2020(07)LCX0140(AAR)
AAR-GUJARAT
M/s Swan LNG Pvt. Ltd
decided on 30/07/2020
GUJARAT AUTHORITY FOR ADVANCE
RULING
GOODS AND SERVICES TAX
A/5, RAJYA KAR BHAVAN, ASHRAM ROAD,
AHMEDABAD – 380 009.
ADVANCE RULING NO. GUJ/GAAR/R/46/2020
(IN APPLICATION NO. Advance Ruling/SGST&CGST/2019/AR/38)
Date: 30.07.2020
Name and address of the applicant | : | M/s. Swan LNG Pvt. Ltd., Flat No.301, Ground floor, 9th Avenue, Behind Rajpath Club, S.G.Highway road, Ahmedabad-380054. |
GSTIN of the applicant | : | 24AASCS9155R1Z7 |
Date of application | : | 14.06.2019. |
Clause(s) of Section 97(2) of CGST / GGST Act, 2017, under which the question(s) raised. | : |
(d) Admissibility of input tax credit of tax paid or deemed to have been paid. |
Date of Personal Hearing | : | 09.07.2020( Through Video Conferencing) |
Present for the applicant | : | Shri. Nirali Gada, Shri Komal Sampat |
B R I E F FA C T S
The applicant M/s. Swan LNG Pvt.
Ltd., has submitted that they are a private limited company incorporated in
India and a subsidiary of Swan Energy Limited. They have submitted that they
have entered into a Concession Agreement dated 18th October, 2017 with the
Gujarat Maritime Board (‘GMB’) to, inter-alia, implement the development,
construction, operation and maintenance of Liquefied Natural Gas (‘LNG’) Port
with a Floating Storage and Regasification Unit (‘FSRU’) facility in Jafrabad,
Gujarat under the Build, own, Operate and transfer (‘BOOT’) basis. As part of
developing the LNG Port and FSRU facility, the applicant would be developing an
Import Terminal for FSRU near the village Bhankodar near Jafrabad, Gujarat for
an output of 10 MMTPA. After development of the said Import Terminal, it would
be providing LNG regasification services to prospective customers.
2. The applicant has submitted that as per the Concession Agreement, the
applicant is required to develop the LNG infrastructure for the purpose of
regasification of LNG, and FSRU, which would be installed in Harbor Area of the
Port facility; that presently, as on the date of filing of this Application, the
Port infrastructure and the FSRU is under development stage and has not yet been
commissioned/operationalized and is expected that this facility would be
commissioned/operationalized by mid 2020; that the proposed LNG Port
Infrastructure consists of building two Jetties (referred to as ‘Jetty 1’ &
‘Jetty 2’), as per the development plan and these LNG Jetties which are proposed
to be developed are completely unique in terms of their purpose and use as
compared to the purpose and use of ‘Jetty’ as understood in a commercial
parlance and shipping industry parlance; that these Jetties are essentially and
primarily proposed to be used as foundation for the plant and machinery, that
is, loading and unloading equipment and other related equipment which will be
used for the purpose of loading, unloading, and transporting LNG; that the LNG
Jetties proposed to be built as foundation of plant and machinery shall consist
of the following:
Unloading platform with a concrete deck providing support for piping and equipment;
Loading and Unloading arms;
Breasting and mooring dolphins fitted with fenders and quick release hooks and accessible by catwalks;
Trestle to shore accommodating piping, cables and a roadway for personnel access and small vehicles;
Mooring load monitoring system, a berthing aid system and an environmental monitoring system;
Control room areas.
3. The LNG Jetties proposed to be developed are designed and built as per the highly particular specifications of the Plant and Machinery which would be installed on it in order to make sure that such Jetties acts as a stable and strong foundation for the same; that these jetties would be a custom built based on the tonnage load to be handled on it; that these jetties would also have pathways for vehicles to enter during time of repairs and maintenance occasionally; that apart from the above, it will also have control rooms built on it for operating the machinery and equipment installed; that the proposed LNG jetties are unique as compared to normal jetty in terms of its purpose and use. While the nomenclature of the said foundation is generally referred as ‘Jetty’, but in substance it is actually a foundation for mounting and installing the plant and machinery for LNG operations, that is regasification of LNG; loading, unloading, connecting to pipeline etc. The applicant has stated that the layout and construct of the LNG Jetties, that is, foundation and the equipment to be installed on it, broadly, includes the following:
LNGC unloading arms.
FSRU loading arms.
HP Gas unloading arms.
Gang way towers, cold drain tanks.
Jetty substation and Instrument Rack Room (IRR).
Nitrogen bugger vessels, fire monitor and analyzer shelter.
4. The applicant has stated that
they would like to draw reference to Section 16 of the Central Goods and
Services Tax Act, 2017 (‘CGST Act, 2017’) read with the Gujarat Goods and
Services Tax Act, 2017 (‘SGST Act, 2017’) with respect to admissibility of
‘input tax credit’ which states that subject to such conditions and restrictions
as may be prescribed and in the manner as prescribed in Rule 49, every
registered person shall be entitled to take input tax credit on any supply of
goods or services or both which are intended to be used in the course or
furtherance of his business; that as far as conditions and restriction in
availing input tax credit is concerned, the Applicant would like to draw
reference to the ‘Explanation’ to Section 17 of the CGST Act to examine whether
the LNG Jetties proposed to be built by the applicant can be said to be a
foundation to ‘Plant and machinery’. The relevant extract of the provisions is
as below:
“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) telecommunications towers; and
(iii) pipelines laid outside the factory premises.”
4.1 The applicant has further submitted that as per the said explanation, any
foundation built for installation of plant and machinery on it should also get
covered under the expression ‘plant and machinery’ and given this, the
restriction on availing input tax credit as prescribed under Section 17(5)(c)
and 17(5)(d) should not be applicable to such foundation for plant and machinery
which can be in the nature of moveable and immoveable property; that in view of
the legal provisions, it is pertinent to examine if the LNG Jetties which are
specifically built for installation of equipment can be considered as
‘foundation’ for such plant and machinery so as to get covered under the
expression ‘Plant and machinery’; that in this context, the applicant hereby
lists down the following tests:
a. The equipment proposed to be installed are ‘Plant and machinery’.
b. If answer to (a) is in affirmative, the LNG Jetties on which such equipment
is proposed to be installed qualifies as ‘foundation’ for such plant and
machinery.
4.2 The applicant has also submitted that as far as the test with respect to
equipment qualifying as ‘Plant and machinery’ is concerned, explanation as
provided for ‘Plant and Machinery’ under Section 17 of the CGST Act, 2017 means
‘apparatus, equipment and machinery; that in view of the said
explanation, the applicant hereby lists down the various equipment with their
description, use and purpose which are installed on the LNG jetties:
LNGC unloading arms.
FSRU loading arms.
HP Gas unloading arms.
Gang way towers, cold drain tanks.
Jetty substation and Instrument Rack Room(IRR).
Nitrogen bugger vessels, fire monitor and analyzer shelter.
4.3 The applicant has detailed
the purpose and use of the aforementioned equipment/machineries as under:
I. LNGC unloading arms/FSRU loading arms/HP gas unloading arms:
Loading/unloading arms permit the transfer of liquefied natural gas from one
tank/vessel to another tank/vessel/FSRU through an articulated pipe system
consisting of rigid piping and swivel joints to obtain flexibility.
II. Gangway towers: Gangway towers help in accessing the vessel’s deck
which due to variation in sea levels and tidal levels moves up and down .
Gangway positioning needs to be adjusted to suit ship’s deck level and each
tower tier.
III. Cold drain tanks: LNG is stored at low temperatures to reduce
vaporization of LNG. Cold drain tanks are used to store LNG gas. The tanks are
provided with protection against high pressure to avoid any damage and with
robust controls to keep the pressure within limits. Generally, LNG cryogenic
pumps are also installed inside the tanks, which pump out LNG from the tanks at
intermediate pressure.
IV. Jetty Substation/IRR: Substation-20: This substation feeds all the LV
electrical equipment/loads located in the Jetty Topside facility. Based on the
hazardous area classification, this substation is pressurised to avoid any
ingress. Blast walls are provided wherever required as per codes and standards.
This substation shall receive 415V power from Substation No.10.(located
onshore). Major loads fed from this Substation are the Loading arms, UPS loads,
Lighting. Substation-20 comprises of the following key equipments:
1. UPS and Batteries.
2. Switch gears.
3. Transformers.
4. Instrument Rack Room(IRR)-consist of Distribution Control System(DCS).
Emergency Shutdown Systems (ESD), Fire Spill Gas Direction System (FSGDS)
cabinets.
V. Nitrogen Buffer Vessel; Two Nitrogen buffer vessels are located on
Jetty-1. These buffer vessels store and supply nitrogen to the equipment
installed on foundation i.e. jetty. Each buffer vessel is sized for at least 30
minutes holdup time. This ensures safe and uninterrupted operation of the plant
in the event of any failure of the Nitrogen generation unit. Initial operating
pressure of the vessel is the normal operating pressure 7 barg, while the final
pressure should not be less than 5 barg.
VI. Fire monitor tower: Tower mounted firewater monitors are provided for
the protection of jetty loading and unloading arms as per codes and standards.
Firewater tower monitors have a minimum capacity of 1000gpm and it can be
remottely operated from the control room. Based on the hazardous area
classification, these monitors are designed to use in hazardous area. Remote
controls for a fire monitor are located at a minimum distance of 15 m from the
protected equipment.
4.4 The applicant has drawn reference to the definitions of the terms Apparatus,
equipments and machineries as described in various dictionaries:
Mac-Millan dictionary:
‘Apparatus: the machines, tools, and equipment needed for doing
something, especially something technical or scientific.
Equipment: the tools, machines, or other things that you need for a
particular job or activity.
Machinery: a piece of equipment that does a particular job by using
electricity, steam, gas etc.
Mc-Graw dictionary:
‘Apparatus: It is a collection or set of materials, instruments,
appliances or machinery designed for a particular use.
Equipment: One or more assemblies capable of performing a complete
function.
Machinery: A group of parts or machines arranged to perform a useful
function.
5. The applicant has submitted that considering the nature and purpose of
various equipment in Paragraph 5, LNGC unloading arms, FSRU loading arms, HP Gas
unloading arms, Gangway towers, cold drain tanks should be considered as
‘equipment’ or ‘machinery’ since they are used for the purpose of mechanically
performing a particular activity, therefore such equipment qualify to be covered
under the expression ‘plant and machinery’; that as far as the test with respect
to qualification of LNG jetties as ‘foundation’ for such plant and machinery is
concerned, the term ‘foundation’ has not been defined in the CGST Act, 2017 or
GGST Act, 2017 and therefore, as per the settled judicial principles of
interpretation, reference is drawn to the dictionaries for the meaning of the
term ‘foundation’. Relevant extract from dictionaries is as below:
https://www.collinsdictionary.com/dictionary/english/foundation
‘The foundations of a building or other structure are the layer of bricks or
concrete below the ground that it is built on.’
https://en.oxforddictionaries.com/definition/foundation
‘The lowest load-bearing part of a building, typically below ground level.’
https://www.businessdictionary.com/definition/foundation.html
‘Part of a building or structure that transmits structural loads to the earth
and supports the superstructure.’
5.1 The applicant has submitted that in technical and commercial parlance,
typically ‘foundation can be categorised as: (a) shallow foundations and; (b)
deep foundations; that the term ‘shallow’ and ‘deep’ refer to the depth of soil
in which the foundation has been made. Generally, shallow foundations can be
made in depths of as little as 3ft (1 metre), while deep foundations can be made
at depths of 60-200 ft.(20-65 metres). The various kinds of foundations are
mentioned hereunder:
Foundation |
Shallow foundation |
Isolet Spred footing |
Wall footing | ||
Combined footing | ||
Cantilever or strap footing | ||
Raft or mat footing | ||
Deep foundation |
Pile foundation | |
Pier foundation | ||
Caisson foundation |
5.2 The applicant further submitted that in the present case, the foundation type is being built to support the plant and machinery and other equipment which is to be installed on it is ‘deep foundation’ and which can be further subcategorized as ‘pile foundation’; that in this context, they have submitted the characteristics of the pile foundation as detailed below:
Pile foundation is a slender column or long cylinder made of materials such as concrete or steel which are used to support the structure and transfer the load at desired depth.
Pile foundation is meant only to give stability to the plant and machineries to be installed on it and keep it’s operation fibration free.
This foundation is designed considering the load of the plant and machineries to be installed on it and to minimize the effect of shocks and vibrations (dynamic forces) resulting from operation of these machines.
The main components of the pile foundation are the ‘pile cap’ and the ‘piles’. This can be demonstrated by way of pictorial representation. The pile cap is an area of the pile foundation on which the equipment will be fastened and installed. The purpose of pile is to attach and support the pile cap to the earth as part of the overall pile foundation.
5.3 The applicant has submitted that pile foundations are generally adopted in the following situations:
The sub-soil water table is very high which can easily affect other foundations.
Heavy and uniform load is coming to the soil from the structure.
Where raft or grillage foundations are either very costly or cannot be adopted due to local difficulties.
When timbering of the excavation trenches is not possible.
When it is impossible to maintain the foundation trenches in dry condition by pumping due to heavy inflow of seepage or capillary water.
When the underneath soil is waterlogged and compressive. Hard firm strata are situated at a deeper depth.
When the structure is situated on or near sea-shore or river bed and foundations are liable to be scoured due to the action of water.
5.4. The applicant has further stated that in the present case, given the nature, characteristics as well as meanings of ‘foundation’ and ‘pile foundation’, the characteristics, feature, layout and purpose of the LNG jetties to be built for it to qualify as foundation/pile foundation and also rationale as to why this Jetties are different from normal jetty.
LNG jetties are being built in the harbour area are in the nature /akin to pile foundation.
These jetties are custom designed for the purpose of installation of plant and machinery and are built considering the load of the plant and machineries to be installed on it and to minimize the effect of shocks and vibrations (dynamic forces) resulting from operation of these equipment.
Further, these jetties are meant to give stability to the plant and machinery installed on it and keep its operation vibration free.
In normal terms, jetty is generally being built considering the same to be used as landing stage or a small pier where the vessels/boats are docked or moored or it is built to be used as breakwater to protect or defend the harbour. However, in the present case LNG jetties so built are specifically for loading, unloading of LNG and loading LNG to FSRU for which the loading and unloading arms(equipment) are installed on the jetty. This is the main purpose of LNG jetties so that these equipment can be installed for LNG operations and capable of handling double banking operations.
5.5 The applicant has stated that
fastening the plant and machinery to foundation, it is not necessary to contend
that the said plant and machinery results into an immoveable property; that
reference is drawn to circular issued in excise era Circular No.13/90.1-CX dated
18.04.1990 wherein discussion with excisability respect to plant and machinery
assembled at site and fixed to the ground has been elaborated, the relevant
extract of the said circular is as under:
“It has been decided by the board that machinery, which is superficially
attached or bolted to a prepared foundation on the ground, in order that its
operation is vibration free, does not, by the reason, becomes immovable
property, because it can be easily be unbolted and bought and sold (example:
diesel engine, generating set, power-loom etc.).”
5.6 The applicant therefore categorically submits that in the present case given
the nature, characteristics as well as meanings of ‘foundation’ and ‘pile
foundation’, the characteristics, feature, layout and purpose of the LNG jetties
qualifies as ‘foundation’ for the plant and machinery to be installed in it. The
applicant has also submitted that the input tax credit of GST charged by its
registered suppliers on procurement of inputs, input services or capital goods
for building the LNG jetty is a foundation for plant and equipment and therefore
there are no restrictions in availing credit as per Section 16 read with Section
17 of the relevant Acts. The applicant has put forward the following questions
seeking Advance Ruling on the same:
(1) Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act,
2017, the LNG jetties proposed to be built by the applicant can be said to be
covered within expression ‘plant and machinery’ as foundation to equipment,
apparatus, machinery to be installed on it?
(2) Whether as per Section 16 read with Section 17 of the said Acts, the
applicant can accordingly avail ‘input tax credit’ of GST paid in inputs, input
services as well as capital goods procured for the purpose of building the LNG
jetties?
DISCUSSION & FINDINGS:
6. We have considered the submissions made by the applicant in their application
for advance ruling as well as the arguments/discussions made by their
representative Ms.Nirali Gada at the time of personal hearing. We have also
considered the issues involved on which Advance Ruling is sought by the
applicant.
7. At the outset, we would like to state that the provisions of both the Central
Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act,
2017 are the same except for certain provisions. Therefore, unless a mention is
specifically made to such dissimilar provisions, a reference to the CGST Act
would also mean a reference to similar provisions of the GGST Act.
8. As per the submission of the applicant, they have entered into a Concession
Agreement with the Gujarat Maritime Board (‘GMB’) to, inter-alia, implement the
development, construction, operation and maintenance of Liquified Natural Gas
(‘LNG’) Port with a Floating Storage and Regasification Unit (‘FSRU’) facility
in Jafrabad, Gujarat under the Build, own, Operate and transfer (‘BOOT’) basis;
that as per the Concession Agreement, the applicant is required to develop the
LNG infrastructure for the purpose of regasification of LNG, and FSRU, which
would be installed in Harbor Area of the Port facility; that presently, the Port
infrastructure and the FSRU is under development stage and would be
commissioned/operationalized by mid 2020; that the proposed LNG Port
Infrastructure consists of building two Jetties (referred to as ‘Jetty 1’ &
‘Jetty 2’), as per the development plan; that these Jetties are essentially and
primarily proposed to be used as foundation for the plant and machinery, that
is, loading and unloading equipment and other related equipment which will be
used for the purpose of loading, unloading, and transporting LNG only. The
applicant has referred to Section 16 of the Central Goods and Services Tax Act,
2017 (‘CGST Act, 2017’) read with the Gujarat Goods and Services Tax Act, 2017
(‘GGST Act, 2017’) with respect to admissibility of ‘input tax credit’ which
states that subject to such conditions and restrictions as may be prescribed and
in the manner as prescribed in Rule 49, every registered person shall be
entitled to take input tax credit on any supply of goods or services or both
which are intended to be used in the course or furtherance of his business. The
applicant has also made a reference to the ‘Explanation’ to Section 17 of the
CGST Act to examine whether the LNG Jetties proposed to be built by the
applicant can be said to be a foundation to ‘Plant and machinery’. The applicant
has put forward the following questions seeking Advance Ruling on the same:
(1) Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act,
2017, the LNG jetties proposed to be built by the applicant can be said to be
covered within expression ‘plant and machinery’ as foundation to equipment,
apparatus, machinery to be installed on it?
(2) Whether as per Section 16 read with Section 17 of the said Acts, the
applicant can accordingly avail ‘input tax credit’ of GST paid in inputs, input
services as well as capital goods procured for the purpose of building the LNG
jetties?
9. During the course of personal hearing held on 09.07.2020, the representative
of the applicant was asked to submit the photocopy of the agreement of the
applicant made with Gujarat Maritime Board as well as photos of the jetties they
proposed to build. Since it was not clear from the submission as to whether the
applicant was involved in the supply of goods or services or both in the instant
case, the representative was directed to make an additional submission
clarifying the above facts along with the aforementioned documents. However,
neither any additional submission nor any documents as called for during
personal hearing have been received so far. In view of the above, we are left
with no option but to decide the case on the basis of the records available as
well as on the merits of the case.
10. From the submission of the applicant, we find that they have entered into a
Concession Agreement with the Gujarat Maritime Board (‘GMB’) to, inter-alia,
implement the development, construction, operation and maintenance of Liquified
Natural Gas (‘LNG’) Port with a Floating Storage and Regasification Unit (‘FSRU’)
facility in Jafrabad, Gujarat under the Build, own, Operate and transfer
(‘BOOT’) basis and the purpose of the construction of the 2 jetties is for the
installation of plant and machinery on it. It, therefore, appears that it is a
service contract between GMB and the applicant for: (i) construction of the
jetty (ii) Erection, commissioning and installation of plant and machinery on
the said jetties for the purpose of regasification of LNG and (iii) operation
and maintenance of the said infrastructure including plant and machinery.
However, since the copy of the agreement entered into by the applicant with GMB
has not been submitted, it is not clear as to whether the contract includes
supply of materials also.
10.1 Further, we find that the main issue to be decided is as to whether the
jetties proposed to be built by the applicant can be covered within the
expression ‘plant and machinery’ (as mentioned in the Explanation in Section 17
of the CGST Act, 2017) as ‘foundation’ to the equipment, apparatus, machinery to
be installed on it. For this purpose, we first of all need to find out what a
‘jetty’ is. As per data available online, a jetty, in brief, is a structure
generally constructed on plinths or pillars that projects from land out into
water. It can also be described as a narrow structure projecting from the shore
into the deep water as a landing place for ships i.e. the place where ships or
boats stop to let people get on or off, or to load or unload goods. Jetty
structure is used to berth the vessels alongside and affords them a working
platform and can also be called a landing stage at which boats can dock or be
moored. However, as discussed in the para above, in the instant case, the 2
jetties proposed to be constructed by the applicant as per the agreement with
GMB is not for the aforementioned purpose but solely for installation of plant
and machinery on it for the purpose of regasification of LNG. In short, the
construction of the above jetties is nothing but a civil structure or an
immoveable property constructed on pillars or plinths extending from the sea
shore to the deep sea.
10.2 Next, we need to find out the definition of ‘foundation’. Since the term
‘foundation’ is not defined in the CGST Act, 2017, reference is being drawn to
the dictionaries for the meaning of the said term.The definition of ‘foundation’
as per various dictionaries is mentioned hereunder:
(a) As per Merriam Webster dictionary: a usually stone or concrete
structure that supports a building from underneath.
(b) As per Collins dictionary: the foundation of a building or other
structures are the layers of bricks or concrete below the ground that it is
built on.
(c) As per Macmillan dictionary: the parts of a structure that is below
the ground and supports the rest of it.
(d) As per Cambridge dictionary: the structures below the surface of the
ground that support a building.
10.3 On going through the aforementioned definitions of ‘foundation’, the one
thing that we find strikingly common in all of them is that foundations are
structures which are located below the ground and support the
structures/buildings built above it. Thus, the primary condition for a structure
to be a ‘foundation’ is that it is required to be a concrete structure made of
stones, bricks, cements etc., which should be located below the ground and give
support to the structure/building constructed above it. However, on going
through the definitions as well as the details of jetties proposed to be built
by the applicant as per their agreement with GMB and comparing the same, we find
that the jetties are just civil structures or immoveable property, which are
akin to a building wherein the only difference being that buildings are located
on foundations below the surface of the ground whereas a jetty is a civil
structure which is constructed high above the sea shore and extending into the
deep sea, stationed on pillars or plinths. Thus, the jetties, in itself, being
civil structures and immovable property constructed above the sea shore and
extended into the sea, stationed on pillars and plinths above the earth, cannot
be considered or covered under the definition of ‘foundation’. Hence, on this
ground itself, we conclude that the said jetties proposed to be built by the
applicant cannot, by any stretch of imagination, be called or defined as a
‘foundation’.
11. Next, we need to examine as to whether the ‘plant and machinery’ proposed to
be installed by the applicant on the aforementioned jetties would be covered
under the definition of ‘plant and machinery’ as defined in Explanation to
Section 17 of the CGST Act, 2017. For this, we will be required to refer to the
Explanation given in Section 17 of the CGST Act, 2017, which reads as under:
“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) telecommunications towers; and
(iii) pipelines laid outside the factory premises.”
11.1 On going through the aforementioned ‘Explanation’, we find that it
excludes: (i)land, building or any other civil structures. (ii)
telecommunications towers; and (iii) pipelines laid outside the factory
premises. Condition (iii) specifically states that pipelines laid outside the
factory premises shall be excluded from the definition of ‘plant and machinery’,
which means that ‘pipelines laid inside the factory premises shall be included
in plant and machinery. It also means to say that ‘plant and machinery’ should
necessarily be located within the ‘factory premises. Now, in view of the
aforementioned discussions in terms of the explanation mentioned above, we find
that all the following conditions are invariably required to be fulfilled in
order to be eligible to be covered under the definition of ‘plant and
machinery’:
(i) They have to be apparatus, equipment and machinery.
(ii) They have to be fixed to earth by foundation or structural support.
(iii) They should be used for making outward supply of goods or services or
both.
(iv) They should be located in a factory premises.
11.2 Therefore, we need to find out whether the applicant fulfils all the
aforementioned conditions or otherwise, which shall be discussed one by one as
under:
(i) We find that the applicant in his submission has defined the terms
apparatus, equipment and machinery as per Mac-millan dictionary and Mc-Graw
dictionary as under:
(a) Mac-Millan dictionary:
‘Apparatus: the machines, tools, and equipment needed for doing
something, especially something technical or scientific.
Equipment: the tools, machines, or other things that you need for a
particular job or activity.
Machinery: a piece of equipment that does a particular job by using
electricity, steam, gas etc.
(b) Mc-Graw dictionary:
‘Apparatus: It is a collection or set of materials, instruments,
appliances or machinery designed for a particular use.
Equipment: One or more assemblies capable of performing a complete
function.
Machinery: A group of parts or machines arranged to perform a useful
function.
11.3 The applicant has also submitted the list of equipment and machinery that
he proposes to install on the jetties i.e. LNGC unloading arms, FSRU loading
arms, HP Gas unloading arms, Gang way towers, cold drain tanks, Jetty substation
and Instrument Rack Room(IRR), Nitrogen bugger vessels, fire monitor towers and
analyzer shelter. Although the applicant has given the uses of the above items,
they have not submitted any description and photos of the above mentioned items,
which would have been helpful in determining their eligibility to be covered
under ‘plant and machinery’ or otherwise. We, therefore, proceed to decide the
issue on the available records as well as available data. On going through the
details of their uses as well as the images available online, it appears that
gangway towers, fire monitor towers and jetty substations are civil structures
and are therefore not covered under ‘plant and machinery’, whereas the remaining
equipment appear to be covered under the definition of apparatus, equipment or
machinery. Therefore, this condition is only partially fulfilled.
11.4 The apparatus, equipment and machinery are not fixed to the earth by
foundation or structural support. The same are to be fixed to the jetties which
by themselves do not fall under the definition of ‘foundation’ or structural
support as discussed earlier. Hence this condition is not fulfilled.
11.5 On going through the submission of the applicant, it is not clear as to
whether the aforementioned apparatus, equipment and machinery are involved in
the outward supply of goods or services (or both) or otherwise. Although, the
representative of the applicant was asked to give a submission in this regard
during the course of personal hearing, no submission has been received so far
from the applicant. In absence of any submission in this regard, we are left
with no option but to conclude that the aforementioned apparatus, equipment and
machinery are not involved in the outward supply of goods or services. Hence, we
conclude that this condition is also not fulfilled.
11.6 Further, the aforementioned apparatus, equipment and machinery are to be
installed on the jetties, which do not appear to be covered under the definition
of ‘factory premises’.
11.7 In view of the above, since the apparatus, equipment and machinery proposed
to be installed by the applicant do not satisfy the conditions required to be
defined as ‘plant and machinery’, we conclude that the same are not covered
under the definition of ‘plant and machinery’ in terms of the Explanation to
Section 17 of the CGST Act, 2017.
12. The next issue to be discussed is whether as per Section 16 read with
Section 17 of the said Acts, the applicant can avail ‘input tax credit’ of GST
paid in inputs, input services as well as capital goods procured for the purpose
of building the LNG jetties. In this regard, we would like to draw attention to
the earlier paras, wherein it has been discussed and proved that the apparatus,
equipment and machinery (as referred to by the applicant)proposed to be
installed by the applicant on the jetties are not covered under the definition
of ‘plant and machinery’ as defined in the Explanation to Section 17 of the CGST
Act, 2017 and that the jetties are not covered under the definition of
‘foundation’ as defined in the said explanation. Also as discussed earlier,
jetties proposed to be constructed by the applicant are civil structures
(immoveable property’) which are to be constructed as per their agreement with
Gujarat Maritime Board(GMB). In this context, we would like to draw attention to
the fact that ITC in respect of inputs as well as input services used in the
construction of civil structures or immovable property are not available to the
applicant as per the provisions laid down in Rule 17(5)(c) and 17(5)(d) of the
CGST Act, 2017. Rule 17(5) of the CGST Act, 2017 reads, as under:
“Section 17(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) motor vehicles for transportation of persons having approved seating
capacity of not more than thirteen persons (including the driver), except when
they are used for making the following taxable supplies, namely:
(b) the following supply of goods or services or both—–
(c) works contract services when supplied for construction of an immovable
property (other than plant and machinery) except where it is an input service
for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business.
Explanation.––For the purposes of 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;”
13. In light of the foregoing, we rule as under –
RULING
Question-1:
Whether in terms of Section 17 of the CGST Act, 2017 read
with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can
be said to be covered within expression ‘plant and machinery’ as foundation to
equipment, apparatus, machinery to be installed on it?
Answer: The LNG jetties proposed to be built by the applicant are
not covered within the expression ‘plant and machinery’ as foundation to
equipment, apparatus, machinery to be installed on it in terms of Section 17 of
the CGST Act, 2017 read with GGST Act, 2017 for the reasons discussed
hereinabove.
Question-2:Whether as per Section 16 read with Section 17 of the
said Acts, the applicant can accordingly avail ‘input tax credit’ of GST paid on
inputs, input services as well as capital goods procured for the purpose of
building the LNG jetties?
Answer: The applicant cannot avail ‘input tax credit’ of GST paid
on inputs, input services as well as capital goods procured for the purpose of
building the LNG jetties in terms of Section 16 read with Section 17 of the CGST
Act, 2017 read with GGST Act, 2017 for the reasons discussed hereinabove.
(SANJAY SAXENA)
MEMBER
(MOHIT AGRAWAL)
MEMBER
Place: Ahmedabad
Date: 30.07.2020.
Equivalent .