Case Title | Inox Air Products Pvt Ltd |
Court | Tamil Nadu AAAR |
Honorable Judges | Member M.V.S.Choudary & Member M.A.Siddique |
Citation | 2021 (12) GSTPanacea 71 HC Tamil nadu TN/AAAR/22/2021(AR) |
Judgement Date | 02-December-2021 |
Council for Petitioner | Rohit Jain |
Council for Respondent | NA |
Section | Section 17(5)(d) of the CGST Act |
In Favour of | In Favour of Revenue |
The Tamil Nadu Bench of Member M.V.S.Choudary & Member M.A.Siddique has held that the services received from IPL, the cost of which is capitalised along with ASP, is a service received `for construction` of an immovable property, and therefore the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017 and bench uphold the ruling of the Lower Authority.
Facts of the Case
The Appellant has stated that they are engaged in the business of manufacture and supply of industrial & Medical gases, including oxygen (both Industrial & Medical Grade), nitrogen, argon etc. (in both liquid and gaseous form); State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry;
INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State of the art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases; INOX and IPL entered into a Memorandum of Understanding for transfer of leasehold rights(MOU) dated 20.11.2020; SIPCOT vide Order No. P-II/SICH/II/IPL/146/2012 dated 28.12.2020 had accorded its approval for transfer of leasehold rights to INOX. Accordingly, SIPCOT has amended its original lease agreement vide a modified lease deed on 12.01.2021 in order to lease the part property to INOX. In terms of Clause 2 of MOU, IPL has agreed to transfer the leasehold rights in the part property to INOX for a total consideration of Rs. 15,00,00,000
The Appellant had filed an application before Hon`ble Authority for Advance Ruling, seeking clarification on the following question:
Whether INOX would be entitled to avail and utilize ITC of GST Charged by IPL if such transaction is considered to be a supply
.The Original Authority has ruled as follows:
The applicant is not entitled to avail and utilize ITC of GST charged by IPL as the same is restricted under Section 17(5)(d) of the CGST/TNGST Act 2017, if such transaction is considered to be a supply
Aggrieved by the above decision, the Appellant has filed the present appeal.
The contention of the appellant is that the restriction under Section 17(5)(d) applies only to goods and services used for construction of an immovable property. In the case at hand, there is no construction of any immovable property; construction if any results in a movable property which is the ASP and in any event, ASP qualifies as a `Plant and Machinery` and the exclusion of land from the definition of `plant and machinery` will apply only in a situation where services are received for any construction activity/ development of land.
Therefore, the restriction in respect of goods or services received for construction of an immovable properly under Section 17(5)(d) is not applicable to their case and the impugned Credit is available for them. In this regard they have relied on Hon`ble Apex Court decisions and stated that `taxing statute is to be strictly interpreted`; the word `for` used with the active participle of a verb means `for the purpose of`; the object and the intention behind an annexation to the earth is relevant to determine whether a chattel annexed would amount to an immovable property.
Court Held
Considering the facts as recorded, held that ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake `construction` of the manufacturing Plant, ASP. Also, ASP is an immovable property and not mere `Plant` or `machinery` but can be termed as `Plant and Machinery`, the Explanation of which specifically excludes land.
Thus, it is clear that intention of law maker is to restrict ITC on services related to land, received for construction.
Thus, bench hold that, the services received from IPL, the cost of which is capitalised along with ASP, is a service received `for construction` of an immovable property, and therefore the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017 and bench uphold the ruling of the Lower Authority.
Analysis of the Judgement
The Explanation gives what is `Plant and Machinery` and has a means, inclusive and exclusive limbs.
The means limb mentions `apparatus, equipment, and machinery fixed to earth by foundation or structural support ; the inclusive limb covers foundations and structural supports; and the exclusion limb excludes `land, building or any other civil structure`.
Thus the explanation when read with the main portion of the Section 17(5) (d), establishes that the intention of the restriction at S. 17(5).(d) of the Act, which is not to extend credit of goods or services received for construction other than for construction of `Plant` or `machinery`.
The intention stands crystalised by the explanation provided wherein the goods/services used for foundation or structural support is included but goods/services received for `Land, civil structures` is excluded. In the case at hand the impugned services are received by the appellant `for construction` of the manufacturing plant which is an immovable property and even if the said plant is considerable as `Plant and Machinery`, the restriction on the services received towards the leasehold of the `Land` is restricted by Section 17(5)(d) of the Act read with the Explanation for `Construction` and `Plant and Machinery`.
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