Case-1-Kumaran Oil Mill- 120 taxmann.com 386-AAR – TAMILNADU
Question-Whether proportionate claim of input tax credit for procurement of capital goods can be made for power generation business?
Held-The RE power generator is used in the business by the applicant and the output of such RE Power Generator is Electricity and Renewable Energy Certificate. Thus to answer the question raised, we hold that the proportionate claim of Input Tax Credit is available for the applicant and the provisions of Section 17(2) applies to the case at hand.
The applicant has further sought to clarify as to whether they could apportion the common credit using total turnover of the registered person for the tax period, i.e., Turnover of the tax period of existing business + Turnover of the tax period of the new Power Generation business. We find that both under Rule 42 and Rule 43, the ‘F’ in the Formula denotes the Total Turnover[in the State] of the registered person during the tax period’. It is clear that the rule wants the ‘total turnover’ to be considered against ‘F’ in the formulae under Rule 42 & Rule 43 of the GST Rules. In the applicant’s case at hand, therefore, we clarify that the Total Turnover of the Registered Person’ should include the Turnover of Edible Oil Business’ and Total Turnover of Power Generation Business’.
Case-2-Assistant Commissioner of CGST and Central Excise v. Sutherland Global Services (P.) Ltd.- 120 taxmann.com 295
Subject-Availability of Transitional Credit of Cess
Held-The learned Single Judge, with great respects, erred in allowing the claim of the Assessee under section 140 of the CGST Act. The main pitfalls in the reasoning given by the learned Single Judge are
- the character of levy in the form of Cess like Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess was distinct and stand alone levies and their input credit even under the Cenvat Rules which were applicable mutatis mutandis did not permit any such cross Input Tax Credit, much less conferred a vested right, especially after the levy of these Cesses itself was dropped;
- Explanation 3 to Section 140 could not be applied in a restricted manner only to the specified Sub-sections of Section 140 of the Act mentioned in the Explanations 1 and 2 and as a tool of interpretation, Explanation 3 would apply to the entire Section 140 of the Act and since it excluded the Cess of any kind for the purpose of Section 140 of the Act, which is not specified therein, the transition, carry forward or adjustment of unutilised Cess of any kind other than specified Cess, viz. National Calamity Contingent Duty (NCCD), against Output GST liability could not arise.
62. For the aforesaid reasons, we are inclined to allow the appeal of the Revenue and with all due respect for the learned Single Judge, set aside the judgment of the learned Single Judge dated 5-9-2019 and we hold that the Assessee was not entitled to carry forward and set off of unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess against the GST Output Liability with reference to Section 140 of the CGST Act, 2017. The appeal of the Revenue is allowed. CMP No. 690 of 2020 is closed.
Explanation 3.—For removal of doubts, it is hereby clarified that the expression ―eligible duties and taxes‖ excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs TariffAct,1975.
Case-3-Kandla Port Trust- 120 taxmann.com 185-AAR Gujarat
Subject-Availability of Input Tax Credit on expenditure incurred for providing common facilities to their employees within the residential colony
4.2 As per clear reading of Sub Section (1) of Section 16 and sub section (1) of Section 17 of the CGST Act, 2017, it is clear that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only.
4.3 In that case, the applicant is incurring expenses for providing common facilities to their employees within the residential colony where the quarter has been given on nominal fees i.e. Hospitals, Sports Complex, garden, Guest House for official visitors and school for employee’s children and the same is not related to furtherance of their business/output service i.e. port service.
4.4 In view of the above, the Jurisdictional Commissionerate has opinioned that as per Sub Section (1) of Section 17 of the CGST Act, 2017, the applicant is not entitled to take credit of input tax charged in respect of above mentioned expenses as the same is not used in furtherance of their business.
5. We also find that the applicant is engaged in supply of port services to various clients. Said expenses are for providing common facilities to their employees within the residential colony and the same are not relates to furtherance of their business/output service i.e. “Port Service”.It is very clear from the provisions of Sub Section (1) of Section 16 and Sub section (1) of Section 17 of the CGST Act, 2017, that a registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business only. In view of the above, the applicant is not entitled to take credit of input tax charged in respect of above-mentioned expenses as the same is not used in furtherance of their business.
Case-4-Tata Motors Ltd.- 119 taxmann.com 106-AAR Maharashtra
Subject-Availability of Input Tax Credit on Transportation Facilities provided to Staff and Taxability of Amount recovered from them
5.3.1 Applicant has submitted that they issue pass only to their employees, so that the transportation facility can be used by such employees, for which nominal amount is recovered on monthly basis. They have also submitted that once, employee ceases to be in employment with Applicant, he/she is not authorized to use the transportation facility. In other words, employer-employee relationship is must to avail this facility.
5.3.2 In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant’s contentions that they are eligible for exemption from GST under Sl. No. 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017 in respect of nominal amounts of recoveries made from their employees towards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to “Employer-Employee” relation as stated by the applicant in their submissions, is not a supply under GST Act.
5.3.3 To answer the second question we now refer to Schedule III to the CGST Act which lists activities which shall be treated neither as a supply of goods nor a supply of services. As per clause 1 of the said Schedule-III. Services by an employee to the employer in the course of or in relation to his employment shall be treated neither as a supply of goods nor a supply of services.
5.3.4 Since the applicant is not supplying any services to its employees, in view of Schedule III mentioned above, we are of the opinion GST is not applicable on the nominal amounts recovered by Applicants from their employees in the subject case.
5.4 The last question raised by the applicant is if ITC is available to them, whether it will be restricted to the extent of cost borne by the Applicant.
5.4.1 The applicant, citing the decision of the Hon’ble High court of Bombay in the case of Ultratech Cements Ltd. (supra) has submitted that ITC is not admissible to Applicant on part of cost borne by employee and thus ITC will be restricted to the extent of cost borne by the Applicant.
5.4.2 The jurisdictional officer has also endorsed the view of the applicant and we have no reason to deviate from the view expressed by both, the applicant as well as the jurisdictional officer.
Case-5-P.K. Mahapatra- 121 taxmann.com 186-AAR – CHHATTISGARH
Subject-Availability of Input Tax Credit on Inputs and Input Services Lighting of Plant Road, Boundary & Watchtower
Fact-It is observed that the Appellant M/s. NMDC had entered into a contract agreement with M/s. Bajaj Electricals Ltd. for Lighting of Plant Road, Boundary & Watchtower. It includes various Inputs and Input services like design and engineering, supply of plant and equipment and erection of such plant and equipment including street lighting tubular poles, fittings, aviation lamps, switch box, pipes for laying the cables. The issue in hand is whether the tax paid on such inputs and input services used for lighting of plant road, boundary wall and watchtower is eligible for Input Tax Credit under CGST Act, 2017. It has further been their contention that to serve the said plant and enable NMDC for round clock manufacturing operations, lighting is indispensable and in this regard NMDC has awarded the project of Lighting of Plant Road, Boundary & Watchtower (Package 33) to M/s. Bajaj Electricals Limited. The lighting system works are used for illuminating the plant area, lighting arterial roads, boundary wall and watch tower which are essential to carry the manufacturing operations as the steel plant it is a continuous process plant which will run round the clock. We also find that the scope of impugned work can be summarized as comprising of three major parts viz. Design & Engineering, Supply of Plant & Equipment and Erection of such Plant & Equipment. The Appellant has further contended that the lighting installed at their Plant Road, Boundary Wall and Watchtower can be dismantled without substantial damage and can be reassembled at another place without substantially damaging it and therefore may be considered as movable property and accordingly they are eligible for credits of tax paid on inputs and input services used for Lighting of Plant Road, Boundary & Watchtower should be eligible. Without prejudice to above it was also M/s. NMDC’s contention that if such lighting is treated as an immovable property, then credit of the taxes paid on various inputs will be eligible if the said lighting satisfies the definition of the “plant and machinery” and that Lighting of plant road comprises of equipment like street poles, fittings, aviation lamps, switch box, pipes for laying the cables and therefore lighting of plant road, boundary & watchtower will qualify as an apparatus or an equipment.
Whether the claim for Input Tax Credit is in relation to Immovable Property- Thus from above discussion it gets crystal clear that the instant contract consists of transfer of property in goods, coupled with supply of services which leads to the inevitable conclusion that this is a case of Works contract, covered under the definition of “Works contract” defined under section 2(119) of the CGST Act, 2017 supra. Works contract, covers in its ambit only certain works performed on immovable property. The details of works as enumerated above and as forthcoming from the contract, goes to show that the said project of lighting of Plant Road, Boundary and Watchtower awarded to the Contractor by the Appellant is not as simple or movable. The work consists of an entire system comprising a variety of different structures which are installed after a lot of prior work which involves detailed Designing, Engineering, Supply, Civil work, Civil engineering, Ground work, Foundation work, Fabrication, Erection of Building Steel Structures & Sheeting and Erection of Electrical items etc. The magnitude of work done is enormous and these are tailored specifically to fit the dimensions and orientation of the needs of the project. It does not appear prudent or for that matter viable to move these items from one place to the other. Thus, the project fulfills the conditions of it being an immovable property.
Decision Referred-T.T.G. Industries Ltd. V. Collector of Central Excise, [decided] on 7 May, 2004 in Appeal (Civil) 10911 of 1996 [2004 (167) ELT 501 (SC)], Quality Steel Tubes (P.) Ltd. 1995 (75) ELT 17 (SC) and Mittal Engineering Works (P.) Ltd. 1996 (88) ELT 622 (SC). Duncans Industries Ltd. V. State of U.P. & Ors. On 3 December, 1999
In view of the discussions supra and as works contract, covers in its ambit only certain works performed on immovable property we in affirmation with the findings of the AAR and more so with no visible intention to dismantle the said project for lighting and these being intended to be used for a fairly long period of time and on the basis of the scope of work itself as forthcoming from the contract agreement supra between the Appellant M/s. NMDC and M/s. Bajaj Electricals, come to the considered conclusion that the resultant structures are civil structures with foundations and are immovable in nature.
Meaning of Plant and Machinery-The said project for lighting consisting of civil structures as discussed above cannot be said to be used by the Appellant for making outward supply of goods or services or both, which is the utmost essential ingredient for being termed as “Plant and Machinery”. In the instant case, Structures/towers meant for Lighting for Plant Road, Boundary Wall and Watchtower can in no way be related to the outward supply of goods. As per Section 2(83) of CGST Act, 2017 “outward supply” in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed, to be made by such person in the course or furtherance of business. Not acceding, but if assuming for the sake of discussion that these are apparatus/equipment as contended by the Appellant then too it is implausible and farfetched to imagine that these items which eventually are used for lighting of Plant Road, Boundary wall and watchtower, are used for making any “outward supply”. To apply the term “used for” in the definition for plant and machinery, there should be a nexus between the impugned items on which ITC is being claimed and “outward supply”. In the present case the project of lighting of plant Road, Boundary wall and watchtower will render such nexus tenuous.
7.7 We affirm with the findings by the AAR that “the provisions facilitating availment of Input Tax credit does not extend any blanket or unconditional permission for availment of credit on all items irrespective of its use, place of use and its role in making outward supply of goods or services or both, as appears to have been misconstrued by the applicant. These towers, boundary and watch tower by their very nature appears to be nothing but independent civil structures, having no relationship whatsoever with outward supply”.
8.3 Citing reference of the case of Vodafone Mobile Services Ltd. V. Commissioner of Service Tax (Delhi High Court) dated 31-10-2018 the Appellant’s contention was that Credit of taxes paid on telecom towers have been allowed. In this context, it is seen that the case of M/s. Vodafone Mobile’ Services Ltd. And Other such providers of Telecommunication service providers are distinct and distinguishable from the facts and circumstances of the case in hand, inasmuch as in the cited case such towers are being used for providing the “output service”, viz. Telecommunication service, whereas in the instant case there is no nexus between the impugned items required for the said project of lighting of plant Road, Boundary wall and watchtower on which ITC is being claimed and the “outward supply” of the Appellant. In the cited Vodafone case, ‘Capital goods’ are the items under specified Tariff headings or parts, components, spares or accessories thereof and these are ‘Base Transmission System’ (BTS), which enables the telecom company to transmit mobile signals and thereby render telecom services. Appellant have also given reference to other case laws as well all of which in view of the above stated reasons are distinct and distinguishable from the issue in hand. As already discussed it is of utmost importance for availing credit, that the nexus test gets established. Thus, the cited case laws are not applicable to the instant case.
In view of the above, there is no merit in the appeal filed by the Appellant M/s. NMDC having GSTIN 22AAACN7325A3Z3, against the Advance Ruling Order No. STC/AAR/02/2019, dated 24th April, 2019 passed by the AAR, Chhattisgarh and accordingly the said order is upheld.
Observation-Relevant Provision-Explanation below Section 17(5)
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—