The Hon’ble AAAR, Maharashtra in the matter of M/s Konkan LNG Private Limited [Order No. MAH/AAAR/SS-RJ/14/2019-20 dated November 6, 2019] upheld the decision of Hon’ble AAR, Maharashtra to disallow that Input Tax Credit (ITC) of taxes paid on breakwater wall construction which saves the jetty and cargo from high tide and forceful sea waves.
M/s Konkan LNG Private Limited (“the Appellant” or “KLPL”) is engaged in the regasification of LNG. The LNG reaches to the plant through the jetty where it is unloaded from various cargoes. That in order to prevent jetty from high tide and forceful sea waves, there is existing partly constructed breakwater which was constructed by Dabhol Power Company (“DPC”). This breakwater was a part of original approved design, meaning thereby, the jetty was not workable at its potential without breakwater.
Although, having the breakwater was absolute necessity, the existing breakwater was not complete and required immediate reconstruction. Also, due to incomplete breakwater facility, the NSPC, the authority for the clearance of jetty, provides only provisional clearances for the berthing and unloading of the LNG cargo and therefore does not allow berthing of the cargo unless the height of the wave is less than 0.5 meters. Thus, the performance of jetty is much below its potential and has suffered the risk of damage due to high tides and waves.
The Appellant invited tender where scope of work included basic design, detail engineering, surveys, supply of material, construction, drawings, job specifics etc.
AAR- Held that the Appellant is not allowed to take credit of ITC of the amount of the GST paid to the contractors/supplier of the goods or services as:
Whether the Appellant is eligible for taking ITC on construction of breakwater, which is an important and integral part of the existing jetty?
The Hon’ble AAAR, Maharashtra in Order No. MAH/AAAR/SS-RJ/14/2019-20 dated November 6, 2019 held as under:
Section 17(5)(d) of the CGST Act:
“Apportionment of credit and blocked credits.
(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: –
(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;”
Explanation to Section 17(5)(d) of the CGST Act:
“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) telecommunication towers; and
(iii) pipelines laid outside the factory premises.”
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