a "civil structure" or otherwise. We also find that as per The Construction (Design and Management) Regulations 2015, United Kingdom, a structure has been defined as under:- "structure" means- (a) any building, timber, masonry, metal or reinforced concrete structure, railway line or siding, tramway line, dock, harbour, inland navigation, tunnel, shaft, bridge, viaduct, waterworks, reservoir, pipe or pipeline, cable, aqueduct, sewer, sewage works, gasholder, road, airfield, sea defence works, river works, drainage works, earthworks, lagoon, dam, wall, caisson, mast, tower, pylon, underground tank, earth retaining structure or structure designed to preserve or alter any natural feature and fixed plant; (b) any structure similar to anything specified in paragraph (a); (c) any formwork, falsework, scaffold or other structure designed or used to provide support or means of access during construction work, and any reference to a structure includes part of a structure; 5.12 On examining the nature of the breakwater project, the construction of the said breakwater using rocks, roubles and accropodes, we find that the said....
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....ng the scope of the plant and machinery only for making outward supply of goods and services. In the instant case, it is seen that even when the breakwater project was not commissioned, the plant of the applicant was functioning and they were able to conduct regassification of the liquid petroleum gas received through the ships and make outward supply of the said gas. The regassification plant of the applicant could function, even in the absence of the breakwater wall. It was only during the monsoon, due to heavy winds and tides, that there were restrictions on the applicant in the sense that the ships carrying the Liquified petroleum gas could not be moored on the jetty. Thus, we find that the absence of the breakwater would disrupt the inward supply of raw materials to the applicant through the sea route. This activity may disrupt the outward supply, in absence of enough raw material stock. However, it does not restrict the applicant from procuring the raw materials through the land routes, thereby ensuring continuous outward supply. Further, the breakwater does not contribute in making outward supply of goods or services. It contributes in making inward supply of goods or servic....
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....the words 'Plant or Machinery' used in Clause 17(5)(d) as opposed to the word 'plant and machinery' used in Clause 17(5)(c). Based on this difference and based on the decision of the Hon'ble Supreme Court in the case of Chief Commissioner of CGST Vs. Safari Retreats Pvt. Ltd. And others reported in 2024 (90) GSTL 3 (SC), the applicant has sought to make an argument that the breakwater wall is a plant and has argued that the test of functionality envisaged by the Hon'ble Supreme Court should be considered. 5.16 We find that the applicant in their submissions dated 18.8.2025 have basically relied upon the decision of the Hon'ble Supreme Court in the case of Chief Commissioner of CGST Vs. Safari Retreats Pvt. Ltd. And others reported in 2024 (90) GSTL 3 (SC) and have relied upon the definition of 'plant and machinery' in the popular sense. On the basis of the said decision of the Hon'ble Supreme Court, the applicant has dwelled deep into the definition of plant and machinery, as it is known in common parlance, in the Income Tax Act and the dictionary meaning of the word plant and machinery. They have relied upon various decisions of judicial bodies to augment their argument that th....
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....etreats was deciding on the issue whether the ITC would be available with respect to Clause (d) of Section 17(5) of the CGST Act, 2017. From the decision of the Hon'ble Supreme Court in the said case, it is clear that the main distinction which was pointed out by the Hon'ble Court was that the words used in the clause (c) of the Section 17(5) was 'Plant and Machinery' and the words used in Clause (d) of the Section 17(5) was 'Plant or Machinery'. The Supreme Court then went on to the Explanation given under Section 17 which defined the meaning of the term 'Plant and Machinery' and came to a conclusion that the explanation covered only the term 'plant and machinery' which is different from the expression used in clause (d) of Section 17(5) i.e. 'Plant or Machinery'. The Hon'ble Supreme Court then proceeded to examine the definition of the word Plant and held that since the GST Act does not provide any definition for the said expression, the definition of 'plant' as is understood in common parlance should be considered. It was on the basis of such an understanding that the Hon'ble Supreme Court went on to define the meaning of the term 'plant' in common parlance and envisaged the tes....
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....nes "plant and machinery". The explanation seeks to define the expression "plant and machinery" used in Chapter V and Chapter VI. In Chapter VI, the expression "plant and machinery" appears in several places, but the expression "plant or machinery" is found only in Section 17(5)(d). If the legislature intended to give the expression "plant or machinery" the same meaning as "plant and machinery" as defined in the explanation, the legislature would not have specifically used the expression "plant or machinery" in Section 17(5)(d). The legislature has made this distinction consciously. Therefore, the expression "plant and machinery" and "plant or machinery" cannot be given the same meaning. It may also be noted here that the expression 'plant or machinery' is used in dealing with a peculiar case of goods or services being received by a taxable person for the construction of an immovable property on his own account, even when such goods or services or both are used in the course of furtherance of business. Therefore, if the expression "plant or machinery" is given the same meaning as the expression "plant and machinery" as per the definition contained in the explanation to Section 17, ....
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.... to be interpreted by taking recourse to the functionality test. 5.19 In the instant case, we find that the work of construction of the breakwater project was handled by M/s. Larsen & Toubro. The applicant themselves has stated that the services provided by the said contractor was a works contract service. Therefore, we find that the clause which restricts Input Tax Credit in such cases would be clause 17(5)(c) and not 17(5)(d). This is a case of supply of works contract for which ITC is restricted under clause 17(5)(c) which restricts availment of 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. Therefore, primarily, we find that the decision of the Hon'ble Supreme Court in the case of M/s. Safari Retreats is not applicable to the facts of this case and the applicant's reliance upon the decision of the Hon'ble Supreme Court in the case of Safari Retreats is misplaced as their case is not covered by Clause 17(5)(d) of the CGST Act, 2017. In the instant case, the definition of Plant and Machinery provided under Section....
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.....2025 and the various case laws relied upon by them with respect to the functionality test and the meaning of the term 'plant' in various judicial forums, especially the Income Tax Act and other Acts become inapplicable in the present case. Since the definition of Plant and Machinery has been provided in the CGST Act, the same has to be taken into consideration for deciding whether the applicant is eligible to avail ITC on the breakwater project. 5.22 We find that the other question on which ruling is sought by the applicant is whether the services of the works contract by the contractor is covered under item (vii) of S.No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.6.2017. In this regard, we find that the advance ruling authority is governed by the provisions of chapter XVII of the CGST Act, 2017. As per Section 95 of the CGST Act, 2017, the term 'advance ruling' means a decision provided by the authority to the applicant on matter or questions specified in sub section 2 of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Since the breakwater project is constructed by a contractor, ....