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2018 (9) TMI 1256 - AAR - GSTClassification of goods - supply of Copper XLPE insulated armoured low tension cables - Whether the power cables supplied by the Applicant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CT? Held that - Notification provides concessional rate only for the goods falling under entry no. 1 to 24 subject to certain other specific conditions. Electric Cables, being accessories, stores, materials, consumables does not automatically qualifies them for enjoying concessional rates as mentioned in Notification no.03/2017-CT. - Electric cables are not included in any of the entries of goods specified from entry no. 1 to 23 of the List of goods appended to Notification No. 03/2017-CT. It is agreed that cables supplied to ws Vedanta by applicant will be used to supply and transmit electricity for petroleum operations at work site (Block RJ-ON-90/1). But will these electrical cables supplied be used as accessories, stores, materials and/or consumables for goods ONLY covered under entry no. 1 to 23 is not clear from the documents and evidences submitted by the dealer. Even the applicant seems not sure of its uses. Concessional rate is conditional to terms and conditions of Notifications - It is a clear possibility that there are other machine and equipment and their accessories, stores, materials and consumables which though being used in process of petroleum operation but are not enjoining concessional rate as they are not covered under entry no. I to 23 of the notification yet being supplied electricity by these electrical cables to make them functional . Electrical Cables are generally used to set up a network of wires and cables which are usually permanent in nature through which electricity can flow, distributed and supplied to various points. To regard Electrical Cables as accessories, stores, materials or consumables for running of the goods specified in the List as mentioned in entry no. 24 of the notification is not rational by any stretch of imagination - If we regard Electrical Cables as accessories, stores, materials and/or consumables for running of the goods specified in the List, then going through this logic poles, insulators, transformers and all other equipments used to ensure flow of electricity at work site from the main source to the supply point are to be covered under this classification. The applicant has failed to identify/clarify as to under which category i.e. accessories, stores, materials or consumables as mentioned in S.No. 1 to 23 of the list, would electrical cables fall. Further he has not given any assurance regarding restricting the use of electrical cables as accessories, stores, materials, consumables to goods falling under entry no. I to 23 of the list, which is an essential pre requisite to claim concession. Ruling - Electrical Cables do not fall under Entry no. 24 of list as material , accessories , consumables , and/or stores of SI. No. 1 of Notification No. 03/2017-central Tax (Rate) dated 28.06.2017.
Issues Involved:
1. Whether the power cables supplied by the Applicant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CT? Detailed Analysis: Submission of The Applicant: The Applicant, a public limited company engaged in manufacturing power cables, supplied Copper XLPE insulated armoured low tension cables to M/S. Vedanta Ltd. for petroleum operations. The Applicant sought an advance ruling on whether these power cables qualify for concessional tax rates under Notification No. 03/2017-CT. Issues Requiring Advance Ruling: The Applicant questioned if the power cables supplied would fall under the scope of SI. No. 1 of Notification No. 03/2017-CT, which provides concessional tax rates for certain goods used in petroleum operations. Applicant’s Understanding: The Applicant argued that the power cables should be considered as 'material', 'accessories', 'consumables', and/or 'stores' under Sl. No. 1 of Notification No. 03/2017-CT. They contended that these cables are essential for running machines used in petroleum operations. Applicable Provisions: Notification No. 03/2017-CT specifies goods eligible for concessional tax rates if used in petroleum operations under specified contracts. The list includes "sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in this List." Conditions for Concessional Rate: To qualify for the concessional rate, the following conditions must be met: 1. The goods must be covered under the list in Notification No. 03/2017-CT. 2. The goods must be supplied in connection with petroleum operations under specified contracts. 3. The goods must be supplied to an Indian company or a consortium/contractor thereof in connection with operations under a contract with the Government of India. 4. A certificate from the Directorate General of Hydrocarbons must certify that the goods are required for petroleum operations. Analysis of Conditions: 1. Condition No. 1: The power cables must be covered by entry no. 24 of the list appended to Notification No. 03/2017-CT, which includes various goods necessary for running, repairing, or maintaining the machines listed. 2. Condition No. 2: The power cables supplied are used for supplying electricity to machines used in petroleum operations under a specified contract. 3. Condition No. 3: The power cables are supplied to Vedanta, an Indian company, for petroleum operations. 4. Condition No. 4: Vedanta provides a certificate from the Directorate General of Hydrocarbons certifying the necessity of the goods for petroleum operations. Jurisdictional Officer’s Opinion: The Jurisdictional Officer argued that the Applicant did not specify which machines listed in the notification the power cables would be used for. The Officer concluded that the power cables do not qualify under the notification as the Applicant did not fulfill the condition of specifying the machines. Findings and Analysis: - The notification provides concessional rates for goods specified from entry no. 1 to 23 and their corresponding accessories, stores, materials, and consumables (entry no. 24). - The Applicant failed to specify that the power cables would be used exclusively with machines listed in entries 1 to 23. - The power cables are general and can be used with various machines, not exclusively those listed in the notification. - The Applicant did not provide assurance that the power cables would be restricted to use with machines listed in entries 1 to 23. Ruling: Under the facts and circumstances discussed, "Electrical Cables" do not fall under Entry no. 24 of the list as 'material', 'accessories', 'consumables', and/or 'stores' of SI. No. 1 of Notification No. 03/2017-Central Tax (Rate) dated 28.06.2017.
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