2022 (7) TMI 909 - AAAR - GST

Rate of GST - product Solar HT/LT XLPE Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator - whether the benefit of concessional rate of GST in terms of Sr. No. 234 of Schedule-I to Notification No. 1/2017-IT (Rate) dated 28.06.2017 will be applicable to the HT/LT XLPE Cables designed, manufactured and supplied by the appellant for use as parts in the manufacture of Solar Power Generating System/ Solar Power Projects? HELD THAT - Section 10 of Chapter II of Indian Contract Act, 1872, as referred by appellant, says that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. The purchase orders submitted by appellant may be treated as contract if they follow conditions prescribed under Indian Contract Act, 1872 i.e. they are made for lawful consideration and with a lawful object and made by the free consent of both parties. After conjoint reading of observation of GAAR, provisions under Indian Contract Act, 1872, and Board's Circular dated 6.8.2013, it can be said that purchase orders, submitted by appellant would amount to a valid contract and hence appellant fulfills the condition prescribed in Board Circular No. 80/54/2018-GST dated 31.12.2018 for availing benefit under entry 234. On perusal of Circular No. 80/54/2018-GST dated 31.12.2018, it is clearly expressed that (i) GST is self assessed which means if a taxpayer is claiming exemption/concession under any notification issued under GST Act. he has to satisfy himself that he fulfills the mandatory conditions for claiming the same, onus to prove that he is eligible for such exemption/concession lies on that taxpayer, and (ii) the words used in above para of circular need to satisfy himself with the requisite document from a buyer such as supply contracts/order provides examples, using word 'such as', of documents required from buyer, for satisfaction of taxpayer that goods arc indeed used in WTEP - it is found that meaning of above para cannot be construed to include only 'supply contracts/order' but it will include all such documents which can satisfy the supplier regarding usage of their goods by their buyers. In the present case we find that appellant has received purchase order No. 4500293305 dated 25.12.2018 from M/s. Adani Green Energy Ltd., for supply of XLPE Cables. They have accepted the said purchase order and as discussed above the said purchase orders are a valid contract based on which the appellant can claim exemption/concession for their supplies under referred entry no.234. The amendment made to Sr.234 of Notification No. 01/2017-Integrated Tax (Rate) vide Notification No. 25/2018- Integrated Tax (Rate) dated 31.12.2018 and Notification No. 28/2018-Integrated Tax (Rate) dated 31.12.2018, for deciding value of services and rate of GST thereon, will not be applicable as there is no provision of service supplied by the appellant with respect to Solar Power Generating System The product in question viz. Solar LT/HT XLPE Cables supplied for Solar Power Generating System, classified under Chapter 85, forms integral part of Solar Power Generating System is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021. Thereafter the same will be covered under entry Sr.No. 201A appearing under Schedule-II to the Notification No.01/2017-IT (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-IT (Rate) dated 30.09.2021 and liable to be taxed @12% GST w.e.f. 01.10.2021.

Summary

Issues Involved:
1. Applicability of concessional GST rate on HT/LT XLPE Cables used in Solar Power Generating Systems.
2. Validity of purchase orders as legal documents for availing GST concessions.
3. Classification of services involved in the supply of cables.

Detailed Analysis:

1. Applicability of Concessional GST Rate:
The primary issue was whether HT/LT XLPE Cables, designed, manufactured, and supplied by the appellant for use in Solar Power Generating Systems, qualify for a concessional GST rate under Sr. No. 234 of Schedule-I to Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017. The appellant argued that their cables fall under Chapter 85, which is covered under the said notification, and therefore, should attract a concessional rate of 5% GST.

The appellate authority examined Entry No. 234, which provides a 5% GST rate for goods under Chapter 84, 85, or 94 used in renewable energy devices, including Solar Power Generating Systems. The authority agreed with the GAAR's observation that the XLPE cables are covered under Chapter Heading 8544 and form an integral part of the Solar Power Generating System. Therefore, the cables meet the criteria for the concessional rate.

2. Validity of Purchase Orders as Legal Documents:
The GAAR had previously ruled that the appellant did not provide sufficient legal documents such as supply contracts or original purchase orders to substantiate their claim for the concessional rate. The appellant contended that they had submitted the original purchase order dated 25.12.2018 and that purchase orders, in general, should be considered valid contracts under the Indian Contract Act, 1872.

The appellate authority referred to Section 10 of the Indian Contract Act, 1872, which states that valid contracts are made by the free consent of competent parties for lawful consideration and with a lawful object. The authority also cited a Board Circular No. 31/2013-Cus dated 6th August 2013, which supports the view that purchase orders meeting these criteria are valid contracts. Consequently, the appellate authority concluded that the purchase orders submitted by the appellant are valid legal documents.

3. Classification of Services Involved:
GAAR had noted a distinct possibility of services being involved along with the supply of goods, which could affect the applicability of the concessional GST rate. The appellant argued that any services mentioned in the purchase order, such as design, engineering, manufacturing, and transportation, are naturally bundled with the principal supply of goods and do not constitute separate taxable services.

The appellate authority reviewed an affidavit from Adani Green Energy Limited, confirming that the appellant supplied only goods and no additional services. The authority agreed that the services listed in the purchase order are essential for making the goods marketable and do not extend beyond the sale of goods. Therefore, these services should not affect the concessional GST rate.

Conclusion:
The appellate authority modified the Advance Ruling No. GUJ/GAAR/R/03/2021, holding that the appellant's Solar HT/LT XLPE Cables are eligible for the concessional GST rate of 5% under Entry No. 234 of Schedule-I to Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017, up to 30.09.2021. From 01.10.2021, the cables will be taxed at 12% GST under Entry No. 201A of Schedule-II to the same notification, as amended.