2019 (2) TMI 1009 – AUTHORITY FOR ADVANCE RULING, WEST BENGAL – TMI – Input tax credit – inward supplies for construction of the warehouse – section 17(5) (c) & (d) of the GST Act – immovable property or not? – property of the warehouse being built – Held that:- The Vendor is not supplying the floor as a pre-fabricated removable structure. The civil work undertaken is meant not only for fixing the prefabricated structure built upon the floor but also for developing the floor space itself – Beneficial enjoyment of the floor so inalienably attached to the land is integral to the enjoyment of the warehouse.
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The Applicant is constructing a warehouse that is intended to be used as a permanent structure, and associated with beneficial enjoyment of the land on which it is being built. The technology used for the construction of the warehouse involves the application of pre-fabricated structures and also civil work for supporting the pre-fabricated structure and developing the floor of
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ation. He seeks a ruling on whether the input tax credit is admissible on the inward supplies for construction of the said warehouse. The above question is admissible under section 97(2)(d) of the CGST/WBGST Act, 2017 (hereinafter collectively called the GST Act). The Applicant declares that the issue raised in the application is not pending nor decided in any proceedings under any provisions of the GST Act. The officer concerned has raised no objection to the admissibility of the Application. The Application is, therefore, admitted. 2. In his written submission the Applicant describes the property under construction as Prefabricated Warehousing System (hereinafter the System ). It is being purchased from M/s. Pennar Engineering Building Systems Ltd (hereinafter the Vendor). The Applicant has annexed the literature (Annexure 4 to the Application) in which the Vendor provides a brief description of the pre-fabricated structures being supplied with pictorial and graphic presentations. Th
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according to the Applicant, the warehousing system built thereon, can be dismantled, and thus reduces repeated capital expenses in the event of a shift of location. Moreover, the question of treatment of a property that is attached to a structure permanently embedded on earth has a long legal history. The consensus that has emerged favours treatment of such property as movable or immovable depending on the extent of annexation to the permanently embedded structure and the object of such annexation. According to the Applicant, if the nature of annexation is such that an item so annexed can be removed without any damage and future enjoyment of that item in a similar capacity is not affected, such an item will not be considered to be immovable property. He refers to the apex court s judgments in Solid & Correct Engineering Works [(2010) 252 ELT 481 (SC)] = 2010 (4) TMI 15 – SUPREME COURT and Sirpur Paper Mills Ltd [97 ELT 3 (SC)] = 1997 (12) TMI 109 – SUPREME COURT OF INDIA. He furth
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under the GST Act, recourse is being taken to other allied Acts dealing with property to determine the definition of Immovable property . It is seen that Section 3(26) of the General Clauses Act, 1897 defines Immovable Property as to include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth; Section 3 of the Transfer of Property Act, 1882 simply provides that unless there is something repugnant in the subject or context immovable property does not include standing timber, growing crops or grass. The Section, however, defines the term attached to the earth to mean (a) rooted in the earth, as in the case of trees and shrubs, (b) embedded in the earth, as in the case of walls or buildings, and (c) attached to what is so embedded for permanent beneficial enjoyment of that to which it is attached. The essential character of immovable property , as emerges from the above discussion and relevant to the present
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dinary circumstances, it may be considered permanently fastened to anything attached to the earth. Furthermore, in the context of the GST Act, if the article attached to the earth is not agreed to be severed before supply or under a contract for supply, it ceases to be goods and, for that matter, a moveable property. 5. In the case of Solid & Correct Engineering Works (supra) that the Applicant refers to, the Apex Court, while examining whether a machine, fixed with nuts and bolts to a foundation, with no intent to permanently attach it to the earth, is an immovable property or not, has held that such an attachment without necessary intent to making it permanent cannot be an immovable property. The emphasis is on the intention of the party. The Apex Court observes that the machine in question can be moved and has indeed been moved after the road construction and repair project, for which it was installed, is completed. However, if a machine is intended to be fixed permanently to a
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n, therefore, is beneficial enjoyment for more than two decades of the property being built. Unless the business is wound up, the Applicant, after the expiry of the lease, can approach KOPT for granting a fresh lease. The structure being built is, therefore, not for the purpose of temporary enjoyment, but intended to be used as a permanent structure subject to usual business uncertainties. The concerned officer from the revenue has also pointed out correctly that the System refers only to the pre-fabricated structures that are used for constructing the warehouse and not to the warehouse itself. The core issue in the context of the Application is not the beneficial enjoyment of the System, but of the property of the warehouse being built. Being a storage facility, a warehouse is associated with the space available, whereas the System refers to the materials and structures used for turning the space into a covered storage facility. As technology advances, the engineering for building a f
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l building the Vendor provides a vivid pictorial illustration of the various parts of the structure – the walls, roof, doors and windows etc. that will be built upon the floor, but does not provide any description of the floor as a pre-fabricated structure. The literature refers to wide bay purlins spanning up to 12 M for better shop floor lay out and less foundation cost. It indicates that the Vendor supplies building materials that, in his opinion, provides a more cost effective method to support the foundation for laying out the floor. It does not in any way claim that the floor itself is a pre-fabricated structure detachable from the foundation and associated civil work. In fact, the diagram showing a typical pre-engineered building does not at all include a cross-section of the floor as a prefabricated structure. It, therefore, appears that the Vendor is not supplying the floor as a pre-fabricated removable structure. The civil work undertaken is meant not only for fixing the pref
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omplete warehouse. The warehouse cannot be conceived without the beneficial enjoyment of the civil structure, which is an integral part of the property. The decision in Vindhya Telelinks Ltd (supra) is not, therefore, relevant. In this connection, reference may be made to clause 4(v) of the Circular No. 58/1/2002-CX dated 15/01/2002, where it is concluded that if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. Clearly, the warehouse cannot be relocated by unfixing the pre-fabricated structures alone. The dismantling of the floor, which is the most important component of the warehouse, is not possible without substantial damage to the foundation. 8. In the light of the above discussion, it is concluded that the Applicant is constructing a warehouse that is intended to be us
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