2019(01)LCX0198(AAAR)
AAAR-GUJARAT
M/s Satyesh Brinehem Private Limited
decided on 28/01/2019
GUJARAT APPELLATE AUTHORITY FOR
ADVANCE RULING
GOODS AND SERVICES TAX
A/5, RAJYA KAR BHAVAN, ASHRAM ROAD,
AHMEDABAD – 380 009.
ADVANCE RULING (APPEAL) No.- GUJ/GAaar/APPEAL/2020/01
(In Application Ruling/SGST & CGST/2019/AR/4)
Date 28.01.2019
Name and address of the Appellant | : |
Satyesh Brinechem Private Limited, |
GSTIN of the Appellant | : | |
Advance Ruling No. and Date | : | |
Date of filing appeal | : | 06.10.2018 |
Date of Personal Hearing | : | 19.12.2018 01.01.2019 02.01.2019 |
Present for the applicant | : | Shri Dhruvank Parikh, CA |
M/s. Satyesh Brinehem Private
Limited (herein after referred to as “the applicant”) raised the following
question for advance ruling in the application for Advance Ruling filed by it.
“Whether input tax credit is admissible to the applicant under the GST Acts
in respect of bunds which are constructed and used in the manufacture of salt
and bromine chemicals?”
2.1 The applicant submitted in the application for Advance Ruling that the
applicant is setting up a Greenfield project for manufacture of salt and bromine
chemicals in the Greater Rann of Kutch in the State of Gujarat. The salt
manufactured by the applicant is required to be exported as per condition and
undertaking given to the Government while taking land on lease basis. Therefore
the manufactured salt is ‘Zero Rated’ supply under section 16 of the Integrated
Goods and Services Tax Act, 2017(herein after referred to as the “IGST Act,
2017”) for the applicant.
2.2 The applicant described the process of manufacturing salt and bromine
chemicals. It was submitted that the material used for constructing bunds as
well as the services availed for construction of bunds are used in the course or
furtherance of business, hence input tax credit is admissible under Section
16(1) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and
Services Tax Act, 2017 (herein after referred to as the “CGST Act, 2017” and the
“GGST Act, 2017” respectively and collectively referred to as the “GST Acts”).
It was submitted that “bunds” do not fall under any of the restrictive clauses
of Section 17 of the GST Acts and hence input tax credit is admissible. It was
further submitted that the “bunds” are plant and machinery used for
manufacturing salt and bromine and hence clauses (c) and (d) of Section 17(5) of
the Acts are in applicable. The applicant submitted that the “bunds” are
directly used in the manufacturing process and hence they qualify as “plant and
machinery”. The applicant cited several judgements in support of its
contentions. As regards the phrase “any other civil structure” appearing in
explanation to Section 17 of the GST Acts, the applicant submitted that the same
is to be read’ ejusdem generis to the preceding words being land and building.
It has been submitted that the phrase “any civil structures” is to be restricted
to immovable property in the nature of land and building i.e. property which is
as such only a place where the business is carried on or where manufacturing
activity is undertaken. Any structure which is used as an apparatus in the
manufacturing activity wiki not be “any other civil structure” and it will be
“plant and machinery” for which input tax credit is admissible.
3. The Gujarat Authority for Advance Ruling (herein after referred to as ‘the
GAAR’). vide Advance Ruling No. GUJ/GAAR/R/19/2019 dated 11.09.2019. inter-alia
observed that as per section 16(2) of the IGST Act, 2017, input tax credit is
available on inputs and’ input services to make Zero Rated supplies (such supply
may be an exempt supply), subject to the provisions of sub-section (5) of
section 17 of the CGST Act, 2017. It was also observed that as per clauses (c)
and (d) of Section 17(5) of the GST Acts, input tax credit is not admissible in
respect of works contract services or any goods and services for construction of
immovable property (other than plant and machinery). Thus, a specific exception
is made with regard to “plant and machinery”. In view of the foregoing, the GAAR
ruled as follows :
“Question 1: Whether input tax credit is admissible to the applicant under
the GST Acts in respect of bunds which are constructed and used in the
manufacture of salt and bromine chemicals?
Answer: Input tax credit of GST paid on goods and services used to construct the
“bunds” is admissible to M/s. Satyesh Brinechem Private Limited, provided that
the bunds are used for making zero rated supplies and fulfill the conditions
which are necessary for treating the bunds as “plant and machinery”.”
4. Aggrieved by the aforesaid ruling, the Deputy Commissioner, Central Goods and
Services Tax, Division - VI, Ahmedabad - South Commissionerate (Jurisdictional
Officer) (herein after referred to. as the “appellant”) has filed the present
appeal.
5.1 It has been submitted in the grounds of appeal that the aforesaid Advance
Ruling is based on erroneous interpretation of “Bunds” as and machinery’ whereas
as per Section 17(5) of the CGST Act, 2017, “Bunds” qualifies as immovable
property. Further, aforesaid Advance Ruling has erroneously allowed input tax
credit on excluded category as marked in Section 17, clauses (c) and (d). It has
been submitted that in the instant case, “Bunds” also fall in the category of
exclusion mentioned in section 17 being a land, building or any other civil
structure and shall not be considered as the apparatus, equipment and machinery,
5.2 It has been further submitted that the applicant themselves have submitted
that the applicant has to construct “Bunds” with soil. However, as per
explanation given in Section 17 of the CGST Act, 2017, 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.
It has been submitted that the applicant themselves have categorized it as the
immovable property by constructing it and shall fall under. the category of
“land, building or any civil structure” and therefore as per the exclusion of
Section 17(5), it does not qualify as the ‘plant and machinery’.
5.3 The decision in the case of M/s. Konkan LNG Pvt. Ltd. repotted at 2019 (27)
GSTL 112 (AAR-GST) has been Cited and it has been submitted that it has been
held in the said decision that Break Wall is an immovable property and does not
fall within the ambit of ‘plant and machinery’ and as such input tax credit is
not admissible. It has been submitted that the ratio of the above case law is
squarely applicable to the facts of the present ease.
5.4 As regards the phrase “any other civil structure”, it has been submitted
that the applicant themselves have stated that they are constructing the “bunds”
by using the material like Soil, Terrazyme Chemical, HB Metal and LDPE Film
etc., and therefore, it may be classified as the Civil Structure and an
immovable property from where manufacturing is being carried out with the
harvesting of the raw salt and so as per Section 17(5) of the CGST Act, 2017,
they shall not be eligible for Input Tax Credit on construction of “bunds” being
immovable property. It has been submitted that the applicant have further
submitted that they use works contract services for construction of “bunds”.
However, as per the exception mentioned in the section. 17(5) of the CGST Act,
2017, they shall not be eligible for availing the Input Tax Credit on activity
of construction of immovable property i.e. “Bunds”.
6.1 The applicant has submitted counter reply to the Grounds of Appeal vide its
letter dated 26.12.2019. The applicant has explained the process of industrial
salt and has submitted that the “bunds” are prepared by using the material like
Soil, Water, Terrazyme Chemical, GSB Metal, HB Metal, Steel, Cement, Box
Culvert, LDPE Film, etc. It has been submitted that without “bunds”, production
of salt and bromine are not possible and it is an integral part of the entire
manufacturing process.
6.2 The applicant has mentioned that the Jurisdictional Authority had not
furnished any submissions / comments in the matter, which has been recorded by
the GAAR in the impugned order. The applicant has submitted that the
authorization issued by the Principal Commissioner to file appeal, in exercise
of the powers conferred under Section 107(2) of the CGST Act, 2017 is erroneous
and as the authorization itself being fundamentally wrong, the appeal filed by
exercising the said authorization would be void and liable to be quashed. The
applicant has relied-upon-the decision in case of M/s. Tiger Services Vs. CCE,
Madurai [2009-TIOL-607-CESTAT-MAD].
6.3 The applicant has further submitted that the reliance placed on the decision
in the case of Konkan LNG Private Limited [2019 (27) GSTL 112 (AAR-GST)] is not
sustainable in the facts of the present case. It has been submitted that as per
Section 103 of the CGST Act, 2017, Advance Ruling pronounced under Chapter XVII
is binding only on the applicant who had sought the advance ruling and the
jurisdictional officer in respect of the applicant who has sought the ruling. It
has been submitted that on the contrary, the observations made by the AAR in
Konkan LNG (supra) favours the applicant and may have persuasive value.
6.4 The applicant has submitted that the “bunds” (crystallizers) are covered in
the ambit of the plant and therefore are eligible for input tax credit. It has
been submitted that while input tax credit is not admissible in respect of works
contract services or any goods and services for construction of immovable
property, generally, a specific exception is made with regard to ‘plant and
machinery’. The applicant has also referred to the definition of the phrase
‘plant and machinery’ given in explanation to Section 17 of the CGST Act, 2017
and submitted that an essential component of plant and machinery is that it
should be used for making outward supply of goods. It has been submitted that
“bunds” are an indispensable part of manufacturing process of salt, since
without “bunds”, the applicant would not be able to commence the evaporation
process, a critical activity in the entire process of manufacturing salt. The
applicant has placed reliance on the following case laws
(i) The State of Gujarat Vs. M/s. Pipavav Defense and Offshore Engineering
Company Limited [2017-TIOL-1018-HC-AHM-VAT]
(ii) Inland Revenue Commissioner Vs. Barclay, Curle & Company Limited [(1970) 76
ITR 62 (HL)]
(iii) Scientific Engineering House (P) Ltd. vs. CIT [2002-TIOL-665-SC-IT]
(iv) CIT Vs. Elecon Engineering Company Limited [2003-TIOL-275-HC-AHM]
(v) Collector of Central’ Excise Vs. Rajasthan State Chemical Works
6.5 The applicant has submitted that salt manufacturing process has to be viewed
from independent of a traditional manufacturing process leading to manufacture
of goods in a factory and outward supply therefrom. “Bunds” are not mere
immovable property, the “bund” itself plays an essential part in the
manufacturing process. The applicant also submitted their ‘site plant’.
6.6 The applicant has submitted that the appeal filed by the department assumes
that ‘immovable property’ automatically stands outside the scope of input
tax-credit scheme, which in applicant’s view is based on incorrect
interpretation of law. The appeal concedes the fact that Soil, Water, Terrazyme
Chemical, GSB Metal, HB Metal, Steel, Cement, Box Culvert, LDPE Film etc. are
used in the construction of the “bund”. The GST Law does not mandate
disallowance of input tax credit merely because various GST suffered material
together become immovable post its erection/ construction post its receipt in
the factory. For examples various machineries received in a factory may become a
cement or sugar plant which is immovable in nature, however, the immovability in
itself would not warrant denial of input tax credit under GST law, especially
plant and machinery’ is excluded from the restrictive provisions by way of
sub-clause (c) and (d) of Section 17(5) of the CGST Act, 2017. In view of these
submissions, the applicant has submitted that since “bunds” (crystallizers) are
covered within the ambit of ‘plant’, the applicant is eligible for input tax
credit on services received for such bunds,
6.7 The applicant has further submitted that the “bunds” (crystallizers) are not
‘land, building and any other civil structure’ which is excluded from the ambit
of ‘plant and machinery’. It has been submitted that the applicant has nowhere
concurred that the “bund” falls in the category of ‘land, building or any civil
structure. On the contrary, it has stated in the application for advance ruling
that the bund covered in the ambit of plant and machinery’ as per the
explanation provided in Section 17(5) of the CGST Act, 2017. It has been
submitted that it has been merely stated in the appeal that “bunds” are covered
under land, building and civil structure, without providing any reason for such
an inclusion. The applicant has submitted that the phrase ‘any other civil
structures’ as appearing in explanation to Section 17(5) of the GST Acts is to
be read ejusdem generis to the preceding words being land and building. The
applicant has cited judgements of Hon’ble Supreme Court in the case of Collector
of Central Excise, Bombay Vs. Maharashtra Fur Fabric Limited [2002 (145) ELT 287
(SC)] and judgement in the case of Amar Chandra Chakraborty Vs. Collector of
Central Excise [AIR 1972 SC 1863)], in this regard. It has been submitted that
the “bunds” are neither land nor building, accordingly, applying the principle
of ejusdem generis, “bunds” (crystallizers) can neither be constructed as any
other civil structure.
6.8 The applicant has further submitted that the GST law hag not clearly
delineated whether the salt works, i.e. salt pans reservoirs and condensers etc.
are covered under the meaning of plant. Under such circumstance, inference has
to be drawn from other legislations. It has been submitted that the Income Tax
Act, 1961 clearly provides the treatment of Salt Works as the depreciation
schedule under the Income Tax Act, 1961 covers Salt Works. It has been submitted
that once the Salt Works are covered under the ambit of plant and machinery
under the Income Tax Act, 1961, it would be plausible to infer that the same
element would retain its identity as a plant and machinery even under the GST
law. The principles laid down under the Income Tax Act, 1961 may be applied to
draw an analogy even under the GST law, given the fact there is no detailed
aspect provided under the GST law to classify an item as a plant and machinery.
6.9 The applicant has requested to set aside the appeal filed by the Assistant
Commissioner and consider (crystallizers) as plant and’ machinery allowing input
tax credit thereon.
7, The Personal Hearing in this case was held on 30.12.2019 wherein Shri
Mahendra Kumar, Assistant Commissioner, Division VI, CGST, Ahmedabad South
Commissionerate reiterated points made in appeal memorandum and Shri Manakiwala,
CA reiterated the points made in written and counter submissions dated
26.12.2019.
8. The applicant vide letter dated 02.01.2020 Submitted that they would like to
place additional submission and appear in person for personal hearing and
requested to grant an opportunity for personal hearing and written submission.
Accordingly, an opportunity of Personal Hearing has again been granted on
13.01.2020, wherein Shri Paresh M. Dave, Shai Amal p. Dave and Shri Ashish Shah
appeared on behalf of the applicant and submitted detailed written submission of
dated 13.01.2020, a synopsis and copies of relied upon circular and judgements
in support of their arguments. Shri Mahendra Kumar, Assistant Commissioner
appeared on behalf of the appellant department.
9.1 In the written submission dated 13.01.2020, the applicant has, inter-alia
submitted that the bunds are clearly “Plant and machinery” as they arc the tools
of the trade and without them manufacture of salt is impossible. It has been
submitted that the appellant department has not disputed that bunds do not
qualify as ‘plant and machinery’, however, the dispute raised by the appellant
department is based on the exception to ‘plant and machinery’ as laid down in
the explanation to section 17 of the CGST Act, 2017. It has been submitted that
on the basis of the definition of the expression “plant and machinery”, the bone
of contention of the appellant is that bunds fall in the exception (i) of “land,
building or any other civil structure” and it is therefore not a ‘plant and
machinery’. In this regard, the applicant has submitted that the dispute
involved in this case is regarding admissibility of input, tax credit, which is
an integral part of the substantive provisions of the GST Acts. It has been
submitted that it is well settled that substantive provisions of taxing statutes
are to be strictly construed. The applicant relied upon the decisions. In the
case of The State of West Bengal Vs. Kesoram Industries Ltd. and Others [JT 2004
(1) SC 375], Commissioner of Sales Tax, Uttar Pradesh vs. Modi sugar Mills Ltd.
[12 STC 182 (SC)] and State of Gujarat vs. Reliance Industries Ltd. [(2018) 50
GSTR 14 (SC)].
9.2 The applicant has further submitted. that the phrase “any other civil
structures” as appearing in clause (i) of Explanation to Section 17 of the GST
Acts is to be read ejusdem generis to the preceding words being ‘land and
building’. The applicant relied upon the decisions in the case of Amar Chandra
Chakraborty Vs. Collector of Central Excise [AIR 1972 SC 1863] and Siddeshwari
Cotton Mills (P) Ltd. Vs. Union of India [AIR 1989 SC 1019]. It has been
submitted that by applying the principle of ejusdem generis, the phrase “any
other civil structures” in clause (i) of the Explanation to section 17 of the
GST Acts is to be restricted to immovable property in the nature of land and
building i.e. property which is as such only a place where the business is
carried on or where manufacturing activity is undertaken. Any structure which is
used as an apparatus in the manufacturing activity and with the help of which
the process of manufacture is undertaken will not be “any other civil structure”
within the meaning of that clause. It has been therefore submitted that bunds
are “plant and machinery” and therefore input tax credit is admissible to it.
The applicant has submitted that the submission of the appellant department that
bunds are civil structures and therefore they are not plant and machinery is
incorrect and should be rejected.
9.3 It has been submitted by the applicant that the emphasis of the appellant
that bunds are constructed by the respondent and are therefore immovable
property and hence input tax credit is not admissible, is unwarranted and
unjustified. It has been submitted by the applicant that even if what is
constructed is Immovable property, if it qualifies as plant and machinery, then
input tax credit is admissible under the GST Acts. The applicant referred to the
definition of “works contract” given under section 2(119) of the GST Acts and
submitted that the works contract necessarily relates to immovable property and
when plant and machinery is carved out as an exception to works contract for
granting input tax credit, it is a provision granting input tax credit even if
plant and machinery is immovable property. It has been further submitted that
machinery or equipment fixed to earth by foundation or structural support which
is specified as plant and machinery for admissibility of input tax credit is
immovable property only. They relied on the decisions in case of Madras
Petrochem Ltd. Vs. Commercial Tax Officer and Others [103 STC 54 (TNTST)].
Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs.
Bobby Rubber Industries [108 STC 410 (Ker.)], Commissioner, Sales Tax, U.P.,
Lucknow Vs. Prahlad Industries [112 STC 548 (All.)], Karthik Engineering Works
vs. state of Karnataka [119 STC 88 (Kar,)], Commissioner Trade Tax, UP Vs.
Gulshan Sugar And Chemicals Ltd. [25 VST 505 (All.)], Commissioner Trade Tax, UP
Vs. Triveni N. L. Ltd. [72 VST 448 (All.)], Petrofils Co. Op. Ltd. Vs. The State
of Gujarat [2008 GSTB 177] = , C.G. Glass Ltd. vs. the State of Gujarat [2008
GSTB 237] and Rama Newsprint and papers Ltd. (2011 GSTB 282], wherein plant and
machinery embedded to earth were held as immovable property.
9.4 The applicant also made an alternative submission that presuming without
admitting that bunds are civil structures, then also since bunds are directly
used for the manufacture of salt which is exported. input tax credit is
admissible to the respondent. The decision in the case of Safari Retreats Pvt.
Ltd. Vs. Chief Commissioner of Central Goods and Services Tax and Others [67
GSTR 16 (Ori.)] has been relied in support of this submission. It is submitted
that the applicant exports the salt manufactured with the help of bunds and
therefore they being zero rated supplies, input tax credit and consequently
refund is admissible to the applicant under the GST Acts.
9.5 It has also been submitted that the granting of refund of tax paid on
purchases of goods used for exports is also in consonance with the national
policy of avoiding tax burden on exported goods so as to permit trade and
industry of the country to withstand global competition. It has been submitted
that keeping this wider national interest in mind also, it is required to be
held that the applicant is entitled to input tax credit and consequently refund
of tax paid on the purchases of goods and procurement of services for the
construction of bunds.
9.6 It is the submission of the applicant that the appellant department has
erred in relying upon the submission of the applicant in the application for
advance ruling for not falling in the exception relating to plant and machinery
pertaining to land or building or any other civil structure, to contend that
since the applicant has categorized it as immovable property, it is not entitled
to input tax credit. It has been submitted that since the applicant is seeking
input tax credit on the ground that bunds are used as plant and machinery in the
manufacture of salt, it has to satisfy all the conditions for treating bunds as
plant and machinery. It is for that reason that in the application submitted for
advance ruling, apart from submitting that bunds qualify as plant and machinery
as per the decided cases, it was submitted as to why it does not fall in the
exception relating to land or building or any other civil structure. The
applicant has submitted that unless the contention about applicability of
principle of ejusdem generis for finding out the true meaning of civil structure
used along with land and building in the exception clause giving explanation of
plant and machinery is rejected, simply based on submission of the respondent as
to why that exception clause is not applicable to its case, the appellant
department has erred in contending that the respondent has accepted that bunds
fall under the exception clause (i) of the explanation to section 17 of the GST
Acts.
10.1 In the synopsis submitted at the time of personal hearing, it has been
submitted that bunds are ‘plant and machinery’, inasmuch as they are directly
used for production of salt and chemicals and use of bunds is undisputedly
inevitable for processes like evaporation, crystallization, harvesting and the
like.
10.2 it has been submitted that only because a plant and / or machinery was
“constructed”, it would not fall under, the excluded category of clause (i) of
explanation under Section 17. It has been submitted that plants and various
machinery are also “constructed” and plant and machinery are also often
permanently fixed or embedded to earth by foundation; and hence immovable
property, but still they are considered and referred to as ‘plant and machinery”
in commercial parlance. Circular No. 58/1/2002-CX dated 15.01.2002 of the
Central Board of Excise and Customs (herein after referred to as the ‘CBEC’) has
been relied in this context. It has been submitted that the input tax credit of
plant and machinery is specifically allowed under section 17(5)(c) and (d) of
the GST Acts and therefore the department’s case that any and every immovable
property is excluded from scheme of input tax credit is incorrect and
unjustified.
10.3 The applicant has submitted that section 17(5)(c) specifically allows input
tax credit of works contract services for construction of plant and machinery.
They referred the definition of the term “works contract” under Section 2(119)
and submitted that works contract service necessarily involves construction of
immovable properties, but such service is covered under the scheme of input tax
credit by virtue of section 17(5)(c) and therefore also the department’s case
that any activity in the nature of construction of any immovable property is
excluded from the input tax credit scheme is incorrect and unjustified.
10.4 It has been submitted that “other civil structure” should be in the nature
of land and building, because these two words precede the expression “any other
civil structure” and therefore this expression takes colour from the preceding
words. It has been submitted that civil structures like land and building only
are excluded from input tax credit scheme and not civil structures which
directly contribute to production and consequently supply of goods. It has been
submitted that bunds are not immovable properties like land and building, and
hence not excluded from input tax credit scheme only because they are
“constructed” and they are in the nature of “immovable property”.
11.1 The appellant department has, vide letter dated 16.01.2020 inter-alia
submitted that “bunds” also fall in the category of exclusion mentioned in
section 17, being land, building or any other civil structure and shall not be
considered as the apparatus, equipment and machinery. The judgement of Hon’ble
High Court of Calcutta in the case of Singh Alloys & Steel Ltd. Vs. Assistant
Collector of Central Excise [1993 (66) ELT 594 (Cal.)] has been relied wherein
the terms ‘apparatus’, ‘appliance’, ‘equipment’, ‘machine’, ‘machinery’, ‘plant’
and ‘tool’ have been examined.
11.2 It has been submitted that the “bunds” are constructed by using the
material like Soil, Terrazyme Chemical, HB Metal and LDPE Film etc. and
therefore it may be classified as the Civil Structure and an immovable property
from where manufacturing is being carried out with the harvesting of the raw
salt and so therefore as per section 17(5) of the CGST Act, 2017, they shall not
be eligible for input tax credit on construction of “bunds” being immovable
property.
12.1 In response to the aforesaid submission dated 16.01.2020 of the appellant
department, the applicant vide letter dated 20.01.2020 has submitted that the
judgement in the case of Singh Alloys & Steel Ltd. (supra) is in respect of old
Modvat Credit Scheme under the Central Excise Rules, 1944 and it involves
“chemicals” used for protecting the equipment. It has been submitted that the
provisions of Modvat scheme were material different from the scheme of input tax
credit under sections 16 and 17 of the CGST Act and it was nobody’s claim that
the chemicals involved in the case before the Hon’ble High Court of Calcutta
were in any way used for, or contributed to, the, manufacture of any goods. It
has been submitted that the facts in the of Singh Alloys & Steel Ltd, were
totally different but the principle of ejusdem generis is applied by the Hon’ble
High Court for interpreting a general expression preceded by specific category
of words.
12.2 The applicant has submitted that “bunds” are not a place (like land and /
or building) from where manufacturing is carried out but with the help of which
manufacturing activity is carried out; but bunds are admittedly and undisputedly
crystallizers (plant and machinery) where raw salt is harvested and the goods in
question. namely, salt and chemicals are produced. It has been submitted that
the bunds” are not in the nature of an immovable property from where
manufacturing is being carried out, but bunds are in the nature of a plant where
manufacturing is carried out. Such immovable property with the help of which
manufacturing is being carried out, is not excluded from input tax credit
scheme, and such immovable property where manufacturing is actually carried out
is quite different from immovable properties like land and building are used
only for installation of a factory or for housing and protecting machineries,
equipment etc., whereas manufacturing of salt and chemicals is actually
undertaken by using bunds and therefore builds are actually contributing
directly to manufacture of the goods
12.3 The applicant has requested to reject the appeal filed by the appellant
department with all consequential benefit to the applicant.
FINDINGS :-
13. We have carefully gone through and considered the appeal and written
submissions filed by the CGST department, written submissions and synopsis filed
by the applicant, submission made at the time of personal hearing, Advance
Ruling given by the GAAR and other material available on record.
14. As regards the submission of the applicant that the appeal authorization has
been issued under Section 107(2) of the CGST Act, 2017, which is improper hence
appeal filed by exercising the said authorization would be void and liable to be
quashed, it is observed that the appeal in the present case has been filed in
prescribed Form ARA-03 under Rule 106(2) of the Central Goods and Services Tax
Rules, 2017. Review Order No. 02/2019-20 as well as the forwarding letter
clearly mentions that the appeal is tiled under Section 100(1) of the CGST Act,
2017. Even the subject of the authorization letter refers to filing an appeal
under sub-section (i) of Section 100 of CGST Act, 2017. Therefore, the present
appeal does not become void merely on the ground of mention of Section 107(2) of
the CGST Act, 2017 in authorizations letter.
15.1 The applicant bas submitted that it is engaged in manufacture arid supply
of salt and bromine chemicals. It has been submitted that the salt manufactured
by the applicant is required to be exported as pet condition and undertaking
given to the Government, therefore the manufactured salt would be ‘zero rated
supply’ in terms of the provisions of Section 16 of the IGST Act, 2017, hence
input tax credit and consequently refund is admissible to the applicant under
the GST Acts. In this regard, the provisions of Section 16 of the IGST Act, 2017
may be referred, which reads as follows :-
“SECTION 16. Zero rated supply. - (1) “zero rated supply” means any of the
following supplies of goods or services or both, namely
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or
a Special Economic Zone unit.
(2) Subject to-the provisions of sub-section (5) of section 17 of the Central
Goods and Services Tax Act, credit of input tax may be availed for making
zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3)… …. ….. ….”
15.2 Since the salt would be exported, the same would be considered as ‘zero
rated supply’ and object to the provisions of section 17(5) of the CGST Act,
2017, credit of input tax may be availed for making such zero rated supplies. In
view of the provisions of section 16 of the IGST Act, 2017. It is seen that
these facts are not in dispute.
16.1 The main issue to be decided in the present case is whether the credit of
input tax on goods and services used for making ‘bunds’ is admissible to the
applicant or otherwise. In this regard, the issues that arise for consideration
and decision are
(i) whether input tax credit is admissible on ‘bunds’ on the ground that the
‘bunds’ are indispensible in the process of manufacture of salt?
(ii) whether input tax credit is inadmissible on the ‘bunds’ on the ground that
it is immovable property?;
(iii) whether ‘bunds’ are ‘plant and machinery’? ; and
(iv) whether ‘bunds’ are ‘any other civil structure’ as mentioned in clause (i)
of explanation below Section 17 of the GST Acts ?
16.2 Before proceeding to examine these issues, the process of manufacture of
salt and construction of ‘bunds, submitted by the applicant well relevant
provisions of GST Acts may be referred.
16.3 The applicant has submitted the process of manufacture of salt and brine as
follows :-
(i) Salt and Brine are produced from sea water which requires solar evaporation.
For the purpose of manufacturing salt the applicant has to construct “Bunds”.
which are also known as “crystallizers” wherein Salt gets deposited Due to
atmospheric heat and solar evaporation, raw salt crystallize from sea water in
the crystallizers within 40 to 45 days. Later on the raw salt thus deposited is
harvested either manually or by machines,
(ii) In order-to produce industrial salt, the harvested salt in the form of wet
crystals is washed in the washery plant with brine to remove insoluble matter as
well as soluble impurities. The washery plant consists of steel structures in
which the applicant has to install equipment like Belt conveyor, metallic
screener, hopper, and lay the civil foundation at different heights as per
process requirement.
(iii) After harvesting the raw salt, the remaining brine is discharged into the
circuit area and stored in the Reservoir for conversion into “Bittern” which is
used as raw material in the manufacture of bromine. In order to form such
circuit the applicant requires “Bunds”. “Bunds” are prepared by sub-contractor
by using the material like Soil, Terrazyme Chemical, HB Metal and LDPE film etc.
The applicant is paying GST on procurement of works contract services and
purchase of materials also, Without “bunds/ crystallizers” activity of
manufacturing salt and bromine are not possible, Thereafter, the Bittern is
transferred through pipeline into the Bromine Plant.
(iv) Thus “bunds” / “crystallizers” are an indispensible part of the apparatus
used for manufacturing salt and bromine. It is in fact impossible to manufacture
salt and bromine without bunds.
16.3 The applicant has submitted that process of construction of bunds and
crystallizers is as follows :-
(i) Thu “bunds” / “crystallizers” channels are primarily made of dugged Soil.
Such dugged soil is spread / stacked up to a height of 1.5 to 2.5 meters and
after drying, it is rolled, compacted & dressed to a proper shape and slope to
give it stability to withstand storage of huge quantity of water, which is
essential to produce salt and bromine.
(ii) Since bunds require holding of huge quantity of water into it, it is
necessary to make it solid enough, therefore while making these bunds, a mixture
of Chemical namely Terrazyme, GSB metal, along with water is mixed into the
dugged soil, a LDPE film Is also layed into it wherever required which gives
sufficient strength to these bunds to hold such huge quantity of water and to
rotate water into it to make raw material for producing Salt & Bromine.
(iii) These bunds/ crystallizers/ channels are also inter-connected with box
culverts which are installed on rabble soling PCC foundation. The water into
these crystallizers are charged through these box culverts and also discharged
through the said box culverts into the channels to rotate the water into
channels.
(iv) Once the Salt is formed into these crystallizers and the water gain desired
level of degree, the remaining water is discharged through these box eulverts
into the channels and from these channels, by rotating the discharged water,
brine is made which is diverted into the Bromine plant via circuit to extract
the bromine from it.
16.4 The relevant provisions related to input tax credit contained in Section
16 and 17 of the GST Acts are as follows :-
“SECTION 16. Eligibility and conditions for taking Input tax credit. -
(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.
(2) … … … … …
(3) … … … … …
(4) … … … … …
SECTION 17. Apportionment of credit and blocked credits.
(1) … … … … …
(2) … … … … …
(3) … … … … …
(4) … … … … …
(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:-
(a) … … …
(b) … … …
(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 foods or services or both are used in the course or
furtherance of business.
Explanation.- For the purposes of clauses (c) and (d), the expression
“construction “ includes re-construction, renovation, additions or alterations
or repairs, to the extent of capitalisation, to the said immovable property;
(e) … … …
(f) … … …
(g) … … …
(h) … … …
(i) … … …
(6) … … … … … …
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.”
‘Bunds’ are indispensible in the process of manufacture of salt
17.1 In support of the argument that credit of taxes charged on goods and
services used for constructing bunds/ crystallizers is admissible, the applicant
has submitted that the “bunds” / “crystallizers” are indispensible part of the
manufacturing of salt and bromine and it is in fact impossible to manufacture
salt and bromine without bunds. The applicant has referred to Section 16(1) of
the GST Acts.
17.2 We find that sub-section (5) of section 17 of the GST Acts starts with non-obstane
clause and will have overriding effect on the provisions of Section 16(1) of the
GST Acts. Therefore,’ if the goods and/ or services are covered under
sub-section (5) of Section 17 of the GST Acts, the input tax credit Shall be
available.
17.3 it may also be pointed out here that credit of input tax may be availed for
making zero rated supplies in view of the provisions of sub-section (2) of
section 16 of the IGST Act, 2017. However, this provision in also subject to the
provision of of sub-section (5) of section 17 of the CGST Act, 2017.
17.4 We therefore hold that the input-tax credit shall not be available on goods
or services covered by sub-section (5) of section 17 of the GST Acts, even if
the same are indispensible in the process of manufacture.
Whether input tax credit is inadmissible on the ‘bunds’ on the ground that
it is immovable property.
18.1 The issue therefore arises whether the goods and services used by the
applicant for construction of “bunds” / “crystallizers” are covered under
sub-section (5) of section 17 of the GST Acts or otherwise.
18.2 ‘The 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’ is covered under clause (c) of
Section 17(5) of the GST Acts. ‘The 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’ is covered under clause (d) of
Section 17(5) of the GST Acts. It is seen from the process of construction of
bunds/ crystallizers submitted by the applicant that works contract services as
well as goods and services on applicant’s own account are used for construction
of bunds / crystallizers, which are immovable property. The works contract
services used by the applicant are not an input service for further supply of
works contract service. Thus, the works contract service and goods and services
used by the applicant for construction of bunds crystallizers are covered under
clause (c) and (d) of Section 17(S) of the CGST Act, 2017. However, it is
pertinent to note that the said clauses (c) and (d) covers the works contract
services and goods and/ or service received for construction of immovable
property, other than plant and machinery. Thus, even if the works contract
service and goods and / or services are received for construction of immovable
property, if such construction of immovable property is ‘plant and machinery’,
the same would be outside the purview of clauses (c) and (d) of Section 17(5) of
the CGST Act, 2017 and eligible for input tax credit. The question to be decided
is whether the bunds / crystallizers can be considered as ‘plant and machinery’
oi not.
18.3 The applicant has submitted that the input tax credit cannot be denied on
the ground that ‘bunds’ are immovable property, as machinery or equipment fixed
to earth by foundation or structural support is specified as ‘plant and
machinery’ for admissibility of input tax credit. They have referred to various
decisions on this issue. However, in the said decision relied upon by the
applicant, the issue before the Hon’ble Court or Tribunal was whether the plant
and machinery embedded to earth were immovable property or otherwise, in the
context of the provision of respective State Sales Tax Law / Value Added Tax
Law. The issue under consideration in the present case is not whether or not
input tax credit is admissible on immovable property. As already; noted, ‘plant
and machinery’ would be outside the purview of clauses (c) and (d) of Section
17(5) of the CGST Act, 2017 and would be eligible for input tax credit. However,
it is required to be examined whether the bunds / crystallizers can be
considered as ‘plant and machinery’ or not.
Whether ‘bunds’ are ‘plant and machinery’
19.1 The expression ‘plant and machinery’ has been defined in the explanation
below sub-section (6) of section 17 of the GST Acts, As per the said definition,
‘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. However, (i) land, building or any other civil structures; (ii)
telecommunication towers; -and (iii) pipelines laid outside the factory
premises, have been specifically kept outside the purview of the definition of
the expression ‘plant and machinery.
19.2 The expression ‘plant and machinery’ is specifically defined in the GST
Acts. In the explanation below section 17 of the GST Acts, the definition ‘plant
and machinery’ uses the term ‘means’. As per the principles of interpretation of
law laid down by the higher judiciary, the definition using the term ‘means’ has
to be strictly construed to mean only what is stated therein, nothing more,
nothing less. In this regard, the judgement of Hon’ble High Court of Kerala in
the case of Kerala Public Service Commission Vs. State Information Commission,
Kerala [2011 (272) E.L.T. 18 (Ker.)], may be referred, wherein it has been held
as follows:-
“6. … … … … When the statutory provision defining a particular term says that
the said term shall mean what is stated in that definition clause, it shall mean
only that; nothing more, nothing less; for the purpose of the statute which
carries that definition. When a statute says that a word or phrase shall “mean”
- not merely that it shall “include” ~ certain things or acts, the definition is
a hard-and-fast one, and no other meaning can be assigned to the expression than
the one put down in definition. A definition is an explicit statement of the
full connotation of a term. - See Punjab Land Development and Reclamation Corpn.
Ltd. v. Presiding Officer [(1990) 3 SCC 682] and P. Kasilingam v. P.S.G. College
of Technology [1995 Supp (2) SCC 348] rendered relying on Gough v. Gough [(1891)
2 QB 665 : 65 LT 110]. As noticed in S.N.College, the Legislature has the power
to define a word even artificially. When a statute says that a word or phrase
shall “mean” a particular thing, certain things or acts, that definition is a
hard-and-fast one and no other meaning can be assigned to the expression than is
put down in that definition. That definition is an explicit statement of the
full connotation of a term.”
19.3.1 AS per the definition, the expression ‘plan and machinery” means
apparatus, equipment, and machinery fixed to earth by foundation or structural
support. The terms apparatus, equipment and machinery have not been defined in
the GST Acts. Therefore, the natural or dictionary meaning of these terms may be
taken into consideration.
19.3.2 In case of Singh Alloys & Steel Ltd, ‘(supra) relied upon by the
appellant department, the issue under consideration of Hon’ble High Court was
the definition of “inputs” under Rule 57A of the Central Excise Rules, 1944,
which did not include machines, machinery, plant, equipment, apparatus, tools or
appliances etc. In the said judgement, the terms apparatus, equipment and
machinery defined in Mc-Graw Hill dictionary have been referred, which are as
follows :-
Apparatus - A compound instrument designed to carry out a specific function
Equipment - One or more assemblies capable of performing a complete function.
Machinery - A group of parts or machines arranged to perform a useful function.
19.3.3 Similarly, in the case of Modern Malleable Ltd. Vs. Commissioner of
Central Excise, Calcutta-II [2008 (228) ELT 460 (Tri, - Kolkata)], definitions
of the term ‘apparatus’ given in different dictionaries have been referred,
which are as follows:-
Apparatus | thing prepared or provided for a specific use; any complex machine, device, or system. [Webster’s New Dictionary and Thesaurus (Concise Edition)] | |
Apparatus | It is a collection or set of materials. instruments, appliances or machinery designed for a particular use [Mav. Web. Dic]. | |
ap.pa.rat.us | (ap’a rat ‘as. -ra tas).n, pl.-tus, -tus.as. | |
1. a group or aggregate of instruments, machinery, tools, materials etc.,. having a particular function or intended for a specific use. | ||
2. any complex instrument or machine for a particular purpose. | ||
3. any system or systematic organization of activities, functions, processes, etc., directed toward a specific goal; the apparatus of government; espionage apparatus. | ||
4. Physiol, a group pf structurally different organs working together in the performance of a particular function: the digestive apparatus. [ < L < apparatus (ptp. of apparare) provided, equiv. To ap AP 1 + par prepare + -dtus -ATE 1] | ||
[Webster’s Encyclopedic Unabridged Dictionary of the English Language] |
19.3.4 The applicant has
stated that the judgement in the case of Singh Alloys & Steel Ltd. (supra) is
not relevant as the same was in the context of MODVAT Credit Scheme under the
Central Excise Rules; 1944. However, this argument is not acceptable, as the
definition of ‘Apparatus’, ‘Equipment? and ‘Machinery relied in this judgement
is based on different dictionaries and in the absence of any specific definition
in statute, the dictionary meaning will be relevant for understanding the scope
of these terms.
19.3.5 It is seen from the meaning of the terms ‘apparatus’, ‘equipment’ and
‘machinery’ as well as from the process of construction of bunds / crystallizers
and process of manufacture of salt and brine submitted by the applicant that the
‘bunds’ are neither apparatus, nor equipment nor machinery. The bunds/
crystallizers cannot be termed as compound instrument designed to carry out a
specific function. The bunds/ crystallizers can neither be termed as complex
machine, device or system nor can ‘bund’ be termed as collection or set of
materials, instruments, appliances or machinery designed for a particular use,
Bunds/ crystallizers are not group or aggregate of instruments, machinery,
tools, materials etc. having a particular function or intended for a specific
use. Thus, the bunds / crystallizers are not ‘apparatus’. Further, the bund/
crystallizer is not one or more assemblies capable of performing a complete
function. Therefore, the bund/ crystallizer cannot be termed as ‘equipment’. The
bund/ crystallizer is not a group of parts or machines arranged to perform a
useful function, Therefore, bund/ crystallizer cannot be termed as ‘machinery’.
As the-bund/ crystallizer is neither apparatus, nor equipment and nor machinery,
the same do not qualify to be termed as ‘plant and machinery 9 within the
meaning of the said term defined in the explanation below Section 17(6) of the
GST Acts.
19.4 The applicant has submitted that an essential component of plant and
machinery is that it should be used for making outward supply of goods. However,
we notice that the applicant has relied upon only part of definition of ‘plant
and machinery’ which has been defined to mean 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. As the ‘bunds’ are not
covered in the first limb of the definition of ‘plant and machinery’ as ‘bunds’
are not apparatus, equipment or machinery, they cannot be considered to be
covered in the said definition.
19.5 The definition of ‘plant and machinery’ given in the GST Acts is very
specific. Therefore, when the ‘bunds’ are not covered in the said definition,
the fact that the ‘bunds’ are essentially used in the manufacturing process
would not make any difference and the ‘bunds’ would not get covered under ‘plant
and machinery’ on this ground, as pleaded by the applicant.
19.6 The applicant has pleaded that plants and various machinery are also
“constructed”. and plant and machinery are also often permanently fixed or
embedded to earth by foundation, and hence immovable property, but still they
are considered and referred to as ‘plant and machinery” in commercial parlance.
They have referred to Circular No. 58/1/2002-CX dated ‘15.01.2002 of the CBEC.
In this regard, it is seen that the said Circular was issued by the CBEC to
clarify the issue relating to excisability and stage of excisability of plant
and machinery assembled at site in view of various judgements of Hon’ble Supreme
Court regarding non-excisability of immovable property. As the CBEC Circular has
been issued in the context of provisions of the Central Excise Act, 1944, the
same has no applicability per se in respect of GST Acts. Further, in the present
case, it is not the case of the applicant that in order to construct ‘bunds’,
apparatus, equipment and / or machinery is fixed to earth by foundation or
structural support. Furthermore, when a specific definition of ‘plant and
machinery’ is given in the statute, there arises no occasion for us to refer to
commercial parlance or common parlance meaning of the phrase ‘plant and
machinery’.
19.7 The applicant has submitted that the GST law has not clearly delineated
whether the salt works, i.e. salt pans reservoirs and condensers etc. are
covered under the meaning of plant and therefore inference has to be drawn from
other legislations. The applicant has submitted that the Income Tax Act, 1961
clearly provides the treatment of Salt Works as ‘plant and machinery’ as the
depreciation schedule under the Income Tax Act, 1961 covers Salt Works. However,
as already discussed, a specific definition of ‘plant and machinery’ has been
given under the GST Acts. Therefore, definition of ‘plant’ in the Income Tax
Act. 1961 or treatment of Salt Works under depreciation schedule of the Income
Tax Act, 1961 is not required to be adopted in the present case.
19.8 The applicant has cited several judgements in support of the contention
that the bund/ crystallizer can be termed as ‘plant and machinery’. We have gone
through these judgements.
(i) Scientific Engineering House (P) Ltd. Vs. Commissioner of income Tax,
Andhra Pradesh [157 ITR 86 (S.C)].
In this case, the issue. before the Hon’ble Supreme Court was whether the
acquisition of capital asset of technical knowhow in the shape of drawings,
design, charts, plans, processing data and other literature etc., is depreciable
asset or not (for the purpose of income Tux Act) ? In this Judgement, it was
observed that under section 32 of the Income Tax Act, depreciation allowance is
permissible in respect of certain assets specified therein, namely, buildings,
machinery, plant and furniture owned by the assessee and used for the purpose of
business while section 43(3) of the Income Tax Act defines ‘plant’ in very wide
terms saying “plant includes ships, vehicles, books, scientific apparatus and
surgical equipment used for the purpose of the business”. In this context,
Hon’ble Supreme Court decided whether technical knowhow in the shape of
drawings, designs, charts, plans, processing data and other literature etc.
falls within the definition of ‘plant.
(ii) Commissioner of Income Tax, Gujarat Vs. Elecon Engineering Co, Ltd.
[1974 96 ITR 672 Guj,].
In this case also, the issue before the’ ‘Hon’ble High Court was whether
drawings and patterns received by an assessee from a foreign company under a
collaboration agreement can be said to be “plant” on which depreciation is
allowable under section 32 of the Income Tax Act, 1961.
In the present case, the definition of ‘plant and machinery’ given in Section 17
of the GST Acts is different than the definition of ‘plant’ under Income Tax
Act, which was under consideration before the Hon’ble Supreme Court in the case
of Specific Engineering House (P) Ltd. (supra) and before the Hon’ble High Court
in the case of Elecon Engineering Co. Ltd. (supra). The subject matter of
dispute (bund) in the present case is also different.
(iii) Jayaswal Neco Ltd. Vs. Commissioner of Central Excise, Raipur [2015
(319) E.L.T. 247 (S.C.)]
In this case, the Hon’ble Supreme Court examined the definition of ‘capital
goods’ given in Rule 57Q of the Central Excise Rules, 1944 and in that context
examined whether the Railways Tracks installed within plant would be considered
as ‘capital goods’
(iv) Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning &
Weaving Mills Ltd. [2010 (255) E.L.T. 481 (S.C.)]
In this case also, the Hon’ble Supreme Court examined the definition of
‘capital goods’ given in Rule 57Q of the Central Excise Rules, 1944 and in that
context examined whether the credit was admissible on Steel Plates and M.S.
Channels used in fabrication of chimney for diesel generating set. In the
present case, the definition of ‘Plant and machinery’ given in Section 17 of the
GST Acts is different than the definition of ‘capital goods’ - under Central
Excise Rules, 1944, which was under consideration before the Hon’ble Supreme
Court in the case of Jayaswal Neco Ltd. (supra) and in the case of Rajasthan
Spinning & Weaving Mills Ltd.(supra). The subject matter of dispute (bund) in
the present case is also different.
(v) The State of Gujarat Vs. Pipavav Defence and Offshore Engineering
Company Ltd. [2017-TIOL-1018-HC-AHM-VAT]
In this case, the Hon’ble High Court examined whether ‘Dry Dock and Fit Out
Berth’ can be categorised as ‘capital goods’ as per definition given under
section 2(5) of the Gujarat Value Added Tax Act, 2003, according to which,
“‘Capital Goods” means plant and machinery (other than plant and machinery)
meant for use in manufacture of taxable goods and accounted as capital assets in
the books of accounts”. The expression ‘plant and machinery’ was not defined in
the Gujarat Valued Added Tax Act, 2003. In the context of the said definition of
‘Capital Goods’, Hon’ble High Court held that Dry Dock and Fit Out Berth ate
plant / capital goods.
In the present case, the definition of ‘plant and machinery’ has been
specifically given in Section 17 of the GST Acts and the said definition is
different than the definition of ‘capital goods’ given under the Gujarat Value
Added Tax, 2003, which was under consideration before the Hon’ble High Court in
the case of Pipavav Defence and Offshore Engineering (supra). The subject matter
of dispute (bund) in the present case is also different.
As held by Hon’ble Apex Court in the case of Collector of Central Excise,
Calcutta Vs. Alnoori Tobacco Products [2004 (170) ELT 135 (SC)], circumstantial
flexibility, one additional or different fact may make a world of difference
between conclusions in two cases; that disposal of cases by blindly placing
reliance on a decision is not proper. Therefore, the aforesaid judgements relied
upon by the applicant are found applicable in the present case.
19.9 In view of the foregoing, we hold that ‘bund’ / crystallizer’ are not
covered within the definition of ‘plant and machinery’ given under Section 17 of
the GST Acts.
Whether ‘bunds’ are ‘any other civil structure?
20.1 As the bunds/ crystallizer do not fall within the main part of the
definition of ‘plant and machinery’ given in explanation under Section 17 of the
GST Acts, it is not required to examine the exclusion part of the said
definition. However, since the exclusion clause (i) (i.e. land, building or any
other civil structures) and specifically the phrase ‘any’ other civil
structures’ has been referred to by the appellant. department as well as by the
applicant, the same has been examined to the extent it is relevant for the
present case.
20.2. It has been pleaded by the applicant that principle of ejusdem generis
should be applied in interpretation of the phrase ‘any other civil structures’
and the said phrase should be restricted to immovable property in the nature of
land and building i.e. property which is as such only a place where the business
is carried on or where manufacturing activity is undertaken.
20.2.2 In this regard, it is seen that the phrase ‘any other civil structures’
needs to be understood in the context of the definition of ‘plant and
machinery’, which is kept outside the purview of blocked credit under clauses
(c) and (d) of section 17(5) of the GST Acts. As per the said definition, ‘plant
and machinery’ means apparatus, equipment, and machinery fixed to earth by
foundation or structural support. The foundation or Structural support, which
have been used to fix the apparatus, equipment, and machinery to earth, may be
in the nature of civil structure, but such foundation and structural supports
have been specifically included in the main part of the definition of ‘plant and
machinery’. When the exclusion clause (i) excludes ‘land, building or any other
civil structures’ from the purview of the definition of ‘plant and machinery’,
the phrase ‘any other civil structures’ naturally refers to all other civil
structures, other than foundation and structural supports used to fix the
apparatus, equipment, and machinery to earth.
20.2.3 The above view is strengthened when the definition of ‘plant and
machinery’ is seen in the context of clauses (c) and (d) of section 17(5) of the
GST Acts. As per said clause (c), credit of input tax charged on works contract
services, when supplied for construction of an immovable property (other than
plant and machinery), is not admissible. ‘Works Contract’ has been defined under
section 2(119) or the GST Acts to mean a contract for building, construction,
fabrication, completion, erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation, alteration or commissioning 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. Thus, the
phrase ‘any Other civil structures’ mentioned in the exclusion clause (i) of the
definition of ‘plant and machinery’ would mean all other civil structures, other
than foundation and structural supports used to fix the apparatus, equipment,
and machinery to earth.
20.2.4 The applicant has relied upon the judgement of Hon’ble Supreme Court in
the cases of Amar Chandra Chakraborty Vs. Collector of Central Excise [AIR 1972
SC 1863] and Siddeshwari Cotto Mills (P) Ltd. Vs. Union of India [AIR 1989 SC
1019]. In the case of Siddeshwari Cotton Mills (P) Ltd., Hon’ble Supreme Court
inter-alia held that the preceding words in the statutory provision which, under
this particular rule (ejusdem generis) of construction, control and limit the
meaning of the subsequent words must represent a genus or a family which admits
of a number of species or members, If there is only one species it cannot supply
the idea of a genus. A reference may also be made to the judgement of Hon’ble
Supreme Court in the case of Assistant Collector of Central Excise Vs. Ramdev
Tobacco Company [1991. (51) ELT 631 (S.C.)] (wherein the judgement of Amar
Chandra Chakraborty was also referred), wherein it has been held as follows
“6. The rule of ejusdem generis is generally invoked where the scope and ambit
of the general words which follow certain specific words (which have some common
characteristic and constitute a genus) is required to be determined. By the
application of this rule the scope and ambit of the general words which follow
certain specific words constituting a genus is restricted to things ejusdem
generis with those preceding them, unless the context otherwise requires.
General words must ordinarily bear their natural and larger meaning and need not
be confined ejusdem generis to things previously enumerated unless the language
of the statute spells out an intention to that effect. Courts have also limited
the scope of the general words in cases where a larger meaning is likely to lead
to absurd and unforeseen results. To put it differently, the general expression
has to be read to comprehend things of the same kind as those referred to by the
preceding specific things constituting a genus, unless of course from the
language of the statute it can be inferred that the general words were not
intended to be so limited and no absurdity or unintended and unforeseen
complication is likely to result if they are allowed to take their natural
meaning. The cardinal rule of interpretation is to allow the general words to
take their natural wide meaning unless the language of the statute gives a
different indication or such meaning is likely to lead to absurd results in
which case their meaning can be restricted by the application of this rule and
they may be required to fall in line with the specific things designated by the
preceding words. But unless there is a genus which can be comprehended from the
preceding words, there can be no question of invoking this rule. Nor can this
rule have any application where the general words precede specific words.”
[emphasis supplied]
Similarly, in the case of
Commissioner VAT Vs. Taneja Mines Pvt. Ltd. [2011 (273) E.L.T. 228 (Del.)],
Hon’ble High Court of Delhi held as follows :-
“16. As regards the applicability of the principle of ejusdem generis sought to
be pressed into service by the Department, it would be trite that the said
principle is not an inviolable rule of law. It is only in the absence of any
indication to the contrary that it may be pressed into service. When Entry No.
45 is absolutely clear and unambiguous, the rule of ejusdem generis can have no
application. As held in Siddeshwari Cotton Mills (P) Ltd. (supra) and Grasim
Industries Ltd. (supra), the said rule has to be applied with caution and not
pushed too far. The rule reflects an attempt to reconcile incompatibility
between the specific and general words and applies only where the context of the
enactment does not require restricted meaning to be attached to the words of
general import. But, as stated above, a note of caution has been sounded by the
Apex Court in this regard, namely, that the rule is to be applied with care and
caution and in the absence of any indication to the contrary. In the instant
case, in our view, the said rule of ejusdem generis is wholly inapplicable.”
20.2.5 In the present case, the natural meaning of the phrase ‘any other civil
structures’, as discussed herein above, is compatible with clauses (c) and (d)
of Section 17(5) and definition of ‘plant and machinery’ given under Section 17
of the GST Acts. Even otherwise, the specific words ‘land’ and ‘building’
preceding general words ‘any other civil structures’ do not constitute a genus.
20.2.6 Therefore, the bunds constructed by mixing chemical Terrazyme, GSB Metal,
Water with dugged aud laying LDPE film wherever required, can be said to be
covered under ‘any other civil structures’.
20.3 The applicant has submitted that even if bunds are held as civil structure,
input tax credit is admissible. They relied on the judgement of Hon’ble High
Court of Orissa in the case of Safari Retreats Pvt. Ltd, and Another Vs. Chief
Commissioner of Central Goods and Services Tax and Others [67 GSTR 16 (Ori.). In
that case, the issue before the Hon’ble High Court was whether clause (d) of
sub-section (5) of section 17 of the GST Acts is applicable in the case of
construction of immovable property (shopping mall) intended for letting out for
rent. In this regard, it has been seen that the said judgement has not dealt
with the definition of ‘plant and machinery’ given below section 17 of the GST
Acts, which is under consideration in the present case. In any case, Special
Leave Petition (Civil) No. 26696 of 2019 has been admitted by the Hon’ble
Supreme Court against the said judgement of Hon’ble High Court of Orissa. As
held by Hon’ble Supreme Court of India in the case of Union of India vs. west
Coast Paper Mills Ltd. [2004 (164) E.L.T. 375 (S.C.)], once an appeal is filed
before the Supreme Court and the same is entertained, the judgment of the High
Court or the Tribunal is in jeopardy; that the subject matter of the lis unless
determined by the last Court, cannot be said to have attained finality; that
grant of stay of operation of the judgment may not be of much relevance once
this Court (Supreme Court) grants special leave and decides to hear the matter
on merit. Therefore, judgment in the case of Safari Retreats Pvt. Ltd. (supra)
is not applicable in the present case.
21. The applicant has submitted that the granting of refund of tax paid on
purchases of goods used for exports is also in consonance with the national
policy of avoiding tax burden on exported goods so as to permit trade and
industry of the country to withstand global competition. In this regard, suffice
it to say that the refund of input tax on zero rated supplies is admissible in
accordance with the provisions of GST Acts.
22. In View of foregoing, we modify the Advance Ruling No. GUJ/GAAR/R/19/2019
dated 11.09.2019 by holding that-
‘Bunds’ constructed by M/s. Satyesh Brinechem
Private Limited, Ahmedabad [GSTIN 24AAUCS2572G1Z1) are not ‘plant-and
machinery within the definition of the said term under Section 17 of the GST
Acts, and therefore, in view of clauses (c) and (d) of. Section 19(5) read with
explanation below Section 17 of the GST Acts, Input Tax Credit in respect of
works contract service or goods or services used in construction of ‘bunds’ is
not admissible to M/s. Satyesh Brinechem Private Limited, Ahmedabad.
(Ajay Jain)
Member
(Dr. P.D. Vaghela)
Member
Place : Ahmedabad
Date : 28.01.2019.
Equivalent .