In re NMDC Limited (GST AAAR Chhattisgarh)
The appellant M/s P.K. Mahapatra, Assistant General Manager (Finance) NMDC Limited, ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh GSTIN 22AAACN7325A1Z5 has tiled this appeal u/s 100 of the Chhattisgarh Goods & Services Tax Act, 2017 requesting advance ruling in respect of the following questions:-
1. Whether input tax credit can be availed for civil and railway allied works in connection with the laying of private Railway Siding?
2. Whether input tax credit can be availed on signaling & telecommunication system, mechanical and structural works in relation to Railway Siding?
3. Whether input tax credit can be availed on execution of P-Way, Civil, over head electrification, general electrical and signaling & telecommunication works for the proposed block station yard in relation to private Railway Siding?
2. Facts of the case:-
I. The Appellant NMDC Limited having GSTIN 22AAACN7325A3Z3 is a state-controlled mineral producer of the Government of India. It is owned by the Government of India and is under administrative control of the Ministry of Steel. It is India’s largest iron ore producer and exporter producing 30 million tons of iron ore from 3 fully mechanized mines in Chhattisgarh.
II. NMDC, as part of its diversification, value addition and forward integration programme is setting up a 3 MTPA capacity Greenfield Integrated Steel Plant based on HiSmelt technology in Nagarnar, located 16 km from Jagdalpur in the State of Chhattisgarh with an estimated outlay of Rs. 20,000 Crore. To serve the said plant in receiving the raw materials and dispatching the finished products, a railway siding is proposed for the integrated steel plant, which is located on Kothavalsa- Kirandul (K.K.) single line electrified section of Waltair Division of East Coast Railway. The proposed site is situated approximately 2 Km from K.K. line between Ambagaon and Amagura Railway station. For movement of raw material and finished products by rail, M/s NMDC proposed to have one rail connectivity from the proposed new block station at Ch:277.030 km from Kothavasala Centre of station building on Ambagaon nd and one connectivity from the existing Amagura Station at Ch:281.429 km from Kothavalsa Centre of station building on Kirandul end.
III. The project of railway siding is being implemented by M/s IRCON International Ltd. The project is divided into 3 major packages for laying of private railway siding which are as below:-
Package I- Civil and Railway allied works in connection with laying of private railway siding;
Package II- Execution of Civil, S&T, Mechanical and Structural works in connection with laying of the railway siding;
Package IV- Execution of civil, P-way, Over head Electrification, General Electrification and Signaling & Telecommunication works for the proposed block station yard in connection with 3MTPA Integrated Steel Plant for NMDC Ltd.
IV. Each of the above packages is divided into 3 namely, civil works, supplies and erection with separate values identified for supplies made within each part.
M/s NMDC has applied for advance ruling on the following issues:
1. Whether Input Tax Credit can be availed for civil and railway allied works in connection with the laying of private railway siding?
2. Whether Input Tax Credit can be availed on signaling & telecommunication system, mechanical and structural works in relation to Railway Siding?
3. Whether Input Tax Credit can be availed on execution of P-way, civil, over head electrification, general electrical and signaling & telecommunication works for the proposed block station yard in relation to private railway siding?
On all of the above question, the AAR has ruled that “the Appellant is not entitled for Input Tax Credit on the inward supplies pertaining to the activities brought about by the Appellant in their application relating to laying of the said private railway siding located at a site outside the premises of the Appellant, in view of the exclusions stipulated under section 17(5) of the CGST Act, 2017“.
V. The Appellant preferred an appeal on the questions as mentioned in para V above, before the Appellate Authority for Advance Ruling in Chhattisgarh, Atal Nagar, Raipur.
VI. As per Section 100(1) of CGST Act, appeal against the advance ruling can be presented before the Appellate Authority.
3. Contention of the Appellant:
a) Appellant states that the main objective and purpose of laying railway track is for transporting raw materials inside the factory and for outward transportation of finished product. Taking into account the aforementioned facts it was contended that railway siding is integral part and inseparable in manufacturing process without which steel cannot be manufactured.
b) The Appellant requests for ruling on the following questions by the Hon’ble Appellate Authority for Advance Ruling (hereinafter ‘AAAR’):-
1. Whether the impugned order is right in holding that the items in question merit treatment as a civil structure/immovable property and not as “plant and machinery”?
2. Whether the impugned order fails to appreciate the expression “plant and machinery” in the explanation in section 17 of the CGST Act, 2017 without considering the meaning of ‘equipment’, ‘apparatus’ and ‘machinery’ mentioned therein?
3. Whether the Hon’ble Supreme Court’s decision in JAYASWAL NECO LTD. [2015 (319) E.L.T 247 (S.C)] holding that Railway Siding is eligible for credit can be disregarded merely on the ground that it was rendered under Cenvat Credit Rules when the issue therein involves interpretation of identical words as to whether ‘machines, machinery, plant, equipment, apparatus’ will include railway siding?
4. Even if they are regarded as immovable property, the rail tracks, signaling and telecommunication systems can be regarded as are supporting structures or foundation on which the Locomotives and Torpedo Laddle owned by the Appellant has to ply for the purpose of various material handing work within the factory?
5. Whether the impugned order is right in denying credit for some portion of rail network outside the factory given that such exclusion is limited only to Pipelines in the Explanation?
6. Whether the impugned order fails to appreciate the scope of section 16 of the CGST Act, 2017, which allows credit of taxes on supply of goods or services or both used or intended in the course or furtherance of one’s business?
c) That, the impugned order concludes that railway siding works are nothing but immovable property and cannot be considered as goods in any way for the simple reason that these are attached to earth. The impugned order also places on the definitions of the term “immovable property” under General Clauses Act, 1897 and section 3 of the Transfer of Property Act, 1882 to explain the term “immovable property”. Certain case laws also were relied upon by the Authority in support of its conclusion.
d) That, on bare perusal of section 17(5)(c) and (d) of the CGST Act, 2017, it is understandable that the test of movability/immovability is immaterial to determine the eligibility of credit once the items in question qualify as “plant and machinery”. Once the items in question qualify as “plant and machinery”, they stand excluded from the meaning of “immovable property”. As a matter of fact, under the CGST Act, 2017, even if the items in question are attached to earth, they will qualify as “plant and machinery”. The relevant extracts of the section 17(5)(c) and section 17(5)(d) are extracted herewith for ease of reference:-
“17. (1)…..
(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:—
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(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:-Explanation.–For the purposes of clauses (c) and (d), the expression” construction” includes re-construction, renovation, additions or the or alterations or repairs, to the extent of capitalization, to the said immovable property;
………………………..
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.
e) That, from the above, it is pertinent to test whether the impugned works are regarded as ‘plant & machinery’ or foundation or structural support of plant and machinery and does not fall in any of the 3 exclusions given in the Explanation.
f) That, the order has not examined the meaning of ‘plant and machinery’ as provided in the Explanation but confined to examining if it is movable or immovable property. It is submitted that even any immovable property, once qualifies as ‘plant & machinery’, they stand excluded from the restriction and the credit is eligible not only for plant and machinery but includes their foundation and supporting structures.
g) That, it is evident from para 5.15 of the impugned order, the scope of work under the packages in question is completely misunderstood and misappreciated by the AAR. The Appellant submits the observations of the AAR in the impugned order are incorrect for the following reasons:-
– It is settled law that clauses in the agreement should be read as a whole and not in isolation to understand the tenor and intention of the contracting parties.
– The Appellant had explained in their application about the civil works on which the Appellant does not intend to claim credit. The Appellant further made submissions that it is only Package III rail network that is outside the factory which has been duly recorded in Para 4 of the Order.
– The Appellant draws attention the scope of work given package-wise in their submissions dated 13.3.2019.
– Denial of credit only on the ground the contract involves civil work is unsustainable. Basis the above table, it is clear that the contract is for railway siding works and apart from the civil works involved in the contract, the Appellant is eligible to take credit of taxes paid by it.
h) That, the Hon’ble Supreme Court in the case of JAYASWAL NECO LTD. [2015 (319) E.L.T. 247 (S.C.)] has held that Railway track was handling system for raw material and processed material. Their use inside plant formed process of manufacturing. It was integral part of process as without activity for which railway tracks are used, manufacturing/commercial production of pig iron was not possible. Hence, railway track was capital goods, on which assessee was entitled to take credit of duty paid by them. The relevant Para is quoted below for your reference:
“18. We find from the order of the Commissioner that in spite of taking note of the aforesaid use of the railway tracks and accepting the same as correct, the Commissioner denied the relief to the appellant on an extraneous ground, i.e., railway tracks were used for other purposes as well, namely, apart from conveying hot metal and hot pigs, it was used for carrying raw materials and finished goods as well. This can hardly be a ground to deny the relief inasmuch as by incidental use of the railway tracks for some other innocuous purpose, it does not lose the character of being an integral part of the manufacturing process. The Commissioner has further observed in his order that the railway track is not utilized directly or indirectly for producing or processing of goods or bringing about any change for manufacture of final product.
This conclusion, obviously, is completely erroneous and amounts to misreading of the process. Such an error has occurred because the Commissioner did not keep in mind the principle of law laid down by this Court in M/s. J.K. Cotton Spinning & Weaving Mills Co. Ltd.’s case, highlighted above.
When we read the order of the CEGA7, we find that CEGAT has not even adverted to and examined the issue from the aforesaid angle, which was the only method for arriving at a finding as to whether the railway tracks installed within the plant would come within the definition of capital goods under Rule 57Q of the Rules or not. The order of the CEGAT is stoically silent. It has affirmed the order of the Commissioner by simply observing that the Commissioner has arrived at the conclusion that these goods are not being used directly or indirectly for producing or processing the goods or for bringing about any change for the manufacture of the final product. We have already pointed out that the aforesaid conclusion of the Commissioner is not only factually incorrect and perverse but legally unsustainable as well.
j) Resultantly, we set aside the order of the Commissioner as well as of CEGAT insofar as it pertains to item “railway track material used for handling raw materials, process goods” and hold that the appellant has rightfully claimed for Modvat credit in respect of this item which credit is wrongly reversed by the authorities below. To that extent, order of the Commissioner as well CEGAT is set aside and the present appeal is allowed in the aforesaid terms.”
k) That, the Appellant would also like to quote decision of Hon’ble High Court of Rajasthan in case of Aditya Cement f2008 (221) E.L.T. 362 (Raj.)] wherein in Para 20 it was held that:
“So far as the claim to Railway Track material is concerned, it is common ground that the same has been used for transporting of coal and product of cement. Apparently, though the coal is not end product of the appellant but used as essential adjunct of plant for feeding it with fuel, the essential element of production process for manufacture of cement. Without supply of fuel the plant does not function. Therefore, the Railway Track used for one of the essential activity of running the plant itself cannot be kept out of consideration for availing Modvat credit though which is not being used directly for the purpose of manufacture of cement. But if as an integral part of manufacturing cement bringing of coal directly to the machine from site, railway track is used, it becomes part of plant and of manufacturing process. Similarly until the end product reaches in deliverable state, it remains part of the manufacturing process. In view of this matter the claim of the assessee in respect of Modvat credit of duty paid on railway track material deserves to be sustained.”
l) The Appellant also wishes to quote Hon’ble Supreme Court in its decision in Commissioner of C. Ex., Coimbatore v. Jawahar Mills Ltd., 2001 (132) E.L.T. 3 (S.C.) page 3, wherein for weigh bridge following has been while considering the definition of capital goods under Rule 57Q even after its amendment said :
“4. The aforesaid definition of ‘Capital goods’ is very wide. Capital goods can be machines, machinery, plant equipments, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be ‘Capital goods, and, therefore, qualify for availing Modvat credit Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be ‘Capital goods’ and qualify for Modvat credit entitlement. Clause (c) make moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal.”
m) Further, in case of Ultra Tech Cement Ltd [2016 (339) E.L.T. 127 (Tri. – Hyd)], it was held in Para 6 that mono block concrete sleepers for Rail track are eligible Cenvatable goods. The relevant extract of the said case is excerpted below for ference.
“I have considered the submissions made by either side. The issue is whether credit is admissible on MBC sleepers. The allegation in the show cause notice is that these are used for foundation and therefore credit is not admissible. The appellants have put forward a consistent plea regarding the use of MBC sleepers within the factory. It is used for transportation of raw material and finished product. The use as explained by the learned counsel makes it clear that these are essential and integrally connected to the process of manufacture. In addition, the judgments relied by the appellant and stated supra have held that credit is admissible on railway tracks/sleepers used within the factory for transportation of raw materials and finished goods. Following the ratio laid in these judgments, I hold that the appellant has established a case on merits and that credit is admissible on MBC sleepers.”
n) In the case of Orient Cement Ltd. Vs CCE, Hyderabad-I 2017 (51) S.T.R. 459 (Tri.-Hyd.), Railway siding laid outside the factory premises were held to be part and parcel of facility for transportation provided inside the factory premises and the assessee was held eligible for Cenvat credit. The Appellant wishes to quote Para 7 and 8 of the said decision for reference:
“7. From the discussions and observations made in the above judgments as well as the facts presented before us, we are of the view that the credit availed on service tax paid on maintenance service of railway sidings is eligible. It has also to be pointed out that without the railway sidings laid outside the factory so as to connect factory with a railway station, no purpose would be served. Following the decisions, we hold that the credit is admissible.
o) In the result, the impugned order to the extent of disallowing credit in respect of commissioning and installation services and Maintenance of Railway sidings is set aside. We hold that appellant is eligible for credit of these two set of services.”
p) Hon’ble High Court of Chhattisgarh, in case of M/s. Vimla Infrastructure India Pvt. Ltd. vs CCE, Raipur [2018-TIOL-556-HC-CHHATTISGARH-ST], held that
“The railway sidings are low-speed tracks, distinct from a running line or through route such as a main line or branch line – Railway sidings are used for marshaling, stabling, storing, loading and unloading vehicles & other goods in raising construction of railway siding, the assessee used MBC Sleepers, which are in turn constructed using MBC Railway Sleepers and RLS Rails – It may be noted that such railway sidings facilitate provision of ‘Cargo Handling Service’ – Thereby, considering such facts, the ‘Inputs’ were used to provide taxable output services – Hence, by erecting Railway Siding, the assessee provided taxable service for providing an output service – Thus it is eligible to claim Cenvat credit: High Court”
q) The Appellant also wishes to rely on Schedule XIV to the Companies Act, 1956, wherein the rates of depreciation provided for “Railway sidings” is categorized under the head plant and machinery. Therefore, it can be said that Railway siding will qualify as plant and machinery and meets the test of qualifying as plant and machinery. Thus, the credit would be eligible.
r) The Appellant wish to rely on the judicial precedents under Income Tax Act, 1961 as below:
In the case of Chief Commissioner (Admn.) v. Visveswarayya Iron and Steel Ltd., (1993) 199 ITR 98 (Kar), wherein the Karnataka High Court treated Railway Siding as part of the plant.
In the case of Kalinga Tubes Ltd. v. CIT [1974] 96 ITR 20. The Orissa High Court held in the said decision that the assessee was entitled to the development rebate on ilway sidings which were erected for the purpose of business of the assessee. It as held that this was covered by the heading “Machinery and plant” under rule 8.
s) Based on the above citations, it can be concluded that even as per Companies Act and Income Tax Act, Railway Siding is construed as Plant and Machinery and therefore credit on the same is eligible.
t) Without any reference to the decision of the Delhi High Court in Vodafone Mobile Services Limited v. Commissioner of Service Tax, Delhi, CEAC 12/2016 dated 31.10.2018, the reliance on the decision of the Bombay High Court in the BhartiAirtel (case), is completely erroneous and misplaced.
u) In the Vodafone Mobile Services Limited Case, the Hon-ble Delhi High Court had expressly recorded its dissent with the decision of the Bombay High Court in thy BhartfAirtel case and held the credit of taxes paid of telecom towers is eligible. According to the Delhi High Court, the Bombay High Court’s decision in the BhartiAirtel case goes against the law laid down by the Apex Court in Commissioner of Central Excise v. Solid and Correct Engineering Ruling, 2010 (5) SCC 122. The relevant extracts of the decision are as under:-
“This court is of the opinion, with due respect to the Bombay Nigh Court that those two judgments are contrary to settled judicial precedents, including the later view of the Supreme Court in Solid and Correct Engineering (supra).-
v) While the Hon’ble AAR ignored the reliance placed by the Appellant on the case of M/s Vodafone Mobile Services Ltd during the course of the hearing, the same authority placed reliance on the case of M/s BhartiAirtel Limited in support of its conclusion. The Appellant submits that the principle debated in both the above matters was the same but the AAR has rejected the contention on the Appellant on one hand while relying on a similar issue to support their stand.
w) That, the Delhi High Court had allowed credit of taxes paid on telecom towers holding the same to be essential for provision of telecommunication service. Likewise, when railway siding works are essential for transport of raw materials, / credit of taxes paid thereon should be allowed by this Authority.
x) That, reliance was also placed by the AAR on the decision of the Supreme Court in Triveni Engineering Ltd. v. Commissioner of Central Excise, 2000 (120) ELT 273 (SC) to support its conclusion that if anything is attached to earth, both the limn, as well as the intention of fastening has to be ascertained from the facts .rid circumstances of the each case.
y) That, any reliance on the decision in Triveni Engineering is incorrect for several reasons. The decision in Triveni Engineering was rendered in the context of central excise law, where under the movability or otherwise of the items now, in question was integral to determine the excisablity of goods. In Triveni Engineering, the items question (steam turbine and alternator) were erected on a platform specially constructed for the purpose which made the machine immovable. Under the GST law, the test of movablity/immovability is irrelevant and the explanation in section 17 of the CGST Act, 2017 clearly permits and does not bar “plant and machinery” to be attached to earth by foundation or structural support.
z) That, reference is also made by the impugned order to CBIC Circular No. 58/1/2002-CX dated 15.01.2002 to state that if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components, then the items cannot be considered as movable and will, therefore, not be goods.
aa) That, the Appellant, reiterates that the test of immovability/movability is irrelevant under the GST law and that under the GST law, the explanation in section 17 of the CGST Act, 2017 clearly allows items to be assembled to earth by foundation/structural support.
ab) That, under section 17 of the CGST Act, 2017, the expression “plant and machinery” is defined as apparatus, equipment and machinery fixed to earth by foundation or structural support used for making outward supply of goods or services or both and includes such foundation and structural support.
ac) The Appellant submits that they are entitled to input credit for the following reasons:
a. Large part of the railway are intended to bring the raw material, unload them in the material handling plant area, move the molten metal in the Torpedo Laddle to the Pig iron plant, load the finished goods for further transportation and they are integrally connected with the operations.
b. The expression `plant and machinery’ does not merely include only mechanical items but those that aid in the manufacture of goods. The rail network within the plant, signaling system and other telecom network established in the factory can be regarded as `apparatus’ or ‘equipment” machinery. As they do not fall in the exclusion clause, credit shall be eligible.
c. It is submitted that the restriction is limited only to buildings and civil structures.
d. Even if they are not regarded as plant & machinery, they can be regarded as supporting structures and foundation on which locomotives and torpedo ladle shall ply and they shall be regarded as accessories. It is submitted that locomotives and torpedo ladles are owned by the Appellant and they qualify as equipment, machinery and without rails, they cannot be effectively used or operated.
ad) Explaining the term ”plant”, the Supreme Court in Scientific Engineering House ad) Explaining the term “plant”, the Sup Income Tax, AP, 2002-TIOL-665-SC-IT, Private Limited v. Commissioner of observed as below:-
“In other words, plant would include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. In order to qualify as plant, the article must have some degree of durability, as for instance, in Hinton v. Maden& Ireland Lt ind. [1960] 39 ITR 357 (HL), knives and lasts having an average life of three years used manufacturing shoes were held to be plant IN CIT v.TajMahal Hotel [1971] 82 ITR 44 (SC) = 2002-TIOL-642-SC-IT, the respondent, which ran a hotel, installed sanitary and pipeline fittings in one of its branches in respect whereof it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of plant given in section 10(5) of the 1922 Act which was similar to the definition given in section 43(3) of the 1961 Act and this court after approving the definition of plant given by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647, as expounded in Jarrold v. John Good and Sons Ltd. [1962] 40 TC 681 (CA), held that sanitary and pipeline fittings fell within the definition of plant.”
ae) That, relying on the above definition of the Apex Court, the Gujarat High Court in pipavav Defense and Offshore Engineering Company ltd [2017-TIOL-1018-HC AHM-VAT] observed as below:-
26. The word “plant”, though an ordinary English word, is not altogether an easy word to construe. It may have a more or less extensive meaning according to its context. It has come up for interpretation before various courts on numerous occasions in the context of different statutes and the catena of judicial decisions shows that it is a word of wide and varied import susceptible of diverse meanings depending upon its setting in the scheme of the statute. Almost all cases bearing upon the interpretation of the word “plant” decided in England and in this country were cited before us and the following enumeration would show as to what an amazing variety of articles, objects or things have been held to be plant or not plant:
PLANT
(i) Horse, Yarmouth v. France; (ii) knives and lasts used in manufacture of shoes, Hinton v. Maden & lreland Ltd.; (iii) aircraft engine which was being dismantled, Watts v. Enfield Rolling Mills (Aluminium) Ltd.; (iv) movable office partitions, Jarrold v. John Good & Sons Ltd.; (v) concrete dry dock, Inland Revenue Commissioner v. Barclay, Curie& Co. Ltd.; (vi) electrical fans and other office appliances, Sundaram Motors Pvt. v. Commissioner of Income tax; (vii) poles, cables conductors and switch boards for distribution of electricity, Commissioner of Income tax v. Indian Turpentine and Rosin Co. Ltd.; (viii) light fittings, ceiling and pedestal fans and water pipe fittings in a hotel, Commissioner of Income tax v. Jagade schandran & Co.; (ix) sanitary and pipeline fittings in a hotel, Commissioner of Income tax v. Taj Mahal Hotel.”
af) That, the common definition of the term “equipment” is “a set of equipment or tools or a machine that is used for a particular purpose”. The Appellant would also like to cite meaning of the above term from different dictionaries as under:
“Apparatus – It is a collection or set of materials, instruments, appliances or machinery designed for a particular use (May. Web.Dic). A compound instrument designed to carry out a specific function. (McGraw Hill Dic. of Sc. & Tech. Terms).”
ag) That, the Appellant wishes to quote further on the meaning of apparatus from the Webster’s Encyclopedic Unabridged Dictionary of the English Language which reads as under :-
“a group or aggregate of instruments, machinery, tools, materials etc., having a particular function or intended for a specific use. 2. any complex instrument or machine for a particular purpose. 3. any system or systematic organization of activities, functions, processes, etc., directed toward a specific goal; the apparatus of government; espionage apparatus. 4. Physiol, a group of structurally different organs working together in the performance of a particular function: the digestive apparatus.”
ah) That, the Appellant also wishes to rely on the definition cited in various case laws. As per the P RamanathaAiyar’s Legal Lexicon:
“The word apparatus would certainly mean the compound instrument or chain of series if instruments designed to carry out specific function or for a particular use (Commer. Of Customs v. C-NET Communication (1) (P) Ltd., (2007) 12 SCC 72, 82-83, para 36).
Apparatus is a compound instrument designed to carry out a specific function or for a particular use. I.C.B. (P) Ltd. v. CCE, 1997 (95) ELT 239 (T).”
ai) That, the Appellant encloses herewith the interpretation of the expression ‘apparatus’, ‘equipment’ , ‘machinery’ given as a compendium in various dictionaries. In terms of the above definition, it is clear that the railway siding in question having a particular function or intended for a specific use of transport of materials can get rightly covered under the definition of “plant and machinery”.
aj) That, the railway siding in question does not definitely do not qualify as land/building. The exclusion is for land, building or any other civil structure. Applying the principle of ejusdem generis, it needs to be understood that the phrase “any other civil structures” has to be read in conjunction with land and building. Any civil structure in the nature of land and building will ordinarily be a place from where the business is being carried on and not a structure used in the process of manufacture or forming part of factory premise for making inward and outward supply of goods/services. Therefore, it can be safely inferred that facilities in question used will not be a civil structure and falls within the definition of plant and machinery.
ak) That, it is submitted that the Hon’ble AAR never examined and confined their analysis to Sec.17(5) of the Act and never proceeded to examine the definition of ‘plant and machinery’ given in the Explanation.
al) That, the explanation proceeds to clarify the meaning of Plant & machinery as under:
(i) Any equipment, apparatus or machinery fixed to earth by foundation
(ii) Any equipment, apparatus or machinery fixed to earth by structural support
(iii) It includes the foundation and such structural support
The explanation only excludes the immovable property in the nature of land, building or any other civil structure.
am) That, these expressions of equipment, apparatus, machinery are not defined in the GST Act, the appellant placed reliance on the above Supreme Court’s decision wherein similar words were come up for interpretation in the context of Railway Siding for the purpose of credit under the erstwhile Rule 57Q of the Central Excise Rules.
an) That, the same expression of machinery, equipment , apparatus were defined as ‘capital goods’ and in this case they are defined as ‘plant and machinery’. The Court after examining the arguments has held that railway siding can be regarded as machinery, equipment or apparatus and held that credit is eligible.
The Appellant therefore submits that issue therein involves what items will come ki- within the ambit of machinery or equipment or apparatus and the same question is involved in the impugned case also.
ao) That, the impugned order observes that railway siding and allied works of signaling, telecommunication located outside the premises of the Appellant cannot be treated as plant and machinery by any stretch of imagination in as much as plant and machinery used for making outward supplies and rather merit treatment as civil structure at a premises not within the precincts of the Appellant.
ap) That, it is also observed that provisions facilitating availment of input tax credit under the CGST Act, 2017 do not extend any blanket or unconditional permission for availment of credit and all items irrespective of its use, place of use and its role in making the outward supply.
aq) That, the conclusion of the AAR is also flawed for the following reasons:-
– Section 16 of the CGST Act, 2017 allows credit inputs/inputs services used or intended to be used in the course of furtherance of one’s business, unless restricted by section 17 of the CGST Act, 2017.
– Since railway siding is essential/integral for transport of materials for the assessee to carry on its operations, credit of taxes paid on railway siding should be construed for use in the course or furtherance of business and used for making outward supply.
It is to be kept in mind that the words used in the explanation are “used for making outward supply” and not “directly used in making outward supply”. Any input/input service, even if remotely essential, should be considered as eligible for credit.
– Also, unlike under the pre-GST law, inputs/input services were to be used “in or in relation to the manufacture” or “in the factory by the manufacturer”, section 16 of the CGST Act, 2017 allows credit of taxes paid on inputs/input services “used or intended to be used in the course of furtherance of business.” The said expression is of the widest possible import and is in keeping with the spirit of the GST law to allow seamless flow of credit.
ar) The Appellant relied upon the following case laws, although under the erstwhile indirect tax regime to support their submissions:-
