Delhi High Court Allows Delhi Airport To Approach Adjudicating Authority For ITC Claim In Light Of Safari Retreats

The division bench of Justices Anil Kshetrapal and Harish Vaidyanathan Shankar granted it liberty to approach the Adjudicating Authority for consideration of its claim in light of the Supreme Court's ruling in Chief Commissioner of Central Goods and Services Tax v M/s Safari Retreats Private Ltd.

In the said case, the Supreme Court had held that if construction of a building is essential for supplying services such as renting out, it could fall into the "plant" exception to section 17(5)(d) of the CGST Act, which provides that Input Tax Credit cannot be claimed for construction material (other than plant or machinery) for immovable property construction.

However, the Supreme Court had emphasised the applicability of the "functionality test" and held that whether a particular structure qualifies as a "plant" would depend on the facts of each case.

The petition filed by Delhi International Airport Ltd had also challenged the validity of Circular No. 28 (Flyer No.) dated January 1, 2018 on “Works Contract”, which clarified that ITC paid on works contract services for construction of plant and machinery would be available, even where the plant and machinery is permanently affixed to the earth and constitutes immovable property.

The High Court noted that the circular had been issued before the Supreme Court's judgment in Safari Retreats. It held that the circular would have to be read in accordance with the Supreme Court's judgment, but said that such an exercise could only be undertaken by the Adjudicating Authority after considering the facts and circumstances of the case.

"In view of the judgment passed by the Hon'ble Supreme Court, the IC has to be read in accordance therewith. However, such an exercise can only be carried out by the Adjudicating Authority upon appreciating of facts and circumstances of the present case," the Court observed.

Counsel appearing for the respondents also did not dispute that the Supreme Court's judgment would have to be applied and that the circular had to be read accordingly.

The Court accordingly disposed of the petition.

For Petitioner: Senior Advocate: Taun Gulati; Advocates: Sparsh Bhargava, Vanshika Taneja and Aryan Singh.

For Respondents: Standing Counsel: Shiva Lakshmi; Advocates: Prassant Kumar Sharma and Pankhuri Tiwari; Central Government Standing Counsel: Amit Tiwari; Advocates: Ayushi Srivastava, Arpan Narwal, Kushagra Malik and Ujjwal Tyagi; Panel Counsel: Vaishali Gupta; Standing Counsel: Harpreet Singh; Advocate: Jatin Kumar Gaur.