Page 152 - GSTL_3rd September 2020_Vol 40_Part 1

86 GST LAW TIMES [ Vol. 40
with proper foundations and civil work for erection thereof and in
that process, the use of cement would constitute an integral part of
the overall cost of the plant and machinery itself. Such overall im-
movable asset in the form of plant and machinery purchased, in-
stalled and erected by the petitioner assessee, would only be fit for
use for manufacturing of cement itself later on. But, the term
“Plant” is not defined in the KVAT Act and therefore, one can take
a broad view and interpret the meaning of the word ‘Plant’ with the
help of precedents or case laws, which we would shortly refer.
12. Once the Court comes to the conclusion that the cement, used
for erection and setting up of the Plant and machinery, would con-
stitute a “Plant” and therefore, is Capital Goods, as defined under
Section 2(7) of the KVAT Act, the recourse can also be made to Sec-
tion 12 of the KVAT Act quoted above and the input tax in respect
of the purchase of capital goods, including the cost of “Plant and
machinery” and cost of cement for erection thereof, would consti-
tute jointly capital goods, which are used for manufacture and sale of
the cement ultimately produced with such plant and machinery.
(7.4) In the matter of Income Tax proceedings, in the case of M/s. Jayadev
Oil Mill, Hubli v. The Additional Commissioner of Commercial Taxes.
Belgaum, a Division Bench of Karnataka High Court in STA No. 23
of 1994 held as under :
10. In deciding whether a ‘building’ or a structure is a plant, the
functional test has to be applied as indicated in the said decisions. If the
‘building’ is an apparatus or tool used by the Assessee for carrying on
the business or manufacturing activity, then it would be part of the
‘plant’. If on the other hand, if a building or a part of a building has
no connection with the business or manufacturing activity that is
being carried on, then obviously such a building or portion of the
building will not be part of the plant. These aspects of the matter
have not been considered or dealt with by the Revisional authority.
He has merely proceeded on the basis that the decisions relied on
by the appellant are not applicable as they were rendered with ref-
erence to Income-tax Act.
11. Therefore, the word ‘installed’ is used in connection with the
words ‘plant and machinery’, can also refer to ‘installation’ of a fac-
tory building. After all, the intention of the Notification is to en-
courage setting up of new industries in Karnataka. There is nothing
in the Act or the Notification to exclude the factory building from
‘plant’. We find no reason why the meaning attached to the said
work, while examining the provisions of the Income-tax Act, cannot
be applied while construing the meaning of the said word in the ex-
emption Notification issued under the Karnataka Sales Tax Act.
Therefore, the mere use of the word ‘installed’ with reference to
‘plant and Machinery’ is not sufficient to exclude the factory build-
ing, from the scope of the ‘plant and machinery’ used in the Notifi-
cation dated 15-10-1981. Hence, we feel that the Revisional Authori-
ty ought to have examined these aspects with reference to the func-
tional tests. In fact, none of the authorities have examined the mat-
ter with reference to the functional tests, repeatedly prescribed by
the Supreme Court and this Court.
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