M/S Sbs Schooling Faridkot vs. State Of Punjab And Others

Held

The High Court held that the constitutional validity of Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017, is not in doubt, as concluded by the Supreme Court in Chief Commissioner of Central Goods and Service Tax vs. Safari Retreats (P.) Ltd. The Court further held that the expression 'plant or machinery' in Section 17(5)(d) should not be given the same meaning as the broader definition of 'plant and machinery' in the explanation to Section 17. Crucially, the Court determined that whether a building, warehouse, or cinema theatre can be classified as a 'plant' under Section 17(5)(d) is a factual question. This determination requires applying a 'functionality test' to ascertain if the building was essential for carrying out the business activities. The Supreme Court directed High Courts to examine this functionality test. Consequently, the High Court found it appropriate to remand the matter back to the respondents. The respondents are directed to re-examine the issue, apply the functionality test, and pass a speaking order, ensuring the petitioner is given an opportunity of hearing. The notice in Form GST ASMT-10 dated July 17, 2024, was set aside with liberty to the respondents to proceed afresh.

Facts

The petitioner, M/s SBS Schooling Faridkot, filed a writ petition challenging the constitutional validity of Section 17(5)(c) and 17(5)(d) of the Central GST Act, 2017. The petitioner's grievance stemmed from a notice issued in Form GST ASMT-10 on July 17, 2024. The High Court noted that the issue of constitutional validity of these sections was already decided by the Supreme Court in the case of Chief Commissioner of Central Goods and Service Tax vs. Safari Retreats (P.) Ltd. The Supreme Court's judgment provided specific conclusions regarding the interpretation and application of Section 17(5)(c) and (d), particularly concerning buildings and their classification as 'plant or machinery'. The High Court, referencing the Supreme Court's directions, decided to remand the matter back to the respondents for re-examination.

Key Issues

1. Whether the constitutional validity of Section 17(5)(c) and 17(5)(d) of the Central GST Act, 2017, is established? The petitioner challenged these provisions. The revenue contended that the constitutional validity of these clauses was not established, as per the Supreme Court's decision in Chief Commissioner of Central Goods and Service Tax vs. Safari Retreats (P.) Ltd. The Supreme Court held that 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. 2. Whether the expression 'plant or machinery' used in Section 17(5)(d) can be given the same meaning as the expression 'plant and machinery' defined by the explanation to Section 17? The petitioner's argument is not explicitly recorded. The revenue relied on the Supreme Court's ruling that the expression 'plant or machinery' in Section 17(5)(d) cannot be given the same meaning as 'plant and machinery' defined by the explanation to Section 17. 3. Whether a small building, warehouse, or cinema theatre can be classified as a plant within the meaning of 'plant or machinery' used in Section 17(5)(d)? This is a factual determination. The Supreme Court held that this is a factual question to be determined based on the business of the registered person and the role the building plays. A functionality test must be applied. The revenue did not present a separate argument on this point, relying on the Supreme Court's findings.