Konkan LNG Ltd. V/s Commissioner of State Tax {HIGH COURT OF BOMBAY}
Konkan LNG Ltd. V/s Commissioner of State Tax {HIGH COURT OF BOMBAY} :
Date of Order : 28-06-2024
In the case of Konkan LNG Ltd. v. Commissioner of State Tax, the issue revolved around whether Konkan LNG Ltd., a subsidiary of GAIL engaged in LNG regassification, could claim Input Tax Credit (ITC) for the taxes paid on the construction of a breakwater at its regassification plant.
Konkan LNG Ltd. reconstructed a breakwater near its jetty at a substantial cost to facilitate the berthing and unloading of LNG carriers during monsoon and rough weather conditions. They argued that the breakwater should be considered as “plant and machinery” under Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (CGST Act), making them eligible for ITC.
However, the Maharashtra Appellate Authority for Advance Ruling (MAAAR) had previously ruled against this, stating that the breakwater did not qualify as plant and machinery and thus ITC could not be claimed on its construction costs. This decision was upheld in subsequent proceedings.
The Bombay High Court upheld the decision of the MAAAR, emphasizing that under Section 17(5)(d) of the CGST Act, ITC is not available for the construction of immovable property, except for plant and machinery. The breakwater, in this case, was deemed to be an immovable civil structure designed primarily for protecting vessels during the unloading of LNG, rather than for directly facilitating outward supplies of goods or services.
The court pointed out that the explanation to Section 17 requires “plant and machinery” to be used for making outward supplies to qualify for ITC. Since the breakwater’s primary function was not related to making outward supplies but rather to operational safety and logistics (protecting vessels during LNG unloading), it did not meet the criteria for ITC eligibility.
Therefore, Konkan LNG Ltd.’s claim for ITC on the construction of the breakwater was denied because it did not fulfill the statutory conditions set out in Section 17 of the CGST Act. The court dismissed the writ petition, affirming the MAAAR’s decision that the breakwater was not eligible for ITC under current tax laws.
