ITC Eligibility on Overhead Crane & Integrated Factory Building Structural Support

Fact and issue of the case

At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are in pari materia and have the same provisions in like mailer and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act. 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act, 2017.

The subject appeal has been filed under Section 100 (1) of the Tamilnadu Goods & Services Tax Act, 2017/Central Goods & Services Tax Act 2017 by M/s. Coral Manufacturing Works India Private Limited, (herein after referred as the Appellant), having their registered office al No. 150. Villarasampatti Naal Road, Nasiyanur Road, Villarasampatti, Erode, Tamil Nadu, 638 107. They are registered under GST with GSTIN 33AAICC4646F1ZT. The appeal is filed against the Order No. 12/ARA/2022 dated 31.03.2022 passed by the Tamil Nadu State Authority for Advance ruling on the application for advance ruling filed by the Appellant.

The Appellant has stated that they are in the process of completing the establishment of an Integrated Factory’ Building to manufacture and supply generators for wind operated electricity generators (WOEG). The Integrated factory building that was being constructed, was a special kind of two-in-one building in the sense that it was not merely a conventional roofed factory building to protect the men, machineries and materials from rain and shine, but was a plant and machinery in itself due to its incrementally strong and large foundation, large numbers of pillars, 10 metres highly placed gantry beams with support mountings across the length and breadth, rails over the floor and beams for facilitating the overhead cranes to handle, move and operate heavy parts of the Generators from one work-station to another and finally to load the generators on to the special trucks to carry the generators to the destination. These facilities built into the building make the entire building undoubtedly a plant and machinery to make the WOEG.

As huge amount of steel, cement, structures, pre-cast, reinforced concrete beams, poles etc. are used in the process to make the above Integrated Factory Building and as huge GST amount is paid on these items when converted in to Works contract service (WCS), the Appellants felt in a bonafide manner that they may be entitled to Input ‘fax benefit under Sec. 16 of the CGST Act, 2017.

The Appellant had sought Advance Ruling on the following questions: Whether input tax credit of GST is admissible for supply of the following goods & services

(a) steel, cement and other consumables etc., to the extent of their actual usage in the execution of the works contract service when supplied for construction of immovable property, in the form of the factory which is an Integrated Factory building with Gantry Beam, which in turn used for mounting across the pre-cast concrete beams, poles and over which the crane would be operated;

(b) structures, Pre cast, reinforced concrete beams, poles etc. (purchased as it is) which are used as supports to mount and operate the crane over 10 metres from ground, as shown in the pictures attached; and

The Advance Ruling Authority (ARA) pronounced the following rulings in Para 9 of the Order, as under:

Input Tax Credit of GST paid on Steel, cement and other consumables are not available for the appellant as per the findings at Para 8 of the ruling.

The eligibility to credit of GST paid on structures. Pre cast, reinforced concrete beams, poles etc. (purchased as it is) and other capital goods are not answered as the question is not substantiated with the factual documents.

Aggrieved with the above ruling, the Appellant has filed the present appeal. The grounds of appeal are as follows:

“The ruling conveyed in the Order No. 12/ARA/2022 dated 31.03.2022 [impugned] not sustainable in law and the appellants wish to make the grounds of appeal, especially against the findings in para 8.1 and 8.2.and against decision in para 9 of the impugned advance ruling

Observation of the court

In the case of the appellant, they have erected pillars, gantry beams, rails and beams for movement of overhead crane in the factory premises. 1’he CGST Act.2017 states that “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that arc used for making outward supply of goods or services or both and includes such foundation and structural supports but exclude land, building or any other civil structures.

First we look into the question of whether the overhead crane fixed in the factory premises can be classified as plant and machinery. This crane is falling under HSN 8426 and taxable at 9% CGST+9% SGST in schedule III under Sl.No.327 of rate notification No. 1/2017 Central fax Rate. Chapter 84 deals with machinery and hence the overhead crane would fall under the category of plant and machinery. As per the Explanation under section 17 of the CGS T Act.2017. the expression “Plant & 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. Therefore, the structural support erected in relation to overhead crane alone would cover under the extended meaning of plant and machinery.

From the materials made available before us, the integrated factory building per se is not to be categorized as plant and machinery. The overhead crane and its proportionate structural support would be categorized as plant and machinery as per the explanation to Section 17 of the TNGST Act,2017. Such structural support would not fall under the category of blocked input lax credit. Hence the appellant would be eligible for input tax credit proportionate to the extent of structural support erected in relation to overhead crane alone subject to fulfillment of conditions stipulated in section 17(5)(c) and (d) of the CGST Act,2017 and explanation thereunder. I However, they are not eligible for input tax credit relating to construction of other civil structure like side walls, roof of the Integrated factory building.

In other words, the eligibility of ITC would be as follows:

(i) The appellants arc entitled to the eligible ITC on overhead rails and gantry beams laid exclusively for the purpose of movement of overhead crane.

(ii) The appellants are entitled to proportion of eligible ITC in respect of structural support for overhead crane by applying the ratio of Load transferred by overhead crane, railings and gantry beams to the pillars and beams to the total load including roof, walls etc., whose load arc transferred to the pillars and beams of the integrated factory building i.e.

(Eligible ITC on works contract service for construction of integrated factory building)	X	(Load transferred by overhead crane, railings and gantry beams to the pillars and beams)
		(Total load of the integrated factory building including roof walls, etc. whose load are transferred to the pillars and beams

However, they are not eligible for input tax credit relating to construction of other civil structure like side walls, roof of the Integrated factory building.

In view of the above, the appeal is allowed and orders of the AAR is modified to the extent mentioned in the foregoing paragraph.

With regard to the appellant’s prayer for application of the ratio of the Supreme Court decision and the ARA ruling. , the Hon’ble Supreme Court in the case of M/s. Jayaswal Neco Ltd. Vs, Commissioner of Central Excise. Raipur [2015 (4) TMI 569] had upheld the MODVAT credit claimed on the railway tracks installed within the plant used for handling raw materials, process goods. Tn the instant case, the issue is relating to input tax credit on the inputs used for the structural support to plant and machinery and hence the ruling of the Hon’ble Supreme Court relied on by the appellant would not be squarely applicable to the case on appeal. The appellant had also relied on the AAR of Tamil Nadu in the case of M/s. SHV Energy Private Ltd. As per section 103(1) of the CGST Act, 2017, the said ruling shall be binding on the appellant who had sought it and on the concerned officer or the jurisdictional officer in respect of the appellant and hence it is not applicable to the present case.

In view of the above facts, we rule as under:

RULING

The appellant would be eligible for input tax credit proportionate to the extent of structural support erected in relation to overhead crane alone as discussed in paras 7.10 and 7.11 above subject to fulfillment of conditions stipulated in section 17(5)(c) and (d) of the CGST Act,20I7 and explanation thereunder.

However, they are not eligible for input tax credit as per section 17(5)(c) and (d) of the CGST Act,2017 relating to construction of other civil structure like side walls, roof of the Integrated factory building.