No ITC on construction of Tie-in pipeline for delivery of re-gasified LNG from FSRU to National Grid

In re Western Concessions Private Limited (GST AAR Maharashtra)

It is clear that there are some ships which are categorized as factories in the commercial world and hence it is incorrect to argue that FRSU is not a factory by relying on selective dictionary meanings.

The second contention of the applicant is that the pipeline would be otherwise covered under ‘apparatus’, ‘equipment’, or ‘machinery’ since it is fitted with Valves, metering system, pressure regulating system, bends, fittings, flanges, gas leak detection system, gauges, transmitters etc. and hence qualify as ‘plant and machinery’ under explanation to Section 17(5). We are also not in favour of this contention because every pipeline is fitted with these equipments and the pipeline in question is no exception. To call it an ‘apparatus’, ‘equipment’, or ‘machinery’ would be a distortion of the meaning when the applicant himself has described it as a ‘pipeline’. When a specific description is available, it is not justified to bring a ‘pipeline’ within the meaning of ‘an ‘apparatus’, ‘equipment’, or ‘machinery’ by quoting convenient dictionary meanings just in order to claim ITC.

The applicant also contends that the pipeline should be considered as the one which is ‘not outside the factory ‘in as much as FRSU is not a factory. But as explained in the foregoing discussion we find that FRSU is a factory, and hence the pipeline laid for transporting re-gasified LNG from FRSU squarely falls within the meaning of a ‘pipeline outside the factory’.

To argue further, a pipeline cannot exist in vacuum without a factory. The expression “pipelines outside the factory” signifies that the pipeline is to transport some product from the factory to the end user. In the instant case the LNG, re-gasified in the ship, is transported through the pipeline which is outside the factory ship. Hence, we are of the view that the said pipeline is a “pipeline outside the factory”.

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