2020(08)LCX0150(AAR)
AAR-HARYANA
M/s VDM Hospitality Private Limited
decided on 28/08/2020
HARYANA AUTHORITY FOR ADVANCE
RULING,
GOODS AND SERVICES TAX,
HARYANA VANIJYA BHAWAN, PLOT NO 1-3, SECTOR 5,
PANCHKULA-134151 (HARYANA)
Advance Ruling No. HAR/HAAR/R/2019-20/02
(In Application No. 02/2019-20, dated 05.04.2019)
Name & Address of the Applicant | : | M/s VDM Hospitality Private Limited, FF-15, Block-C, Omaxe, Guragon Mall, Sohna Road, Gurgaon, Haryana. |
GSTIN of the Applicant | : | 06AAFCV5809A1ZL |
Date of Receipt of Application | : | 05.04.2019 |
Clause(s) of Section 97(2) of CGST/HGST Act, 2017, under which the question(s) raised. |
: | Clause (d)- admissibility of input tax credit of tax paid or deemed to have been paid. |
Date of Personal Hearing | : | 03.06.2019 |
Present for the Applicant | : | Sh. Ritesh Wahal (C.A.) |
Memo No.: 1042/AAR
Dated: 28/08/2020
1. Annexure I
Question on which advance ruling is required:
1.1 Whether the Temporary Structure (i.e. hall or pandal or shamiana or any
other place) built up with Iron/Steel Pillars tight up with Nuts and Bolts (as
shown picture enclosed) specially created for functions would be treated as
Movable or Immovable property in pursuance to the GST Law ?
1.2 Whether credit of the tax paid on Iron/Steel Pillars tight up with Nuts and
Bolt used for the creation of Temporary Structure (i.e. hall or pandal or
shamiana or any other place) especially for functions are admissible under
section 16 of the CGST Act, 2017?
2. Annexure II
Statement of relevant facts having a bearing on the question raised:
2.1 The Appellant is a company engaged in the business of organizing wedding &
other banquet functions on a large scale, from its premises at Ambience Golf
Drive, Near Caitriona Apartment, Behind Ambience Mall, Gurugram, Haryana. The
said location is among the premier locations for wedding functions in Delhi NCR.
2.2 The Appellant creates a temporary structure (i.e. a hall) on the above
mentioned premises, though the following process:
2.2.1 A hangar/frame is created for the entire structure by using Iron and steel
pillars and sheets, pipes, ‘ballies’, and angles and the same has been tightened
up with nuts and bolts.
2.2.2 This frame is covered with iron sheets, and canvas, for coverage and
water-proofing and Plywood is used in the inner portion to make the roof smooth
and then the decoration is done. The said frame is also decorated on the
outside, through design modifications and sheet material, to resemble the
thematic identity of the interior;
2.2.3 Pictures of the structure & the hall during construction and dismantling
process, along with the exterior and interior view of thematic product
season-by-season, attached for your kind perusal.
2.2.4 Further, there is no permanent affixation of pillars and pre-fabricated
shelters to the earth. The structures were custom made and these are fixed to
foundations by nuts and bolts, not with the intention to permanently attach them
to the earth or for the beneficial enjoyment thereof, but only since securing
these to a foundation is necessary to provide stability and wobble/vibration
free operation and to ensure stability of such temporary structure (i.e. hall or
pandal or shamiana).
2.2.5 An attachment of this kind without the necessary intent of making the same
permanent cannot, in our opinion, constitute permanent fixing, embedding or
attachment in the sense that would make that structure a part and parcel of the
earth permanently. In that view of the matter we see no difficulty in holding
that such temporary structure (i.e. hall or pandal or shamiana) in question were
not immovable property.
3. Annexure III
Statement containing the applicant’s interpretation of law and/or facts, as
the case may be, in respect of the aforesaid question(s) (i.e. applicant’s view
point and submissions on issues on which the advance ruling is sought):
3.1 In our case, the fundamental issue which needs to be decided is whether the
said temporary structure (i.e. hall or pandal or shamiana or any other place)
created especially for functions is movable or immovable property. However,
Movable and Immovable property have nowhere defined under the Act. In this
regard, it would be useful to refer the relevant statutory provisions to
examine, what would constitute as moveable or immovable property. The expression
“moveable property” has been defined in Section 3(36) of General Clause Act,
1897 as under:
“Section 3(36): “movable property” shall mean property of every description,
except immovable property”.
3.2 It is obvious that the answer to the question whether the said temporary
structure (i.e. hall or pandal or shamiana or any other place) in question are
movable property, would depend upon whether they are immovable property. That is
because anything that is not immovable property is by its definition
“movable” in nature. Section 3 of the Transfer of Property Act, 1882 does
not spell out an exhaustive definition of the expression “immovable property”.
It simply provides that unless there is something repugnant in the subject or
context, ‘immovable property’ under the Transfer of Property Act, 1882 does not
include standing timber, growing crops or grass. Section 3(26) of the General
Clauses Act, 1897 similarly does not provide an exhaustive definition of the
said expression. It reads:
“Section 3(26): “immovable property” shall include land, benefits to arise
out of land, and things attached to the earth, or permanently fastened to
anything attached to the earth.”
3.3 A plain reading of Section 3(26), shows that it defines “immovable property”
as things attached to the earth or permanently fastened to anything attached to
the earth. The term “attached to the earth” has not been defined in the General
Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the
following meaning to the expression “attached to earth”:
(a) rooted in the earth, as in the case of trees and shrubs;
(b) imbedded in the earth, as in the case of walls and buildings;
(c) attached to what is so imbedded for the permanent beneficial enjoyment of
that to which it is attached.
3.4 Also, Supreme Court in the Case of Triveni Engineering (supra), has defined
things which is said to be Movable and Immovable. Also, Supreme Court heavily
relied on the Test of Marketability to decide whether the thing is Movable or
Immovable.
4. Relevant Para of the Judgment is as follows:-
4.1 Triveni Engineering (supra), highlighted the marketability of the goods:
whether they can be taken to the market and sold. From the above finding, it
follows that to be taken to the market and sold, the turbo alternator has to be
separated into components — turbine and other alternator — but then it would not
remain turbo alternator. Therefore, the court held that since turbo alternator
gets dismantled into steam turbine and alternator, the test of permanency fails.
4.2 Issue in the case of Sirpur paper Mills Ltd. (supra), is that whether the
paper machine assembled at site mainly with the help of components bought from
the market was dutiable under the Excise Act. The assessee’s argument was that
as the machine was embedded in a concrete base, it was immovable property though
embedding was meant only to provide a wobble free operation of the machine.
Repelling that contention, this court held that just because the machine was
attached to earth for a more efficient working and operation the same did not
per se become immovable property. The Court observed:
“5. Apart from this finding of fact made by the Tribunal, the point
advanced on behalf of the appellant, that whatever is embedded in earth must be
treated as immovable property is basically not sound. For example, a factory
owner or a householder may purchase a water pump and fix it on a cement base for
operational efficiency and also for security. That will not make the water pump
an item of immovable property. Some of the components of the water pump may even
be assembled on site. That too will not make any difference to the principle.
The test is whether the paper making machine can be sold in the market. The
Tribunal has found as a fact that it can be sold. In view of that finding, we
are unable to uphold the contention of the appellant that the machine must be
treated as a part of the immovable property of the company. Just because a plant
and machinery are fixed in the earth for better functioning, it does not
automatically become an immovable property.”
4.3 The Supreme Court after taking into consideration of judgment in Sirpur
Paper Mills Lid. V. Collector of Central Excise Hyderabad (1998) 1 SSC 400 and
after taking into account the earlier view in the Triveni Engineering & Indus
Ltd. v Commissioner of Central Excise 2000 (120) ELT 273 (SC): finally concluded
what is the “permanency test” in the case of Solid and Correct Engineering
(supra). In Solid and Correct Engineering (supra), the court after analyzing its
previous judgments, stated the controlling principle as follows:
“33. It is noteworthy that in none of the cases relied upon as specified
above was there any element of installation of the machine for a given period of
time as is the position in the instant case. The machines in question were by
their very nature intended to be fixed permanently to the structures which were
embedded in the earth. The structures were also custom made for the fixing of
such machines without which the same could not become functional. The machines
thus becoming a part and parcel of the structures in which they were fitted were
no longer moveable goods. It was in those peculiar circumstances that the
installation and erection of machines at site were held to be by this court, to
be immovable property that ceased to remain movable or marketable as they were
at the time of their purchase. Once such a machine is fixed, embedded or
assimilated in a permanent structure, the movable character of the machine
becomes extinct. The same cannot thereafter be treated as moveable so as to be
dutiable under the Excise Act. But cases in which there is no assimilation of
the machine with the structure permanently, would stand on a different footing.
In the instant case all that has been said by the assesse is that the machine is
fixed by nuts and bolts to a foundation not because the intention was to
permanently attach it to the earth but because a foundation was necessary to
provide a wobble free operation to the machine. An attachment of this kind
without the necessary intent of making the same permanent cannot, in our
opinion, constitute permanent fixing, embedding or attachment in the sense that
would make the machine a part and parcel of the earth permanently. In that view
of the matter we see no difficulty in holding that the plants in question were
not immovable property so as to be immune from the levy of excise duty.”
4.4 Here, the distinction between Triveni Engineering (supra) and the later
judgment of Solid and Correct Engineering (supra), that in Triveni (supra), the
Supreme Court applied dismantling of components and re-assembly as failing the
permanency test.
“20. Further, in the instant case, it is a common ground that a turbo
alternator comes into existence only when a steam turbine and alternator with
all their accessories are fixed at the site and only then it is known by a name
different from the names of its components in the market. The Tribunal recorded
the finding that fixing of steam turbine and the alternator is necessitated by
the need to make them functionally effective to reduce vibration and to minimize
disturbance to the coupling arrangements and other connections with the related
equipments. It also noted that the removal of the machinery does not involve any
dismantling of the turbine and alternator in the sense of pulling them down or
taking them to pieces but only undoing the foundation bolts arrangement by which
they are fixed to the platform and uncoupling of two units and, therefore, the
turbo alternator did not answer the test of permanency laid down by his court in
the case of Municipal Corporation of Generator Bombay (supra). In our view, the
findings recorded do not justify the conclusion of the Tribunal in as much as on
removal a turbo alternator gets dismantled into its components – steam turbine
and alternator. It appears that the Tribunal did not keep in mind the
distinction between a turbo alternator and its components. Thus, in our view,
the test of permanency fails.”
The Supreme Court, however, later, in Solid and Correct Engineering (supra)
concluded that any plant fixed by nuts and bolts to a foundation involving no
assimilation of the machinery with the structure permanently and where the civil
foundation was necessary to provide a wobble free operation to the machine, the
test of permanency fails.
4.5 Further, also in the case of (spat Industries Limited v Commissioner of
Central excise 2006 ELT 164, was a case where the High Court allowed credit of
duty paid on angles, channels, plates, etc. which were used in errection,
installation and commissioning of the machinery (immovable). The Revenue’s
appeal against this judgment was rejected by order dated 19.07.2007 in Central
excise Appeal No.187 of 2006, by the Supreme Court.
4.6 Also, in Lloyds Steel Industries v Commissioner of Central Excise 2004 (64)
RLT 732, the High Court allowed credit of cement and steel used for the
construction of foundation that were not excisable goods. The Revenue’s appeal
against the judgment was dismissed. Commissioner of Central Excise v. ICL Sugars
Limited 2011 (271) ELT 360 (Kar.) was a Karnataka High Court decision, rejecting
the Revenue’s appeal holding that plates, etc. used for fabrication and
installation of a storage tank would be admissible for credit. The Revenue’s
sole contention to deny credit was that the storage tank was an immovable
property and once erected to the earth becomes non-excisable. Negating this
contention, the High Court allowed the credit.
4.7 The Revenue contends that the towers and shelters are not per se immovable
property but transform and become immovable as they are permanently imbedded in
earth in as much as they are fixed to a foundation imbedded in earth. This
argument has to be considered in the light of the decisions discussed above.
Attachment of the towers in question with the help of nuts and bolts to a
foundation (not more than one foot step), intended to provide stability to the
working of the towers and prevent vibration/wobble free operation does not per
se qualify its description as attached to the earth in any one of the three
clauses (of Section 3 which defined “attached to the earth”) extracted above.
Clearly attachment of the towers to the foundation is not comparable or
synonymous to trees and shrubs rooted in earth. It is also not equivalent to
entrenching in the earth of the plant as in the case of walls and buildings, for
the obvious reason that a building imbedded in the earth is permanent and cannot
be detached without demolition. Imbedding of a wall in the earth is not
comparable to attachment of a tower to a foundation meant only to provide
stability to the plant especially because the attachment is not permanent and
what is attached can be easily detached from the foundation. So also attachment
of the tower to the foundation on which it rests would not fall in the third
category (attached to what is so imbedded for the permanent beneficial enjoyment
of that to which it is attached), for an attachment to fall in that category it
must be for permanent beneficial enjoyment of that to which the tower is
attached.
4.8 A number of Apex Court judgments have been delivered on this issue in the
recent past and some of the important ones are mentioned above.
4.9 Further, CBEC through its Circular No. 58/1/2002-CX dated 15.01.2002, was
relied on, to say that when the final product is considered as an immovable and
hence, non-excisable, the same product in CKD condition or unassembled form will
also not be dutiable as a whole by applying Rule 2 (1) of the Credit Rules of
Interpretation of the Central Excise Tariff. The relevant portion of the
circular is extracted hereunder for reference:
“4. (vi) if any goods installed at site ( example paper making machine)
are capable of being sold or shifted as such after removal from the base and
without dismantling into components/parts, the goods would be considered to be
movable and excisable. The mere fact that the goods, though being capable of
being sold or shifted without dismantling, are actually dismantled into their
components/parts for ease of transportation etc. they will not cease to be
dutiable merely because they are transported in dismantled condition. Rule 2(a)
of the Rules for the Interpretation of Central excise Tariff will be attracted
as guiding factor is capability of being marketed in the original form and not
whether it is actually dismantled or not, into its components. Each case will
therefore have to be decided keeping in view the facts and circumstances,
particularly whether it is practically possible (considering the size and nature
of the goods, capability of goods to move on self-propulsion ships etc.) to
remove and sell the goods as they are, without dismantling into their
components. If the goods are incapable of being sold, shifted and marketed
without first being dismantled into components parts, the goods would be
considered as immovable and therefore, not excisable to duty.
4.10 On an application of the above tests to our case, we are of the opinion
that the creation of temporary structure (i.e. hall or pandal or shamiana or any
other place) especially for the functions do not constitute annexation and hence
cannot be termed as immovable property for the following reasons:
a) The structure in question are not per se immovable property
b) Such structures cannot be said to be “attached to the earth” within the
meaning of that expression as defined in Section 3 of the Transfer of Property
Act.
c) The fixing of the structure to a foundation is meant only to give stability
to the structure and keep its operation vibration free.
d) The setting up of the structure itself is not intended to be permanent at a
given place. The structure can be moved and indeed moved after the repair
project for which it is set up is completed.
5. Discussion:
5.1 Dealing with the contention of the applicant, it is important to discuss the
relevant provision contain in the CGST/ HGST Act, 2017. Section 2(52) defines
goods as “every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a
contract of supply”.
5.2 Section 16(a) of the Act provides for eligibility of Input Tax Credit. It
reads as “in possession of a tax invoice or debit note issued by a
supplier registered under this Act, or such other tax paying documents as may be
prescribed”.
5.3 Section 17 of the GST Act deals with Apportionment of credit and blocked
credits. Section 17(5)(d) reads as “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”.
5.4 Now, as per the definition of goods some movable property is excluded from
the category of goods whereas at the same time, some immovable properties are
treated as goods. But the terms movable and immovable property have not been
defined under the GST Act. In laymen terms, any goods that can moved is a
movable property and which cannot be moved is immovable property.
5.5 But the General Clauses Act 1897 and the Transfer of Property Act defines
both these terms. Section 3(26) of the General Clauses Act says:
“immovable property” shall include land, benefits to arise out of land, and
things attached to the earth, or permanently fastened to anything attached to
the earth”. Whereas, Section 3(36) defines movable property as “property
of every description, except immovable property”. So as per this definition, any
property which does not qualify to be immovable property, is a movable property.
This definition of immovable property under the General Clauses Act is
affirmative in nature as against the definition contained in the Transfer of the
property Act 1882, which is negative in nature. As per TPA, immovable property
does not include standing timber, growing crops or grass. It further says that
“attached to the earth” means:
(a) rooted in the earth, as in the case of trees and shrubs;
(b) imbedded in the earth, as in the case of walls or buildings; or
(c) attached to what is so imbedded for the permanent beneficial enjoyment of
that to which it is attached.
5.6 Now, section 17(5)(d) bars any taxpayer to avail the benefit of Input Tax
Credit in case where the goods or services or both received by the said person
are used for the construction of an immovable property even if it is in the
course or furtherance of business. But the applicant has contended that the
structure i.e. the hall or pandal or shamiana constructed/ erected by it is not
immovable property.
5.7 As per the definition of immovable property contained in the General Clauses
Act and the Transfer of Property Act, it is clear that things attached to the
earth or permanently fastened to anything attached to the earth is immovable
property. Anything imbedded in the earth or attached to what is so imbedded for
the permanent beneficial enjoyment of that to which it is attached, qualifies to
be attached to the earth. In the case of applicant, it is an admitted fact that
the structure (shamiana, pandal or tent) constructed/ erected by the applicant
is fixed to the foundation by nuts and bolts. But the applicant holds that this
affixation of pillars and prefabricated shelter to the earth is not permanent.
So, in essence, the question which needs to be dealt with by this Authority is
whether this affixation of the structure with the earth or pillar imbedded in
the earth is permanent or temporary. The applicant has quoted some excerpts from
the judgment of Hon’ble Supreme Court in Triveni Engineering and Industry
Limited (2000) case in support of its case. But it has ignored an important
observation of the Apex Court in this case wherein it was observed that in order
to determine whether an article is permanently fastened to anything attached to
the earth, both the intention as well as the factum of fastening has to be
ascertained from the facts and circumstances of each case. The English Law also
attaches great significance to the degree and nature of annexation. The
Allahabad High Court in S/S Triveni N L Limited has observed that “permanently
fastened to anything attached to the earth” has to be read in the context for
the reason that nothing can be fastened to the earth permanently so that it can
never be removed. If the article cannot be used without fastening or attaching
it to the earth and it is not removed under ordinary circumstances, it may be
considered permanently fastened to anything attached to the earth.
5.8 In this case, the applicant company is in the business of organizing wedding
and other functions from its own premises at Ambience Golf Drive, Gurugram
Haryana. Since, the premises where the structure has been erected is company’s
own premises, it suggests that the shamiana/ tent/ pandal has been constructed/
erected for permanent enjoyment. It is not the case of applicant that it plans
to dismantle and move the structure to some other place. The pictures attached
with the application also depict that the civil work has been undertaken on a
very large scale at the premises and this also indicates the permanent nature of
the construction/ erected. Further, the concretionary base and the pillars used
as platform and support to the structure is also of large dimensions and the
platform or the structure cannot be put to beneficial use without the existence
of the other. Merely because the walls and roofs have been replaced with
prefabricated structure (an Engineering marvel), an immovable property cannot
be categorized as movable property. Since, both the degree and nature of
annexation/ attachment of the structure to the earth is strong and permanent,
the structure in question is an immovable property.
6. Ruling:
6.1. The structure created by the applicant is an immovable property for the
purposes of GST Law.
6.2 The applicant is not entitle to the credit of input tax in view of the
provisions of Section 17(5)(d) of the CGST/ HGST Act, 2017.
Ordered accordingly.
To be communicated.
21.06.2019
Panchkula.
(Sangeeta Karmakar)
Member (CGST)
(Madhubala)
Member (SGST)
Regd. AD/Speed Post
M/s VDM Hospitality Private Limited, FF-15, Block-C, Omaxe, Guragon Mall, Sohna Road, Gurgaon, Haryana.
Copy to:
1. The Principal Commissioner of
Central Goods & Service Tax, GST Bhawan, Plot No. 36-37, Sector-32, Gurugram,
Haryana.
2. Deputy Excise and Taxation Commissioner (ST), Gurugram (South).
Equivalent .