Konkan LNG Limited Vs Commissioner of State Tax (Bombay High Court)
The Bombay High Court recently adjudicated on a contentious tax issue involving Konkan LNG Limited (KLPL), a subsidiary of GAIL (India) Ltd., regarding the eligibility for Input Tax Credit (ITC) on the construction of a breakwater-wall at their regassification plant in Dabhol.
KLPL argued that the breakwater-wall, crucial for protecting LNG carriers during adverse weather conditions, should be considered ‘plant and machinery’ under the GST framework, thereby allowing them to claim ITC. They contended that the structure enhanced operational efficiency and safety, essential for their regassification operations.
However, Maharashtra’s Authority for Advance Ruling (AAR) and the Appellate Authority denied ITC eligibility, citing Section 17(5)(d) of the CGST Act. This section excludes ITC for goods or services used in the construction of immovable property unless it qualifies as ‘plant and machinery’.
The core debate centered on whether the breakwater-wall could be categorized as ‘plant and machinery’. KLPL argued that the structure, designed with accropodes and other components, functioned as an apparatus crucial for operational purposes, aligning with definitions from various dictionaries.
On the other hand, the authorities emphasized that the breakwater-wall primarily served civil engineering purposes and did not meet the criteria for ‘plant and machinery’ as per GST regulations. They highlighted the extensive civil work involved in its construction, which, according to them, categorically defined it as an immovable property.
