The Gujarat Appellate Authority of Advance Ruling (AAAR) has ruled that Input Tax Credit (ITC) is not available on services procured by port for operation and maintenance of diving support vehicles (DSV).
The bench of Rajeev Topno and B V Siva Naga Kumari has allowed the application of department against the of the Authority of Advance Ruling (AAR) by which it was held that M/s Sikka is entitled to avail ITC on the services procured for the Operation and maintenance of DSVs: Relsagar & Reldarshan. M/s Sikka is entitled to avail ITC on the services procured for the Operation and maintenance of SPVs: Eagle, Chetak, Calypso fortune & ML Noorani.
The respondent, M/s Sikka runs and operates a port and terminal handling facility at Sikka Port, Gujarat for receipt of crude oil and other feedstock as well as for evacuation of various finished products of the crude oil refinery set up by Reliance Industries Limited (‘RIL’) at Jamnagar. Sikka Port, was developed by the Applicant company in 1990s as a captive port for RIL’s refinery project.
Apart from the usual port infrastructure, SPMs (Single Point Moorings) are also available to enable loading, unloading of various goods. In 2007, with a new refinery being set up by Reliance Petroleum Limited (RIL), the Applicant expanded its port and terminal handling facilities, by incurring substantial capital cost for setting up additional facilities such as three SPMs, subsea pipelines, crude and product pipelines, marine tank farms, sea water outfall system and support vessels comprising of marine support vessels, diving support vessel, three tugs and two pilot boats, all with a view to handle the increase in the quantity of the crude and products that was likely to transit through the port for the new refinery.
The respondent entered into a long term contract with RIL on 26-3-2007 titled “Agreement for the Receipt Handling Storage and Evacuation of Crude, Petroleum and Petrochemical Products’’, vide which the respondent was obliged to set up new facilities as described in Schedule 1 thereto, for enabling it to provide services described in Schedule 2 of the long term contract.
The respondent sought the advance ruling on the issue whether it is entitled to avail Input Tax Credit (ITC) on services procured for the operation and maintenance of Diving Support Vehicle owned by them and used by it for supplying port and terminal handling services.
Yet another ruling sought was whether the Applicant is entitled to avail Input Tax Credit (ITC) on services procured for hiring, and for operation and maintenance of Security Patrol Vessel used by it for supplying port and terminal handling services.
The AAR held that Section 17(5)(ab) CGST Act pertains to Blocked credit on services of repair and maintenance in so far as they relate to Vessels. Even this is not the case before us. The services supplied by the said Contractors to M/s Sikka is not limited merely to ‘Repair and Maintenance’ to Vessels but the essence and substance of the Contracts reads that the Services supplied by the said Contractors pertain to enabling discharge of liquid cargo into the sub sea pipelines and also the Services of Security Patrolling cum Pollution checks by way of operation and manning and maintenance of DSVs and SPVs respectively, by qualified crew.
The AAR found that the bar of blocked credit raised vide Section 17(5)(aa); Section 17(5)(ab); section 17(5)(b)(i) CGST Act is not applicable.
The department filed the appeal before the AAAR on the ground that the respondent suppressed the fact by mis-representing that DSV Relsagar is owned by them, when factually it was owned by M/s. Reliance Industries Ltd.. The ruling sought was on the DSV owned by M/s. Sikka.
The respondent has stated that it was a bonafide mistake which even otherwise, would not have any effect on the conclusion arrived by the GAAR.
The AAAR held that the ITC is blocked under section 17(5), in respect of hiring of vessel [SPV] wherein the contractor of the respondent has discharged GST under SAC code 996602 and 996609.
Appellant Name: The Assistant Commissioner, Central GST & Excise, Division I (M/s. Sikka Ports & Terminals Ltd)
Date: 30/12/2024
