Dismissed

Order No. Cg/Aaar/ 03/2019-20 of M/s Nmdc Limited, Bacheli

GST AAAR3 Sept 2019Order No. CG/AAAR/ 03/2019-20

Case brief

AI extract

What is this about?

Appellant appealed an Advance Ruling Order allowing Input Tax Credit on lighting towers and walls. This bench distinguished pre-decisions and held civil structures for lighting are taxable works, not 'plant and machinery' as they lack nexus with outward supply, dismissing the appeal and upholding the order.

What did the court decide?

The appeal filed by M/s NMDC against the Advance Ruling Order is dismissed, and the impugned AAR order is upheld.

Order No. Cg/Aaar/ 03/2019-20 of M/s Nmdc Limited, Bacheli — GST and Indirect Tax | GST AAAR (2019)

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excisable or immovable property). The mono vertical crystallisers is fixed on solid the court held that goods which are attached to earth and thus become immovable the issue was whether mono vertical crystallisersis goods (in which case it would be RCC Slab. It consists of bottom plates, tanks, coils, drive frames, supports etc. It is a the said product has to be assembled, erected and attached to the earth by a did not satisfy the test of being goods within the meaning of the Act. It held that tube mill or welding head is immovable property. In the case of Mittal Engineering Works, tall structure rather like a tower with a platform. It was decided by the Court that foundation and therefore not goods but immovable property.

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fertilizer is 'goods' or 'immoveable property. The Apex Court held that the same is immoveable property and observing as under:-

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6.9 In the case of Duncans Industries Ltd. v. State of U.P. & Ors on 3 December, 1999 Hon'ble Supreme Court had to decide whether the 'plant and machinery' in the

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_intended to be temporary or permanent. A careful perusal of the agreement of sale and property or an immovable property, depends upon the facts and circumstances of each the conveyance deed along with the attendant circumstances and taking into "The question whether a machinery which is embedded in the earth is movable case. Primarily, the court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such embedment was consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the same as a fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of con~eyance also ~hows ~ithout any doubt t~~t they were set up permanently

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,.,., ~ "::C.-~J,;r" ::C.-~J,;r" -~J,;r" J,_;r" ,P ,:?<id¥_ ~ . ..z}'J ..z}'J ~1>-NCE.Ru(1. ~~ • 'i '<o .. ~G' G' 'd_'<'t- ;(..-, --...;;;;=•:::;::::;·, ;,,-~, ~,

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,.,., ~ "::C.-~J,;r" ::C.-~J,;r" -~J,;r" ~J,;r" ,P ese machines were embedded was to use the plant as a factory for the manufacture · the land m question with a view to operate a fert1/,zer plant and the same was not ~ . ..z}'J ..z}'J ~~ • bedded to dismantle and remove the same for the purpose of sale as machinery at . a:: y point of time. The facts as could be found also show that the purpose for which· 'i '<o .. ~G' G' ;,,-~, ~, ;(..-,

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'd_'<'t- of fertiliser at various stages of its production. Hence, the contention that these

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:::;::::;·, ·, machines should be treated as movables cannot be accepted."

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,... '

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6.10 In view of the discussions supra and as works contract, covers in its ambit only cert~ n works perfonned on immovable property we in affirmation with the findings of the AA R and more so with no visible intention to dismantle the said project for lighting and t hese being intended to be used for a fairly long period of time and on the basis of the scope of work itself as forthcoming from the contract agreement supra between the Appe llant M/s NMDC and M/s Bajaj Electricals, come to the considered conch1sil,n that the res ul tant structures are civil structures with found at ions ~rnd ,lt'l' immo vable in nat ure.

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l\ ,Ri.' 22 127

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- . wa~chtower which comprises of items like street poles, fittings, aviation lamps, equipment. The test of immovable property is not relevant for plant and machinery

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tax~s. ~aid on "various items will be eligible if the said lighting project satisfies the explanation to sec 17(5) (c) and (d).

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definition of plant and machinery' Credit unless otherwise restricted. The restriction of ITC is only on the telccom towers, pipelines which are not treated as plant and machinery by virtue of

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1. -I Now coming to the oth er issue raised by the Appellant, viz. whether credit of the as section 17(5)(c) and (d) exclude plant and machinery from immovable property.

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switch box, pipes for laying the cables would qualify as an apparatus or an Since, plant and machinery are excluded from immovable property, construction and other activity in relation to plant and machinery shall be eligible for Input Tax 1 and that Lighting of plant road boundary &

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7 .1 As already discussed in the preceding paras, Input Tax Credit provisions restrict ITC even when construction activity do not fall into the scope of works contract. However, works contract and construction activity is eligible for Input Tax Credit if

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credit of works contract services for works to be performed on immovable property and also restrict the credit of construction related activity of immovable property done in respect of plant and machinery.

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7_2 Thus, Section 17 (5) (c) and (d) would not apply if the expenditure is in relation to a

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Plant & Machinery.

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Explanat1on.--F1 th, purpo apparatus equipment, and machinery fixed to earth t th;t are used for making outward supply of

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"plant and machmery mea~s ses of this Chapter and Chapter VI, the expression

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goods or services or both an me u excludes-

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Term 'Plant & Machinery' is defined in explanation to section 17 as under: by foundatio~ or structura :po~es such foundation and structural supports but

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(i) land, building or any other civil structures;

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(ii) telecommunication towers; and

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·ct tl f ctory pre mises.

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(iii) pipelines laid outs1 e 1e a

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, ,. · . ,,r

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7.3 "Constru ction 1s . . to include . . -. /' r e . -co tion to the said 11.,1, 11, < , i11t 111(1\·uhl,· ,,,.0110 ·1.r alterations or rep uu .,, · · tion to section 17(:,)(c) and (d) for t lH'

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" · d fi ned und er exp ana ac c '""11·'

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purpose of th ese prov1 s1ons · .. to the e rte 11I of c 0 /1 11" l,\u ' , 1 ffno wlf io11.

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· . . ·ti m

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~ ( ': I - r ~ -

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Works contract may or may not be a construction.

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7.4 Thus, Plant and machinery has been specifically defined as any equipment, goods or services. Plant and machinery to specifically exclude telecom towers, pipelines etc. As per the definition of works contract, the works contract interalia include construction of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. On the other hand Construction has been defined under explanation to section 17(5) (c) and (d) as reconstruction, repairs, renovation, additions etc. to an immovable property the cost of such work is capitalised. Thus, Construction activity will not qualify as works contract if there is no transfer of property in goods involved i.e. the contractor is supplying service only without any supply of goods.

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apparatus attached to earth by foundation or structural support used for supply of

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7 .5 On dissection of the above definition, it can be seen that "Plant and Machinery" means:

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(i) apparatus, equipment, and machinery, which is

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(ii) fixed to earth by foundation or structural support, that are (iii) used for making outward supply of goods or services or both and includes such foundation and structural supports

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(iv) but excludes-

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a) land, building or any other civil structures;

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b) telecommunication towers; and

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c) pipelines laid outside the factory premises.

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Accordingly, If a structure resulting from an expense satisfies above definition, then it shall be construed as a Plant and Machinery.

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~-:f-1., • c~ 0 ima ine that these items which eventually are used fo r hghtmg of Plant Road, su µ p y . c , 7.6 The said project for lighting consisting of civil structures as discussed above cannot be said to be used by the Appellant for making outward supply of goods or services 9-Q\JE ,'?u(0,. or both, which is the utmost essential ingredient for being termed as "Plant and / 0 1jf'':.. G' • achinery". In the instant case, Structures/owers meant for Lighting for Plant \ _1(:-s-fj;:l ',,!--§_ upply of goods. As per Section 2(83) of CGST Act, 2017 "outward supply" in relation ·(-?-' to a taxable person, means supply of goods or services or both, whether by sale, · ,:- -- - transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or accedin g, but if assuming for the sake of discussion that these are apparatus/ equ ipment as contended by the Appellant then too it is impla_usile and far-fetched t Boun d ary g Wall and watchtower are use d f or ma I . <.tng a ny " outwar d I ., 'I' o Page 24 I 27 ~ **f~/ 7'<-1!/~J1J** I oad, Boundary Wall and Watch tower can m no way be related to the outward agreed to be made by such person in the course or furtherance of business._ Not _{!>/1.-.:.""~J_

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watchtower will render such nexus tenuous. :1 nexus between the impugned items on which ITC is being claimed and "outward supply''. In the present case the project of lighting of plant Road, Boundary wall and

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/:1pply the term "used for" in the definition for plant and machinery, there ~hCJuld be

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misconstrued by the applicant. These towers, boundary and watch tower by their

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Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been very natu re appears to be nothing but independent civil structures, havi ng no relationship whatsoever with outward supply".

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1. 7 We affirm with the findings by the AAR that "the provisions facilitating availment of

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Th e Appellant have cited reference of decisions of Hon'ble Supreme Court·~ 1r1 the case of Scientific Engineering House Pvt. ltd Vs Commissioner of Income Ta ,-.:, AP and apparatu s/ equipment. The case laws cited by the Appellant are distinguishable to the facts and circumstances involved here in as much as, these items have no nexus whatsoever with the "outward supply" involved here, as already discussed in the preceding para.

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in the case of Pipavav Defense and Offshore Engineering Co. Ltd of Hon'ble Gujrat High Court in support of their claim that these items are "plant"/ machinery I

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~ )' ) 8. 1 The Appellant's reliance of the case laws of Hon'ble CESTAT in the case of SAIL vs altogether distinct and different set of law governing availment of Modvat/ Ccnvat credit under Mod vat /Cenvat Credit Rules. These issue pertains to the c·rstwhile

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· .· - ~ \

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I, ... ~ und_e, Chapter 84. 85 etc. of CET~. 1985. Some c. ase law cited even pertain to the.•

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~ penod when Rule 57Q of ersnvhile Central Excise Rules, 1944 as was ,n vogw.:-, stip ulating therei n the provisions fo r availment of credit

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CCE & ST Raipur and CC£ vs India Cement, Hon'ble Supreme Court in the case of CCE Ltd, in the instant case is misplaced as the issues involved therein pertained to an

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Jf:~~--;·,~~~j Capital gods cenvat crdit regime w~en ~e chapt:r heading / subheading of the· ~'\I vs Jawahar Mills Ltd, Hon'ble HC in the case of CCE Tiruchinapallivs Maris Spinners

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\t :.·':.}J/•1nde~ the definition of capital goods mentioned in the s_tature vi 7_ items falling ~~,-; --~ .:. terns, qualtfied them be111g termed as capital goods , that were spec1.·fically cover,·d

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I ' ~ roi.-~ :::-..

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,d. CfC:- 0 · · :: Of

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in tJH.• case of Nipro Corporarian Pvc.. Ltd bv Mahamshrra A..4R cr ·,r1· n o t h· t . 1<1 .

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taxes paid on "elecrrical works· was allowed. ln rhe cited c 3 si: rk c c- 'd , . f : h .

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8.2 The Appellant in their defense have al so cited reference to the CST r\d\·ann · Ru!.nu l. t <..t t ', ,; \ ~

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• -> .,c., " o

P.ig~ 2S f 17

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allowed for items used at the production floor / production utilities, which is certainly not the case here in as much as here the items are undisputedly being used for lighting of Plant Road, Boundary wall & watchtower and are not for making any Act, 2017, the advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. Corporation Pvt. ltd supra, cited by the Appellant does not in any way relate to the "outward supply", as discussed in the preceding paras. Thus the case of M/s NIPRO present case. It is also worth mentioning here that as per Section 103 (1) of CGST

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~~ • cr1"'1>-

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8.3 Citing reference of the case of Vodafone Mobile Services limited Vs Commissioner Of Credit of taxes paid on telecom towers have been allowed. In this context, it is seen Telecommunication service providers are distinct and distinguishable from the facts are being used for providing the "output service", viz. Telecommunication service, for the said project of lighting of plant Road, Boundary wall and watchtower on which ITC is being claimed and the "outward supply" of the Appellant. In the cited System' (BTS), which enables the telecom company to transmit mobile signals and

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~ thereby render telecom services. Appellant have also given reference to other case distinguishable from the issue in hand. As already discussed it is of utmost case laws are not applicable to the instant case.

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Service Tax (Delhi High Court) dated 31.10.2018, the Appellant's contention was that and circumstances of the case in hand, in as much as in the cited case such towers whereas in the instant case there is no nexus between the impugned items required Vodafone case, 'Capital goods' are the items under specified Tariff headings or parts, components, spares or accessories thereof and these are 'Base Transmission

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}} laws as well all of which in view of the above stated reasons are distinct and that the case of M/s Vodafone Mobile Services Ltd. and other such providers of importance for availing credit, that the nexus test gets established. Thus, the cited

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Having regard to the facts and circumstances of the case and discussions as above, we dispose of the instant appeal filed by M/s NMDC, the Appellant by passing the following order:-

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Page 26 127

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ORDER

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(UnderSection 101(1) of the CGST Act, 2017 and Chhattisgarh Goods and Services Tax Act, 2017)

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N o.STC/ AAAR/03/2019/?- !J

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Raipur Dated .JJ~/09 /2019

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The ruling so sought by the Appellant is accordingly answered as under:-

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Ruling ln view of the above, there is no merit in the appeal filed by the Appellant M/s NMDC having GSTlN 22AAACN7325A3Z3, against the Advance order No. STC/ AAR/02/2019 , dated 24th April 2019 passed by the AAR, Chhattisgarh and accordingly = · d order is upheld.

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