2020(06)LCX0077(AAR)
AAR-MADHYA PRADESH
Atriwal Amusement Park
decided on 09/06/2020
AUTHORITY FOR ADVANCE
RULING - MADHYA PRADESH Goods and Service Tax
O/o THE COMMISSIONER, COMMERCIAL TAX,
MOTI BUNGALOW,
MAHATMA GANDHI MARG, INDORE (M.P.) - 452007
e-mail :aar@mptax.mp.gov.in Phone : 0731- 2437315 fax, no. : 0731-2536229
PROCEEDINGS OF THE AUTHORITY FOR ADVANCE RULING
U/S,98 OF THE GOODS AND SERVICES TAX ACT ,2017
Members Present
1. Sh. Virendra Kumar Jain
Additional Commissioner,
Office of the Commissioner,CGST and Central Excise, Indore
2. Manoj Kumar Choubey
Joint Commissioner,
Office of the joint Commissioner of Commercial Tax, Indore Division-1
GSTIN Number. If any/User-id | NA |
Name and address of the applicant | Atriwal Amusement Park, |
Clause(s) of section 97(2) of CGST/SGST Act, 2017 under which the question(s) raised | NA |
Present on behalf of applicant | NA |
Case Number | 29/2019 |
Order dated | 09/06/2020 |
Order Number | 12/2020 |
PROCEEDINGS
(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017
and the Madhya Pradesh Goods & Service Tax Act, 2017)
1. M/s Atriwal Amusement
Park (hereinafter referred to as the Applicant) is engaged in construction of
Water Park, for construction of the same various components & services will be
used. All such components & services are taxable under GST. The Applicant is not
registered. However the Applicant has declared that he is desirous of obtaining
registration in GST.
2. The provisions of the CGST Act and MPGST Act are identical. except for
certain provisions. Therefore, unless a specific mention of the dissimilar
provision is made, a reference to the CGST Act would also mean a reference to
the same provision under the MPGST Act. Further, henceforth. for the purposes of
this Advance Ruling, a reference to such a similar provision under the CGST or
MP GST Act would he mentioned as being under the GST Act.
3. BRIEF FACTS OF THE CASE -
3.1 Atriwal Amusement Park was incorporated on 13th March 2018. With 5000000
Share Holders Holding 4970000 shares of Rs.10/- each.
3.2 Applicant has a proposed activity of construction of Water Park, for
construction of the same various components & services will be used. All such
components & services are taxable under GST.
4. QUESTION RAISED BEFORE THE AUTHORITY -
4.1 Whether we are eligible to take credit on Input Tax paid on Purchase of
Water Slides? Water Slides are made up of Strong PVC.
4.2 Water Slides are installed on Steel and Civil Structure. Credit of Tax paid
on Input goods and services used in construction of this support structure will
be available or not?
4.3 Input Tax will be available or not on Goods and services used for area
development and preparation of land on which water slides are erected.
4.4 Whether applicant will be eligible to take credit of Input Goods and
Services used for construction of Swimming Pool / Wave Pool as water slides
directly run into pools?
5. RECORD OF PERSONAL HEARING -
5.1 CA Ankit Khatri,……….. appeared for personal hearing on and they reiterated
the submission already made in the application and attached additional
submission which goes as follows -
5.2 In Regards to question No. 1 -
In regards to point no. 1 it is hereby submitted that according to the nature of
industry applicant is required to buy Plant & Machinery that are used in
providing output services & it includes Water Slides, kids play slide, wave
generation machine & other machinery to be used in waterpark. These are
clearly covered under the definition of plant & machinery (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.) hence credit is
allowable.
5.3 In regards to point no. 2 it is hereby submitted that for the installation
of water slides applicant is required to construct support structure (Commonly
known as Tower) on which water slides are installed as without those civil and
steel structure water slides cannot be installed. The support structure is
generally made up of steel, Iron & other civil work. Definition of plant &
machinery specifically includes foundation or structural support hence its
credit should he allowed.
Also for Installation of Machines (Machine generating waves in water pool)
applicant is required to construct machine foundation and room for protection of
this machine as without that protection machine cannot operate effectively
As per the explanation it is specifically covered under the definition of plant
& machinery in foundation or structural support hence its credit should
be allowed.
5.4 In regards to point no. 3 it is hereby submitted that for installation of
water slides applicant is required to create a strong base which involves area
development, digging process &creation of base using concrete. iron, steel etc.
As without creating base nor the structural support can be installed nor the
water slides. It is the foundation for placing water slide as slides will be
attached to base through screw. Hence Input and input service used in
construction of base/ foundation for laying slides directly covered under the
definition of P & M under structural support and foundation.
5.5 In Regards to Point No. 4-
Swimming pool / Wave Pool is the integral part of water slides and should be
considered as single unit as without Swimming pool / Wave Pool there is no use
of water slides.
Hence this forms the support structure for water slides as slides are directly
connected to swimming pool / Wave Pool.
6. DISCUSSIONS AND FINDINGS -
1. The explanation below section 17(6), relating to the expression “plant and
machinery- has included foundation and structural support in the term “plant and
machinery”. It has also been stated that such foundation and structural support
are used for fixing apparatus. equipment and machinery. Therefore. in the
definition, foundation and structures are duly included. Further the definition
has excluded land building and any other civil structure from the definition of
the “plant and machinery”. Prima facie, there seems to be contradiction in the
inclusion of “such foundation and structural supports” and exclusion of
“……building or any other civil structures”.
2. Foundation:
2.1. Foundation means a usually stone or concrete structure that supports a
building or structure from underneath. Foundation Bolts are used to fasten
machinery or structures to the foundations. Dictionary meaning of Foundation is
as under:
● the structures below the surface of the ground
that support a building (https://dietionary.cambridge.org/dictionary/english/foundation)
● an underlying base or support (https://www.merriam-webster.com/dictionary/foundation)
2.2. Further, in the SB Sarkar’s Words and Phrases of Excise. Customs & Service
Tax, it has been stated as under:
“The lowest load-bearing part of a building, typically below ground level”.
It further states that that Foundation is the construction below the ground that
distributes the load of a “building, wall etc.
2.3. Foundation thus is a civil structure, which forms the base of a structure.
This structure can be that a building or a support structure. Therefore. it is
not under any doubt that Foundation is a sub-specie of the genus Civil
Structure.
3. This apparent contraction is however negated by the fact that the exclusion
of the building or civil structure is for plant and machinery per se, while the
inclusion is for foundation and structure is only to the extent that such
foundation and structure is used to fasten the apparent, equipment or machinery
to earth. Thus, if the plant and / or machinery is fixed / fastened to the earth
by a foundation or civil structure then such foundation or civil structure shall
be included in plant and machinery.
4. It is important to see why the exclusion to the term “building and civil
structure” has been provided for in law. The term plant has a wide meaning and
it changes with the context and purpose of the law under which the matter is
being sought to he interpreted. The term plant is defined as under in Cambridge
Dictionary:
● machines used in industry: a factory in which a particular product is made or
power is produced: a large, heavy machine or vehicle used in industry for
building roads. etc.
(https://dictionary.cambridge.org/dictionary/english/plant)
5. Further in Merriam Webster, plant is defined as under:
a : the land, buildings, machinery, apparatus, and fixtures employed in carrying
on a trade or an industrial business
b: a factory or workshop for the manufacture of a particular product also :
powerplant
c: the total facilities available for production or service
d: the buildings and other physical equipment of an institution
(https://www.merriam-webster.com/dictionary/plant)
6. Again. in in M.C. Graw Hill dictionary as below:
“Plant - The land, buildings and equipment used in an industry.”
7. Judicial pronouncements have also enlarged the definition of the term plant.
Some of the pronouncements are as under:
7.1. In the matter of SHANMUGARAJA SPINNING MILLS LTD. Versus COMMR. OF C.
EX., COIMBATORE reported in 1998 (98) E.L.T. 702 (Tribunal) it has been stated
as under by the Honorable CESTAT:
2…………………. “Plant” is a very wide term. Supreme Court observed that the word must
be construed in its popular sense and that the very fact that even books and
surgical instruments have been included showed the meaning to be given to
“Plant” was wide. The Court referred to the decision in Jarrold’s case -1982
(40) TC 681 (C.A.), assets such as heating, air-conditioning and water-softening
installations were held to fall within the meaning of ‘plant’ in the English
judgment, although they played a passive role. Supreme Court held that sanitary
fittings in the bathroom in a hotel would be ‘plant’ within the ambit of section
10(5) I.T. In C.I T. v. Tajmahal Hotel - (1971) 82 I.T.R. 44 (SC). It was
held by Allahabad High Court that “the word ‘plant’ in common parlance included
within its meaning buildings and equipments used for manufacturing purposes”
C.I.T v. Kanodia Cold Storage - (1975) UPTC 169. ‘plant’ has been defined as
machinery, fixtures, etc. used in industrial process vide Words & Phrases of
Central Excise & Customs - S.B. Sarkar p. 532.
7.2 Again, in the matter of VIVEK ALLOYS LIMITED Vs COMMISSIONER OF C. EX.,
COIMBATORE, reported in 1998 (98) E.L.T. 156 (Tribunal) the Honorable stated
as under:
13. For the purpose of Income Tax Act, capital goods include appliances used for
the purpose of trade or business. The definition of “capital goods- in the
explanation to Rule 57Q of the Rules follows quite a different scheme. The
sub-rule itself referred to capital goods used by the Manufacturer in his
factory. Explanation 1(a) refers to Machines, Machinery, Plant, Equipment,
apparatus, tools or appliances used for producing or processing of any goods or
for bringing about any change in any substance for the manufacture of final
products. Considering the scheme of Rule 57Q, the definition in Explanation 1
(a) of capital goods, as meaning machines, equipments, apparatus, tools,
appliances used for producing or processing the goods etc., clearly indicate the
intention of the rule making authority to give the wider meaning to the
expression ‘plant’ but to give a narrower meaning which is suitable in the
context. “Plant-. therefore. could he regarded as machine or group of machines
fitted in such a manner as to serve the purpose of manufacturing any particular
product, and the whole system of machine has to be regarded as Plant.
7.3 The Karnataka High Court in the matter of J.K. CEMENT WORKS Vs STATE OF
KARNAIAKA reported in 2017 (7) G.S.T.L. 408 (Kar.) came to the conclusion
that Cement although specified in Fifth Schedule. since it is used for laying
foundation and erection of cement manufacturing plant and machinery, prior to
commencement of commercial production, constitutes part and parcel of ‘plant’
and thus ‘capital goods’ used for manufacturing of cement later on. In the
order, at para 11 and 12 the Honorable High Court stated as under:
11. We see no justification in the contention of the learned Additional
Government Advocate appearing for the Revenue that a narrow meaning should be
given to the word “Plant- and restrict it to the value or cost of purchase of
plant itself. The plant and machinery for manufacturing of cement by itself
would be nothing and would he useless. unless they are properly installed and
erected with proper foundations and civil work for erection thereof and in that
process. the use of cement would constitute an integral part of the overall cost
of the plant and machinery itself. Such overall immovable asset in the form of
plant and machinery purchased. installed and erected by the petitioner assessee,
would only he fit for use for manufacturing of cement itself later on. But, the
term “Plant” is not defined in the KVAT Act and therefore, one can take a broad
view and interpret the meaning of the word ‘Plant’ with the help of precedents
or case laws. which we would shortly refer.
12. Once the Court comes to the conclusion that the cement, used for erection
and setting up of the Plant and machinery, would constitute a “Plant and
therefore, is Capital Goods, as defined under Section 2(7) of the KVAT Act, the
recourse can also be made to Section 12 of the KVAT Act quoted above and the
input tax in respect of the purchase of capital goods, including the cost of
“Plant and machinery- and cost of cement for erection thereof. would constitute
jointly capital goods, which are used for manufacture and sale of the cement
ultimately produced with such plant and machinery.
7.4 In the matter of Income Tax proceedings. in the case of M/s. Jayadev
Oil Mill, Hubli V. The Additional Commissioner of Commercial Taxes, Belgaum, a
Division Bench of Karnataka High Court in STA No. 23 of 1994 held as
under:
10. In deciding whether a ‘building” or a structure is a plant, the functional
lest has to be applied as indicated in the said decision. If the ‘building’ is
an apparatus or tool used by the Assessee for carrying on the business or
manufacturing activity, then it would he part of ‘plant’. If on the other hand.
if a building or a part of a building has no connection with the business or
manufacturing activity that is being carried on, then obviously such a building
or portion of the building will not be part of the plant. These aspects of the
matter have not been considered or dealt with by the Revisional authority. He
has merely proceeded on the basis that the decisions relied on by the appellant
are not applicable as they were rendered with reference to Income-tax Act.
11. Therefore, the word ‘installed’ is used in connection with the words plant
and machinery’, can also refer to ‘installation’ of a factory building. After
all, the intention of the Notification is to encourage setting up of new
industries in Karnataka. There is nothing in the Act or the Notification to
exclude the factory building from ‘plant’. We find no reason why the meaning
attached to the said work, while examining the provisions of the Income-tax Act,
cannot be applied while construing the meaning of the said word in the exemption
Notification issued under the Karnataka Sales Tax Act. Therefore, the mere use
of the word ‘installed’ with reference to ‘plant and Machinery’ is not
sufficient to exclude the factory building, from the scope of the ‘plant and
machinery’ used in the Notification dated 15-10-1981. Hence, we feel that the
Revisional Authority ought to have examined these aspects with reference to the
functional tests. In fact, none of the authorities have examined the matter with
reference to the functional tests, repeatedly prescribed by the Supreme Court
and this Court.
12. In the circumstances. we set aside the orders of the Revisional Authority,
Appellate Authority and the Assessing Authority and remit the matter to the
Assessing Authority for reconsideration of the matter.
7.5. Further, the Honorable Supreme Court in the case of Scientific Engineering
House Pvt. Ltd. (supra) relied upon certain following foreign decisions while
dealing with the explanation ‘Plant’ and gave it a wide meaning under the
provisions of Income Tax law in the following manner:
The classic definition of ‘plant’ was given by Lindley, L.J. in Yarmouth v.
France, [1887] 19 Q.B.D. 647, a case in which it was decided that a cart-horse
was plant within the meaning of section 1 (1) of Employers’ Liability Act, 1880.
The relevant passage occurring at page 658 of the Report runs thus:-
“There is no definition of plant in the Act: but, in its ordinary sense, it
includes whatever apparatus is used by a businessman for carrying on his
business, - not his stock-in-trade which he buys or makes for sale: but all
goods and chattels, fixed or movable, live or dear which he keeps for permanent
employment in his business.”
In other words, plant would include any article or object fixed or movable, live
or dead. used by businessman for carrying on his business and it is not
necessarily confined to an apparatus which is used for mechanical operations or
processes or is employed in mechanical or industrial business. In order to
qualify as plant the article must have some degree of durability. as for
instance, in Hinton v. Maden & Ireland Ltd., 39 I.T.R. 357, knives and lasts
having an average life of three years used in manufacturing shoes were held to
be plant. In C.I.T. Andhra Pradesh v. Taj Mahal Hotel, 82 I.T.R. 44, the
respondent, which ran a hotel, installed sanitary and pipeline fittings in one
of its branches in respect whereof it claimed development rebate and the
question was whether the sanitary and pipeline fittings installed fell within
the definition of plant given in Sec. 10(5) of the 1922 Act which was similar to
the definition given in Sec. 43(3) of the 1961 Act and this Court after
approving the definition of plant given by Lindley L.J. in Yarmouth v. France as
expounded in Jarrold v. John Good and Sons Limited, 1962 40 T.C. 681 C.A., held
that sanitary and pipeline fittings fell within the definition of plant.
In Inland Revenue Commissioner v. Barly Curie & Co. Ltd, 76 I.T.R. 62. the House
of Lords held that a dry dock, since it fulfilled the function of a plant, must
be held to be a plant. Lord Reid considered the part which a dry dock played in
the assessee company’s operations and observed :
“It seems to me that every part of this dry dock plays an essential part……The
whole of the dock is. I think, the means by which, or plant with which, the
operation is performed.”
Lord Guest indicated a functional test in these words :
“In order to decide whether a particular subject is an ‘apparatus’ it seems
obvious that an enquiry has to be made as to what operation it performs. The
functional test is. therefore. essential at any rate as a preliminary”.
7.6 Indian Courts as well as English Courts. depending upon the context of law,
have treated even the assets like dry dock, silos built in the shipyard freezing
chamber in the case of cold storage, cinema building. etc. as falling within the
definition of ‘Plant’.
“IRC v. Barclay, Curle and Co. Ltd. [1970] 76 ITR 62 (HL). The question that
arose for consideration was whether a dry clock could be construed as plant for
the purposes of the trade of the company within section 279(1) of the English
Act. In that case. the dry dock had been made, the walls and bottom of which had
to be strong and impervious to water so that large vessels could get into it for
the purposes of repairs. In the facts and circumstances of the said case, it was
held that the entire dry dock together with the ancillary structures constituted
plant.
In Schofield v. R. and H. Hall Ltd. [1974] 49 TC 538 (CA) concerning silosbuilt
in the shipyard. The company carried on a trade which consisted of storage of
grain. The question was whether the silos is part of the setting in which such
trade was carried on. It was found that considering the function of the silos in
relation to the assessee’s trade. the silos served as an essential part of’ the
overall trading activity. Their function was to hold the grain in a position
from which it could he conveniently discharged in varying quantities. Hence, it
was held that the silos would rank for capital allowance.
In C.I.T v. Kanodia Cold Storage - (1975) UPTC 169, the question was whether the
building with insulated walls used as a freezing chamber, though it is not
machinery or part thereof. is part of the air-conditioning plant of the cold
storage of the assessee, entitled to special depreciation on its written down
value. In the specific facts of the case, the whole freezing chamber including
walls and structure was held to be a plant with which the assessee was carrying
on his business activity. On the analogy of the above cases. Sri Prasad, learned
counsel for the assessee, contended that the whole theatre should he treated as
plant with which the assessee carries on his show business.
In Benson v. Yard Arm Club Ltd. [1978] 2 All ER 958, 968, [1979] Tax LR 778. 785
(Ch D). the subject-matter was a ship which was converted into a restaurant by
the assessee. The whole ship was claimed as an apparatus .1br carrying on their
business of a floating restaurant, and as such it was a plant to claim
allowance. On a review of various earlier decisions, the Chancery Division has
held that the vessel is the place or setting where the restaurant business was
carried on and was not plant and hence. the expenditure on them did not qualify
for capital allowance.”
8. To set to rest the disputes regarding the definition of the Plant, in light
of the fact that input tax credit of works contract services, goods and services
received as input for construction of immovable property on own account has been
specifically put under the Blocked Credit list with the rider that it shall not
apply to plant and machinery, it was incumbent that there should be clarity
regarding classification of buildings and civil structures that were hitherto
been classified as ‘Plant’.
9. Accordingly. in the explanation relating to Plant and Machinery, beneath
sub-section (6) of section 17. while providing the meaning of the term plant and
machinery, it has been clearly stated that Buildings and Civil Structures shall
not be covered under the term Plant. However, while so clarifying, it has been
accepted and understood that plant and machinery many a times requires support
structure and / or foundation for installation and cannot work otherwise. Thus,
civil structures and foundation as supporting structure for fastening of plant
and machinery to earth has been included as part of plant and machinery.
7. Ruling
7.1 Regarding the eligibility of
ITC in case of Input Tax paid on Purchase of Water Slides, we have to state that
Water Slides shall fall within the meaning of the term apparatus, equipment and
machinery and therefore, shall be eligible for claim of ITC.
7.2 Regarding the Steel and Civil Structure on which the Water Slides are
installed, we have to state that foundation and support structures which are
used to fasten plant and / or machinery to the Earth is classifiable as ‘Plant
and / or Machinery’. In the instant case. slide are fastened to the Steel and
Civil Structure are affixed to the Earth through these Steel an Civil
Structures. Therefore, these Steel and Civil Structures shall form part of the
Plant and Machinery. Accordingly. the credit of “Fax paid on Input goods and
services used in construction of this support structure shall be available.
7.3 It has been stated that for Wave Pool, Machines have been installed. The
foundation for these machines are eligible to be part of the Machines and the
ITC shall be treated in a manner similar to that of the Machines. However, the
Machine Room, which is a civil structure, erected for protecting machine is
neither foundation nor civil structure for machine therefore, IT relatable to
the construction of the room for Housing the machine shall not be eligible for
ITC.
7.4 Regarding the Input Fax on Goods and services used for area development and
preparation of land on which water slides are placed. we have to state that area
development and expenditure on preparation of land like site formation services
are part of the cost of the land and thus are interminably bound with land.
These expenses are liable to be capitalized under the head Land. Therefore, on
account of the specific exclusion of Land from the meaning of ‘plant and
machinery’. ITC related to Land Development, subject to its capitalization as
per accounting principles shall not be available.
7.5 Regarding eligibility of Input Tax Credit on Goods and Services used for
construction of swimming pools / Wave Pool in which the water slides directly
run into, we have to state that such Swimming Pools / Wave Pools are not support
structure or foundation for a plant, but are independent items per se. Since
they are not foundation or support structure on which slides are fasted for
affixing them to earth and also on account they being Civil Structures. they are
therefore excluded from the meaning of ‘plant and machinery’. Thus, the ITC
related to the construction of the Swimming Pools and Wave Pools. subject to its
capitalization shall not be available.
7.6 The provision of facilities like transformers. sewage treatment plant.
Electrical Wiring and Fixtures. Surveillance systems. D.G. Sets. Lilts. Air
Handling Units etc. are sine qua non for a commercial mall and hence cannot he
considered separate from the building or civil structure. The provision of these
are either statutory for a building or defines the nature of the building as a
commercial mall. Hence the input tax credit on the inward supplies of goods or
services involved in the construction of immovable properly which is a civil
structure or building is not available to the applicant and hence blocked.
8.7 The ruling is valid subject to the provisions under Section 103 (2) until
and unless declared void under Section 104 (1) of the GST Act.
Sh. Virendra Kumar Jain
(MEMBER)
MANOJ KUMAR CHOUBEY
(MEMBER)
Indore dt 09/06/2020
Copy to:-
1. Applicant
2. The Chief Commissioner, CGST & Central Excise, Bhopal Zone, Bhopal
3. The Commissioner(SGST) Indore
4. The Commissioner, CGST & Central Excise,
Indore
5. The Concerned Officer .
Equivalent .