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GST – Maharashtra AAR - Section 17(5) of the CGST Act, 2017, Blocked credit – Construction of ‘Tie-in pipelines’ laid down for delivery of LNG to National Grid, ‘Plant and machinery’ – Application of Supreme Court judgement in the case of Safari Retreats – For setting-up of Liquified Natural Gas (LNG) re-gasification project, the applicant is constructing a gas pipeline for delivering the high pressure from the Floating Storage Regasification Unit (FSRU) to the National Grid - Whether the pipelines laid down by the applicant can be treated as a plant or machinery and the applicant is eligible to avail ITC on the construction of pipeline – HELD – the FSRU, where the re-gasification of LNG is carried out for delivery to the National Grid through the Tie-in pipeline proposed to be connecting the FSRU to the National Grid, can be rightly considered as factory premises. Since FRSU is a factory, the pipeline laid for transporting re-gasified LNG from FRSU squarely falls within the meaning of a ‘pipelines laid outside the factory premises’ - The basic function carried out by the pipeline is to transfer the gasified LPG from the FSRU to the National Grid. In order to carry out the said function, the pipelines use various techniques and technology and devices. The presence of such system may entitle them to fit in ‘apparatus, equipment and machinery’ but does not take them out of phrase ‘pipelines laid outside the factory premises’. Hence, they would not be called as ‘plant and machinery’ for the purposes of section 17(5)(c) and 17(5)(d) of the Act - Once it has been established that the premises of the FSRU can be justly considered as factory premises, then the Tie-in pipeline to be laid to join the FSRU to the National Grid, will be considered as pipeline laid outside the factory premises, and accordingly attract the exclusion clause (iii) of the explanation to section 17 of CGST Act - The applicant is not entitled to avail the ITC on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid as per the provisions of Section 17(5)(c) and 17(5)(d) of the CGST Act – Ordered accordingly - Application of Supreme Court judgement in the case of Safari Retreats – HELD - The decision of the Hon’ble Supreme Court of India in the case of Safari Retreats Pvt. Ltd., & Ors, was based on the fact that the explanation of the words “Plant and Machinery” provided in the said Section would be applicable to the words “plant and machinery” used in clause (c) of the said section and not to clause (d) of the said section where the words used were “Plant or Machinery” would not be applicable to that extent. It was based on the said position of law that the Hon’ble Supreme Court had rejected the explanation of ‘Plant and Machinery’ as provided in the statute for deciding what is ‘plant or machinery’ and espoused the test of functionality to determine whether the Input Tax Credit would be available to the petitioner on the ‘plant or machinery’ installed by the petitioner. However, after the retrospective amendment to the provisions of clause (d) of the Section 17(5) vide Finance Act 2025, it is no longer necessary to reject the definition of ‘Plant and Machinery’ provided in explanation to Section 17(5) and to look into the other aspects of functionality to determine whether the pipelines laid down by the applicant outside the factory premises for supply of gas to the customer would qualify as ‘plant and machinery’ for the purpose of section 17(5)(c) and 17(5)(d) of the CGST, Act, 2017.
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