2019(10)LCX0142(AAAR)
AAAR-MAHARASHTRA
Western Concessions Private Limited
decided on 07/10/2019
THE MAHARASHTRA APPELLATE
AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX
(Constituted under Section 99 of the Maharashtra Goods and Services Tax Act,
2017)
ORDER NO. MAH/AAAR/SS-RJ/09/2019-20
Date- 07.10.2019
BEFORE THE BENCH OF
(1) Smt. Sungita Sharma, MEMBER
(2) Shri RajivJalota, MEMBER
GSTIN Number | 27AACCH4231P1ZD |
Legal Name of Appellant | Western Concessions Private Limited |
Registered Address | 12th Floor, Knowledge Park, Hiranandani Business Park, Powai, Mumbai - 400 076. |
Details of appeal |
Appeal No. MAH/GST-AAAR-09/2019-20 dated 10.07.2019 against Advance Ruling No. GST-ARA- 94/2018-19/B-22 dated 22.02.2019 |
Jurisdictional Officer/Respondent | Asstt. Commissioner of CGST, Division-Ill, Navi Mumbai |
PROCEEDINGS
(Under Section 101 of the Central Goods and Services Tax Act, 2017 and the
Maharashtra Goods and Services Tax Act, 2017)
At the outset, we would
like to make it clear that the provisions of both the CGST Act and the MGST Act
are the same except for certain provisions. Therefore, unless a mention is
specifically made to such dissimilar provisions, a reference to the CGST Act
would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and
Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017
[hereinafter referred to as the CGST Act and MGST Act¯] by Western concessions
private limited (herein after referred to as the (Appellant¯) against the
Advance Ruling No.GST-ARA-94/2018-19/B-22 dated 22.02.2019.
Brief Facts of the Case
A. M/s. Western Concessions Private Limited (hereinafter referred to as the
appellants¯) having its corporate head office at 12th Floor, Knowledge Park, Hiranandani Business Park, Powai, Mumbai, is, inter-alia, engaged in
regasification of Liquified Natural Gas and delivering the same to customers.
B. The appellants have obtained registration and holding valid registration
certificate issued under Central Goods and Services Tax Act, 2017 (CGST Act¯).
C. The appellants are setting up a Liquified Natural Gas (LNG) re-gasification
project at Jaigarh port in the state of Maharashtra (hereinafter referred to as
LNG Terminal¯).
D. The LNG Terminal consists of a Floating Storage Re-gasification Unit (FSRU)
with 4 MMTPA re-gasification capacity moored to jetty and has associated
facilities like gas unloading arm, gas pipeline for delivering natural gas from
the FSRU to the National Grid.
E. The re-gasified LNG is required to be inducted into the cross-country
pipeline/national Grid in order to be supplied to the ultimate customer.
F. Therefore, the appellants is constructing a gas pipeline for delivering the
high pressure natural gas from the FSRU to the National Grid.
G. The Development of the project consists of two legs as mentioned below:
i. Setting up of infrastructure facility, i.e., jetty, onshore receiving
facility close to the jetty, etc. for enabling FSRU to re-gasify the LNG; and
ii. Connecting the Terminal with the cross-country gas pipeline to enable supply
of re-gasified natural gas to customer (referred to as the Tie in Pipeline¯).
H. The re-gasified LNG is of no use unless the appellants are able to supply the
gas to its customers. Given the nature of the commodity, i.e., high pressure
natural gas, pipeline is the only technically viable and safe method of supply,
I. The Tie-in pipeline is, therefore, not constructed to provide gas
transportation service to the customers, but it connects the gas terminal to
cross-country pipeline to enable further distribution of gas to the customers.
J. The Tie-in pipeline would be laid under the ground and the length of the
pipeline would be approximately 60 KMs. The sample photographs of FSRU and the
pipeline to be constructed from FSRU to the grid are enclosed in the appeal
paper-book. Further, the approval obtained by the appellants from various
authorities such as Ministry of Environment and Forest, Maharashtra Pollution
Control Board, Petroleum and Natural Gas Regulatory Board, etc. are collectively
enclosed.
K. Section 16 of the CGST Act deals with the eligibility of taking input tax
credit (ITC) and the conditions to be fulfilled by the registered person.
Section 16(1), inter alia, states that a registered person shall be entitled to
take ITC on goods and services used or intended to be used in the course or
furtherance of his business. Section 16(1) is reproduced hereunder for ready
reference:
16. (1) Every registered person shall, subject to such conditions and
restrictions as may be prescribed and in the manner specified in section 49, be
entitled to take credit of input tax charged on any supply of goods or services
or both to him which are used or intended to be used in the course or
furtherance of his business and the said amount shall be credited to the
electronic credit ledger of such person.¯
...emphasis supplied
L. Further, Section 17(5) of the CGST Act provides that in certain cases, input
tax credit will not be available even if the goods or services are used in the
course or furtherance of business. The relevant portion of section 17(5) is
extracted as under:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and
subsection (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 or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business.
¦
Explanation.- For the purposes of 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.¯
¦..emphasis supplied
M. Thus, the restriction on availment of ITC under Section 17(5)(c) and 17(5)(d)
is not applicable in case where the goods or services are used for construction
of Plant and Machinery. However, as per the explanation to Section 17, Plant and
Machinery does not includes a pipeline laid outside the factory premises.
N. The appellants key activity is re-gasification of LNG, which inter alia
includes delivery in a form and manner which is consumable, usable and saleable.
Hence, the provision of the gas to the nearest practical delivery point i.e.
national grid, is an integral and essential part of the economic activity being
carried out by the appellants.
O. Therefore, the Tie-in pipeline connecting the LNG terminal to the National
Grid, which is immovable in nature, forms Plant and Machinery for the querist.
Further, the re-gasification activity would be undertaken by the appellants at
the FSRU, which is not a factory per se.
Application for Advance Ruling
P. The appellants filed an application for Advance Ruling before the Learned
Authority for Advance Ruling, Maharashtra (hereinafter referred to as Ld. AAR¯)
for obtaining an Advance Ruling on the issue as to whether the appellants would
be eligible to avail the ITC of GST paid on goods and services used for
construction of Tie-in pipelines, from the FSRU to the National grid.
Advance Ruling passed by Ld. AAR, Maharashtra
Q. The Ld. AAR, considered the application filed by the appellants and passed
Advance Ruling No. GST-AAR-94/2018-19/B-22 dated 22.2.2019 denying the ITC of
GST paid on goods and services used for construction of the tie-in pipeline and
held as follows -
i. Since the term factory is not defined under the CGST Act, a definition
given in another statute can always be relied upon. As per the Ld. AAR, the FSRU
is covered under the definition of factory under Section of 2(m) of the
Factories Act, 1948.
ii. According to the Ld. AAR, the existence of land or building is not necessary
for anything to qualify as factory, but it is the manufacturing or production
of something that makes a factory.
iii. The Ld. AAR has relied on the decision of Porritts and Spencer (Asia) Ltd.
Vs. State of Haryana [1979 AIR 300] to state that the meaning of factory
should not be restricted only to a building on land, but would also include the FSRU vessel where the activity of re-gasification of LNG takes place in the
present case.
iv. The various equipment fitted to tie-in pipeline constructed by appellants
would not make it an apparatus, equipment or machinery, as every pipeline
would be fitted with such equipment. Hence, it would not qualify as plant and
machinery under Explanation to Section 17(5) of the CGST Act and thus the ITC
in respect of goods and services used for construction of pipeline would not be
available to the appellants.
R. Aggrieved by the above ruling passed by the Ld. AAR, the appellants are
filing the present appeal, inter alia, on the following grounds which are
without prejudice to each other.
GROUNDS OF APPEAL
1. The tie-in pipeline constructed by the appellants would qualify as
plant and machinery. Further. since the pipeline is not laid outside a factory premises, it would not be covered under the exclusion clause of
explanation to section 17(5). Thus, the restriction provided under Section
17(5)(c) and 17(5)(d) would not be attracted.
1.1 Section 16 of the CGST Act deals with the eligibility of taking ITC and the
conditions to be fulfilled by the registered person. Section 16(1) inter alia
states that a registered person shall be entitled to take ITC on goods and
services used or intended to be used in the course or furtherance of his
business.
1.2 Section 17(5) of the CGST Act provides that in certain cases, input tax
credit will not be available even if the goods or services are used in the
course or furtherance of business.
1.3 Clause (c) of section 17(5) restricts availability of ITC in respect of
works contract service used for construction of immovable property, except in
case where it is an input service for further supply of works contract service,
Clause (d) of Section 17(5) bars ITC in respect of goods or service used for
construction of immovable property on assessees own account.
1.4 However, the above restriction on availment of input tax credit will not
apply if the immovable property constructed is plant and machinery. The term plant and machinery¯ is defined in the explanation to section 17 as apparatus,
equipment, and machinery fixed to earth by foundation or structural support that
are used for making outward supply but, inter alia, excludes pipelines laid
outside the factory premises. The relevant portion of section 17(5) is extracted
as under:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and
subsection (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 or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the furtherance of
business.
¦
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.¯
¦.emphasis supplied
1.5 Since, the pipeline in the present case is embedded in the earth, it would
qualify as an immovable property and thus the construction of said pipeline
amounts to a Works contract under Section 2(119) of the CGST Act. Further, for
the reason mentioned in the foregoing paragraphs of this appeal, the tie-in
pipeline qualifies to be a plant and machinery¯ as per explanation to section
17 of the CGST Act.
1.6 Further, since the FSRU which is a vessel would not amount to a factory
premise, the tie-in pipeline connecting the FSRU to the grid would not be
covered under the exclusion clause of the aforesaid explanation.
1.7 Thus, the appellants submit that the restriction provided under Section
17(5)(c) and 17(5)(d) would not be attracted in respect of construction of the
said pipeline. Hence the impugned ruling is liable to be set aside on this
ground alone.
2. The wordings used in the Explanation Clause should be strictly
interpreted. The exclusion clause of Explanation to Section 17(5) of the CGST
Act presupposes that there should be a factory premises, and in order to be
excluded from the definition of plant and machinery, the pipeline should be laid
outside such factory premises. In absence of factory premise, the exclusion
clause would not be applicable.
2.1 The appellants submit that while construing the aforesaid explanation to
Section 17(5), Rule of Strict Interpretation should be applied. The appellants
submit that the one of the principle objectives of implementation of the CGST
Act was to allow seamless flow of Tax-credit to an assessee at each level of
value addition and to avoid to blockage of the credit chain. Hence, the Rule of
strict construction of statue would apply with great force to the GST
legislation, especially to a provision which restricts the availability of ITC
in the hands of the supplier.
2.2 The appellants submit that it is a settled law that a taxing statute has to
be strictly construed and no additional meaning shall be given to the plain
wordings used by the legislation. Reliance is placed on the decision of Supreme
Court in case of Sales Tax Commissioner v. Modi Sugar Mills reported at AIR 1961
SC 1047 wherein the Supreme court observed as under-
In interpreting a taxing statute, equitable considerations are entirely out
of place. Nor can taxing statutes be interpreted on any presumptions or
assumptions. The court must look squarely at the words of the statute and
interpret them. It must interpret a taxing statute in the light of what is
clearly expressed it Cannot imply anything which is not expressed it cannot
import provisions in the statutes so as to supply any assumed deficiency.¯
2.3 Similar view was given in the decision of Supreme Court in case of A.V.
Fernandez v. State of Kerala reported at AIR 1957 SC 657. The relevant portion
of the said judgment is extracted as under -
....lt is no doubt true that in construing fiscal statutes and in
determining the liability of a subject to tax one must have regard to the strict
letter of the law and not merely to the spirit of the statute or the substance
of the law. If the Revenue satisfies the Court that the case falls strictly
within the provisions of the law, the subject can be taxed. If, on the other
hand, the case is not covered within the four corners of the provisions of the
taxing statute, no tax can be imposed by inference or by analogy or by trying to
probe into the intentions of the legislature and by considering what was the
substance of the matter...¯
2.4 Thus, the appellants submit that the exclusion clause pipelines laid
outside the factory premises has to be strictly interpreted. The aforesaid
exclusion clause presupposes that there should be a factory premises, and in
order to be excluded from the definition of plant and machinery, the pipeline
should be laid outside such factory premises.
2.5 The contra positive of pipelines laid outside factory premises is not that
only pipelines laid inside a factory would be covered under plant and
machinery and eligible for availing ITC. The exclusion provided to pipelines
laid outside factory only means that if there is a factory premises, then the
pipelines laid outside such factory premises would not be a plant and
machinery. In case, where there is no factory premise, the exclusion clause
(iii) of Explanation to Section 17(5) would not come into play, and in that case
the pipeline would be covered under plant and machinery.
2.6 The words factory or premises is not defined under the CGST Act.
Therefore, it is pertinent to refer to some dictionary meaning of the term factory and premises which are extracted as under -
Dictionary of the term Factory¯
(i) Oxford Encyclopedic Dictionary (The new Oxford Illustrated Dictionary)
Building or range of buildings with plant for manufacture of goods.
(ii) Collins internet-linked dictionary of Business - Third edition
A business premise used by a firm in the production of goods.
(iii) The New International Websters Comprehensive Dictionary of the
English Language
pl. An establishment devoted to the manufacture of something, including the
building or buildings and machinery necessary to such manufacture; a
manufactory.
(iv) Cambridge International Dictionary of English
A building or set of building where large amounts of goods are made using
machines.
Dictionary meaning of terms premises -
(i) Illustrated Oxford Dictionary
2. (in pl.) a House, building, with grounds and appurtenances.
(ii) The New International Websters Comprehensive Dictionary of the
English Language
4. pl. A distinct portion of real estate; land or lands; land with its
appurtenances, as buildings:
(iii) The Chambers Dictionary
(in PI) the aforesaid (property; law); hence, a building and its adjuncts, esp.
a public house or place of business;
(iv) Blacks Law Dictionary. V Edition
Premises.
In estate and property. Land and tenements; an estate, including land and
buildings thereon; the subject-matter of the conveyance. F.F. Proctor Troy
Properties Co. v. Dugan Store, 191 App.Div.685, 181 NYS 786. The area of land
surrounding a house, and actually or by legal construction forming one enclosure
with it. A distinct and definite locality and may mean a room, especially
building or other definite area, or a distinct portion of real estate. Land and
its appurtenances.
(v) Cambridge International Dictionary of English
(in PI) the land and building owned by someone, esp. by a company or
organization.
(vi) The American Heritage Dictionary of English Language, III Edition
4. premises. a. Land and the building on it. b. A building or a part of building
on it.
(vii) Whartons Law Lexicon, 1976 Reprint Ed
premises is often used as meaning land or houses.
(viii) Cochrans Law Lexicon IV Edition
Premises means houses or lands.
(ix) Earl Jowitt, Dictionary of English Law
Premises...from this use of the word, premises has gradually acquired popular
sense of land or buildings. Originally, it was only used in this sense by
laymen, and it was never so used in well- drawn instruments, but it is now
frequently found in instruments and in Acts of Parliament as meaning land or
houses, e.g., the Public Health Act, 1875. Sec. 4, where premises includes
measures, buildings, lands, easements, tenements and hereditaments, of any
tenure...
(x) Ballentine. J.A., Law Dictionary with Pronunciation. II Edition
Premises - as applied to land, Websters New International Dictionary defines
the word as follows: The property conveyed in a deed; hence, in general, a piece
of land or real estate; sometimes, especially in fire insurance papers, a
building or buildings on land; the premises insured.
2.7 On perusal of the aforesaid dictionary meanings, a Factory would mean any
building or other place where goods are manufactured with machines. Further, the
perusal of the dictionary meaning of the term premises¯ shows that premises
means land, house or building and any land surrounding such house or building.
2.8 Therefore, a conjoint reading of the term factory¯ and premises¯ makes it
abundantly clear that the phrase factory premises used in clause (iii) of
explanation to Section 17(5) can only mean a factory building located on land.
The said phrase has to be strictly interpreted by giving it the general meaning
and cannot be stretched to cover FSRU, which is a vessel capable of navigating
in oceanic waters.
2.9 The Ld. AAR, in the impugned ruling, has held that the a pipeline outside
the factory means a pipeline used to transport some product from factory to end
user and hence the tie-in pipeline which is outside the FSRU i.e. a factory,
would be covered by the said exclusion clause.
2.10 The appellants submit that the aforesaid finding of the Ld. AAR is not
correct as the Ld. AAR has stretched the meaning of the exclusion clause to
cover FSRU which is a vessel, within the meaning of a factory. The appellants
place reliance on the decision of Tribunal in case of Sri Chaitanya Educational
Committee Vs. C.C., C. E. & S.T., Guntur reported at 2016 (41) S.T.R. 241 (Tri.
- Bang.). In the said case, while interpreting the definition of Commercial
Training or Coaching Centre¯ under Section 65(27) of Finance Act, 1994, the
Tribunal held that the exclusion clause of a definition must be strictly
interpreted and the exclusion clause cannot be stretched to give a wider
meaning. The relevant portion of the said decision is extracted as under-
80. The definition of Commercial Training or Coaching
Centre¯ have both inclusive and exclusive part i.e. it may include certain
things and exclude others. The word any¯ e.g. institute or establishment
providing Commercial Training or Coaching in the main part of the definition, is
a word having very wide meaning. It is noted that the definition also
categorically includes coaching or tutorial classes¯. The word includes¯ in the
definition makes it clear that the intention was to make it more extensive. In
this perspective, the exclusion part of the definition suggests a very limited
purpose to pre-school coaching and training centre¯ and any institute or
establishment, which issues any certificate or diploma recognized by law. The coaching or tutorial classes¯ mentioned in the inclusive part of the definition
and it cannot be covered in the exclusive portion of the definition. While
interpreting the definition of Commercial Training or Coaching Centre¯, the
exclusion part must be strictly construed, what is being included in the
definition cannot be excluded, unless it is specifically mentioned. In the
present case, according to the Appellant, they were offering coaching classes to
the students of intermediate standard of their colleges and other colleges for
appearing joint entrance examination of IIT, JEE etc. In my considered view,
when coaching classes¯ have categorically included in the definition, then, it
cannot be excluded by stretching the meaning of exclusion clause of the
definition.¯
¦..emphasis supplied
2.11 In view of the above,
the appellants submit that the wording used in exclusion clause of explanation
to Section 17(5) must be strictly interpreted. Hence, in absence of a factory
premise, the ITC on goods and services used for construction of the tie-in
pipeline would be available to the appellants.
2.12 Thus, the impugned ruling given by the Ld. AAR is liable to be set aside.
3. The FSRU does not qualify as a factory premises. In absence of a
specific definition of the term factory under the CGST Act, the definition of
factory as given under Factories Act 1948 cannot be relied upon.
3.1 The restriction on availment of input tax credit will not apply if the
immovable property constructed amounts to plant and machinery as defined under
explanation to section 17(5). The following two conditions have to be fulfilled
for the Tie-in pipeline to be regarded as plant and machinery in terms of
explanation to Section 17 of CGST Act:
The pipeline should be an apparatus, equipment or machinery used for making
outward supply; and
It should not be covered by the exclusion clause pipeline laid outside the
factory premises¯
3.2 In the present case, the appellants are constructing a Tie-in pipeline to
deliver the re-gasified LNG to the cross-country pipeline/National Grid for
further transportation to the customers. The said pipeline will be laid under
the ground and the length of the pipeline would be approximately 60 KMs.
3.3 For the reasons mentioned in the foregoing part of this appeal, the tie-in
pipeline qualifies to be a plant and machinery¯ as per explanation to section
17 of the CGST Act.
3.4 Further, the term factory has not been defined under the CGST Act.
Therefore, the term factory shall be given the same meaning by which it is
understood in common parlance. In common parlance, a factory is understood to
be a building or similar structure constructed on land, where some manufacturing
activity is undertaken. This is also clear from the various dictionary meanings
of factory as extracted in para 1.11 above.
3.5 Thus, the appellants submit that in absence of a specific definition of
factory in CGST Act, the FSRU which is a vessel, would not qualify as factory
premises. Hence, the exclusion clause under explanation to section 17(5) would
not be applicable in the present case.
3.6 The appellants further submit that in absence of definition of factory
under CGST Act, the definition given under any other statute cannot be imported
to extend the scope of the term factory premises to a FSRU vessel wherein the
regasification activity would be undertaken.
3.7 The Ld. AAR, in impugned order dated 22.2.2019, has held that when the
definition of the factory is not available in CGST Act, a definition given in
some other statute can always be relied upon. Accordingly, the Ld. AAR has
relied on the definition of Factory under Section 2(m) of the Factories Act,
1948.
3.8 The appellants submit that the aforesaid finding given by the Ld. AAR is
incorrect. The appellants submit that the definition of the term factory¯ given
under the Factories Act, 1948 cannot be applied for ascertaining the meaning of
the term factory premises used in clause (iii) of explanation to Section 17(5)
of the CGST Act.
3.9 The appellants submit that to interpret a word used in a statute by using
the definition of said word in other statutes, when they are not dealing with
the same subject, is bad interpretation. In this regard, the Honble Supreme
Court in the case of M/s. Msco. Pvt. Ltd vs Union of India, 1985 AIR 76, held as
under:
But while construing a word which occurs in a statute or a statutory instrument
in the absence of any definition in that very document it must be given the same
meaning which it receives in ordinary parlance or understood in the sense in
which people conversant with the subject matter of the statute or statutory
instrument understand it. It is hazardous to interpret a word in
accordance with its definition in another statute or statutory instrument and
more so when such statute or statutory instrument is not dealing with any
cognate subject.¯
...emphasis supplied
3.10 In the present case, the term factory has not been defined under CGST
Act. Thus, in view of the ratio laid down by the aforesaid judgment, it is
incorrect to adopt the meaning of factory given in the Factories Act 1948 to
interpret the term factory premises¯ used in Explanation to Section 17(5) of
the CGST Act.
3.11 The appellants submit that the Ld. AAR has not given any specific finding
on the aforesaid submission made by the appellants. The Ld. AAR has merely made
a passing remark that in absence of a specific definition in the CGST Act, the
definition of factory given under other statute (Factories Act) can be always
relied upon. The Ld. AAR has not produced any case law to support the aforesaid
finding.
3.12 Thus, the definition of factory given under Section 2(m) of the Factories
Act 1948 cannot be applied to interpret the term factory premises¯ used in
Explanation to Section 17(5) of the CGST Act.
3.13 The appellants further place reliance on the decision of Supreme Court in
case of P.C. Cheriyan Vs. Barfi Devi reported at 1980 AIR 86. In the said case,
the Supreme Court was concerned with the question as to whether lease of
premises granted for carrying on the business of retreading of tyres would
amount to a lease for manufacturing purpose¯ under the Transfer of property
Act, 1882. In the said case, the term manufacturing purpose¯ was not defined
under the Transfer of property Act, 1882.
3.14 The Supreme court held that in absence of a specific definition under the
Transfer of property Act, 1882, the term manufacturing purpose¯ should be
construed in its popular sense. Accordingly, the court held that the process of
retreading of tyres carried on by the lessee did not result in any new
commercially different product and hence the said lease could not be said to be
for manufacturing purpose. Further, the Supreme court specifically stated,
that in such a case, definition of manufacture¯ given under other statutes such
as Central Excise Act, 1944 or Factories Act, 1948 cannot be relied upon to
interpret the term manufacturing purpose under Transfer of Property Act. The
relevant portion of the aforesaid judgment is extracted as under-
The expression manufacturing purposes¯ has not been defined in the Transfer of
Property Act. It has therefore. to be construed in its popular sense.
¦.
The old tyre retains its basic structure and identity. The courts below were
therefore, right in holding that the lease in the present case was not for
manufacturing purposes, and the tenancy had been rightly terminated by thirty
days notice.
Before parting with this judgment, we may sound a note of caution, that
definitions of manufacture¯ given in other enactments, such as, in the
Factories Act or the Excise Act should not be blindly applied while interpreting
the expression manufacturing purposes¯ in Section 106, of the Transfer of
Property Act. In some enactments, for instance in the Excise Act, the term manufacture¯ has been given an extended meaning by including in it repairs¯,
also.¯
¦emphasis supplied.
3.15 In view of the above, the appellants submit that the definition of
factory given under the Factories Act, cannot be relied upon in the present
case. Hence, the finding given by the Ld. AAR in this regard is not sustainable.
3.16 Therefore, the appellants submit that the impugned ruling dated 22.2.2019
is liable to be set aside.
4. Even if the definition given in Factories Act, 1948 is relied upon, the FSRU
which is vessel would not qualify as a factory.
4.1 Without prejudice to the submissions made in the preceding paragraph, even
if the definition of factory given under the Factories Act is borrowed, the
FSRU would not be covered under the said definition. Section 2(m) of The
Factories Act, 1948 which defines the term factory reads as under-
2. (m) factory¯ means any premises including the precincts thereof-
(i) whereon ten or more workers are working, or were working on any day of the
preceding twelve months, and in any part of which a manufacturing process is
being carried on with the aid of power, or is ordinarily so carried on, or
(ii) Whereon twenty or more workers are working, or were working on any day of
the preceding twelve months, and in any part of which a manufacturing process is
being carried on without the aid of power, or is ordinarily so carried on,-
but does not include a mine subject to the operation of the Mines Act, 1952 (35
of 1952)] or a mobile unit belonging to the armed forces of the Union, a railway
running shed or a hotel, restaurant or eating place.¯
4.2 Thus Section 2(m) of the Factories Act, 1948 defines factory as any premises¯ where manufacturing activity is undertaken. In other words, the
aforesaid definition given under the Factories Act presupposes the existence of
a premises
4.3 Since the term premises is not defined under the Factories Act, 1948, it
is pertinent to refer to the dictionary meaning of the term premises.
4.4 The perusal of the dictionary meaning of the term premises¯ as extracted in
para 1.11 above, shows that premises would only mean land, house or building and
any land surrounding such house or building. Hence, even if the definition of
factory given in the Factories Act, 1948 is relied upon, the FSRU, which is
vessel and not a structure on land, would not qualify as a factory.
4.5 The Ld. AAR, in the impugned ruling dated 22.2.2109, has held that The
production or manufacturing process may not be taking place on land but it is
place on ship (FSRU) and the same has to be considered as a factory unit in the
subject case, as the process leads to production of natural gas . Further,
according to the Ld. AAR it is the production of something that makes a
factory, and not the building¯.
4.6 The appellants submit that the aforesaid finding of the Ld. AAR is
incorrect. The appellants submit that the Ld. AAR has overlooked the essential
condition of existence of a premises given under Section 2(m) of Factories
Act, 1948. The appellants submit that only an establishment or facility on land,
where any manufacturing activity takes place, would qualify as factory under
Section 2(m) of the Factories Act, 1948.
4.7 The Ld. AAR in the impugned ruling has also relied on the decision of
Supreme Court in case of Porritts and Spenser (Asia) Ltd. Vs. State of Haryana
reported at 1979 AIR 300. The relevant portion of the said decision which has
been relied by the Ld. AAR in the impugned order is reproduced as under-
But it must be remembered that the concept or textiles is not a static
concept. It has, having regard to newly developing materials, methods,
techniques and processes, a continually expanding content and new kinds of
fabric may be invented which may legitimately, without doing any violence to the
language, be regarded as textiles.¯
4.8 In view of the above, the Ld. AAR has held that even factory should not be
given a restricted meaning. Considering the development in trade and commerce,
factory should not only mean a building situated on land but would also include
a vessel (FSRU in the present case) if any manufacturing activity is undertaken
onboard such vessel.
4.9 The appellants submit that the reliance placed by the Ld. AAR on the
aforesaid decision to state that FSRU shall be considered as a factory is not
correct in law. The appellants submit that the said decision is rather in favor
of the appellants.
4.10 In the aforesaid case, the question for consideration before the Supreme
Court was whether the dryer felt manufactured by the appellant-assessee would
qualify as textile, to fall under Item 30 of Schedule B of Punjab General
Sales Tax Act, 1948 (hereinafter referred to as Punjab Sales Tax Act¯), and
thereby eligible for exemption from payment of sales tax. The term Textile was
not defined anywhere under the Punjab Sales Tax Act.
4.11 In that case, the Supreme Court held that where a word used in a Taxing
statute has a scientific/technical meaning and an ordinary meaning used in
common parlance, such word shall be interpreted in the light of the meaning
given to it in common parlance. The relevant portion of the said decision is
extracted as under-
3. Now, the word textiles is not defined in the Act but it is well settled as
a result of several decisions of this Court of which we may mention only a few,
namely, Ramavatar Budhaiprasad v. Assistant Sales Tax officer, Akola and M/s.
Motipur Jamindary Co. Ltd. v. State of Bihar and the State of West Bengal v
Washi Ahmed that in a taxing statute words of every day use must be construed
not in their scientific or technical sense but as understood in common parlance.
¦
5. There can, therefore, be no doubt that the word textiles in Item 30 of
Schedule B must be interpreted according to its popular senset meaning that
scene which people conversant with the subject-matter with which the statute is
dealing would attribute to it¯
¦¦¦.
6. ¦.Dryer felts are, therefore, clearly woven fabrics and must be held to fall
within the ordinary meaning of the word textiles. We do not think that the
word textiles has any narrower meaning in common parlance other than the
ordinary meaning given in the dictionary, namely, a woven fabric. There may be
wide ranging varieties of woven fabric and they may go on multiplying and
proliferating with new developments in science and technology and inventions of
new methods¯ materials and techniques, but nonetheless they would all be
textiles. .............. Where a word has a scientific or technical meaning and
also an ordinary meaning according to common parlance, it is in the latter sense
that in a taxing statute the word must be held to have been used, unless
contrary intention is clearly expressed by. the Legislature. The reason is that
as pointed out by Story, J., in 200 Chest. (of Tea (supra), the Legislature does not suppose our merchants to be naturalists, or geologists, or botanists¯. But
here the word textiles is not sought by the assessee to be given a scientific
or technical meaning in preference to its popular meaning. It has only one
meaning. namely, a woven fabric and that is the meaning which it bears in
ordinary parlance. It is true that out minds are conditioned by old and
antiquated notions of what are textiles and, therefore, it may sound a little
strange to regard dryer felts as textiles. But it must be remembered that
the concept or textiles is not a static concept.¯
¦..emphasis supplied
4.12 Even in the present case, the word factory has not been defined under the
CGST Act. Thus, in view of the aforesaid decision of Supreme Court relied upon
by the Ld. AAR, the term factory used in Explanation to section 17(5) should
be understood in accordance with the meaning given to it in common parlance and
should not be interpreted in light of the technical definition given under the
Factories Act, 1948.
4.13 The appellants submit that Ld. AAR has selectively relied only on a portion
of the aforesaid judgment, without appreciating the ratio laid down by the
Supreme Court, which in the present case supports the contention of the
appellants. Thus, the finding given by the Ld. AAR is incorrect to that extent.
4.14 Thus, the impugned ruling dated 22.2.2019 is liable to be set aside.
5. The tie-in pipeline being created by the appellants indeed qualifies as
a plant and machinery
5.1 As per the Explanation to Section 17(5) of the CGST Act plant and
machinery¯ means any-
apparatus,
equipment, and
machinery
which is fixed to earth by foundation or structural support and is used for
making outward supply.
5.2 The terms apparatus, equipment and machinery are not defined under the
CGST Act. It is settled position of law that in absence of definition in the
statute, the words used in the statute should be understood in their natural and
ordinary meaning. The dictionary meaning of the aforesaid terms are as under:
P Ramanatha Aiyars Advanced Law Lexicon:
Apparatus is a compound instrument designed to carry out a specific function
or for a particular use.
Apparatus means something which is inclusive of some other appliance.
Apparatus are the implements used in an operation or activity.
Equipment is an act of equipping or fitting, or the state of being equipped;
to supply with whatever is necessary to efficient action in the way.
Equipment is a thing which is used for a particular purpose.
Webster Comprehensive Dictionary
Apparatus - A complex devise or machine for a particular purpose: an x-ray
apparatus.
Apparatus - An integrated assembly of tools, appliances, instrument, etc.
operating to achieve a specified result.
Equipment - Whatever constitute an outfit for special purpose
Machine - Any combination of mechanics for utilizing, modifying, applying, or
transmitting energy, whether simple, as a lever and fulcrum, pulley, etc. or
complex, as a Fourdrinier paper-making apparatus.
Blacks Law Dictionary
Equipment - The articles or implements used for a specific purpose or
activity.
Machine - A devise or apparatus consisting of fixed or moving parts that works
together to perform some function. - Also termed apparatus.
5.3 The appellants submit that the tie-in pipeline being constructed by the
appellants is not merely a passive structure, but a machinery for transportation
of gas from the FSRU to the national grid.
5.4 In order to understand the nature of the Tie-pipeline being constructed by
the appellants, it is pertinent to understand the various components, equipment
and devices forming part of the pipeline.
i. Pipes - These comprises of the hollow pipes laid underground from the
Jaigarh Terminal to the National grid.
ii. High pressure Un-loading Arm - The high pressure unloading arm installed
at the Jaigarh terminal is a special equipment for unloading the high pressure
Gas from FSRU into the Tie-in Pipeline.
iii. Isolation valves Check valves-Check valves are installed to ensure
that the flow of Gas is unidirectional. Isolation Valves are installed on the
pipeline for controlling flow (to restrict the flow or allow the flow).
iv. Metering System - The metering system is installed to measure the
quantity of gas supplied. This system is installed at the Jaigarh Terminal i.e.
the starting point of pipeline and at Dabhol Terminal i.e. the end point of
pipeline before it is connected to National Grid.
v. Pressure Regulating System - This system is installed at Dabhol
Terminal to control the pressure at which such gas is supplied
vi. Gas Chromatograph - Chromatograph is a special equipment fitted near
the metering device which helps in determination of the composition of the
natural gas re-gasifed from the FSRU.
vii. Pig Launcher/Pig Scrapper - This equipment are used for cleaning the
debris from inside the pipeline. These equipment also facilitate to monitor the
inside condition of pipeline. These are located at the starting point and end
point of the pipeline.
viii. Bends- The bends is a part used to connect the two ends of the
pipeline where there is turn or curve in the directions of the pipeline.
ix. SV Station - The appellant has 3 SV stations at different point along
the course of the pipeline. SV stations help in isolating one section of the
pipeline from another section in case on any emergencies like leakage in
pipeline etc.
x. SCADA Monitoring system - This system is installed for supervision and
control of pipeline remotely and for data / parameters acquisition remotely.
xi. Power Generation Systems (Diesel Generators & Solar Panels) -These
are installed at Terminals and SV Stations for generation of secondary power or
back up power.
xii. Filtering- This equipment is located at the start point and end point
of the pipeline for filtration of Gas thereby separating any debris or solid
contamination.
xiii. Gas Detention/ Leak Detection system - The Gas and leak detection
systems are used to identify whether any leak has occurred in any part of the
pipeline network.
xiv. OFC cables - These are laid down alongside the pipeline for
collection and transfer of data relating to the tie-in pipeline.
xv. Gauges & Transmitters- These instruments are installed in pipeline
for measuring and transmitting parameters like pressure and temperature of gas.
xvi. Cathodic Protection System - This system is installed in pipeline
for controlling the corrosion of pipeline.
5.5 The aforesaid equipment and machineries allow the appellants to induct,
control, manage and monitor the flow of gas in the tie-in pipeline and such
equipment together comprise the tie-in pipeline, which acts a machinery for
transportation of gas to national grid.
5.6 Thus, the appellants submit that the tie-in pipeline qualifies as plant and
machinery as defined under Explanation to Section 17(5) of the CGST Act.
5.7 The Ld. AAR in the impugned ruling has held that the pipeline is not a
apparatus, equipment or machinery since every pipeline is fitted with various
equipment and the pipeline constructed by appellants is not an exception. The
Ld. AAR has further held that since a specific description of pipeline is
available, it cannot be brought under the meaning of apparatus, equipment,
or machinery.
5.8 The appellants submit that the aforesaid finding of Ld. AAR is incorrect and
not sustainable in law. The appellants submit that the various parts mentioned
above are highly sophisticated equipment which are designed and installed for
the purpose of transportation of high pressure gas. The pipeline constructed by
the querist cannot be compared with a typical pipeline for carrying water, which
would not contain the aforesaid equipment.
5.9 Further, the appellants submit that an exclusion clause of a definition can
only exclude something which is already covered by the main body of the
provision. Therefore, the fact that pipelines laid outside factory premises is
excluded from the definition of plant and machinery¯ given under explanation to
Section 17(5), would itself mean that such pipelines would be otherwise covered
under apparatus, equipment, or machinery and hence qualify as plant and
machinery under explanation to Section 17(5).
5.10 In this regard, reliance is placed on the decision of Commissioner of Sales
Tax, Bombay Vs. Ravi Trading Company reported at 2018 (9) G.S.T.L. 250 (Bom.).
The relevant portion of the said decision is extracted as under -
14. The aforesaid definition of sale price¯ is
capable of same interpretation of the expression sale price¯ considered by the
Apex Court in the judgment in Hindustan Sugar Mills case, cited supra. The
first part says that sale price means the amount of valuable consideration
paid or payable to a dealer for any sale made and the only relevant question to
be asked in respect of it is, what is the amount payable by the purchaser to the
dealer as consideration for safe and not as to what is the net consideration
retainable by the dealer, The latter part of the definition of sale price in
the present case also contains a clause of exclusion of the amount of the cost
of insurance for transit or of installation when such cost is separately
charged. It will, therefore, have to be held that the exclusion clause does not
operate as an exception to the first part of the definition and it merely enact
an exclusion out of the inclusion clause and takes out some thing which would
otherwise be within the inclusive clause. It has to be held that the exclusion
clause can be availed of by the assessee only if the State seeks to rely on the
inclusive clause for the purposes of bringing the particular amount within the
definition of sale price¯.¯
¦emphasis supplied
5.11 Further reliance is also
placed on the decision of Supreme Court in case of Sardar Gurmej Singh Vs.
Sardar Partap Singh Kairon reported at AIR 1960 (SC) 122 wherein the Supreme
court observed as under-
9. To accept this argument is to impute to the Legislature want of
precision. The words revenue officers¯, in whatever sense they are used, cannot
obviously comprehend officers who are not revenue officers, and in that
situation there is no necessity to exclude such officers from the group of
revenue officers. The Legislative device of exclusion is adopted only to exclude
a part from the whole, which, but for the exclusion, continues to be part of it.
¦¦¦¯
¦.emphasis supplied
5.12 Thus, in view of the above, the appellants submit that the exclusion clause
to Section 17(5) would itself mean that a pipeline would be otherwise covered
under apparatus, equipment, or machinery and hence qualify as plant and
machinery under explanation to Section 17(5).
5.13 Thus, the appellants submit that the impugned order of AAR is liable to be
set aside.
Personal Hearing
6. We had granted personal hearing to the Appellant, in the present matter, on
04.10.2019. Accordingly, the letter informing the Appellant about the date and
time of the personal hearing to be conducted, had been issued on 27.09.2019. The
said letter informing the schedule of the personal hearing was also communicated
to the Appellant through e-mail, and the receipt of the same was also confirmed
telephonically from them.
7. However, the Appellant sought adjournment in the matter vide their letter
sent via e-mail dated 03.10.2019. Here, it is pertinent to mention section
101(2) of the CGST Act, 2017, which provides as under:
the order referred to in sub-section (1) shall be passed within a period of
ninety days from the date of filing of the appeal under section 100 or a
reference under sub-section (5) of section 98.
8. Thus, on perusal of the above provision, it is revealed that any order in the
appeal filed before the Appellate Authority for Advance Ruling has to
essentially to be issued within the period of 90 days and not beyond that under
any circumstances whatsoever it may be. Hence, bound by the above provision of
the act, we were not in a position to adjourn the above said personal hearing,
which was scheduled on 04.10.2019 due to the dearth of time.
9. In view of the above, we proceed to discuss the subject matter of the appeal
on the basis of the written submissions, records, and documents filed by the
Appellant, and which are available on record before us.
Discussion and Findings
10. We perused the entire written submissions filed by the Appellant, which
included the facts of the case and various grounds of the appeal, challenging
the impugned Advance Ruling pronounced by the Authority for Advance Ruling (AAR).
We also perused the impugned advance ruling, wherein the Authority had held that
the Appellant was not eligible to avail ITC of the GST paid on goods and
services used for the construction of the Tie-in pipeline or delivery of
re-gasified LNG from FSRU to the National Grid. The ruling made the AAR was
primarily based on the following observations:
(a) that the FSRU is factory and that the pipeline under question is to laid
outside the factory premises;
(b) that the said pipelines does not qualify to be an equipment, apparatus or
machinery for the purpose of claiming ITC;
(c) hence, the restriction on availment of ITC under Section 17(5)(c) and
17(5)(d) is rightly applicable in the present case.
11. However, the Appellant vide their written submissions, beset with various
case laws and contentions in their favor, which they filed before us challenged
the ruling pronounced by the Advance Ruling Authority, and has prayed to set
aside the impugned advance ruling.
12. On perusal of the entire case records available with us, the moot issues
before us are as under;
(i) Whether FSRU, where the re-gasification of the LNG is carried out for
delivery to the National grid, will be construed as factory or otherwise.
(ii) In case the same is held as factory, whether the tie-in pipeline which is
to be laid can be construed to be the pipeline laid out side the factory
premises or otherwise.
13. It is a matter of fact that the factory has not been defined anywhere in the
CGST Act. Therefore, we proceed to explore the meaning of factory as understood
in the ordinary parlance. Accordingly, we will resort to the meaning provided to
the term factory in the various dictionaries. In this way, we concur with the
contention put forth by the Appellant in so much as they have advocated for the
adoption of the meaning of the factory as understood in the common parlance, for
which they have relied upon the meaning of the term factory provided in the
various dictionaries. As regards the AAR interpretation of the term factory,
wherein they have adopted the definition provided under the Factories Act, 1948
in absence of the definition of the impugned term factory, it is opined that
Honble Supreme Court, vide its judgment in the case of M/s. Msco. Pvt. Ltd vs
Union Of India, 1985 AIR 76, which has been cited and relied upon by the
Appellant in their defense, has abundantly clarified against the adoption of the
definition or meaning of any term, which has not been defined under a particular
statute with which the impugned matter is concerned, from another statute
containing the definition or meaning of that very term. The relevant extract of
the aforesaid judgment is being reproduced herein under:
But while construing a word which occurs in a statute or a statutory
instrument in the absence of any definition in that very document it must be
given the same meaning which It receives in ordinary parlance or understood in
the sense in which people conversant with the subject matter of the statute or
statutory instrument understand it. It is hazardous to interpret a word in
accordance with its definition in another statute or statutory instrument and
more so when such statute or statutory instrument is not dealing with any
cognate subject.¯
...emphasis supplied.
14. Thus, it is observed that the AAR interpretation of the term factory, on
the basis of the definition provided under the Factories Act, 1948 is contrary
to the afore said Supreme Court ruling, and hence not tenable.
15. Now, coming back to the dictionary meaning of term factory, which is also
advocated by the Appellant, first we would like to visit the dictionary meaning
of the term factory as provided under the various dictionaries. The submission
made by the Appellant in this regard is reproduced herein under:
Dictionary of the term Factory¯
(i) Oxford Encyclopedic Dictionary (The new Oxford Illustrated Dictionary)
Building or range of buildings with plant for manufacture of goods.
(ii) Collins internet-linked dictionary of Business - Third edition
A business premise used by a firm in the production of goods.
(iii) The New International Websters Comprehensive Dictionary of the
English Language
pl. An establishment devoted to the manufacture of something, including the
building or buildings and machinery necessary to such manufacture; a
manufactory.
(iv) Cambridge International Dictionary of English
A building or set of building where large amounts of goods are made using
machines.
16. On perusal of the above meaning of the factory provided under the
abovementioned dictionaries, it is revealed that for any structure to be
considered as factory, the following two parameters needs to be met with:
(i) First, it should be building, a set or range of buildings, a business
premises, or an establishment;
(ii) There should be some manufacturing activities being carried out at these
places.
17. Now, to decide what constitutes building, a set or range of buildings, a
business premises, or an establishment, we will again resort to the dictionary
meaning of the terms building, business premises, and establishment, as the same
are also not defined under the CGST Act.
Dictionary meaning of the term Building:
As per the Cambridge Dictionary:
A structure with walls and a roof, such as a house or factory.
As per Merriam Webster Dictionary:
a usually roofed and walled structure built for permanent use (as for a
dwelling)
18. Thus, on perusal of the above dictionary meaning of the term Building, it
is abundantly clear that any structure with the walls and roofs would be
considered as Building. Further, in the above definition, there is no such
constraint that such structure should be situated on the land only. Thus, by
looking at the photographs of Floating Storage Re-gasification Unit (FSRU),
submitted by the Appellant, where this re-gasification of the LNS is carried out
by the Appellant, may very well be considered as the building as there are
enough structures with walls and roofs, which have been built on this processing
unit, which c l early indicates that the FSRU encompasses many buildings, where
the regasification of the LNG is carried out for delivery of the same to the
National grid with the aid of the tie-in pipelines under question.
19. Dictionary meaning of the term establishment:
As per the Cambridge Dictionary:
a business or other organization, or the place where an organization operates:
As per Merriam Webster Dictionary:
a place of business or residence with its furnishings and staff;
20. Thus, on perusal of the above dictionary meaning of the term
establishment, it is crystal clear that the establishment is a place from
where any organization operates. Here also, there is no such restriction that
such place should be located on the land only. It may be any where including the
water bodies, such as sea, oceans etc.
21. In view of the above discussions, it is clearly established that the FSRU,
the place in question, can be considered as building, or establishment. Further,
there is no dispute, by the Appellant, over the activities, carried out at the
FSRU, where the re-gasification of the LNG is taking place, being in the nature
of the manufacturing activity. Therefore, we would not go into the details of
the activities carried out at the FSRU, as the same is accepted as manufacturing
activities.
22. Thus, the impugned FSRU satisfies both the aforementioned essential
conditions of the Factory, and accordingly will be construed as factory.
23. Now, we proceed to the definition of the premises provided under the
various dictionaries. The submissions made by the Appellant in this regard is
reproduced herein under for discussion:
Dictionary meaning of terms premises -
(i) Illustrated Oxford Dictionary
2. (in pl.) a House, building, with grounds and appurtenances.
(ii) The New International Websters Comprehensive Dictionary of the
English Language
4. pl. A distinct portion of real estate; land or lands; land with its
appurtenances, as buildings:
(iii) The Chambers Dictionary
(in PI) the aforesaid (property; law); hence, a building and its adjuncts, esp.
a public house or place of business;
(iv) Blacks Law Dictionary, V Edition
Premises.
In estate and property. Land and tenements; an estate, including land and
buildings thereon; the subject-matter of the conveyance. F.F. Proctor Troy
Properties Co. v. Dugan Store, 191 App.Div.685, 181 NYS 786. The area of land
surrounding a house, and actually or by legal construction forming one enclosure
with it. A distinct and definite locality and may mean a room, especially
building or other definite area, or a distinct portion of real estate. Land and
its appurtenances.
(v) Cambridge International Dictionary of English
(in PI) the land and building owned by someone, esp. by a company or
organization.
(vi) The American Heritage Dictionary of English Language, Ill Edition
4. premises. a. Land and the building on it. b. A building or a part of building
on it.
(vii) Whartons Law Lexicon, 1976 Reprint Ed
premises is often used as meaning land or houses.
(viii) Cochrans Law Lexicon IV Edition
Premises means houses or lands.
(ix) Earl Jowitt. Dictionary of English Law
Premises...from this use of the word, premises has gradually acquired popular
sense of land or buildings. Originally, it was only used in this sense by
laymen, and it was never so used in well- drawn instruments, but it is now
frequently found in instruments and in Acts of Parliament as meaning land or
houses, e.g., the Public Health Act, 1875. Sec. 4, where premises includes
measures, buildings, lands, easements, tenements and hereditaments, of any
tenure...
(x) Ballentine, J.A., Law Dictionary with Pronunciation, II Edition
Premises- as applied to land, Websters New International Dictionary defines
the word as follows: The property conveyed in a deed; hence, in general, a piece
of land or real estate; sometimes, especially in fire insurance papers, a
building or buildings on land; the premises insured.
24. The Appellant, vide their above submission in the form of compilation of the
dictionaries meaning of the term premises, has laid stress upon the argument
that FSRU, a structure not being located on the land, will not be considered as
building, and hence will not come under the meaning of factory as provided under
various dictionaries. They have also underlined the meaning of the premises as
provided under various dictionaries, highlighting that premises will cover the
portion of land only, which are in nature of appurtenances to building, real
estate etc.
25. Now, before setting out to interpret the term premises, we will first take
a look into the context into which this term premises has been used. It is
pertinent to mention that this impugned advance ruling revolves around the
single core issue of interpretation of the exclusion clause i.e. pipelines laid
outside the factory premises¯ pertaining to the explanation to the Section
17(5)(c) and 17(5)(d) of the CGST Act, 2017, which is being reproduced as under:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and
subsection (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 or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business.
¦
Explanation.- For the purposes of 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.¯
26. Now, it is a well settled principle in law that any legislation must be read
in its entirety, and that texts used in the legislation should be construed in
terms of context, in which these are used. Now, coming to the issue of the
interpretation of the meaning premises, it is seen that the term premises
has been used adjacent to the term factory. Thus, in a way the term factory
is acting as a qualifier to the term premises, and hence it is inferred that
premises need not be restricted to the land, rather it can be construed even
beyond the land and may transcend to the establishment like FSRU. Thus, under
the present exclusion clause, the contextual meaning of the premises will
prevail over the literal meaning, as advocated by the Appellant.
27. Thus, from the foregoing discussions, it is amply clear that the FSRU, where
the re-gasification of LNG is carried out for delivery to the National Grid
through the tie-in pipeline proposed to be connecting the FSRU to the National
Grid, can be rightly considered as factory.
28. Once it has been established that the premises of the FSRU can be justly
considered as factory premises, then there is no doubt that the tie-in pipeline,
to be laid by the Appellant, which will join the FSRU to the National Grid, will
be considered as pipeline laid outside the factory premises, and accordingly
attract the applicability of the subject exclusion clause i.e. exclusion clause
(iii) of the explanation to section 17(5)(c) and section 17(5)(d) of the CGST
Act, 2017. As a result of this, the tie-in pipeline under question will not be
construed as plant and machinery, and hence the Appellant will not be entitled
to avail the ITC of GST paid on goods and services used for construction of
Tie-in pipelines, from the FSRU to the National grid as per the provision laid
out in section 17(5)(c) and of the CGST Act, 2017.
29. We will not labor over the other submissions including the case laws cited
by the Appellant, as we do not rely upon those submissions of the Appellant.
In view of the above discussion, we modify the ruling pronounced by the Advance
Ruling Authority and pass the following order:
ORDER
We, hereby, modify the ruling pronounced by the Advance Ruling Authority in so far the observation of the facts and legal provisions are concerned and pass the order by holding that the Appellant is not entitled to avail the ITC of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid as per the provision laid out in section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.
RAJIV JALOTA
MEMBER
(SUNGITA SHARMA)
MEMBER
Copy to-
1. The Appellant
2. The AAR, Maharashtra
3. The Pr. Chief Commissioner, CGST and C.Ex., Mumbai
4. The Commissioner of State Tax, Maharashtra
5. The Jurisdictional Officer
7. The Web Manager, WWW.GSTCOUNCIL.GOV.IN
8. Office copy
Equivalent .