CCV Tower Used for Cable Manufacturing Qualifies as ‘Plant and Machinery’: Gujarat AAR Holds ITC Not Barred u/s 17(5) [Read Order]

The Authority for Advance Ruling (AAR), Gujarat held that the Continuous Catenary Vulcanization (CCV) tower used in manufacture of insulated electrical cables forms an integral part of the manufacturing apparatus and therefore ITC on inputs and input services used for its construction would not be barred under Section 17(5).

The applicant, Apar Industries Ltd., is engaged in manufacture and supply of conductors, cable solutions and telecom products. The applicant established a factory for manufacturing cross-linked polyethylene (XLPE) insulated electrical cables and conductors.

At the facility, an integrated cable manufacturing unit comprising a CCV tower and supporting machinery for manufacturing insulated electrical cables was established. According to the applicant, the CCV tower was not a mere civil structure but formed part of the manufacturing system and qualified as ‘plant and machinery’ under the CGST Act.

The applicant sought an advance ruling on whether ITC on inputs and input services used for setting up the CCV tower would be restricted under Section 17(5)(c) and (d) of the CGST Act, 2017.

The applicant contended that the restriction under Section 17(5) would not apply since the CCV tower constituted structural support essential for operation of the manufacturing line. Reliance was also placed on decisions including KEI Industries Ltd. v. Commissioner of CGST, Bharti Airtel Ltd. v. Commissioner and Safari Retreats Pvt. Ltd. v. Chief Commissioner of CGST.

However, the jurisdictional officer opposed the claim contending that the CCV tower amounted to an immovable structure and therefore ITC on goods and services used for its construction would be barred under Section 17(5) of the CGST Act.

After examining the functional role of the structure, the Authority observed that the CCV tower was specifically designed for the manufacturing process and had no independent utility outside production of insulated electrical cables. The Authority further observed that the structure was functionally integrated with the manufacturing machinery and therefore constituted “plant and machinery” under the CGST Act rather than a mere immovable civil structure.

The AAR further observed that although Section 17(5) restricts ITC on construction of immovable property, the restriction would not apply where the structure qualifies as “plant and machinery”.

Reliance was also placed on CBIC Circular No. 219/13/2024-GST dated 26.06.2024 clarifying that support structures forming part of transmission systems qualify as plant and machinery for ITC purposes.

The Bench comprising Vishal Malani (Member CGST) and Sushma Vora (Member SGST) held that the restriction contained under Section 17(5)(c) and (d) would not apply to the CCV tower used in the manufacturing process.

Accordingly, the Gujarat AAR ruled that ITC on inputs and input services used for setting up the CCV tower is admissible under the CGST Act, 2017.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates