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2025 DIGILAW 315 (PAT)

B. K. Warehousing LLP. v. State of Bihar

2025-03-21

RAJEEV RANJAN PRASAD, SOURENDRA PANDEY

body2025
Rajeev Ranjan Prasad.—Heard, Mr. Saket Tiwary, learned counsel for the petitioner and Mr. Vivek Prasad, learned GP-7 for the State-respondents. CWJC No. 8482 of 2024 2. The petitioner in this writ application is aggrieved by and dissatisfied with the order dated 22.01.2024 (Annexure 'P1') passed by the Assistant Commissioner of State Tax, Kadamkuan Circle, Patna by which the petitioner has been directed to pay a sum of Rs. 59,810/- holding that the petitioner was ineligible for availing Input Tax Credit (ITC) for financial year 2021-2022. CWJC No. 9107 of 2024 3. The petitioner in this writ application is aggrieved by and dissatisfied with the order dated 22.01.2024 (Annexure 'P1') passed by Assistant Commissioner of State Tax, Kadamkuan Circle, Patna by which the petitioner has been directed to pay the sum of Rs.23,45,996/- holding that the petitioner was ineligible for availing Input Tax Credit for financial year 2023-24 (April 2023 to July 2023). CWJC No. 9122 of 2024 4. The petitioner in this writ application is aggrieved by and dissatisfied with the order dated 24.01.2024 (Annexure 'P1') passed by the Assistant Commissioner of State Tax, Kadamkuan Circle, Patna by which the petitioner has been directed to pay a sum of Rs.4,81,65,483.00/- holding that the petitioner was ineligible for availing Input Tax Credit for the financial year 2022- 23 (April 2022 to March 2023). Brief Facts of the Case 5. In all these writ applications, a common question has arisen for consideration. The petitioner has constructed a warehouse which is made of brick and mortar structure to some height and thereafter, pre-fabricated structure, truss and iron shed/sheet etc. have been used for building the warehouse. 6. The petitioner has let out the said warehouse and received rent income from the lessees with whom the petitioner has entered into a lease agreement. 7. It is the case of the petitioner that he has let out the warehouse to the various companies dealing in consumable goods, they are e-marketing companies and whatever income the petitioner derives from rent would be liable to tax under the Bihar Goods and Services Tax Act, 2017 (hereinafter referred to as the 'BGST Act, 2017') only after availing the Input Tax Credit. For the financial year 2021, the petitioner claimed an Input Tax Credit of Rs. 30,102/-. 8. For the financial year 2021, the petitioner claimed an Input Tax Credit of Rs. 30,102/-. 8. The Department has, however, taken a view that the warehouse is an immovable property (other than plant or machinery) and relying upon Section 17(5)(d) of the BGST Act, 2017, the Department has expressed its opinion that the petitioner cannot avail ITC against the construction of the warehouse. 9. From the facts revealed on the record, it appears that the petitioner was served with the show cause notice, copy of which has been enclosed with the writ applications. The show cause notice dated 04.11.2023 was replied by the petitioner in CWJC No. 8482 vide Annexure 'P3'. The petitioner claimed that he has availed the ITC paid on purchase of civil construction materials as well as on purchase of pre-fabricated structures fitted/ mounted upon the civil structures so constructed and also against the equipment such as crane, lifter, air-conditioners, generators and other electrical items necessary for carrying out the warehouse activities. 10. It appears on reading of the impugned order (Annexure 'P1') that the Assistant Commissioner of State Tax has recorded that the tax payer was given several opportunities to make submissions in his favour. They were called upon to make available their defence but when they failed to do so, the Assistant Commissioner examined whatever papers were available on the record and found that the warehouse has been constructed not for the use of the petitioner but for renting it out. The judgment of the Hon'ble High Court of Orissa in W.P. (C) No. 20463 of 2018 in the case of M/s Safari Retreats Pvt. Ltd. and Anr. vs. Chief Commissioner of Central Goods & Service Tax & Others which perhaps favoured the petitioner's contentions was also placed before the Assistant Commissioner State Tax. 11. The Assistant Commissioner State Tax, however, took a view that the judgment of the Hon'ble High Court of Orrisa has brought no change in the statute as of now and the said judgment was still under consideration in the Hon'ble Supreme Court of India. What prevailed with the authorities is evident in paragraph 10' of the impugned order where it is recorded that "…. The taxpayer failed to submit any satisfactory documentary evidence supporting his claim. Even after diligent perusal and despite Mr. What prevailed with the authorities is evident in paragraph 10' of the impugned order where it is recorded that "…. The taxpayer failed to submit any satisfactory documentary evidence supporting his claim. Even after diligent perusal and despite Mr. Kumar's acquiescence of permanently reversing ITC taken on inputs of civil construction material and temporarily reversing ITC taken on inputs of prefabricated construction material (mentioned and signed on record), the taxpayer did not reverse the above said ITC. …..". The aforesaid observations of the authority may be found in the impugned order itself where it is recorded that the learned Advocate Mr. Kumar Rahul appeared and after a wide discussion agreed to pay tax related to ITC on civil structure and also agreed to temporarily reverse ITC related to prefab structure by 15.01.2024. Submissions on behalf of the Petitioner 12. Mr. Saket Tiwary, learned counsel for the petitioner submits that the judgment of the Hon'ble High Court of Orrisa in the case of M/s Safari Retreats Pvt. Ltd. & Anr. was pending consideration before the Hon'ble Supreme Court of India, therefore, in all fairness, equity and justice, the Assistant Commissioner, State Taxes could have waited for a while for the judgment of the Hon'ble Supreme Court but that was not done and the impugned order has been passed in haste. It is his submission that the judgment of the Hon'ble Orrisa High Court which was placed before the said authority has not at all been looked into and the impugned order has been passed on the solitary ground that the representative of the petitioner had earlier acquiesced to the part of the demand. 13. By placing a copy of the judgment of the Hon'ble Supreme Court in the case of Chief Commissioner of Central Goods and Service Tax & Ors. vs. M/s Safari Retreats Private Ltd. & Ors. reported in [2024] 131 GSTR 184 (SC), learned counsel has drawn the attention of this Court towards paragraphs 64', 65' and 67'. 14. It is his submission that the Hon'ble Supreme Court has in unequivocal words expressed its opinion that whether a warehouse can be classified as plant within the meaning of the expression "plant or machinery" used in Section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that the building plays in the said business. It is submitted that had the judgment of the Hon'ble Supreme Court been waited for a while, the Assistant Commissioner State Tax would have the benefit of appreciating the factual aspects of the matter and he would have been in a better position to express his opinion on the issue involved. Submissions on behalf of the State 15. The writ applications have been contested by Mr. Vivek Prasad, learned GP-7 for the State. It is submitted that several opportunities were granted to the petitioner to produce satisfactory documentary evidence in support of his claim but the petitioner failed to produce any satisfactory documentary evidence. It is further submitted that Mr. Kumar Rahul who had appeared on behalf of the petitioner had agreed to permanently reverse the ITC taken on inputs on civil construction material and temporarily reversing the ITC taken on inputs of pre-fabricated construction material. It is pointed out that the impugned orders mention the same as "mentioned and signed on record". In such circumstances, it is submitted that the petitioner should have acted in terms of the concession/assurance given by the representative of the petitioner before the said authority. Learned GP-7, therefore, submits that no interference is required by this Court with the impugned orders. Consideration 16. Having heard learned counsel for the petitioner and learned GP-7 for the State as also on going through the judgment of the Hon'ble Supreme Court in the case of M/s Safari Retreats Pvt. Ltd. (supra), we are of the considered opinion that the Assistant Commissioner State Tax, having noticed that what was submitted by Mr. Kumar Rahul, the representative of the petitioner by way of a concession, has not been acted upon and he has not turned up to show compliance with his concession, was obliged to take a view on the merit of the case by going into the factual question as to whether the warehouse in this case may be classified as a plant within the meaning of the expression "plant or machinery" used in Section 17 (5)(d) of the BGST Act, 2017. Paragraph 64', 65' and 67' of the judgment in M/s Safari Retreats Pvt. Ltd. (supra) are being re-produced as under:— "64. Paragraph 64', 65' and 67' of the judgment in M/s Safari Retreats Pvt. Ltd. (supra) are being re-produced as under:— "64. As we are upholding the constitutional validity of clauses (c) and (d) of Section 17(5), and as held earlier, its plain interpretation does not lead to any ambiguity, the question of reading down the provisions does not arise." "65. Some of our conclusions can be summarised as under: (a) The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act is not established; (b) The expression "plant or machinery" used in Section 17(5)(d) cannot be given the same meaning as the expression "plant and machinery" defined by the Explanation to Section 17; (c) The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression "plant or machinery" used in Section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business. If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by clauses 2 and 5 of Schedule II of the CGST Act, the building could be held to be a plant. Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub-section (1) of Section 16. Functionality test will have to be applied to decide whether a building is a plant. Therefore, by using the functionality test, in each case, on facts, in the light of what we have held earlier, it will have to be decided whether the construction of an immovable property is a "plant" for the purposes of clause (d) of Section 17(5)." "67. While deciding these cases, we cannot make any final adjudication on the question of whether the construction of immovable property carried out by the petitioners in writ petitions amounts to plant, and each case will have to be decided on its merit by applying the functionality test in terms of this judgment. The issue must be decided in appropriate proceedings in which adjudication can be made on facts. The issue must be decided in appropriate proceedings in which adjudication can be made on facts. The petitioners are free to adopt appropriate proceedings or raise the issue in appropriate proceedings." 17. We find that the Assistant Commissioner State Tax has not gone into that factual aspect of the matter. The mandate of the judgment of the Hon'ble Supreme Court in the case of M/s Safari Retreats Pvt. Ltd. (supra) as contained in paragraph 65(c) would be equally applicable in the present case and the question as to whether the warehouse would come within the meaning of "plant or machinery" is required to be considered by the Assistant Commissioner State Tax in the factual position of this case. 18. We, therefore, set aside the impugned orders as contained in Annexure 'P1' in all the three writ applications. 19. The petitioner shall appear before the Assistant Commissioner State Tax by 7th April, 2025 and submit all such documentary evidences on which petitioner would like to rely upon to address its stand. The Assistant Commissioner State Tax shall provide an appropriate opportunity of hearing to the petitioner and shall pass a fresh reasoned order within a period of three months thereafter. 20. These writ applications are allowed to the extent indicated hereinabove.