2020(03)LCX0106(AAR)
AAR-MAHARASHTRA
M/s Sundharams Private Limited
decided on 18/03/2020
MAHARASHTRA AUTHORITY FOR
ADVANCE RULING
(Constituted under section 96 of the Maharashtra Goods and Services
Tax Act, 2017)
BEFORE THE BENCH OF
(1) Ms. P. Vinitha Sekhar, Commissioner of
Central Tax, (Member)
(2) Mr. A. A. Chahure Joint Commissioner of State Tax,( Member)
GSTIN Number, if any/ User-id | NA | |
Legal Name of Applicant | M/s. SUNDHARAMS PRIVATE. LTD | |
Registered Address/Address
provided while obtaining user id
Correspondence Address |
NA | |
Application | NA | |
Jurisdictional officer | NA | |
Nature of activity(s) (proposed / present) in respect of which advance ruling sought | NA | |
A | Category | NA |
B | Description (in brief) | NA |
Issue/s on which advance ruling required | NA | |
Question (s) on which advance ruling is required | NA |
PROCEEDINGS
(Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
No.- GST-ARA-36/2019-20/B-41
Date : March 18, 2020
The present application has been filed under Section 97 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”
respectively] by M/s. SUNDHARAMS PRIVATE. LTD, the applicant, seeking an advance
ruling in respect of the following question.
Whether applicant is entitled to avail Input tax credit under CGST/CGST
Act in respect of taxes to be paid on its purchase of Paver Blocks laid on the
land. It is reiterated once again that such blocks are not to be fastened on
earth, rather they are only laid on plain surface to park the cars of Company’s
customers.
At the outset, we would like to mar 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 any dissimilar provisions, a reference
to the CGST Act would also mean a reference to the same provision under the MGST
Act. Further to the earlier, henceforth for the purposes of this Advance Ruling,
the expression ‘GST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION - AS PER THE APPLICANT
The submissions made by the applicant are as under:-
2.1 M/s Sundharams Private Limited, the Applicant, engaged in providing
warehousing, storage and support services to the Original Equipment
Manufacturers (OEMs) of automobile industry, transports cars/tractors using its
fleet of car carrier vehicles. During the course of these services, the cars are
stored in the applicant’s stock yard prior to their transit to the respective
car dealers. On storage rentals of these vehicles, the applicant Company has
been collecting and paying applicable GST.
2.2 Applicant has purchased tax paid Paver Blocks which are laid in the parking
area of the land without any attachment to the earth. The object of laying such
blocks is to ensure efficient and safe parking of automobiles of OEMs during the
contract period. If the cars are placed on the ordinary surface, it will be
subject to quicker wear & tear due to accumulation of water, dust etc. in the
wheels of such automobiles.
2.3 Such paver blocks are not to be permanently embedded on earth and are
capable of being removed as such without causing damage to them for reuse
elsewhere. Moreover, the Lease Deed executed by the Company with its land owners
contains a clause to the effect that the Company shall remove such Paver Blocks
and take possession of the same on vacation of the premises. Hence such Paver
Blocks are to be construed as moveable items.
2.4 Therefore, Applicant feels that it is eligible to avail Input Tax Credit in
respect of taxes paid on purchase of such Paver Blocks laid on land being used
in the course of providing its output services to customers under the head
stockyard management services.
2.5 Laying of Paver Blocks on land does not amount to construction of Immovable
property u/s. 17(5) (c) of the CGST Act, 2017. Expenses on the Paver Blocks are
not capitalized as a part of immovable property (Land) in the applicant’s books
of accounts, hence the input credit on the same is not disallowable u/s. 17(5)
(d) r.w. explanation to Section 17(5) of CGST Act, 2017. Further, as per
explanation to Section 17(5)(c) & (d) of CGST Act 2017, the prohibition to avail
input tax credit is applicable only in respect of expenditure which is
capitalized in the books of account. Hence, if the expenditure on purchase of
paver block is not capitalized & treated as revenue expenditure, there is no bar
on availing credit.
2.6 These paver blocks are laid on the land as movable property and therefore,
can be easily dismantled and re-laid at any other location. Paver blocks are not
fastened or permanently embedded on the earth as part of the land, rather they
are only laid on the plain surface for parking of cars. Applicant company has
fully complied with the conditions contained in the section 16(2) of CGST Act
for claiming of ITC.
2.7 Laying of the paver blocks cannot amount to works contract service for
construction of the immovable property under Section 17(5) (c) of CGST Act
since, the expression “construction” for the purpose of Section 17(5)(c) and
17(5)( d) includes reconstruction, renovation, addition or alteration or repairs
to the extent of capitalization to the said immoveable property. In the case of
the applicant the expenditure on the paver block has not been booked as revenue
expenditure in the books of account and therefore the same will not amount to
construction of immovable property. Accordingly, the input tax credit claimed by
the applicant cannot be hit by restriction placed u/s.17(5)(c) of the CGST Act.
2.8 Applicant has discussed the definitions of ‘Immovable property’ “Movable
Property” and the term ‘Goods’ and have submitted that the paver blocks have
been laid on the entire yard Cars are parked on the paver block surface. In
rainy season no mud is formed on the payer block surface and helps car to be
removed from its slot easily; Bay marking can be done on the paver block which
helps to identify the car easily and the paver block surface gives a strong grip
for the movement of the cars. For placing the paver blocks, the base is prepared
with stone and dust which are rolled very firmly. Then coarse aggregate is added
on the surface and rolled. Grit powder of 30 mm is applied on the surface. After
levelling the paver blocks are placed on the surface manually. The paver blocks
are having interlocking and the gaps are filled with sand. Paver blocks are
easily detachable and removable and therefore the same being movable goods could
be used at any other land or site. It does not become the part and parcel of
immovable property. If the goods are movable from one place to another in the
same position or liable to dismantled or re-erected at a later place, it will be
movable property which is the exact case of the present applicant.
2.9 Even assuming without admitting that permanently fitted Paver Blocks acquire
the character of “Immovable Property”, the claim of Appellant for input tax
credit has to be allowed based on the decision of Orissa High Court’s decision
in Safari Retreats Pvt Ltd. Vs. Chief Commissioner of CGST reported in
[2019] 11 TUD Online 070 (Orissa).
03. CONTENTION - AS PER THE JURISDICTIONAL OFFICER:
The submissions made by the jurisdictional officer are as under:-
3.1 The submissions of the applicant that laying of paver blocks on the land
does not amount to construction is not acceptable on the following grounds:-
3.1.1 The purpose of laying of paver blocks as per applicant is to ensure
efficient parking of automobiles during contract period. If the cars placed on
the ordinary ground, it will be subject to the quicker wear and tear due to
accumulation of water, dust etc. in the wheels. Hence only laying of paver
blocks in loose form on the land is not sufficient. To serve the applicant’s
purpose, compact, firm structure and close fixing of blocks is required.
However, applicant is silent on whether cementing material or interlocking
blocks used or not. But it appears from photographs attached by the applicant
that, paver blocks are fastened to land using interlocking blocks and firm
support of outer wall. These blocks are not kept loosely on the ground. Hence,
mere cementing material not used doesn’t mean paver blocks are not fasted to
earth. Rather with support of outer wall and interlock system blocks are
fastened to earth. Further, laying of such block is time consuming, skill full
job requires to be carried out with due diligence and same way activity of
dismantling also. Therefore mere capability of removal and reuse elsewhere,
doesn’t mean blocks are not permanently embedded to earth. One cannot shift
paver blocks as when required like moveable goods. It requires certain period of
permanency and also without fixing paver block using either cementing material
or interlocking system, you cannot enjoy benefits of laying paver blocks. The
flexibility to re-use does not mean that blocks will be removed and re-erected
frequently. They are meant to be permanently fixed to earth however when the
need arise, client may remove them and re-erect. So primarily nobody will lay
paver blocks with intention to remove it. It appears that to give permanence,
dealer has entered into contract with OEM and land owner also.
3.2 In the case of “Municipal Corporation of Greater Bombay and others Vs,
Indian Oil Corporation Ltd., (1991 Supp (2) Supreme Court Cases 18”, it
was held that the petroleum storage tanks are structures or things attached to
the land and were exigible to the property tax. In paragraph 32 it was observed
as under:
32”. The tanks, though, are resting on earth on their own weight without
being fixed with nuts and bolts, they have permanently been erected without
being shifted from place to place. Permanency is the test. The chattel whether
is movable to another place of use in the same position or liable to be
dismantled and re-erected at the later place? If the answer is yes to the former
it must be a moveable property and thereby it must be held that it is not
attached to the earth. If the answer is yes to the latter it is attached to the
earth. For instance a shop for sale of merchandise or eatables is a structure.
The same could be sold by keeping in a push cart which has its mobility from
place to place. Merely it is stationed at a particular place and business was
carried on, it cannot be said that push cart is a shop. The fact that no nuts
and bolts were used to imbed the tank to the earth by itself is not conclusive.
Though the witness stated that the tank is capable of being shifted, as a fact
the tanks were never shifted from the places of erection. By scientific process,
the tanks stand on their own weight on the earth at the place of erection as a
permanent structure.
3.3 In the instant case also; paver blocks once laid on the land are not movable
to another place of use in the same position unless dismantled and laid again at
later place. Hence, the paver blocks are permanently embedded to earth and hence
laying of the paver blocks on the land amounts to construction of immovable
property u/s 17(5). Therefore. input tax credit is not allowable to M/s.
Sundharams Pvt Ltd.
04. HEARING
Preliminary hearing in the matter was held on 26.11.2019. Sh. Subhash Chhajed,
C.A. along with Sh. Muthuswami, G.M. appeared, and requested for admission of
their application. Jurisdictional Officer Sh. Prashant Patil, Dy. Corhmr. of
S.T.( E-601), Large Tax Unit-1, Mumbai also appeared.
The application was admitted and called for final hearing on 22.01.2020. Sh.
Subhash Chhajed, C.A., Ms. Kajol Jain, C.A., Sh. Muthuswami, G.M. Sh. M Ganeshan,
V.P. and Sh. Balakrishna G.M. appeared made oral and written submissions.
Jurisdictional Officer Sh. Prashant Patil, Dy. Commr. of S.T.( E-601), Large Tax
Unit-1, Mumbai appeared and made written submissions. We heard both the sides.
05. DISCUSSIONS AND FINDINGS:
5.1 We have gone through the facts of the case, documents on record and
submissions made by both, the applicant as well as the jurisdictional office.
5.2 The main issue before this authority is whether the Paver Blocks in the
subject case are to be treated as immovable or movable property
5.3 The applicant has made submissions in support of their contention that
Laying of Paver Blocks on land does not amount to construction of Immovable
property u/s. 17(5) (c) of the CGST Act, 2017 and are to be construed as
moveable items. With respect to eligibility of ITC applicant has stated that,
the prohibition to avail input tax credit is applicable only in respect of
expenditure which is capitalized in the books of account and since, expenses on
Paver Blocks are not capitalized as a part of immovable property (Land) in their
books of accounts, ITC is allowable to them. Applicant has finally surmised that
even if it is assumed that Paver Blocks as in the subject case, acquire the
character of “Immovable Property”, they should be allowed ITC as per the
decision of Orissa High Court’s decision in Safari Retreats Pvt Ltd. Vs.
Chief Commr. of CGST reported in [2019] 11 TUD Online 070 (Orissa). The
Jurisdictional officer, citing the case law of “Municipal Corporation of
Greater Bombay and others Vs, Indian Oil Corporation Ltd., (1991 Supp (2)
Supreme Court Cases 18”” has contended that laying of he paver blocks on
land amounts to construction of immovable property u/s.17(5) and therefore, ITC
is not allowable to the applicant.
4.5 The Paver Blocks brought to the site wouldn’t serve any purpose unless the
same are placed on land on their own weight, fitted by way of interlocking, and
made working. The site would be an immovable property such as vacant land. The
impugned activity does not involve supply of Paver Blocks as a chattel. Further,
it is not the case that in case it is desired to do away with it, one can remove
the system and put it into place on some other piece of vacant land, as it is,
because the installation of Paver Blocks take support from the boundaries of
vacant land and the contours of the new vacant land cannot/may not be the same
as the present vacant land. Also, removal would always involve a total
dismantling which cannot be without loss or damage. Such systems have a
longevity of existence in terms of the aspect that these are not set up and
removed frequently. It is not the case that in case it is desired to do away
with it, one can remove the system and put it -as it is “at another location.
Hence the question in these set of facts is whether the impugned activity could
be said to be one as resulting into immovable property.
5.5.1 The term ‘immovable property’ has not been defined under the GST Act.
However, there are a catena of decisions of various Hon’ble Courts deliberating
on what constitutes an ‘immovable property’.
5.5.2 In the case decided by the Supreme Court in T.T.G. Industries Ltd.
v. CCE, (2004) 4 SCC, the judicial member concluded that, erection of
mudgun and tap hole-drilling machine results in erection of immovable property
and found support in the decision of the Supreme Court in Municipal Corpn.
of Greater Bombay v. Indian Oil Corpn. Ltd. [1991 Supp (2) SCC 18” and
held that the twin tests laid down by this Court to determine whether assembly
erection would result in immovable property or not were fully satisfied in the
facts of this case. It was concluded that the test laid down by the Supreme
Court is that if the chattel is movable to another place as such for use, it is
movable but if it has to be dismantled and reassembled or re-erected at another
place for such use, such chattel would be immovable.
5.5.3 In the subject case, the Paver Blocks have to be dismantled and
disassembled from the vacant land before being erected or assembled elsewhere.
Applying the test laid down by the Supreme Court, the laying of Paver Blocks to
be used by the applicant for parking purposes results in immovable property’. It
cannot be disputed that such Paver Blocks are not usually shifted from one place
to another, nor is it practicable to shift them frequently. The Paver Blocks,
once they arc erected and assembled, continue to operate from where they are
positioned and actually become a part of the parking facility. Having regard to
the manner in which these parking facilities are erected using Paver Blocks,
they do not answer the description of “goods”.
5.6 The Hon. Courts in our country have evolved the term ‘immovable property’
when faced with the question of what constitutes movable and immovable property.
Though not issued under the GST Act, we may mention herein the decision/order
passed by the Hon. Bombay High Court in M/s. Bharti Airtel Ltd. (earlier
known as Bharti Tele-Ventures Ltd.) v. The Commissioner of Central Excise (2014
SCC OnLine Bom 907 : (2015) 77 VST 434) wherein the Hon’ble High Court
had disallowed credit on telecom towers, holding them to be immoveable property.
In the case of Tower Vision India Pvt Ltd v Commissioner of Central Excise
(Adj), New Delhi & Ors (2016 (42) STR 249 (Tri.-LB)), the Customs,
Excise and Service Tax Appellate Tribunal relied on Bharati Airtel when it
disallowed credit on telecom towers to telecom infrastructure companies renting
out such towers to telecom companies.
5.7 The principles laid down in the judgments discussed above stand good under
all statues unless any specific definition is available under the statute. What
we want to say is that these principles cannot be circumscribed to any
particular statute. An elaborate reproduction of the principles as laid down in
the judgments along with their facts has made things clearer for us. The
principles when seen in the light of the facts of the present case help us see
as under:
• The impugned car parking system, to be installed on a vacant plot of land,
by way of laying of Paver Blocks, does not result into supply as chattel. In
fact, before installation, there can be no goods as such which could be called a
‘parking system’.
• The system requires substantial work of interlocking of the Paver Blocks using
support from the boundary walls of the said land, to be done at the site to be
called a ‘parking system’.
• Once made operational the ‘parking system’ obtains a state of permanency. It
is not such as can be easily removed from the existing place and put into place
at some other location. It is also not such that there is an intention to put it
into some other place. Further, apart from that the goods cannot be re-erected
as in the previous place as the requirement of each place is different.
5.8 From the submissions made by the applicant we find that the main reason for
use of paver blocks is to keep the tyres of the vehicles in good condition with
no wear and tear, to have longevity, durability and flexibility to re-use. The
flexibility to re-use does not mean that blocks will be removed and re-erected
frequently. They are meant to be permanently fixed to earth but whenever the
need arises the applicant may remove them and re-erect. Hence we conclude that
the applicant would not use the paver blocks as in the subject case with an
intention to remove it and use the same as a movable property.
5.9 The facts of the case cited by the jurisdictional office is similar to the
facts in the subject case and therefore the decision and reasoning in the case
cited i.e. “Municipal Corporation of Greater Bombay and others Vs, Indian
Oil Corporation Ltd., (1991 Supp (2) Supreme Court Cases 18”., can be
made applicable in the present facts of the matter to rule that paver blocks are
to be considered as immovable property in the subject case. In the said case the
Hon’ble Supreme Court held that the petroleum storage tanks are structures or
things attached to the land and were exigible to the property tax. The Hon’ble
Court observed that, the tanks, though, are resting on earth on their own weight
without being fixed with nuts and bolts, have permanently been erected without
being shifted from place to place and this Permanency is the test. The fact that
no nuts and bolts were used to imbed the tank to the earth by itself’ is not
conclusive. Though the witness stated that the tank is capable of being shifted,
as a fact the tanks were never shifted from the places of erection. By
scientific process. the tanks stand on their own weight on the earth at the
place of erection as a permanent structure.
5.9.1 In the subject case, the Paver Blocks are also placed on their own weight
on the earth at the place of erection as a permanent structure. The process of
laying paver blocks includes preparation of base (on land) with stone and dust,
rolling them very firmly, adding coarse aggregate on the surface and rolling
again, application of Grit powder of 30 mm on the surface and after levelling,
the paver blocks are placed on the surface manually. Thus, it can be observed
that, the paver blocks are not simply arranged on land. The jurisdictional
officer has also submitted that the paver blocks are fastened to land using
interlocking blocks and firm support of’ outer wall. Thus we find that the above
mentioned decision of the, Supreme Court can be made applicable in the present
facts of the matter to rule that paver blocks are to be considered as immovable
property.
5.10 The applicant has submitted that “Even assuming without admitting that
permanently fitted Paver Blocks acquire the character of “Immovable Property”,
the claim of Appellant for input tax credit has to be allowed based on the
decision of Orissa High Court’s decision in Safari Retreats Pvt Ltd. Vs. Chief
Commissioner of CGST’ = [2019] 11 TUD Online 070 (Orissa).
5.10.1 Eligibility of cenvat credit is governed by the provisions of Chapter V
of the CGST Act consisting of Sections 16 to 21. While section 16 mentions the
eligibility and conditions for taking input tax credit, Section 17 speaks about
apportionment of credit and blocked credit. Section 17 (5) states that
notwithstanding anything contained in sub-section (1) of section 16 and
sub-section (1) of Section 18, input tax credit shall not be available in
certain cases. Thus in the subject case it is imperative to find out whether the
applicant is barred from taking under Section 17 (5) of the said Act.
5.10.2 We now reproduce the provisions of Section 17 (5) (d) of the CGST Act,
which is as under:
“Notwithstanding anything contained in sub-section (1) of section 16 and
sub-section (1) of Section 18, input tax credit shall not be available in
respect of 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.”
5.10.3 Section 17 (5) (d) bars a taxable person, in the subject case the
applicant, from taking input tax credit for construction of immovable property
(as in the subject case), even when such goods or services or both are used in
the course or furtherance of business. Further, it is also seen from the
submissions that the immovable property in the subject case is neither plant nor
machinery. Thus we find that, Section 17(5) (d) provides that no ITC is
available in respect of any goods or Services received by a taxable person for
construction of an immovable property on his own account even if such inputs and
input services are used in the course and furtherance of business. In the
instant case the applicant has himself built the immovable property (parking)
for which he has received goods i.e. Paver Blocks. Therefore, as per Section
17(5)(d), no ITC is available on any goods or services received by him for such
construction and the same cannot be claimed by him. Thus, the provisions of
Section 17 (5)(d) squarely applies in the subject case and thus the applicant
cannot avail input tax credit.
5.10.4 We find that, in the case of Sree Varalakshmi Mahaal LLP, the
Advance Ruling Authority in Tamil Nadu, = [2019] 18 TUD Online 104 (Aar-Tamil
Nadu) while deciding application uls 97(2)(d) raised on the question
“Whether the Input Tax Credit available on spent for construction of building
materials can be claimed and utilized to nullify the cascading effect of
taxation?” has rued that, No Input Tax Credit is available against any goods or
services received by the applicant for construction of Marriage Hall on his own
account even if used in the course, or furtherance of his business of renting
the place. The decision made in the Sree Varalakshmi Mahaal LLP, the
Advance Ruling Authority in Tamil Nadu = [2019] 18 TUD Online 104 (Aar-Tamil
Nadu) case is squarely applicable in the subject case also.
5.10.5 The applicant has placed reliance on the judgment rendered by the
Hon’ble High Court Orissa in the case of M/s. Safari Retreats Pvt. Ltd., and
another V/s Chief Commissioner of Central Goods & Service Tax & others. = [2019]
11 TUD Online 070 (Orissa) In the said case it is seen that the party
had constructed malls which were given further on lease. While holding that
Section 17(5) (d) was not ultra vires, the Hon’ble Court ruled that the party
was eligible for credit.
5.10.6 We find that the department has filed an appeal against the said
judgement of the Hon’ble High Court Orissa in the case of M/s. Safari
Retreats Pvt. Ltd., and another V/s Chief Commissioner of Central Goods &
Service Tax & others, = [2019] 11 TUD Online 070 (Orissa) which is presently
pending. The Hon’ble Supreme Court, in the case of Union of India V/s West Coast
Paper Mills Ltd., as reported in [2004 (164) ELT 375 (SC)], has held
that once a special leave to appeal is granted and appeal is admitted,
correctness or otherwise of judgement of Tribunal becomes wide open and in such
appeal, Court is entitled to go into both questions of Tact and as well as law
and correctness of judgement is in jeopardy. Appeal is considered to be a
continuation of suit and a decree becomes executable only when the same is
disposed by the final Court of Appeal.
5.10.7 Hence in view of the above, we are of the opinion that since the case of
M/s. Safari Retreats Pvt. Ltd. = [2019] 11 TUD Online 070 (Orissa)
is pending with the Hon’ble Supreme Court, the same has not attained finality.
We aIso find that the Hon’ble High Court has given the relief to the party
invoking its writ jurisdiction while categorically holding that they are not
inclined to hold Section 17(5)(d) to be ultra vires. Therefore, we are not
relying upon the judgement of the Hon’ble High Court.
5.11 In view of the above discussions, we are of the considered opinion that the
subject would qualify as immovable property and therefore Applicant cannot avail
ITC in the subject case as per Section 17(5) (d) of the CG ST Act, 2017.
06. In view of the extensive deliberations as held hereinabove, we pass an order
as follows:
ORDER
(Under Section 98 of the Central Goods and Services Tax Act, 2917 and the
Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA-36/2019-20/B-41 Dated 18-03-2020
For reasons as discussed in the body of the order, the
questions are answered thus -
Question. Whether applicant is entitled to avail Input tax credit. under
CGST/SGST Act in respect of taxes to be paid on its purchase of Paver Blocks
laid on the land?
Answer:- Answered in the negative.
Place:- Mumbai
Date : March 18, 2020
-sd-
Ms. P. Vinitha Sekhar,
(MEMBER)
-sd-
Mr. A. A. Chahure
(MEMBER)
Copy to:
1. The applicant
2. The concerned Central / State officer
3. The Commissioner of State Tax, Maharashtra State, Mumbai
4. The Commissioner of Central Tax, Churchgate Mumbai
Refer Vide:-
CORRIGENDUM
Equivalent .