ITC Not Allowed on Construction of Breakwater Wall Used for Protecting Vessel From Tides While Unloading LNG | HC

Case Details: Konkan LNG Ltd. v. Commissioner of State Tax - [2024] 164 taxmann.com 167 (Bombay)

Judiciary and Counsel Details

• K.R. Shriram & Jitendra Jain, JJ.
• Sirram Sridharan & Shanmuga Dev for the Petitioner.
• Ms Jyoti Chavan, Addl GP, Dhananjay Deshmukh & Jitendra Mishra for the Respondent.

Facts of the Case

The petitioner was engaged in regassification of LNG at its regassification plant. It was not allowed to berth and unload LNG during monsoon and during rough weather conditions. Therefore, the petitioner decided to reconstruct the existing incomplete breakwater to ensure safety of the jetty and the LNG carriers so that LNG carriers could berth and unload LNG even during monsoon season.

It filed an application for advance ruling to determine whether it would be eligible to avail input tax credit (ITC) for taxes on construction of breakwater wall. The Authority for Advance Ruling (AAR) denied the ITC on the ground that breakwater wall would not qualify for inclusion in the term “plant and machinery” under Section 17(5)(d) of the CGST Act, 2017. It filed appeal against the order but the Appellate Authority for Advance Ruling (AAAR) also upheld the AAR order. Therefore, it filed writ petition against the order.

High Court Held

The Honorable High Court noted that as per Section 17(5)(d), ITC is not available for construction of Immovable property, except plant and machinery. However, as per explanation to Section 17, “plant and machinery” should be used for making outward supply of goods or services. In the instant case, the breakwater wall was used for protecting vessel from tides while unloading LNG received and not for making outward supply of goods or services. Therefore, it was held that the petitioner would not be eligible for ITC and the denial of ITC was justified.