The GAAAR confirmed the GAAR's ruling that M/s. Wago Private Limited is not eligible for ITC on air conditioning, cooling, and ventilation systems. The court held that these systems are works contracts for immovable property, not plant and machinery, and thus fall under blocked credit provisions.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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GUJAlt.{I' APPELLATE AUTHORITY FOR ADVANCI,IIIULING
2ffl'o* GOODS AND SEITVICES TAX YMABKET
D/5, IIAJYA KAIT BHAVAN, ASHIIAM ROAI), AHMEI)AI]AI)
ADVANCE RULTNG(APPEAL) NO. GUJ/GAAAIVAPPF. AL.I 202 4 I 02 (lN APPLICAI'ION NO. Advance Ruling/SGS1'&CGS'17202 1/AiV2 I )
Dale :21 . Q52024
| Nameandaddressofthe appellant |
M/s.WagoPrivateLimited, Block No.94,NH8, VillageVadsala-Varnama, Vadodara, Gujarat391 242 |
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|---|---|---|
| GSTIN oftheappellant | 24AAACWO947R | |
| JurisdictionOffice | OfficeoftheAssistanlCommissionerol'Statc lax,Unit-44, Division-5,Rangc-11,Vadodara. |
|
| Advancc [)ate RulingNo.and |
Guj/GAAR/IV3312021dated30.7 .2021 | |
| I)ateofappeal | 06.09.2021 | |
| [)ateofPersonalHearing | t: | 20.2.2024 |
| Presentforthe appellant | Shri ChitreshGupta andShriIlSl.ralrna. |
At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Serviccs'l'ax Act, 2017 (hereinafter referred to as the 'CGST Act,,2017' and 'GGS'I' Act,2017') arc pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mcntion is pa(icularly madc to such dissimilar provisions, a reference to the CGS'I' Act,2017 would also rnean rclerence to the corresponding similar provisions in the GGST Act,2017.
) IJefore the GAAR, the appellant had raised thc following question viz "The applicant wishes to know the admissibility o/'input tax credit (lTC) of GSl' paid on the procurement of plant and machines f mentbned in para 3- above) including the services of installation and commissioning the same in lerms of
the provisions of section l6 and l7 of the CGSTAct, 2017."
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Vcry briclly put, the lacts are that the appellant was establishing a new factory in vadodara, Gujarat. Prirnarily, the appellant wanted to know whether they werc cligible for I'l'C in rcspect of [a] Air conditioning and cooling system and lbl Vcntilation system -Plant and Admin.
5 'l'hc GAAIi. arrivcd at thc above ruling on tl.rc basis of thc below rncntioncd
Iindings vrz:
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averrnents viz
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I)iscussio n s and Findings:
Sct'rion 16. liligibiliry und conditictns for taking input tax credit.-
(1) l^,cry registered person shall, subject lo such conditions and restrictions as may be prc.scrihed and in the ntunner :specified in section 19, be entitled to take credit oJ'inp lax churged on any supply o./ goods or serttices or both to him which are used or intendcd to be u.red in the course or.furlherance of his business and the said ttmount shall be credited to lhe elec'tronic credit ledger of such person.
Section I7.. A rtionntcnl o credit ancl bbcked credits
(1) 11/hcre the goods or services or bolh are used by the registered person portly./br the pltrposc of any businc.rs und partly .fbr olher purposes, the amounl of credil .rholl be re.\lrictcd to so much o/ lhe input tor as is allributoble to the purposes o/ his busincss.
(2) ,llhcre the goods or .services or both are used by the registered per.son partly .for e/fecting taxable supplics including zero-roted supplies under this Act or under the Integruted Goods and Services Tax Act and partly for effecting exempt supplies under the said ,4cls, the amount ol credit shall be reslricted to so much of the input lax os is attrihutuble lo the said taxable supplies including zero-roted supplies.
/5 ) Notv,it hst anding unyt hing contained in sub-section( I ) of .scct ion I 6 and subse tt ion( I ) q/ section l8 input tox crcdit shall not be atailable in respect <t/'the .following, namcly:(c) u'orks conlr cl services when su1tplied for conslruclion of an immovuble property (othcr lhun plant und machinery) ercepl where il is on inpul servitc litr ./rthersuppl;, of worlcscontrocl service:
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(d) goods or services or bolh received by a laxable person.fbr construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or bolh are used in the course or .furlherancc of business.
Explanalion. " lior the purposes of clauses (c) and(d). the expre.s.tion 'conslruction' includes re-conslruction, renoration, additions or ulteral ions or repairs, to the extent qf capitalisation, lo the said immovable property:
Explanation.- I'or the purposes of this Chapter and Chapter Vl, the expression "planl ond machinery" meons apparatus, equipment, ond machinery fixed lo earlh by foundation or struclural support lhot are used .formaking oul]ardsupplyoJ goodsor serticesor bothand includes.such .foundationand structuralsupports but excludes-
(i) land, building or any other civil structures:
(ii) telecommunicalion lowers: and
(iii) pipelines laid outside the.fitctory premises.
I1. 'Imrnovable property' is not defincd under GSI'. Ilowever, irs defincd under section 3(26) of the General Clauses Act, 1897 to include land, bencfits arising out of land and things attached to thc earth, or permancntly fastencd to anything attached to the earth. Likewise, section 3(36) of General Clauscs Act, 1 897, defines "movable property" to mean property of cvery description, except immovable property. Further, section 3 of the Transfer ol Prope(y Act, 1882 stipulates that unless there is something repugnant in the subject or contcxt, "immovable property" does not include standing timbcr, growing crops or grass. Section 3, further, defines the term "attached to the ear1h" to mean (a) rootcd in thc earth, as in the case oftrees and shrubs (b) embedded to carth, as in the case ofwalls or buildings and (c) attached to what is so embcddcd for pemancnt bcneficial enjoyment of that to which it is attached. Thus, on a conjoint reading, "inrrnovable property", essentially means something which is attached to the earth, or permanently lastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply.
t-) Air Conditionine & Coolins systcm and Vcntilation systcm
13.1 The appellant's contention is mentioned in para sapra and is not repcated for brevity. I{owever, his primary contention still being that System description has clearly specified requirements separately lor lact iI tal1.
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cantecn building and seruer room, it cannot be construed as one system merely on accounl of issue of single work order issued to a single vendor; that the invoices do not dcscribc the nature ofsupply because the vendor is supplying various machines and not onc standalonc systcm thus invoices do not contain the description of any systcrr; that the Air conditioning system is nothing but a group of inter-relatcd and inlcr-dcpendcnt machincs perlbrming a desired task; that the TIVAC system is also a rnachinc; that though the machines become paft of an Air conditioning systern, thc individual machincs do not lose their identity; that the HVAC system is also a rnachinc entrusted to providc cooling for all production processes and area and hencc I'['C cannot be disallowed under section 17(5)(c) of CGST Act. Similar grounds havc bccn taken even for the ventilation system installed in Plant and Administration.
13.2 A conjoint rcading of sections l6( 1) and l7(5)(c), iDid, shows that I'['C can bc availcd by a registercd pcrson subject to conditions and restrictions prescribed on any supply of goods or services or beth, which are used or intended 1o be used in thc course of furtherance ol'his business. The restrictions imposed [as far as thc prcscnt contcxt is ooncernedl is that ITC is not eligible for works contract scrviccs when supplicd for conslruction of any immovable property except when it is an input scrvicc for further supply of works contract service. The only exception being when thc works contract servicc is supplied for construction of plant and machinery. Thc scction lurther gocs on to dcfine plant and machincry.
13.3 Now, as per www.electicalworkbook.com in a central air-conditioning system, all the componcnts of the system are grouped together in one central room and conditioned air is distributed from the central room to the required placcs through exlcnsivc duct work. The whole system can be divided into three parts. i) Plant room, which includes compressor, condenser and motor ii) Air handling unit (ALIU room) iii) Air distribution system (Ducting)
13.4 'l'hc plant room is localcd away from the room to be air conditioned. Othcr componcnts are grouped togcther in a Al{U and conditioned air is circulated through air distribution system i.e. ducting with the help of fan or blower to the room to bc air-conditioncd.'l'he air, which is to be conditioned, is directly allowed to flow over thc cvaporator coil. I-ow pressure and temperature refrigerant passing throu cvapol'ator coii absorbs heat lrom the air. Thus, the air gets cooled.
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13.5 From the details mentioned in para 10 of the impugned ruling dated 30.7 .2021, we find that the work order awarded to IWs. Skai Air Control P I-ld., to supply, install and commission IIVAC works for proposed factory, asscmbly, administration, staff facility & associated works. The work order includcs amongst other things even the maintenance and warranty of the air conditioning and cooling system and the ventilation system. Thus the averment raised that the air conditioning and cooling system and ventilation system, cannot be trcated as onc system and that the vendor is supplying various machines and not one standalone systcm and that the Air conditioning system is nothing but a group of inter-relatcd and intcrdependent machines performing a desired task; that they do not lose their identity, is not a legally tenable argument. It is evident, from the photographs reproduced in the impugned ruling dated 30.7.2021 at para 5.1, the Air Conditioning and cooling system and ventilation system becomes a part ofthe building once it is installcd and thereby an immovable property.
13.6 It is in this context that we would likc to relcr to CBEC's [now CBICI Order No. 581112002-CX dated 15.01.2002, wherein under Para 5(iii), with rcgards to l{efrigeratiorV Air-Conditioning Plants, it is mentioncd as follows:
"5(iii) llefrigeration/Air conditioning plants. These are hasically systems comprising oJ' compressors. ducting, pipings, insulalors and somelimes cooling tou,ers etc. 1'hcy arc in lhe nature ol systemsqnd are nol machines as a whole. They come inlo exislence only by assembly and connection of various components and parls.'l'hough each componenl is dtniable. the refrigeration/air conditioning system as a v,hole cannol be considered to be excisable goods. Air conditioning unils, howeyer, would continue lo remain dutiable as per lhe Central l*cise Tarif."
Taking inference from the above Board's circular we find that the supply of Air Conditioning & Cooling system & Ventilation system lalls undcr thc catcgory of works contract service supplied for construction of an immovable propefty. We would also like to rely on the judgement of the Hon'ble Supreme Court in the casc of Globus Stores P. Limited 12011 (267)ELT 435 (SC)l wherein it was hcld thar airconditioning plant is an immovable properfy.
- In the present appeals also, we are concerned wilh the air-condilioning plunl which is lhe santa good as that o/ Virdi Brothers (supro).'l'he learned counsel appearing.fbr the oppellant. however, has drav,n our allention lo the decision o/ this court in Commis.sioner o[('antral Excise. Ahmedabad v. Solid & Correcl lingineering Works - 2()10(252 ) li.1..7 181. In the said decision, this court had considered thc case o.f setting qt of Asphalt Drum/Iktt Mix plant. Apart Jiom the ./act that the aforesaitl good is differenr fi.om the good in queslion, even lhe circular which i.s reJerued to and relied upon by this Court in ofVirdi Brothers (Supra) was not considered in thc said dccision us tha subject a totally d i/Jirenr. Besides the oir-conditionin lottt rvtrs ott inuttovuble trt Asphalt drum/Hot mix plant is a movahle article. T'herelbre, in our consid, ol)
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thc./Acls o/ both lhe cuses ure difJbrent and. lhere/bre, distinguishable. l.br what is required to be decided in the present case stands already decidecl by this court in Virdi Brothers (supra1. v'hich applie:; to the case in honcl u,ithfull force.
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13.7 As thc installation of the air conditioning and cooling system and vcntilation system via a works contract service as pointed out above, makes it an irnmovable propcrty, it ceascs to be a plant and machinery.
l-6 (Samir Vakil) Mcmhcr (SGST)
(B V Siva Naga Kumari) Member (CGST)
Placc : Ahmcdabad Darc:21 .012024
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3 issues framed by the court
Whether the appellant is eligible for input tax credit on the supply of air conditioning, cooling, and ventilation systems.
Whether these systems constitute 'plant and machinery' or 'immovable property' when installed and commissioned as part of a works contract.
Whether the Blocks of Credit under Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017 pertain to the appellant's specific supply.
Colour shows how this judgement treated each authority
Municipal Corporation of Greater Bombay v/s Indian Oil Corporation Ltd.Referred¶32
1997 Suppl. SCC 181 · Who else cites this
Virdi BrothersFollowed¶97
[2011 (267) ELT 435 (SC)]
Commissioner of Central Excise, Ahmedabad v. Solid & Correct Engineering WorksDistinguished¶98
2010 (252) ELT 181
3 provisions across 1 enactments
M/s. Wago Private Limited
Gujarat Appellate Authority for Advance Ruling
Samir Vakil
B V Siva Naga Kumari
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
