"‘TAMILNADU STATE APPELLATE AUTHORITY FOR ADVANCE RULING ‘Consttuted under Section 99 of Tamil Nadu Goods and Services Tax Act 2017] A.RAppeal No.11/202] AAAR Date: 07.03.2029 BEFORE THE BENCH OF 1. Shri. M.V.S.CHOUDARY, MEMBER (CENTRE) 2. Shri. ICPHANINDRA REDDY, MEMBER (STATE) ORDER-in-Appeal No, AAAR/06/2022 (AR) (Passed by Tamil Nadu State Appellate Authority for Advance Ruling under Section 101(1) of the Tarnil Nadu Goods and Services Tax Aet, 2017) Preamble J 1. tm terms of Section 102 of the’ Central Goods & Services Tax Act 2017 /Tamit Nodu Goods & Services Twx Act 2017(the Act, in Shor), this Onder may be ‘amended by the Appellate authority so as to recy any error apparent on the fave of the record, if such erroris noticed by the Appellate authority on its ovm accord, or is | brought to its notice by the concerned officer, the jurisdictional officer or the sppellant within a petiod of six months from the date ofthe Order, Provided that no rectification which has the effect of enhancing the tax lability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been sven an opportunity of being hear 2. Under Section 103/1) of the Act, this Advance ruling pronounced by the Appellate | | Authority under Chapter XVI of the Act shail be binding ony (s) On the appellant who had sought fe in respect of any mutter refered to in sub section (2) af Section 97 for advance rulings (Oa the concerned ofcer oF the jurisdictional oficer in respect of the appellant 3. Under Section 103 (2) ofthe Act, this advance ruling shal be binding unless the |aw, facts or circumstances supporting the kaid advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appetiate Authority finds that ssdvance ruling pronounced by it under sub-setton (1) of Beetion 101 has been obtained by the appellant by fraud or suppression of material facts or ‘isrepreventation of fact, it may, by arder, declare such ruling to be void a | ana thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. Page tof 29 [Rasen ofthe appellant | M/s. SAV Energy Private Limited, EPG Storage Terminal, (Near Red Gate), New Harbour, Tuticorin ~ 628 004 ‘SUAACCSB676D1Z9 ‘GSTIN oF Heer ID adams Rung Onde? agpinat | Order No, 1O/AAR/2021 dated: 31-08-2021 ‘nicht appeal is filed ‘ate of ing appeal 13.082021 iepreemiarey ____| Sistas, cues Gaps - | Jurisdictional Authority-Centre | Cheniiai Outer Commissionerate Jurisdictional Authority State The Assistant Cormmissioner (ST) | oe Whether payment of fees for fling [ Yes. Payment of Rs. 20000/- made vide peal is discharged, It yes, the | challan No.HDFC 2108330188450 dated famous and challan detaile 16.08.2021 ‘At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act, 2017 and the Tamil Nadu Goods and service Tax Act, 2017 are the same except for certain provisions. Therefore, ‘untess a mention is specifically made to such dissimilar provisions, @ reference to the Central Goods and Service Tax Act, 2017 would also mean reference to the same provisions under the Tamil Nadu Goods and Service Tax ‘Act, 2017. ‘the subject appeal is fled under Section 100 (1) of the Tamilnadu Goods & Servicos Tax Act, 2017/Central Goods & Services Tax Act 2017 by M/s. SHV nergy Private Limited herein after referred as the Appellant), having their registered office at LPG Storage Terminal, (Near Red Gate), New Harbour, Tuticorin ~ 628 004. Thay are registered in India and the primary business comprises of supply of Liguified Petroleum Gas (LPG) in Bulk and in cylinders to domestic) other Business’ sopments tunder the brand name of “SUPER GAS\". SHV also supplies bull LPG for Industrial and Auto LPG. SHV is the subsidiary of SHV Energy N.V., 8 Dutch Multinational Company in Netherlands. They are registered under GST with GSTIN. 34AACCS8676D129. The appeal is fled against the Order No. 10/AAR/2021 dated’ 31.03.2021 pasted by the Tail Nadu State Authority for Advance ruting on te application for advance ruling filed by the appellant, Page 20829 2.1 The appellant has stated that they import LPG from outside India and stores/ processes the same at various terminals located in India. The terminals are in Tuticorin (Tamil Nadu), Porbandar (Gujarat) and Mumbai (Maharashtra). They: operate in 16 states in India through @ terminals, 4 Regional offices, 24 fling plants and 6 depots in India, Their Tuticorin terminal is contemplating expansion to increase the LPG capacity from 3,50,000 Metric Tons Per Annum (MTPA) to 12,00,000 MTPA. The expansion will invalve suitable sugmentation of existing facilities inchiding Utilities and Offsite ystems. The following expenciture is proposed to be incurred by them in the process of expansion amongst others: 1. Construction of transfer Pipeline 2. Construction of refrigerated atmospheric storage tank 3, Constmetion of water tank which is a part of fireighting system 4. Construction of foundation/ structural support through piling Transfer Pipeline: This is basically aid to connect the unloading point Getty) to the storage tanks within factory premise. These are generally long distance pipelines covering various road, rail and river crossing sometimes also across the sea. The cxisting unloading arms and transfer Pipelines shall continue to be available for ‘unloading LPG from ships. As part of proposed expansion, new Propane and Butane tunloading arms (one each) shall be installed at the Jetty. The new loading arms shall be designed to handle 500 MT/tir cach of refrigerated Propane and Butane. Tue approximate linear length of each mew pipeline shall be 4.1 lam and shall be Installed adjacent to the existing piping corridor, The unloading line 16\" size adequacy and hydraulics is based on ship pump head of 120 mle (meter of liquid column}, TWwo 16” pipelines and two 6\" precooling lines with necessary insulation are considerad.in order ta reduce the ambient Ineat Ingress and fire protection of the unloading pipeline, 80mm thick Polyurethane foam (PUF) inser insulation and 50 ‘mm thick Cellular glass outer insulation are recommended. For pre-cooling, the unloading lines, one insulated 6° pipeline is considered. Liquid propane and Butane are admitted into the respective unloading line to affect a slow cooling down of the unloading pipeline (approx. 3-5%C per hour), During the pre-cooling process, gas compressors will have to run continuously, Propane and Butane shall be received in refrigerated ship tankers with their own refrigerated system in parcel sizes of 22,500 MT at Port jetty of Tuticorin. The refrigerated liquid cargo shall be pumped by ship's pumps at a rate of S00 MT/h of Propane and Sutane in euch loading arm. ‘This will be done through two marine unloading arms of 12° diameter end transferred to the storage tank via 16\" diameter pipelines each having a total length Page3 of 29 of about 4.0 to 4:7 kms, The above mentioned is the process of transportation of Propane/ Butane (rom Jetty to the stomge tank by using transfer pipeline, as transportation Ubrough tankers is eumbersome process. Storage Tank: Post expansion ofthe terminal, the Appellant envisages unloading of Propane and Butane from the ship using pipelines and storing in two refrigerated storage tanks of 15,000 MT capacity each. The tanie normal operation pressure shall ‘be 700 mn WC at « temperature of epproximutely (-) 450 C in case of propane and (} 50 C in case of Butane. Propane and Butane pumps are submersible centrifugal type pumps kept inside tnle These pumps are provided fr following functions ¥ transfer of propane/ butane for heating and blending for production of LPG for tanker loading and; Pre cooling of unloading lines prior to ship unloading Each pump is provided with automatic flow contra valve meant for minimum fow remm and these pumps are designed forthe necessary flow to facilitate production Of LPG of diferent ratios of Propane/ Butane. They are hested in separate heating trains to 150 C in two steps using dedicated air heaters fllowed by trim heaters. ‘They are mined in Static Blender (2000-FM-01) at « certain predetermined rato in order to make LPG as per 18-4576, The ratio depends upon the composition of Propane and Butane stored in storage tanke Online blending control system is provided to make LPG as per 18 specifications. The vapor pressure of the mixture is ‘monitored by online measurement at the downstream of static blender with the help of online vapor pressure analyzer. The blended LPG is filled into road tanker via unloading arms for thelr customers, It is important to nate that these tals are constructed for specific usage of storage of Propane and Butane. These storage tankers cannot be used far any common storage ‘Bie Water reservoir (tank apart of Fire fighting system: The current expansion project is proposed to have firefighting aystem in compliance with Oil Industry Safety Directorate (OISD) standards 236. To meet the requirements itis proposed to have provisions for fire tank, fre detection, fre alarm and fie extinguishing fecilties to cover entire terminal and jety. Water is stored to meet the requirement of firefighting for 4 hours duration, with pumps of adequate capacity. Hence two tanks of capacity 4000KL each is proposed. Further, water stored in the tanks will be used for direct fire extinguishing, cooling down surrounding structures & equipment as water curtain to complete cutoff of fire zones. Thus, water reservoir (tank) is integral part of firefighting system which is connected with Hydrant lines sprinklers Page 4 of 28 and water curtain. Ay part of exating safety aystem at Terminal, the system han a frewater system with the following facilities: 2 Nos of Firewater Pumps 2Nos of Jockey Pumps 2 imereonnected Firewater reservoirs with the total capacity of 2817m% Firewater ring main with single and double headed hydrants, monitors and deluge spray systems for Compressor, LPG Pumps, Heaters & Condensers, Tanle Trucle Gantry anid Transformers are available. Due to proposed Terminal expansion and to meet the fire water demand new water tanes are to be constructed, The minixum fire protection measures envisaged and to be constructed for the terminal expansion. ae firewater pamp house with frewater main pumps aud jockey purnps, frewaver storage tanks and firewater main ring. Firewater aystem shall be integrated with the existing (ecility, Firewater demand shall be calculated for a single largest fre seenario, considering composite plant of old and new terminsls, The existing ‘irewater and jockey pumps shall be replaced to suit the new fire water demand Foundation and structural support through Piling: Piling means a heavy stakes or posts insialled to support the foundation of a structure. A pile foundation is defined as a series of columns constricted into the ground to transmit loads to a hard soil Beneath. A pile is a long cylinder made up of a steong material, such as concrete, Piles act as a steady support for structures built om top of them, Pies teanafer the loads from structures to hard strata, roc, or soil with high load Dearing capacity. AS the Appellant's Project site is Jocated close to the sea, the sail ‘led up with clay with a very high ground water table ( The transfer pipelines are an important part of the complete manufacturing ‘Procesi in their business, Thus, such pipelines should be considered as part of the plant and machinery. Reliance can also be placed on the judgment of the Hon’ble Supreme Court of India in the case of State of Bihar & Ors. Vs. Steel City Beverages Lid. & Ors. [AIR 1998 SC 235|whercin a wide Connotation has been given to the word ‘plant’ and the term ‘plant’ has bocn held to mean apparatus which is used by the industry for carrying on its industrial process of manufacture. It has been explained how these pipelines are used in the manufacturing process and are an important part thereof for the manufacture process, Thus, it should be considered as part of the plant and hence éigible for input tax credit. They place further reliance on the judgment of Bombay High Court in the matter of Reliance Industries [TS-226-HC-2017(BOM)-EXC|, wherein MODVAT credit was allowed in respect of ‘Single Point Mooring’ system situated in the seabed, Used for unioading vf imported and coastal consignments and pumping, of Page 90429 raw materials holding that this should be considered as an extension to the ‘actory’ They in their Application had relied upon the meaning of factory from the Factories Act, 1948. Section 2(m) of the Factories Act, 1948, However, the Ld. Authority has held that adopting the definition of ‘factory’ from a different statute is not tenable, It is to be noted that the term “actory’ has not been defined under the GST law and the Ld. Authority in the Impugned Ruling has not suggested any alternate source for deriving the definition or ‘meaning of the term Yactory’, They have now placed reliance on definition provided in Central Excise Act, 1944 also, It is a well settled legal principle that in case of absence of the definition of a term in the statue under litigation, the definition can be derived from other relevant statutes. ‘transfer Pipelines are used in the course of furtherance of business. The rain objective and purpose of laying of pipeline is for unioading of Propane/ Butane, Propane/ Butane are the key raw material the process of manafacture of LPG. It is clear from the above thet laying of pipeline constitutes an integral and inseparable part in the manufacturing process in fas much as without the aforesaid activity of transportation of Propane/Butane far which pipelines are used, there cannot be imamufacturing of LPG, Based on above, itis submitted that pipelines are used in eourse of or furtherance of business. The pipelines constitute an integral part of the manufacture carried out by them: credit of taxes paid by them should be cligible to them, Based on the decision in the case of Commissioner v. GSPL India Transco Lid [2016 (43) &.1:R, J23 (Gui, by the Hon'ble High Court, it can be concluded that even in their case, transportation of Propane/#utane js not possible without laying of pipeline for transport. Therefore, laying of pipetines is an integral part of their business operations and hence used in course of furtherance of the business. Thus, it can be conchided that laying of pipeline for transport of Propane/ Butane from Jetty to Terminal is eligible {for input tax credit under Section 16 of CGST Act and credit should not to be restricted under Section 17 of CGST Act. The Impugned Ruling has not disputed this ground, and this means that the Ld. Authority has accepted that the transfer pipelines are used in the course or furtherance of business. ‘The exchuslon from credit eligibility applies only to the pipelines laid outside the factory premise which is used for making outward supply of goods. Page 10 029 > Having considered the factual background, they wish to highlight specific provision in this regard, Section 17(5) of the COST Actin its explanation has specifically deveribed the expression plant and machinery. Decoding the ‘above provision following inference can be dravn: > The provision restricts the input tax credit on immovable property other than plant and machinery; > Plant and Machinery means any equipment fixed to earth by foundation or structural support; and ‘The provision excludes the credit on pipeline laid outside the factory premise which is used for making outward supply of goods fn ‘the current scenario, they receive Propane and Butane through refrigerated ship tankers with their own refrigerated systems. The refrigerated liquid cargo shall be pumped by ship's pumps at a rate of 500 MT/r each of tefrigerated Propane and Butane in each loading arm, This will be done through two marine unloading arms installed at Jetty and transfers the refrigerated Propane and Butane to their refrigerated storage tanks at ‘Terminal via 16\" diameter transfer pipelines each having a total length of about 43 lems ftom Jetty to the Tenninal. ‘The above referred process of procurement of Propane and Butane trom Jetty to their terminal through frafiafer pipeline is the unique mode of transportation without which they cannot mamufactare LPG which is their outward supply. Section 17 (5) restricts pipelines laid outside the factory premise which are used for making, outward supply of goods or services not inward supply of goods or services. Hence, they believe that the transfer pipelines laid outside the factory premise for procurement of Propane ad Butane is eligible for availing credit. ‘The impugned feuling has éred in hoiding that credit is not eigble on input and input services used for lying Pie foundation.The Impugned Ruling at patugraph 10.5 and 113 hax denied the credit of taxes paid on pile foundation. In this regard, they submit that the above ruling of the Ld. ‘Authority is incorrect forthe following reasons: ‘The impugned Ruling has been passed without providing any proper reasoning and accordingly, the impugned Ruling vitiates the principles of ‘natural justice and therefore, ie bad in law. They had made detailed submissions to substantiate that pile foundation is essential for the storage tanks to bear the load, The Ld. Authority has, without providing any proper Page 11.29 reasoning whatsoever has passed the impugned Ruling holding that pile foundation cannot be attributed as a foundation or structural support for an ‘cquipment/ apparatus. The Authority has not analysed or provided any observations for rejecting the submissions made by the Appellant that pile Toundation is essential to bear the load of the tanks and therefore they form foundation of the storage tanks. This represents « flambayant and prejudiced tiempt of the Authority t frivolously deny the credit without any application of mind. Such order cannot be held to be sustainable in law. It is a settled principle of law (hat the order has to be passed by the Authority by providing 1 proper reasoning, Reliance in this rogard can be placed on the following decisions: +) Tata Rngineering & Locomotive Co, Limited V, Collector of Central Excise, Pune reported én 2006 (203) &, 1.7, 360 (SC) ‘+ State of Punjab v. Bhag Singh reported in 2004 (164) E.L,, 137 (SC) The ratio of the above-mentioned judgments is fully applicable in the facts 1nd circumstances of the present case, The Authority has however completely ignored the submissions made by them and has also not given any findings ‘or reasoning for rejecting the submissions made by them, Accordingly, follossing the principles of natural justice and relying on the above judicial precedents, they submit, that the impugned Ruling in so far as not providing any proper reasoning is erroneous and liable be set aside on this ground > Pile foundation’ essentially acts an a foundation to the storage tanks + Anil foundation is defined as a series af columns constructed into the ground to transmit loads to a hard sot! beneath, + A pile is a tong cylinder made up of a strong material, such as concrete Piles act as a steady support for structures built on tap of then *+ Piles transfer the loads from structures to hard strata, racks, or soil with high load bearing capacity, ‘Their project site is Tocated close to the sea, the sail i filled ip with clay with ‘a very high ground water table (<1 m), this would mean that the load bearing capacity (weight per sqm the soil ean withstand) is very low. Since the storage tanks as well as water tanks are quite heavy, they need to increase th bearing capacity. Therefore, the foundation by way of piling is must. load Page 120129 > As per Section 17(5) (} and (a), the exclusion from credit eligibility for goods and/ or services used in the construction of immovable property is not applicable for plant and machinery: This means that input tax credit is allowed on goods, services and even work contract services received for construction of plant and machinery. As per the definition of Plant and Machinery, plant and machinery has been defined to inelude apparatus, equipment, and machinery fixed to earth and als includes the foundation and structural eupports, > The Impugned Ruling having conchided that the storage tank and wator tanke i plant and machinery, cannot deny the credit of taxes paid for the piling foundation, which in essence is the foundation of these tanks itself, They place reliance on Maharashtra Sales Tax Tribunal in the case of M/s Priyadarshini Polysacks Vs. The State of Maharashtra wherein it was observed that the foundation work for Wind Turbine would be classified as lant and machinery. Tn the above judgment also, foundation has been ‘reated as part of the windmill (machinery) ites. Similarly, in Uke present ‘ease also, the pile foundation should be treated as part of the plant and machinery itself (storage and water tanks in this case) and thus, eredit should be eligible ‘The definition of plant and machinery also specifically includes the foundation and structural support, Hence, the Impugned Ruling rejecting the credit of taxes paid on goods and services used for such pile foundation is ‘erroneous and is able to be set aside > Pile foundation’ should be covered in the definition of plant and machinery ‘and not in the exclusion part of such definition The definition of ‘plant and.machinery\" excludes: {i) Land, building or any other civil stractnres (i}-Telecommunication towers; and (id) Pipelines laid outside the factory premises It is clear thet the foundation and structural support and construction of storage and water tank will not fal! under the purview of clause (il) or (ii) shove. Therefore, clause (i) which provides for land, building or other civil structure is examined here. The exclusion is for land, building or any other civil structure. Since, pile foundation will not fall under land and building, the term ‘any other civil structure’ must be evaluated. In the absence of any specific definition of the term “civil structure” the meaning of the word must Page 13.0f 28 be understood in context of the two of the previous words used,in that ‘sentence by applying the principles of Kjusclem Generis. Hence the phrase ‘any other civil structures has to be read in conjunction with land and building and therefore any civil structure in the nature of land and building should be understood as the civil structure of such land and building only ‘and any other foundation or structural work, which is not part of land and ‘huilding as such, should not be covered in the terms ‘civil structure! in the current clause, Thus, it can be safely concluded that the pile foundation should not be covered in the exclusion list, ‘They farther submit that the Youndation and structural support of ‘plant ‘and machinery’ has been specifically inchided in the definition of plant and ‘machinesy. The pile foundation under consideration here is coveret term ‘foundation and structural support. The Ld, Authority in para 10.5 ‘and 11.3 of the Impugned Rating has confused this pile foundation with the term ‘any other civil structure’ used i the exclusion list in the definition of plant and machinery, As discussed above, the term ‘any other civil structure’ has to be understood in conjunction with ‘and and building’, whereas the pile foundation ie @ part of the storage and water tanks i. plant and machinery. Such foundation is not separate from the plant and machinery, The Ld, Authority has allowed input tax eredit on ‘structural support? whereas denied it on Toundation’, Though in the low these two terrts have beon used together. Specific rebuttal ‘the Ld. Authority vide paragraph 10.5 and 11,3 of the impugned ruling has ‘observed that the pile foundation has been entrusted by them as a separate ‘work and thus, de not form past of the foundation of storage and water tanks such 4s without any basis and is not in consonance to the facts of the case, Ibis @ fact that the pile foundation is intended to be constructed with the objective of providing support and stability to these tanks only. Merely the fact that a separate work order has heen iseued for such foundation work cannot be used as a valid argument to justify thet this is not a foundation of the tanks. ‘The definition of plant and machinery includes its foundation and structural aupport, irrespective of whether the same is undertaken under the same contact oF separate contracts, Such an observation by the Ld. Authority is clearly without any foundation and the impugned Ruling therefore merits to be set aside on this ground alone. Ld. Authority has in Para 10.5 of the Page 14 0f29 impragned Ruling has contended thet Pile foundation is snore aligned to ‘and’ which stands excluded, than the ‘structural support for an equipment” which is stated aa ‘plant and machinery’ in the Explanation to Section 17 of the (CSGT Act. In this segard, they submit that the Ld. Authority has grossly erred in understanding the meaning and purpose of the pile foundation by drawing this conclusion. Based on the discussions above, it has been clearly explained that this pile foundation is made solely for the purpose of providing Support to the storage tanks and water reservoir tanks and works as a foundation for these. The pile foundation cannot be held to be akin to ‘and! at all, In any case, such a conclusion is whimsical and without any basis and therefore stich an observation of the Ia. Authority is erroneous and is liable to be act aside. > Pile foundation is essential for the storage and water tanks. Reatling all the above provisions together, it ear also be interpreted that the essential elements for availing the credit of the input taxes paid in respect of the inward supplies of goods and services, the said supplies shall be used or intended to be used in the course or furtherance of the business, The equipment, plait and machinery and the tanks need a stable base, without proper foundation and structural support they cannot have a stable bese which can take the weight of entice equipment, plant and machinery and the tanks with the product in it, Thus, the pile foundation is essential for the purpuse of business of the Appellant Impugned rating has allowed the credit of taxes paid on storage tanks and water tanks and has disallowed the credit only on the pile foundation which is necessary for construction/ erection of the storage/water tanks, Storege tanks and water reservoir tanks (which are embedded on pite foundation) are ‘extremely heavy in weight and cannot be construcied/erected without the fouhdation. Further, huge quantities of Propane and Butane are stored in the storage tanks and that of water in the water tanks. This makes the tanks even heavier, Hence, a very strong and load bearing foundation is needed to support these tanks. Since the product inside the tank is stored in a refrigerated state, the tank needs to be elevated to allow fee air eireulation beneath the tank, It is to be noted that such pile foundation is specifically ‘used for the storage and water tanks and other heavy structures and not tUuroughout in the factory. This clarifies that the pile foundation is essential specifically for these tanks. Page 15 0f 29 > Piling means a heavy stakes or posts installed to support the foundation of a ‘structure, A pile foundation is defined as a series of columns canstracted int the ground to transmit loads to a hard soil beneath. A pile is a long cylinder ‘made up of « strong material, such as concrete. Piles act as a steady support Jor structures built on top of them. Piles transfer the loads from structures to hhard strata, rocks, or soil with high load bearing capacity. Foundation for the refrigerated tanks are planned with 700mm diameter piles which will be casted on site up to @ depth of 10m (this i the depth where there is hard rock beneath). A total 600 piles are envigaged for both the reftigerated tanks. Once the location of the piles has been identified, a hydraulic rig digs a hole ‘upto the required depth, once the depth has been achieved a reihfareement ‘cage is placed inside the borehole and then filled up with concrete. These piles are Gnished at ground level, Since the refrigerated tanks need an elevated base, the piles are further extended to another 1.5m above the {ground level upon which a pile eap/ conerete foundation is made joining all the piles together to form a load bearing platform, The foundation of water reservoir tanks is also similar to that of the refrigerated storage tanks. The only difference being that the foundation is at ground level. Fire water tane being a smaller structure than the refigerated storage tank the diameter of the piles and the number of piles is lesser. {0% mena ee or tin Page 160129 The above process depicts that pile foundation is built as per the specifications of the tanks and therefore the same is customised according the requirements. The number of piles, the depth of piles, the elevation of the Piles etc are dependent on the requirement as per the tank to be made above them. The tanks are embedded on such pile foundation. It is therefore clear ‘that the pile foundation is an essential foundation for the tanks (plant and machinery). > The Explanation to Section 17(5), while defining the term ‘plant and machinery’ specifically inchides the foundation of such plant and machinery ‘The Explanation is produced below for ready reference: “Explanation — For the purposes of this Chapter andl Chapter Vi. the expression ‘plant and machinery’ means apparatus, eqitioment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both andl ineludles such foundation andl structural supports but excludes i)lamd, building or any other cuit structures; (i) Telecammunication towers; ane (ti) Pipelines taid outside the factory premises.* 1 io clear ffom the above that where a machinery ia fixed to earth by foundation, such foundation is included in the definition of ‘plant and machinery’ Since the storage and water reservoir tariks have been held to be Plant and machinery by the Ld. Authority and thus eligible for input tax ‘credit, the pile foundation which is a foundation essential for the same plant aad machinery should also be allowed in accordance with the provisions of the GST law, Jn Tight of the above, they have submitted that the Ld, Authority has erred in observing that that these pile foundations are civil structures and not foundation for plant and machinery and the impugned ruling therefore merits to be set aside; they ‘re eligible to avail credit of taxes paid for laying of transfer pipelines; they have ‘already submitted in the appeal filed on 18 August 2021 that the transfer pipelines form part-of the factory premises itself and therefore the credit of the taxes paid on laying of the pipelines is not restricted under Section 17 of the Central Goods acid Services Tax Act, 2017 (CGST Act), In order to further substantiate the said submissions, one arm of the transfer pipeline is always connected to the storage ‘tanks situated within the factory premises whereas the other arin is connected to Page 17 029 the vessel (upon scrival. Once the loading/ unloading of Propane/Butane is completed from the vessel to the storage tanks, the transfer pipeline is then disconnected from the vessel. Thus, itis clear that the transfer pipelines are part of factory premises itll. In thia background, the expression ‘pipeline’ in the exclusion trom the definition of tplant and machinery’ connotes fong distance pipelines and not pipes running for short distance. In their case, these transfer pipes are running for = short distance from the jetty to terminal. In light of the above, they are eligible to credit of the taxes paid on transfer pipeline and the impugned ruling therefore ‘merits to be set aside Personal Hearing: 6 ‘The Appellant was granted Virtual Personal Hearing as required under taw before this Appellate Authority on 28.01.2022. The Authorized representatives of the [Appellant Shri. K. Sivarajan and Ms, Khushiboo Gupta reiterated their submissions rade along with their appeal applications and their paperbook submitted earlier they stated that the issue is oa the eligibility of input tax credit on the pipetine laid from. jetty to the factory premises and the pile foundation laid for storage tanks/water tanks. They further stated that the lease is for the factory area and they have ubtained the ‘Right of way leave’ enabling the laying of pipeline and therefore the pipelines should not be considered as laid outside the factory. The pipelines are running through the port area and therefore no GST Registration can be obtained for the pipeline area which is enly procedural and cannot be a ground to reject ITC. The piles are laid to support the relrigerated storage tank and ate specially designed to support the load of the tanks and therefore they are foundation and structural supports and not in the nature of civil structure to be excluded for the purposes of ITC. He further stated that in the case of NMDC Ltd Vs Union of India the stay order status remains, To the query that requirement of pile foundation is gol! specific and itis essentially to go with the land and do not depend oon the load beating, the authorised representative stated that in their case pile foundation is not laid in the entire area but the purpose in the case is to hold the load of the storage tanks. Discussion and findings: 7.1 We have gone through the entire facts of the case, documents placed on record, Order of the Lower Authority & submissions made by the appellant before Page 18 0293 Uo. The appellant hes raised three issue for advance ruling before this appeliate forum praying setting aside the orders of the Advance ruling authority, Tamil Nadu: 1, Whether the applicant is eligible for availment of input tax eredit of GST paid (m woods and services for laying of transfer pipeline and the foundation and structoral support for such pipeline which is intended for Unloading Propane/Butane from the vessel/Jetty to the Termninal? 2 Whether the applicant is eligibte for availment of input tax eredit of GST paid ‘on goods and services used for foundation and structural support foundation tanks? 3 Whether the applicant is eligible for availment of input tax cre of GST paid on goods and services used for foundation and structural support for such 72 Before proceeding into the issue of advance ruling, first we look into the date of filing of appeal before the forum. The appeal has been filed before this forum on 18\" August 2021 against the order of the Authority for Advasice Ruling, Tamil Nad ‘in order No.10/AAR/2021, dated 31- 2021. As per sub-section(2) of section 97 of the CGST Act 2017, appeal has to be fled within 30 days from the date of comnmunication of the order and as per the Proviso to above sub- section(l} of section 97, a further period of 30 days with condonation of delay is granted to fle such appeal The appellant's authorized representative has stated that as per Hon'ble Supreme Court in Su Mota Writ Petition (Civil] No.3/2020 dated 23-03-2020 and 27-4-2021, wherein the period of limitation, aa prescribed under any general or special laws in respect of judicial or ‘Shasi- judicial proceedings, whether condanable ar not, shall stand extended till farther orders. This has been examined and the Hon‘ble Supreme Court in onder No, Mise. Application No,21/2022 in Misc. Application No.665/2021 in Suo Mota ‘Wait petition No.5 of 2020 dates 10-01-2022 has directed that the period from 15-3. 2020 to 28-02-2022 shall be exciuded for the purpose of limitation as may be ‘reseribed under any general or special laws in respect of judicial or quasi-judicial Proceedings. Accordingly, the appeal fled before this appellate forum is within the ‘said extended period and the application is talcen for advance rating, 2021 which was communicated on 22 8.1 The first issue raised before us is ‘Whether the applicant is eligible for availment of input tax credit of OST paid ‘on goods and services for laying of transfer pipeline and the foundation and. Page 19 of 29 structutal support for such pipeline which is intended for Unloading propane/Butane from the vesse/Jtty to the Terminal? she appellant submitted in the appeal thatthe tranefer pipelines form part of te factory premises itself abd therefore the credit of the taxes paid on laying of the sipelines is aot restricted under Section 17 of the Central Goods and Services Tax fet 2017. The Appellant added that one arm of the transfer pipeline = always connected o the storage tanks situated within the factory premises wheres the ‘cher arm is connected to the vessel (upon arrival]; Once the loading/ unloading of Propane/Bulane is completcd from the vessel to the storage tanks, the transfer ripetine i then disconnected from the vessel end thus, itis clear that the trauifer pipelines are part of factory premises feet, The appellant reiterated thet the ‘apression ‘pipeine’ in the exclusion from the dofiltion of ‘plant and machinery connotes long distance pipeines and ot pipes running for short distance; in the ‘case of the Appellant, these transfer pipes ore running for a short distance from the Jetty to terminal; Further, the expression ‘actary’ has niot been defined under the ‘GST law and therefore, the Appeliant has placed reliance an the definition of “actory’ from the Central Exéise Act, 1944 and Factories Act, 1948 ; both these laws have defined Tactory’ to include ‘precincts’, The appellant further stated thet term sprecinets® has beon defined under various dictionaries as below: 1.1 Cambridge taternational Dictionary of English “area around building? 1.2 Collins English Dictionary “the surrounding region or an are” 1.3 Merriam webster “the region immediately surrounding a place” On perusal of aforesaid sieanings, procinet would mean an aren around building oF fa place, A conjoint reading of the term “factory” and “precincts”, makes it ‘abundantly clear that the factory includes the surrounding areas which in the ease fof the Appellant ia the pipes laid from Jetty to Terminal. The appellant has also relied on the judgment of Bombay High Court in the matter of Reliance Industries [1S.226-HC-2017(BOM)-BXC}. In this ease, MODVAT credit was allowed in respect of ‘Single Point Mooring’ system situated in the seabed, used for unloading of imported and coastal consignments and pumping of raw materials holding that this should be considered as att extension to the ‘factory’ and in the case of NMDC Limited Versus Union Of India [WPT No. 77 of 2021} also, the Chhattisgarh igh Court, has insued a stay order against the revenuic order im a similar matter for Mlowance of input tax credit on goods and services used for laying of pipelines covsidering the provisions of Section 16 of the CGST Act, In their additional submission the appellant has also submitted copies of lease deed entered for Right Page 20 of 23 of way for pipeline and relied on the orders of the Appellate authority for advance ruling, Chhattisgarh in the case of NMDC limited. 8.2 The averments made by the appellant are examined at length with reference to the provisions of the CGST Act and Rules made thereunder. The relevant provision of the COST Act,2017 is extracted hereunder for the purpose of reference: 17 (6) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section ({of section 18, input fax evedit shall not be available in respect of the following, namely: — (o) works contract services when supplied for constriction of an immovable property (other than plant and machinery) except where itis an input service {for further supply of works contract service: Explanation. — For the pumposes of this Chapter and Chapter Vi the expression ‘plant and machinenk means apparatus, eeuipment, 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 1) land, butding or any other evil structures {i tetecommunication towers and {ii pipelines taid autside the fuctory premises. From the reading of the shave provisions, it is crystal clear that the pipelines laid outside the factory premises is specifically excluded for the purpose of expression- plant and machinery particularly for chapter V and Chapter VI, The intention of the Legislature in framing this expression, is to limit the vast definition of plant and ‘machinery for the exclusive purpase of availability of Input ‘Tax Credit on such plant and machinery and thereby the Parliament consciously prohibits the availabilty of the Input Tax Credit on pipelines laid outside dhe factory premises. The said cexchision applies to all such pipelines lald outside the factory be it small distance of 4 KM as contended by the Authorized Representative or long distance, When the exclusion has been explicitly provided in the Act, there is na need to borrow the Gefinition from other acts inchiding the subsumed Acts and accordingly the definition of factory as per Central Excise Act or Factories Act, does not apply to this, iamue. The judgment of Bombay High Court in the case of Reliance Industries [TS- 226-C-2017/BOM)-EXC| relied on by the appellant relates to the MODVAT credit ‘ead therefore the provisions of the Central Excise Act and the CGST Aet,2017 are Page 21 29 ‘not one and same and hence this judgment will not help the appellant, ss the COST Act,2017 specifically excludes the pipeline laid outside the factory premises for the purpose of determining the eligibility of Input Tax Credit, Further the appeliant relied on the Appellate authority for advance rating, Chhattisgarh, NMDC Led, It is to be noted that under the provisions of sub-section (1) of section 109 of the COST Act 2017, it is binding on the applicant only and nat applicable to the appellant. Further even in such case, only stay order has been issued and final in the case decision is sti pending and this ean be applied only in the identical circumstances ‘which needs to be proved. Further the appellant relied on the judgment of Hon'ble High Court of Gujarat in the case of GSPL India Transeo Lid. (2016/49]8.7.R.J23|Gu)). This judgment related to the capital goods under the Central Excise and the definition of capital goods under the Central Excise dnd GST iy aot pari-materia and hence the judgment retied on by the appellant would not be useful for the appellant, 3° Its pertinent to note that this pipeline is not used for making outward supply 8 found in the explanation to section 17(3) of the CGST Act,2017 as averred by the appellant. ‘The contention that the transfer pipelines laid outside the factory for inward supply whereas the exclusion provided in the said explanation ‘would be applicable for outward supply is not tenable, The exchision provided therein reads as “pipelines laid outside the factory premises” and it would be applicable for beth outward supply and inward supply, As the transfer pipelines ‘would not fall under Plant and Machinery, the appellant is not eligible to avail input tax credit an the goods and services used for transfer pipelines, the foundations and structural support related <0 pipelines woulld also nat eligible for ITC on the goods and services used for foundations and structural support related to pipelines. With regard to lease deed for Right of Way, the same is for the purpose of utilization of land that are required under the relevant Act which has nothing to do with this Act. In fact, the tax element if any involved for the ssid agreement also not eligible for input tax ered premin 84 In view of the above, the Advance ruling authority of Tamil Nac has rightly: ‘ruled that the input tax credit is not eligible for the pipeline laid ontside the factory Premises and the foundations and structural support for such pipelines. 9. mn respect of the remaining two questiona, the issues raised for advance fuling are common, both are taken up together for discussion and finding is as under: Page22 029 fi) Whether the applicant is eligible for availment of input tax credit of GST ‘paid on goods and services used for foundation and structural support for the tanks? {ii) Whether the applicant is eligible for availment of input tax credit of GST paid on goods end services used for foundation and structural support for such reservoir? 9.2 ‘The Appellant stated that in the impugned ruling, the Advance Ruting ‘authority has allowed the credit of tax paid on storage tanks and water tanks and ‘has disallowed the credit only on the pile foundation which is necessary for construction/ erection of the stordge/water tanks; that the storage tanks and water reservoir tanks (which ate embedded on pile foundation) are extremely heavy in ‘weight’ arid cannot be constructed/erected without the foundation. Further they averred that huge quantities of Propane and Butane are stored in the storage tanks and that of water in the water tanks and this makes the tanks even heavier; Hence, fa very strong and load bearing foundation is needed to support these tanks. The appellant added that since the product inside the tank is stored in @ refrigerated state, the tank needs to be elevated to allow free air circulation, beneath the tank; It 48 to be noted that such pile foundation is specifically used for the storage and water tanks and other heavy structures and not throughout in the factory and this ‘Gasifies that the pile foundation is essential specifically for these tanks. The appelieint ‘stated further that explanation to Section 17(5), while defining the term. ‘plant and machinery’, specifically includes the foundation of such plant and ‘machinery, The Explanation is produced below for ready reference: ‘Bxplanation— For the purposes of this Chapter and Chapter Vi, the expression “plant and machinery” means apparatus, equipment, and machinery fixed ta 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 sipports but exchudes— (i) tand, bung or any other ceil structures; fi) Tetecommnnication towers; and {ily Pipelines Iai outside the factory premises.\" 9,3 The appellant pleated that its clear from the above that where a machinery is fixed to earth by foundation, such foundation Is included in the definition of ‘plant and machinery; Since th plant and machinery by the Ld. Authority and hus eligible for input tax credit, the storage and water reservoir tanks have been held to be Page 23 f 28 pile foundation which is @ foundation essential for the same plant and machinery should also be allowed in accordance with the provisions of the GST lav, In light of lhe above, the Appellant submits that the Ld. Authority has erred in observing that that these pile foundations are civil structures and not foundation for plant and ‘machinery and the impugned ruling therefore merits to be set aside, The Authorised Representative stated further at the time of vietual hearing that in the case of wind mills also, foundation is laid to bear the load and hence in the ease of storage tanks pile foundation laid belovr the ground for load bearing of the tam Discussions of SGST Member: 10,1 The issue has been examined with reference to the grounds of the appeal and the Authorised Representative's contention put forth at the time of virtual persons hearing. The Authorised Representative's contention relied on the very explanation provided in section 17(5) of the CGST Act, 2017 and hence we need to examine the relevant provisions which is extracted above, 10.2 The appellant stated in the grounds of appeal thet a pile foundation is defined 98. series of columns constructed into ground to transmit load to a hard! soil beneath; A pile is long cylinder made up of a strong material, such as concrete; Piles fact as a. steady support of structure built on top of them, Piles transfer the loads fram structure to hard strata, rocks, or soil with high load bearing capacity. in the grounds of sppeal the appellant stated that the piles are further extended to another 15m above the ground level upon which a pile cap /concrete foundation is made joining all the piles together vo form a load bearing platform, 10.8 As per the National Building Code,2016, PART 6 STRUCTURAL DESIGN in Section 2, it has been stated that deep foundations like pile foundations; and other foundation systems to ensure safety and serviceability without exceeding the permissible stresses of the materials of foundations and the bearing capacity of che supporting soil/rock. and foundation has been defined as “That part ofthe structure ‘hich is in direct contact with and transmits loads to the ground(2.1.5)\". Further it hhas been stated in the said code (8,1 General) that “Piles find application in foundations to transfer loads from a structure to competent subsurface strata ‘having adequate load-bearing capacity. The load transfer mechanism from a pile to the surrounding ground is complicated and is not yet fully understood, although ‘application of piled foundations is in practice over many decades. Broudly, piles ‘transfer axial londs either substantially by friction along its shaft and/or by end Poge 240129 Dearing. Piles are used where cither of the above load transfer mechanism ia Possible depending upon the subsoil stratification at a particular site 104 From the above, it is understood that the storage tanks requice pile foundation based on soil condition as a part of stmucture to withstand the load, However, such pile foundation mace of Cement, coarse aggregate, fine aggregate, Time, Surkhi, steel, timber and other materiale and therefore it is basically a civil stcture.. The lower advance ruling authority have ruled that storage tanks are falling under the definition of * plant and machinery\" for which the jurisdictional authority have not raised objection by way of fling of appeal, such ruling attained finality. The foundation has been defined in National building code, 2016 as “That Part of the structure which is in direct contact with aiid transmits loads to the ground.\". Here in question is whether foundation is eligible for input tax eredit on the goods and services used for such foundation as part and parcel of plant and ‘machinery even though it would fall under ivi structure, 10.5 As per the National Puilding Code, 2016, the foundation wall transmit the load of the tanks to the ground. Thus the pile foundation on which plant ane Machinery ic., storage tanks and water reservoir tanks are erected would transmit the load for the tanks (0 the ground and therefore the pile foundation would be eligible for the purpose of availing input tax ereait on the goods and services tsed therein, ss included in the definition of plant and machinery in the provisions of the section 17(5) of the COST Act,2017. Discussions of CGST Member 11.1 1 respectfully disagree with the above conclusion of my brother Member on ‘the credit eligibility for the ‘Pile foundation’ considering the same es ‘Plant and Machinery, In the case at hand, the Input Tax Credit in respect of the Storage ‘Tanks& Water tanks along with the foundation and structural support is held as ‘adiaissible credit by the LA subject to certain conditions. The appellant currently claims the Input Tax Credit of the GST paid on the composite supply of Pile Foundation laid on the Sub-ground level to strengthen the load bearing capacity af the earth/ground, over which with further necessary foundation and structural ‘support the Tanks are fabricated/installed and commissioned is denied by the LA. ‘The appellant has not denied that the tanks are installed with foundation which is laid over the earth strengthened by the Piles. The appellant claim that as the Pile oundation strengthens the earth to bear the load of the tanks, this ‘Pile foundation’ Page 25 of 28 should be considered as ‘Plant and Machinery’ and not to be excluded as to be in the gente of ‘any other civil structure’ exchided from the definition of Plant and Machinery’ for the purposes of ITC 11.2 The appellant has stated that \"Their project site is located close to the sea, the soil is filed up with clay with a very high ground water table («1 m), this would mean that the load bearing eapacity (weight per sqm the soil can withstand) is very flow, Since the storage tanks as well as water tanks are quite heavy, they need to inerease this Toad bearing capacity. Therefore, the foundation by way of piling is must.” 113 The Explanation of Plant and Machinery’ for the purposes of Input Tax Credit fs defined as under: “Pxplanation— For the purposes of this Chapter and Chapter Vi, the expression ‘plant and machinery” means apparatus, eqtripment, 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) lana, busting or any other civil structures; (i) Telecomenunication towers; and fit) Pipelines taid outside the factory premises.\" From the words of the explanation above, “Plant and Machinery” are apparatus, equipment, machinery fixed to earth by foundation or structural support and includes the foundation and stich strustural supports by which the machinery is fixed to earth, 114 In the case st hand, the ile foundation’ is the foundation made to strengthen the earth, upon which the tanks are installed, with necessary structured supports. The Pile foundation is made to strengthen the project site though the piling intervals may depend on the location of the Tanks. This does not make the ‘Pile Foundation’ as the foundation by which the apparams, equipment end machinery are fied to earth. In the case at hand, itis clearly seen that the Storage tanks are placed on the elevated foundation made above ground and the water tanks are placed on the foundation on the graund level and the piles are throughout the project sitefas cant be seen in the Picture at Para S above). The Pile Foundation’ ig an added measure in view of the nature of the soll of the Project site” and in cannot be claimed as the ‘foundation by which the tanks are fixed to earth’, to be eligible as ‘Plant and Machinery’ as per the above explanation, Rather, it can be said that the piles support the earth to withstand the load of the Tanks and are to Page 26 029 be considered as ‘any other civil structure’, excluded trom the definition of Plant fand Machinery’, The reliance on the decision of the Third Bench of the Maharashtra Sales Tribunal in the case of Priyadarshini Pulysacks do not help the case at hand a, Plant and Machinery’ are not defined for the purposes af Rule54() of MVAT, lunder which the claim/decision is arrived at in that case, whereas GST law defines ‘Plant and Machinery for the purposes of IC. 1L5 Farther, National Building code 2016 Part 6 STRUCTURAL DESIGN in Section 2 refered in Para 10.3 by the learned State Member speaks about ‘Section 2 Soils and Foundations’. The code (Part6/Section 2) deals with the Structural design aspects of foundation to be laid in the earth and covers the design principles involved in different types of foundations to be anade depending on the nature of sell, geo-location, terrain, wind, ete and the sustaining load to be put up on the carth, This do not help to substantiate that the Pile foundation’ in the case at hand is to be considered as ‘Plant and Machinery’ for the purposes of nput Tax Credit’ of GST Paid on the said works. 11.6 I differ with the view that since the eredit extended to the ‘Storage Tanks’ holding them as ‘Plant and Machinery’ is not disputed, credit is to be allowed for the pile foundation, as these will transmit the loed of tanks to the ground, I find that the 1A has righily extended the credit of GST paid on the works contract service availed ‘by the’ appellant for Installation & commissioning’ of the Tanks’, considering the ‘Tanks! as Plant and Machinery’ and the variance is only with respect of ‘ile foundation’ which is a foundation laid primarily for the project site and ot specifically contained to the ‘Tanks’. Based on the above views, I hold that File foundation’ laid to the ‘Project site” are not the Toundation’ included as “Plant and Machinery’ and therefore credit of GST Paid on such works contract for ile foundation’ are restricted as per Section 17(5) of the GST Act and not available as mre, 12. In view of the above facts, we rule as under: Page 27 of 29 RULING 1, For reasons dincussed above, we do not find any reason to interfere with the order of the Advance Ruling Authority relating to question No.1. The subject appeal is disposed of accordingly: 2. On Question No.2 & 3, i., on the eligibility of ITC paid on the works contract service for ‘Pile foundation to the project site’ also claimed as foundation for the ‘storage tanks’ and ‘water tanks’, as there is Aifference of opinion between the Members, no ruling is offered as per Section 101(9) of the CGST/TNGST Act 2017 (KPHARISDRAGEDDY) IMwv.s.cHouDaRy]——_ Additional Chief Secretary/ Chief Commissioner of GST Commissioner of Commercial Tax ‘Central Excise ‘Tamil Nacht /Member AAR. ‘Chennai Zome/Member AAAR. the i } 07 KAR 2022 | {30008 AND SERVICE TAX te chennai. Taminasy. | ‘vi SHV Bergy Private Limited, By RPAD 7 LPG Storage Terminal, (Near Red Gate), F-Mail Id: premalg@superges.com New Harbour, Tuticorin ~ 628 004. Copy to: 1, ‘The Principal Chief Commissioner of GST & Central Excise, Wo. 26/1, Mahatma Gandhi Road, Nungambaickam, Ch 600 034. ‘the Additional Chief Secretary/ The Commissioner of Commercial ‘Taxes /Member, 1! Flour, Extilagam, Chepeuk, Chennsi-600 005. Page 28 029 ‘The Commissioner of GST & Central Excise, Chennai Outer Commissionerate, Newry Towers, No.2054, ! Block, lind Avenue, 1% Main Rosd, Annanagar, Chennai-40 Assistant commissioner,(ST) Sciperumbudur Assessment circle, 4/1, Varadherajapuram, Chennai-123, Joint Commissioner (ST)/Member,Authority for Advance Ruling, NadwRoom No.5S03 B, SK Floor, Integrated Commercial ‘Taxes Complex,No.82, Elephant Gate Bridge Road, Chenai-600003 Master File / spare Poge 29 0129, Tamil Office "