2026-VIL-147-GSTAT-BLR
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SGST Tribunal

GST - Input tax credit on construction of resort building - Section 17(5)(d) of CGST Act, 2017 – Effect of Substitution of ‘plant and machinery’ for ‘plant or machinery’ with effect from 01.07.2017 by Finance Act, 2025 - Appellant contended that the resort is a plant on the functionality test as laid down in Safari Retreats - Whether, for the period 2019-20, the resort, or any civil structure in it, can be plant and machinery, and whether it could have been a plant on the functionality test even under the unamended clause - HELD - A competent legislature may amend a law with retrospective effect, and the law so amended governs the periods to which it is made to apply. Clause (d) of Section 17(5) must therefore be read, for every tax period from 01.07.2017, as containing the defined expression plant and machinery - The definition in Explanation 1 expressly excludes land, building or any other civil structures. A resort building is a building, and however essential it may be to the business, it cannot be plant and machinery as defined. The same is true of its halls, lawns, pathways and compound walls - Safari Retreats is followed, since it construed clause (d) in the words it then bore, while the Tribunal must apply the clause in the words it is now deemed always to have borne. Even under the unamended clause, the Supreme Court framed the functionality test for a mall, warehouse or any building other than a hotel or a cinema theatre. The Appellant supplies room accommodation and restaurant services, which is the business of a hotel, so the resort building is in substance a hotel building and the functionality test was not available - The argument that denial of credit breaks the chain is an argument against the policy of clause (d), whose validity was upheld in Safari Retreats, as input tax credit is a statutory concession and not a vested right - The resort building and its civil structures are excluded from plant and machinery, and credit on goods and services received for constructing them is blocked – The appeal is dismissed - Section 17(5)(d) of CGST Act, 2017 – Scope of Expression “on his own account” - Appellant contended that construction for a taxable business is never construction on one's own account, as parts of the resort are let out for weddings, events and photo shoots - Whether the resort was constructed on his own account, and whether hosting of events takes any part of it outside clause (d) - HELD - Clause (d) blocks credit on construction on one's own account including when the goods or services are ‘used in the course or furtherance of business’, if ‘use in business’ were enough the quoted words would have no work to do. Strict construction does not permit those words to be left out. As held in Safari Retreats, the line is not between business use and personal use, but between a building the taxpayer uses as the setting of its own business and a building it intends to sell, lease or license to someone else. The amendment of 2025 did not touch the words on his own account - The Appellant's own reply accepted that clause (d) denies credit to a person who constructs an immovable property for use in his own business - The resort was constructed on the Appellant's own account, and credit on goods and services received for constructing it is blocked by clause (d) - Balance input tax credit after exclusion of items identified by taxpayer - Section 17(5)(d) and Section 155 of CGST Act, 2017 - Appellant contended that there was no invoice-wise scrutiny and that the balance credit included items that never went into the building, subject to verification - Whether any part of the balance credit falls outside clause (d) - HELD - Clause (d) does not block every purchase made by the owner of a resort. It blocks only goods and services received for construction of an immovable property. Two questions arise for every item, namely whether it was received for construction of the building or another civil structure, and if so whether the resulting property is plant and machinery as defined. Neither the books of account nor the label given to an item is decisive. The words to the extent of capitalisation in the Explanation qualify the extended meaning of construction and do not make the fixed-asset register the test of what is construction. Capitalisation under a separate head is a relevant circumstance, but an item does not escape the clause merely because it was capitalised separately. Section 155 places the burden of proving eligibility on the person who claims the credit. The Adjudicating Authority allowed all the credit on the three heads the Appellant itself identified. The Appellant did not name any further invoice, supplier or category and sought credit subject to verification, which does not discharge the burden. The balance consists of items built into the structure, and the Appellant did not show that any such item forms apparatus, equipment or machinery fixed to earth and used for making outward supplies - The balance credit is blocked - Interest and penalty on wrongly availed input tax credit - Section 50(3) read with Rule 88B(3) of CGST Rules, 2017 and Section 73(9) of CGST Act, 2017 - Appellant contended that interest arises only on credit wrongly availed and utilised, that the ledger balances were sufficient, and that the penalty must fall with the tax - Whether the interest and penalty are sustainable - HELD - Under Rule 88B(3), credit wrongly availed is construed to have been utilised when the balance in the electronic credit ledger falls below the amount of credit wrongly availed, and interest runs from the date of such utilisation. The Adjudicating Authority applied this principle on the Appellant's own contention. No interest was levied under SGST, where the ledger balance never fell below the disputed credit - Under CGST, interest was levied only on the amounts and from the date on which the balance fell below the credit, and is correctly computed. The Appellant did not pay the tax and interest within thirty days of the show cause notice, so Section 73(8) did not relieve it of penalty. Section 73(9) then required a penalty of ten per cent of the tax or ten thousand rupees, whichever is higher. It is not a penalty for fraud or suppression, and none was alleged - The interest and penalty are sustained, and the appeal is dismissed with the demand confirmed - Omission by First Appellate Authority to discuss Supreme Court decision cited before it - Sections 75(6) and 107(12) of CGST Act, 2017 - Appellant contended that the orders below are unreasoned as Safari Retreats was not referred to - Whether the omission of the authorities below to discuss Safari Retreats affects their conclusion - HELD - A quasi-judicial authority must record reasons for its conclusions, which show that the mind of the authority was applied to the case the party actually made, and Sections 75(6) and 107(12) give statutory form to that principle - When the Order-in-Original was passed, Safari Retreats was pending before the Supreme Court, and the Adjudicating Authority decided the case on the statute as it stood. The First Appellate Authority ought to have referred to the judgment when it was cited and said, even briefly, why it does or does not apply. The matters have been argued fully before the Tribunal, the amended statute is before it, and its effect depends on no disputed fact. The facts bearing on the balance credit were placed on record by the Appellant itself. The Tribunal is the final fact-finding forum under Section 113(1) and decides every contention afresh - The conclusion reached by the authorities below is correct, and the Appellant has suffered no prejudice.
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