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2020 (9) TMI 1143 - AAAR - GSTWorks Contract - Earth Work or not - construction of tunnel and its allied works - Composite supply of goods and services - Sl.No. 3A of Notification no. 12/2017-CT (Rate) dated 28th June 2017 - any activity in relation function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution . - HELD THAT - It is evident that as per the work order, the work deals with excavation of earth and depositing it on the sides. As per the definitions, it is clear that Earthwork includes excavation and as per the contract the Earthwork constitutes more than 92.66% of the contract by value . On a careful reading of the entry, we find ourselves in disagreement with the finding of the AAR. The entry says that the Composite supply should have earthwork forming more than 75% of the contract by value. Thus it very much clear from the wording that the Contract may be for something else- be it construction of building, tunnel, canal, road and in these contracts if the earthwork constitutes more than 75% then it qualifies for the above entry. If the intention of the Legislature had been to cover only pure contract of earthworks in it then a qualifying condition of more than 75% by value wouldn't have been provided. We therefore find the reasoning of the AAR untenable. The Services provided by the appellant in the impugned matter qualifies for inclusion under entry 3(vii) of the Notification 12/2017 dt 28.6.2017.(as amended by Notification 31/2017 - dt 13.10.2017).
Issues Involved:
1. Applicability of SI No. 3A, Chapter No. 99 as per Notification No. 2/2018-Central Tax (Rate) dated 25th January 2018. 2. Coverage of the contract under the term "Earth Work" as per Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017. 3. Definition and interpretation of "Earth Work" under Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017. Detailed Analysis: Issue 1: Applicability of SI No. 3A, Chapter No. 99 as per Notification No. 2/2018-Central Tax (Rate) dated 25th January 2018 The Appellate Authority examined whether the contract is covered under SI No. 3A, Chapter No. 99. The appellant argued that the contract should be exempt under Notification No. 12/2017-CT (Rate), as amended by Notification No. 2/2018-CT (Rate), since it involves a composite supply of goods and services with the value of supply of goods constituting not more than 25% of the composite supply provided to a governmental authority. The authority noted that the Godavari Marathwada Irrigation Development Corporation qualifies as a "Government Entity" as per the definition in Notification No. 31/2017-Central Tax (Rate). However, since the project is a major irrigation project and not a minor one, it does not fulfill the condition of being a function entrusted to a Panchayat under Article 243G of the Constitution. Therefore, the contract does not qualify for exemption under SI No. 3A. Issue 2: Coverage of the contract under the term "Earth Work" as per Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017 The appellant contended that the contract should be covered under the term "Earth Work" and thus eligible for a concessional GST rate under Entry No. 3(vii) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 31/2017-Central Tax (Rate). The authority reviewed the definitions of "Earth Work" from various dictionaries and found that it includes operations connected with excavations and embankments. The work order involved excavation for tunnels, which constitutes more than 75% of the contract value. Therefore, the authority concluded that the contract qualifies as "Earth Work" and is eligible for the concessional GST rate. Issue 3: Definition and interpretation of "Earth Work" under Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017 The appellant argued that the term "Earth Work" should be understood as it is commonly used in the trade, which includes excavation. The authority agreed, stating that "Earth Work" includes both excavation and fortification. The work order for the contract involved significant excavation activities, which constituted more than 92.66% of the contract value. Consequently, the authority held that the contract meets the criteria for "Earth Work" under Entry No. 3(vii) of Notification No. 11/2017-Central Tax (Rate), as amended. Conclusion: The Appellate Authority modified the order of the AAR. The contract does not qualify for exemption under SI No. 3A of Notification No. 2/2018-Central Tax (Rate) but does qualify for the concessional GST rate under Entry No. 3(vii) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 31/2017-Central Tax (Rate). Order: 1. The contract is not covered under SI No. 3A, Chapter No. 99 as per Notification No. 2/2018-Central Tax (Rate) dated 25th January 2018. 2. The contract is covered under the term "Earth Work" and thus eligible for the concessional GST rate under SI No. 3, Chapter No. 9954 as per Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017. 3. The meaning of "Earth Work" includes excavation activities as discussed.
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