Chief Commissioner of Central Goods and Service Tax & Ors. v. M/s Safari Retreats Private Ltd. & Ors.

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of business, profession or vocation. The Court considered whether the word plant should be given a broader meaning. In paragraph 6 of the said decision, this Court held thus: “6. Now it is well settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of everyday use. Popular sense means “that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it”. In the present case, Section 10(5) enlarges the definition of the word “plant” by including in it the words which have already been mentioned before. The very fact that even books have been included shows that the meaning intended to be given to “plant” is wide. The word “includes” is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, those words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include. The word “include” is also susceptible of other constructions which it is unnecessary to go into.” (emphasis added) Thereafter, in paragraphs 8 and 9, this Court held thus: “8. It cannot be denied that the business of a hotelier is carried on by adapting a building or premises in a suitable way to be used as a residential hotel where visitors come and stay and where there is arrangement for meals and other amenities are provided for their comfort and convenience. To have sanitary fittings etc. in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If the partitions in Jarrold case [(1887) 19 QB 647] could be treated as having been used for the purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier. He can reasonably expect to get more custom and earn larger

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profit by charging higher rates for the use of rooms if the bathrooms have sanitary fittings and similar amenities. We are unable to see how the sanitary fittings in the bathrooms in a hotel will not be “plant” within Section 10(vi)(b) read with Section 10(5) when it is quite clear that the intention of the legislature was to give it a wide meaning and that is why, articles like books and surgical instruments were expressly included in the definition of “plant”. In decided cases, the High Courts have rightly understood the meaning of the term “plant” in a wide sense. (See CIT v. Indian Turpentine and Rosin Co. Ltd. [(1970) 75 ITR 533].

9. If the dictionary meaning of the word plant were to be taken into consideration on the principle that the literal construction of a statute must be adhered to unless the context renders it plain that such a construction cannot be put on the words in question — this is what is stated in Webster’s Third New International Dictionary: “Land, buildings, machinery, apparatus and fixtures employed in carrying on trade or other industrial business....” (emphasis added)

49Copy pinpoint49. The next decision in the line is in the case of Anand Theatres.19 This was a case where the issue was whether a building which is used as a hotel or a cinema theatre can be considered as apparatus or a tool for running a business so that it can be termed as a plant and depreciation can be allowed on the same under the Income Tax Act, 1961. This Court dealt with Section 32, which provided for granting depreciation to buildings, machinery, and plants. This Court extensively referred to its earlier decision in the case of Taj Mahal Hotel18 and other decisions of this Court and High Courts. This Court decided the question of whether a building used for running a hotel or cinema business could be held to be a plant. This Court considered British decisions on the point. Paragraphs 61 to 63 of the decision are material, which read thus: “61. Further, there are hotels of all kinds and hotel business can be carried on in all kinds of buildings, may be pucca or kuccha constructions. A building intended to be used or in fact used earlier either as a residential accommodation

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or business purpose can be converted for running hotel business. Section 32 itself contemplates a hotel business being carried on in a residential accommodation including an accommodation which is in the nature of guest house. On occasions hotel buildings may be constructed with a special design and features so as to attract and accommodate a certain class of tourist. Similarly with regard to cinema business, it can be carried on in a specially-designed and constructed building and also in other buildings. Still, however, it would be difficult to draw a distinction and differentiate by holding that a building which is specially designed and constructed for running a hotel or cinema would be covered by a “plant” and other buildings used for the same purpose would not get depreciation as “plant”, even though such business is carried on in such premises. In our view, the Delhi High Court has in the case of R.C. Chemical Industry [(1982) 134 ITR 330 (Del)] rightly observed that mere fact that manufacture of saccharine would be better carried on in a building having atmospheric controls would not convert the building from “the setting” to “the means” for carrying the business. Similarly, the Rajasthan High Court also in Lake Palace Hotels and Motels [(1997) 226 ITR 561 (Raj)] rightly observed that simply because some special fittings or controlling equipments are attached for the purpose of carrying on hotel business, it will not take it out of the category of building and make it a plant. In our view special fittings or equipments to control atmospheric effects would be plant, but not the building which houses such equipments.

62. Further for running almost all industries or for carrying on any trade or business building is required. On occasions building may be designed and constructed to suit the requirement of a particular industry, trade or business. But that would not make such building a plant. It only shelters running of such business. For each and every business, trade or industry, building is required to carry on such activity. That means building plays some role and in other words, its function is to shelter the business, but it has no

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other function except in some rare cases such as dry dock where it plays an essential part in the operations which take place in getting a ship into the dock, holding it squarely and then returning it to the river. Building is more durable. If the contention of the assessee is accepted, virtually all such buildings would be considered to be a plant and the distinction which the legislature has made between “building” and “machinery” or “plant” would be obliterated.

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running of a hotel. The Court did not proceed to hold that a building in which the hotel was run was itself a plant, otherwise the Court would not have gone into the question whether the sanitary fittings used in bathroom was plant. (3) For a building used for a hotel, specific provision is made granting additional depreciation under Section 32(1)(v) of the Act. (4) Barclay, Curle & Co. case [(1969) 1 WLR 675 : (1969) 1 All ER 732 : (1970) 76 ITR 62 : 1969 SC 30 : 45 TC 221 (HL)] decided by the House of Lords pertains to a dry dockyard which itself was functioning as a plant, that is to say, structure for the plant was constructed so that dry dock can operate. It operated as an essential part in the operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. The dock as a complete unit contained a large amount of equipment without which the dry dock could not perform its function. (5) Even in England, courts have repeatedly held that the meaning to the word “plant” given in various decisions is artificial and imprecise in application, that is to use the words of Lord Buckley, “it is now beyond doubt that the word ‘plant’ is used in the relevant section in an artificial and largely judge-made sense”. Lord Wilberforce commented by stating that “no ordinary man, literate or semi-literate, would think that a horse, a swimming pool, moveable partitions, or even a dry dock was plant”. (6) For the hotel building and hospital in the case of Carr v. Sayer [65 TC 15 : 1992 CLY 2470 : 1992 STC 396 (Ch D)] it has been observed that a hotel building remains a building even when constructed to a luxury specification and similarly a hospital building for infectious diseases which might require a special layout and other features also remains a premises and is not a plant. It is to be added that all these decisions are based upon the interpretation of the phrase “machinery or

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plant” under Section 41 of the Finance Act, 1971 which was applicable and there appears no such distinction for grant of allowance on different heads as provided under Section 32 of the Income Tax Act. (7) To differentiate a building for grant of additional depreciation by holding it to be a “plant” in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable.”

50Copy pinpoint50. Another decision on the point is in the case of Victory Aqua Farm Ltd.,21 wherein the issue before this Court was whether a natural pond used by the assessee, which was specially designed for rearing prawns, could be a plant within the meaning of Section 32 of the Income Tax Act, 1961. This Court heavily relied upon the decision of a three-judge Bench of this Court in the case of Karnataka Power Corporation.20 In this case, the question was whether a power- generating station building is a plant. In the decision rendered by a Bench of three Hon’ble Judges, it was held that the decision in the case of Anand Theatres19 cannot be read broadly. In paragraphs 5 to 8 of the decision, it was held thus: “5. It was the case of the assessee that it was entitled to investment allowance as applicable to a plant in respect of its power-generating station building. In a note filed before the Commissioner (Appeals) it stated that it had included for the purpose the value of its potential transformer foundation, cable duct system, outdoor yard structures and tail race channel. It explained that the process of generation started from letting in water from the reservoir into the penstocks and ducts which were the water conductor system into the turbines. Once electricity had been produced by generation, it had to be conducted, as it was not possible to store the same, and the process of generation continued until the electricity was led to the transmission towers. The water that was used for rotation of the turbines had to be removed and this was done through the tail race channel. For stepping up the electricity, transformers were used in the outdoor yard.

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The conduction of the electricity was through conductors held in ducts, called the cable duct system, which were specifically designed for the purpose. The case of the assessee, therefore, was that all these were part of the special engineering works that were an essential part of a generating plant and, therefore, it was entitled to have the same treated as a plant for the purposes of investment allowance. The Commissioner accepted the correctness of the assessee's case. He held that it was clear that the generating station buildings had to be treated as a plant for the purposes of investment allowance. These buildings could not be separated from the machinery and the machinery could not be worked without such special construction. He, therefore, allowed investment allowance on the generating station building, as claimed. The Tribunal affirmed this finding, as, indeed, did the High Court.

6. We, therefore, have before us a finding of fact recorded by the fact-finding authority that the generating station building is an integral part of the assessee's generating system.

7. Our attention has been drawn by learned counsel for the Revenue to the judgment of this Court in CIT v. Anand Theatres [(2000) 5 SCC 393 : (2000) 244 ITR 192] . He submits that, in that judgment, this Court has held that, except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee's generating station building was not to be treated as a plant for the purposes of investment allowance.

8. It is difficult to read the judgment in the case of Anand Theatres [(2000) 5 SCC 393 : (2000) 244 ITR 192] so broadly. The question before the Court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a “plant” and it was in relation to that question that the Court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or a cinema theatre could not be given depreciation on the basis

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that it was a plant. We must add that the Court said: (SCC p. 430, para 67) “67. (7) To differentiate a building for grant of additional depreciation by holding it to be a ‘plant’ in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable.” This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee’s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance.” (emphasis added)

51Copy pinpoint51. We may note here that the decision in the case of Anand Theatres19 is by a Bench of two Hon’ble Judges. Thus, the decision of a larger Bench in the case of Karnataka Power Corporation20 limits the applicability of the decision in the case of Anand Theatres19 to hotels or cinema theatres. Therefore, the decision in the case of Anand Theatres19 cannot be applied while considering the question of whether a mall or warehouse or a building other than a hotel or a cinema theatre can be said to be a “plant”.

52Copy pinpoint52. This Court has laid down the functionality test. This Court held that whether a building is a plant is a question of fact. This Court held that if it is found on facts that a building has been so planned and constructed as to serve an assessee’s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. The word ‘plant’ used in a bracketed portion of Section 17(5)(d) cannot be given the restricted meaning provided in the definition of “plant and machinery”, which excludes land, buildings or any other civil structures. Therefore, in a given case, a building can also be treated as a plant, which is excluded from the purview of the exception carved out by Section 17(5)(d) as

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it will be covered by the expression “plant or machinery”. We have discussed the provisions of the CGST Act earlier. To give a plain interpretation to clause (d) of Section 17(5), the word “plant” will have to be interpreted by taking recourse to the functionality test.

53Copy pinpoint53. One of the submissions of the learned ASG is that as the Union legislature cannot levy tax on land and buildings, the chain is broken once a building comes into existence by using goods and services. As discussed earlier, Schedule II of the CGST Act recognises the activity of renting or leasing buildings as a supply of service. Even the activity of the construction of a building intended for sale is a supply of service if the total consideration is accepted before the completion certificate is granted. Therefore, if a building qualifies to be a plant, ITC can be availed against the supply of services in the form of renting or leasing the building or premises, provided the other terms and conditions of the CGST Act and Rules framed thereunder are fulfilled. Therefore, the argument regarding breaking the chain cannot be accepted in its entirety. However, if the construction of a building by the recipient of service is for his own use, the chain will break, and therefore, ITC would not be available.

54Copy pinpoint54. One of the arguments of learned ASG was that if different meanings were given to the words “plant and machinery” and “plant or machinery”, it could result in discriminatory treatment. Clause (c) of Section 17(5) operates in a completely different field, as it applies only to works contract services supplied for the construction of immovable property. Clause (d) deals with services received by a taxable person for the construction of an immovable property on his own account. As clauses (c) and (d) operate in substantially different areas, the argument of ASG relying on discrimination cannot be accepted.

55Copy pinpoint55. Under the CGST Act, as observed earlier, renting or leasing immovable property is deemed to be a supply of service, and it can be taxed as output supply. Therefore, if the building in which the premises are situated qualifies for the definition of plant, ITC can be allowed on goods and services used in setting up the immovable property, which is a plant.

56Copy pinpoint56. In the main appeal, which is the subject matter of this group, the High Court has not decided whether the mall in question will satisfy the functionality test of being a plant. The reason is that the High Court has done the exercise of reading down the provision. Each

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mall is different. Therefore, in each case, fact-finding enquiry is contemplated. Thus, in the facts of the case, we will have to send the case back to the High Court to decide whether, on facts, the mall in question satisfies the functionality test so that it can be termed as a plant within the meaning of bracketed portion in Section 17(5)(d). The same applies to warehouses or other buildings except hotels and cinema theatres. A developer may construct a mall predominantly to sell the premises therein after obtaining an occupation certificate. Therefore, it will be out of the purview of clause 5(b) of Schedule II. Each case will have to be tested on merits as the question whether an immovable property or a building is a plant is a factual question to be decided. CONSTITUTIONAL VALIDITY CHALLENGE

57Copy pinpoint57. Now, we turn to the issue of constitutional validity challenge. While dealing with the issue of the constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act, it is necessary to consider the law laid down by this Court in paragraphs 104 to 110 of the decision in the case of VKC Footsteps26 which read thus: “104. As a matter of first principle, it is not possible to accept the premise that the guiding principles which impart a measure of flexibility to the legislature in designing appropriate classifications for the purpose of a fiscal regime should be confined only to the revenue harvesting measures of a statute. The precedents of this Court provide abundant justification for the fundamental principle that a discriminatory provision under tax legislation is not per se invalid. A cause of invalidity arises where equals are treated as unequally and unequals are treated as equals. Both under the Constitution and the CGST Act, goods and services and input goods and input services are not treated as one and the same and they are distinct species.

105. Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions,

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for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this Court on the matter have permitted the legislatures to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes.

47. But, with all this latitude certain irreducible desiderata of equality shall govern classifications for differential treatment in taxation laws as well. The classification must be rational and based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class. But this alone is not sufficient. Differentia must have a rational nexus with the object sought to be achieved by the law. The State, in the exercise of its governmental power, has, of necessity, to make laws operating differently in relation to different groups or classes of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognised that no precise or set formulae or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience.” 105.³. In matters of classification, involving fiscal legislation, the legislature is permitted a larger discretion so long as there is no transgression of the fundamental principle underlying the doctrine of classification. In Hiralal Rattanlal [Hiralal Rattanlal v. State of U.P. (1973) 1 SCC 216 : 1973 SCC (Tax) 307],

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K.S. Hegde, J., speaking for a four-Judge Bench observed : (SCC p. 223, para 20) “20. It must be noticed that generally speaking the primary purpose of the levy of all taxes is to raise funds for public good. Which person should be taxed, what transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations. In a democratic set up it is for the legislature to decide what economic or social policy it should pursue or what administrative considerations it should bear in mind. The classification between the processed or split pulses and unprocessed or unsplit pulses is a reasonable classification. It is based on the use to which those goods can be put. Hence, in our opinion, the impugned classification is not violative of Article 14.” 105.4. More recently in Union of India v. Nitdip Textile Processors (P) Ltd. [Union of India v. Nitdip Textile Processors (P) Ltd. (2012) 1 SCC 226], a two-Judge Bench observed : (SCC p. 255, para 67) “67. It has been laid down in a large number of decisions of this Court that a taxation statute, for the reasons of functional expediency and even otherwise, can pick and choose to tax some. A power to classify being extremely broad and based on diverse considerations of executive pragmatism, the judicature cannot rush in where even the legislature warily treads. All these operational restraints on judicial power must weigh more emphatically where the subject is taxation. Discrimination resulting from fortuitous circumstances arising out of particular situations, in which some of the taxpayers find themselves, is not hit by Article 14 if the legislation, as such, is of general application and does not single them out for harsh treatment. Advantages or disadvantages to individual assessees are

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accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line.”

106. The principles governing a benefit, by way of a refund of tax paid, may well be construed on an analogous frame with an exemption from the payment of tax or a reduction in liability (CCT v. Dharmendra Trading Co. [CCT v. Dharmendra Trading Co. (1988) 3 SCC 570 : 1988 SCC (Tax) 432]).

107. In Elel Hotels & Investments Ltd. v. Union of India [Elel Hotels & Investments Ltd. v. Union of India (1989) 3 SCC 698], M.N. Venkatachaliah, J. (as the learned Chief Justice then was) held that : (SCC p. 708, para 20) “20. … It is now well settled that a very wide latitude is available to the legislature in the matter of classification of objects, persons and things for purposes of taxation. It must need to be so, having regard to the complexities involved in the formulation of a taxation policy. Taxation is not now a mere source of raising money to defray expenses of Government. It is a recognised fiscal tool to achieve fiscal and social objectives. The differentia of classification presupposes and proceeds on the premise that it distinguishes and keeps apart as a distinct class hotels with higher economic status reflected in one of the indicia of such economic superiority. The presumption of constitutionality has not been dislodged by the petitioners by demonstrating how even hotels, not brought into the class, have also equal or higher chargeable receipts and how the assumption of economic superiority of hotels to which the Act is applied is erroneous or irrelevant.”

108. In Spences Hotel (P) Ltd. v. State of W.B. [Spences Hotel (P) Ltd. v. State of W.B. (1991) 2 SCC 154], a two- Judge Bench, speaking through K.N. Saikia, J. revisited the precedents of this Court governing the principles of

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classification in tax legislation and held : (SCC pp. 168- 69, para 24) “24. … The history of taxation is one of evolution as is the case in all human affairs. Its progress is one of constant growth and development in keeping with the advancing economic and social conditions; and the fiscal intelligence of the State has been advancing concomitantly, subjecting by new means and methods hitherto untaxed property, income, service and provisions to taxation. With the change of scientific, commercial and economic conditions and ways of life new species of property, both tangible and intangible gaining enormous values have come into existence and new means of reaching and subjecting the same to contribute towards public finance are being developed, perfected and put into practical operation by the legislatures and courts of this country, of course within constitutional limitations.”

109. The Court held that the principle of equality does not preclude the classification of property, trade, profession and events for taxation — subjecting one kind to one rate of taxation and another to a different rate. The State may exempt certain classes of property from any taxation at all and impose different specific taxes upon different species which it seeks to regulate. The Court held : (Spences Hotel case [Spences Hotel (P) Ltd. v. State of W.B. (1991) 2 SCC 154], SCC p. 171, para 27) “27. ‘Perfect equality in taxation has been said time and again, to be impossible and unattainable. Approximation to it is all that can be had. Under any system of taxation, however, wisely and carefully framed, a disproportionate share of the public burdens would be thrown on certain kinds of property, because they are visible and tangible, while others are of a nature to elude vigilance. It is only where statutes are passed which impose taxes on false and unjust principle, or operate to produce gross inequality, so that they cannot be deemed in any just sense

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proportional in their effect on those who are to bear the public charges that courts can interpose and arrest the course of legislation by declaring such enactments void.’ ‘Perfectly equal taxation’, it has been said, ‘will remain an unattainable good as long as laws and government and man are imperfect.’ ‘Perfect uniformity and perfect equality of taxation’, in all the aspects in which the human mind can view it, is a baseless dream.’

110. Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii). A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund. Parliament has in clause (i) of the first proviso allowed a refund of the unutilised ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilised ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated on a par on a matter of a refund of unutilised ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive. Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection. That is precisely the reason why courts are averse to entering the area of

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policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3).” (emphasis added) Paragraph 142 of the decision reads thus: “142. The above judicial precedents indicate that in the field of taxation, this Court has only intervened to read down or interpret a formula if the formula leads to absurd results or is unworkable. In the present case however, the formula is not ambiguous in nature or unworkable, nor is it opposed to the intent of the legislature in granting limited refund on accumulation of unutilised ITC. It is merely the case that the practical effect of the formula might result in certain inequities. The reading down of the formula as proposed by Mr Natarjan and Mr Sridharan by prescribing an order of utilisation would take this Court down the path of recrafting the formula and walk into the shoes of the executive or the legislature, which is impermissible. Accordingly, we shall refrain from replacing the wisdom of the legislature or its delegate with our own in such a case. However, given the anomalies pointed out by the assessees, we strongly urge the GST Council to reconsider the formula and take a policy decision regarding the same.” At this stage, it will be also necessary to consider the decision of this Court in the case of Nitdip Textiles.8 In paragraph 66, this Court held thus: “66. To sum up, Article 14 does not prohibit reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends. To satisfy the test of permissible classification, it must not be “arbitrary, artificial or evasive” but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the legislature. The taxation laws are no exception to the application of this principle of equality enshrined in Article 14 of the Constitution of India. However, it is well

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settled that the legislature enjoys very wide latitude in the matter of classification of objects, persons and things for the purpose of taxation in view of inherent complexity of fiscal adjustment of diverse elements. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. Even so, large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the court will be reluctant and perhaps ill-equipped to investigate.” (emphasis added) Apart from these decisions, there are other binding decisions which hold that the laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. In the present case, the legislature was dealing with a complex issue. Therefore, greater freedom and greater play in the joints has to be allowed to the legislature.

58Copy pinpoint58. Essentially, the challenge to constitutional validity is that, in the present case, the provisions do not meet the test of reasonable classification, which is a part of Article 14 of the Constitution of India. To satisfy the test, there must be an intelligible differentia forming the basis of the classification, and the differentia should have a rational nexus with the object of legislation. The Union of India rightly contends that immovable property and immovable goods for the purpose of GST constitute a class by themselves. Clauses (c) and (d) of Section 17(5) apply only to this class of cases. The right of ITC is conferred only by the Statute; therefore, unless there is a statutory provision, ITC cannot be enforced. It is a creation of a statute, and thus, no one can claim ITC as a matter of right unless it is expressly provided in the statute. It cannot be disputed that the legislature can always carve out exceptions to the entitlement of ITC under Section 16 of the CGST Act.

59Copy pinpoint59. Therefore, the cases covered by clauses (c) and (d) of Section 17(5) are entirely distinct from the other cases. This appears to be done to ensure the object of not encroaching upon the State’s legislative powers under Entry 49 of List II. Therefore, it is not possible to

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accept the submission that the difference is not intelligible and has no nexus to the object sought to be achieved. Moreover, to decide why transactions covered by clauses (c) and (d) are separately classified, the Court will have to go into complex questions involving fiscal adjustments of diverse elements. The Court has no experience or expertise to embark upon the said exercise.

60Copy pinpoint60. We fail to understand the argument that the classification is underinclusive and creates discrimination. In this case, equals are not being treated as unequals. The test of vice of discrimination in taxing law is less rigorous. Ultimately, the legislature was dealing with a complex economic problem. By no stretch of the imagination, clauses (c) and (d) of Section 17(5) can be said to be discriminatory. No amount of verbose and lengthy arguments will help the assessees prove the discrimination. In the circumstances, it is not possible for us to accept the plea of clauses (c) and (d) of Section 17(5) being unconstitutional.

61Copy pinpoint61. Though, violation of Articles 19(1)(g) and 300A has been alleged, it is not elaborated by the assessees how such a violation is made out.

62Copy pinpoint62. While dealing with a taxing statute, it can always be said that, ideally, a particular provision ought not to have been incorporated or ought to have been incorporated with a modification. Even if this can be said, per se, the particular provision does not become unconstitutional. The Court cannot impose its views on the legislature.

63Copy pinpoint63. Now, we come to the challenge to sub-section (4) of Section 16 of the CGST Act, which reads thus: “16. Eligibility and conditions for taking input tax credit.— .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier: Provided that the registered person shall be entitled to

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Digital Supreme Court Reports

take input tax credit after the due date of furnishing of the return under Section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub- section (1) of Section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.” The words “thirtieth day of November” were substituted with effect from 1st October 2022 for the words “due date of furnishing of the return under Section 39 for the month of September”. We fail to understand how sub-section (4) of Section 16 becomes discriminatory when the legislature says that a registered person shall not be entitled to take ITC in respect of any invoice or debit note for the supply of goods or services or both after the thirtieth day of November following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. It is not shown how the provision is arbitrary and discriminatory. The fact that the provisions could have been drafted in a better manner or more articulately is not sufficient to attract arbitrariness.

64Copy pinpoint64. 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.

65Copy pinpoint65. 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”

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Chief Commissioner of Central Goods and Service Tax & Ors. v. M/s Safari Retreats Private Ltd. & Ors.

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).

66Copy pinpoint66. In the light of what we have held above, by setting aside the impugned judgment in Civil Appeal Nos. 2948 and 2949 of 2023, the writ petitions are remanded to the High Court of Orissa for limited purposes of deciding whether, in the facts of the case, the shopping mall is a “plant” in terms of clause (d) of Section 17(5). Appeals are partly allowed in above terms.

67Copy pinpoint67. 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 petitioners are free to adopt appropriate proceedings or raise the issue in appropriate proceedings.

68Copy pinpoint68. The writ petitions are rejected subject to the interpretation of clause (d) of sub-section (5) of Section 17 of the CGST Act made by us.

Result of the Case: A ppeals partly allowed and writ petitions rejected.

† Headnotes prepared by: Divya Pandey