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2022 (3) TMI 1150 - AAR - GSTClassification of supply - supply of EPABX system along with its installation and commissioning to Railways - The EPABX works like an exchange - taxable at 12% rate of Goods and Services Tax or not - applicability of Entry no. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT - The EPABX system comes into existence by assembly and connection of various goods/components, wherein transfer of property of such goods is involved in the execution of said contracts. It is noted that EPABX system once installed cannot be taken to market in as such condition. It would be required to be dismantled and disassembled in parts and components. In the process of dismantling, some parts of the EPABX system such as cables, connectors may even be damaged/ may not be usable again. Thus, an installed and commissioned EAPBX system becomes an immovable property and thereby its supply with installation and commissioning is Works Contract Service supply. It is apt to refer to CBEC Order No. 58/1/2002-Cx dated 15-1-2002 issued for the purpose of uniformity in connection with classification of goods erected and installed at site. This said CBEC order was issued in wake of plethora of judgments appear to have created some confusion with the assessing officers, the matter was examined by the Board (CBEC) in consultation with the Solicitor General of India and the matter was clarified vide said Order and the relevant extract is reproduced and it is held that its rationale and concept are relevant under GST scheme of law also. The subject supply pertains to Railways as it is for supply in railway office. As per Section 2(31)(d) Railways Act, 1989, railway includes all offices and any other works constructed for the purpose of, or in connection with, railway - The subject supplies of EPABX system for Railways is covered at entry No. 3 (v) of Notification No. 11/2017-CT (R) dated 28-6-17, as amended, and liable to 12% GST.
Issues Involved:
1. Whether the supply, installation, and commissioning of EPABX systems by Intellicon qualify as a works contract under Section 2(119) of the CGST Act. 2. Whether the EPABX system becomes an immovable property upon installation. 3. Applicability of Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 to Intellicon's contracts with Railways. 4. Whether the supplies by Intellicon to Railways are subjected to a concessional GST rate of 12%. Issue-wise Detailed Analysis: 1. Qualification as Works Contract: Intellicon argued that the supply, installation, and commissioning of EPABX systems constitute a works contract as defined under Section 2(119) of the CGST Act, which includes contracts involving the transfer of property in goods in the execution of such contracts. The EPABX system involves various components and equipment that are installed and commissioned at the customer's premises, making it an integral part of the immovable property. The Authority agreed with Intellicon, noting that the EPABX system, once installed, cannot be moved without dismantling and damaging some components, thereby qualifying as a works contract. 2. Immovable Property: Intellicon contended that the EPABX system becomes an integral part of the immovable property once installed, as it involves laying cables through walls, ducts, and conduits, and connecting various components. The Authority referred to several judicial precedents, including the Supreme Court's ruling in the case of Kone Elevator India Pvt. Ltd. and the Bombay High Court's decision in Otis Elevator Company (India) Ltd., which held that installations like elevators and EPABX systems become part of the immovable property. The Authority concluded that the EPABX system, once installed, becomes immovable property. 3. Applicability of Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate): Intellicon argued that their supplies to Railways fall under Entry No. 3(v) of the Notification, which pertains to composite supplies of works contract for construction, erection, commissioning, or installation of original works related to railways. The Authority examined the conditions specified in the Notification and found that Intellicon's contracts with Railways meet these conditions. The contracts involve the supply, installation, and commissioning of EPABX systems, which are considered original works as they involve the erection, commissioning, and installation of machinery and equipment. The Authority also noted that the supplies are made to Railways, fulfilling the requirement of being related to railways. 4. Concessional GST Rate of 12%: Intellicon submitted that their supplies to Railways qualify for a concessional GST rate of 12% as per the Notification. The Authority agreed, noting that the contracts with Railways involve the supply, installation, and commissioning of EPABX systems, which fall under Entry No. 3(v) of the Notification. The Authority also referred to the CBEC Order No. 58/1/2002-Cx and the Supreme Court's decision in the case of Municipal Corporation of Greater Bombay & Ors. v. Indian Oil Corporation Ltd., which supported the view that installations like EPABX systems become immovable property and qualify for the concessional GST rate. Ruling: The Authority ruled that the supply, installation, and commissioning of EPABX systems by Intellicon for Railways are covered under Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, and are liable to a concessional GST rate of 12%.
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