Case Title | Tarun Realtors Pvt Ltd |
Court | Karnataka AAAR |
Honorable Judges | Member D.P.Nagendra Kumar & Member M.S.Srikar |
Citation | 2020 (02) GSTPanacea 25 HC Karnataka KAR/AAAR-14/2019-20 |
Judgement Date | 06-February-2020 |
Council for Petitioner | Badrinath NR |
Council for Respondent | NA |
Section | Section 17(5) |
In Favour of | In Favour of Revenue |
The Karnataka Bench of Member D.P.Nagendra Kumar & Member M.S.Srikar has held that Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Firefighting and water management pump system do not qualify as plant or machinery but are items which are procured for the purpose of construction of the immovable property. Hence, the appellant is not eligible for the input tax credit of the tax paid on above. the supply of the lifts and its installation at the project site of the appellant are done by the vendor M/s OTIS. However, the appellant will not be eligible for the credit of the tax paid on such procurements since the appellant is not doing the installation of the lifts, escalators and travellators. The car parking system being fixed to the earth with structural support qualifies as “Plant and machinery”. However,the appellant will be hit by the restriction imposed in Section 17(5)(d) and will not be eligible for the credit of the tax paid on such procurements in as much as the appellant is not doing the construction and installation of the car parking system
FACTS OF THE CASE
The appellant is developing a shopping Mall – ‘Mantri Arena Mall’ which will include a hypermarket, multiplex cinema theatre complex, departmental stores, retail shops and food courts. The Applicant has entered into various lease agreements with their customers / tenants (Service recipients) and will be leasing all unit(s) at the Mall together with the right to use the staircases, common areas and other common facilities.
To undertake development of the said property, the appellant is required to procurenumerous goods and avail numerous services including works contract service from many suppliers. Accordingly, the appellant placed purchase orders on various suppliers for goods and work order on various suppliers for services and the suppliers have raised invoices on the appellant.
Amongst other goods and services, the appellant has procured goods and / or services for the installation of Chillers, Air Handling Unit (AHU), Lift, Escalator,
Travellator, Water Treatment Plant (WTP), Sewage Treatment Plant (STP), Highspeed Diesel yard (HSD) Mechanical Car Park and Indoor/Outdoor Surveillance
System (CCTV), DG sets, Transformers, Electrical wiring and fixture, Public Health Engineering (PHE), Fire-fighting and water-management pump system. Supply of all the aforesaid goods and services are taxable supplies under the GST Acts and, accordingly, tax has been charged by such suppliers and paid by the appellant to such suppliers.
A brief description of the nature of these installations is given below:
(a) Chillers, (b) Air Handling Unit (AHU), (c) Lift, Escalators and Travellator, (d) Water Treatment Plant (WPP), (e) Sewage Treatment Plant (STP), (f) High Speed Diesel Yard (HSD), (g) Mechanical Car Park (MLCP), (h) Indoor / Outdoor Surveillance System (CCTV), (i) D.G. Sets, (j) Transformers, (k) EIectricaI wiring and fixtures (I) Public Health Engineering (PHE), Fire-fighting and water management pump system The Authority for Advance Ruling vide order No KAR ADRG 103/2019 dated 30th Sept 2019(10) TMI 1021 – AUTHORITY FOR ADVANCE RULING,
KARNATAKA held that “the taxes paid on procurement of goods and/or services for installation of the Installations as listed in the application are regarded as blocked credits under Section 17(5) of the CGST Act, 2017”.
Aggrieved by the said ruling, the appellant has filed this appeal
Court Held
Considering the facts as recorded, held that the items such as Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system do not appear to be apparatus/equipment/machinery which are fixed to the earth.
Bench hold that Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System
(CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Firefighting and water management pump system do not qualify as plant or machinery but are items which are procured for the purpose of construction of the immovable property. Hence, the appellant is not eligible for the input tax credit of the tax paid on the procurement and installation of Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system
However, it appears that the supply of the lifts and its installation at the project site of the appellant are done by the vendor M/s OTIS. In such a case, M/s OTIS will not be hit by the restriction imposed under Section 17(5)(d) since they are engaged in the construction of lift, escalator, travellator which qualifies as plant and machinery. However, the appellant will not be eligible for the credit of the tax paid on such procurements since the appellant is not doing the installation of the lifts, escalators and travellators.
The car parking system being fixed to the earth with structural support qualifies as “Plant and machinery”. However,the appellant will be hit by the restriction imposed in Section 17(5)(d) and will not be eligible for the credit of the tax paid on such procurements in as much as the appellant is not doing the construction and installation of the car parking system This evidences that the complete setting up of the HSD yard is done by the vendor M/s. Veeresh Engineering Works and not by the appellant. Here again the appellant will not be eligible for the credit of the input tax paid on such supply as the construction of the HSD yard has not been done by him In respect of the Water treatment Plant and Sewage Treatment Plant, as can be seen from the photographs, they form part of the civil structure of the immovable property.
Civil structures are specifically excluded from the definition of “Plant and machinery” Therefore, Bench hold that the appellant is not eligible of the credit of the taxes paid on the procurement of the Water Treatment Plant, Sewage Treatment Plant, DG Set and Transformer.
In view of the above, bench hold that the ruling given by the lower Authority is
correct in law.
ANALYSIS OF THE JUDGEMENT
Bench find that the restriction contained in Section 17(5)(d) is applicable to goods and services received by a taxable person for construction of an immovable property. When goods and services are received by a taxable person for construction of plant or machinery, there is no bar on eligibility to input tax credit. The appellant has argued that all the installations mentioned in his application qualify as ‘Plant’ or Machinery’. The Explanation to Section 17 defines “Plant and machinery” to mean 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) telecommunication towers; and (iii) pipelines laid outside the factory premises The appellant has only provided information on the use of the various items mentioned in his application. A general understanding of the items such as Lift, Escalator, Travellator, Water treatment Plant, Sewage Treatment Plant, HSD yard, Mechanical Car Park, DG Set and, Transformers, mentioned in the appellant’s application, is that they are fixed to the earth either by a foundation or with structural support and they qualify to be considered as “Plant and machinery”
On the other hand, the items such as Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system do not appear to be apparatus/equipment/machinery which are fixed to the earth.
The appellant has also not submitted any information as to how these items are getting embedded to the earth since the criteria for terming such items as “Plant and Machinery” is that they have to be fixed to the earth either by foundation or structural support. In the absence of such information Bench hold that Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures,Public Health Engineering (PHE), Fire-fighting and water management pump system do not qualify as plant or machinery but are items which are procured for the purpose of construction of the immovable property. Hence, the appellant is not eligible for the input tax credit of the tax paid on the procurement and installation of Chiller, Air Handling Unit, Indoor/Outdoor Surveillance System (CCTV), electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system.
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