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2024 (3) TMI 891 - AAAR - GSTChallenged the Ruling pronounced by AAR - Support Services in the State of Rajasthan - Classification of Services - under heading 9986 Or 9954 - Rate GST - EPC Contract entered with M/s Vedanta Limited - Nature of activities as per the EPC Contract - whether the appeal has been filed within stipulated period prescribed u/s 100 (2) of CGST Act, 2017 or not - Whether the alternate suggestion of the Appellant seeking classification of the proposed supplies in question under Heading 9983 is acceptable in view of the nature of supplies proposed to be made by them? HELD THAT - We find that the Appellant have not filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. However, the Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of the Hon'ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020 2022 (1) TMI 385 - SC ORDER . Thus, the appellant were required to file the appeal within 30 days from 21.09.2021 in light of the judgment of Hon'ble Supreme Court 2022 (1) TMI 385 - SC ORDER We note that the appellant has filed the appeal on 29.10.2021 that is within the prescribed time limit. We find that the appeal has been filed by the appellant within the prescribed time. Therefore, we proceed further to decide the appeal on merit. We observe that according to the EPC Contract, the Appellant have been assigned the work of construction and installation of the entire facility and the proposed infrastructure being installed is aimed at capacity expansion as has been mentioned by the Appellant in the appeal that the with a view to augment the production from existing well pads at Mangala, the Appellant have entered into EPC contract with Vedanta Limited in March 2018 for constructing additional network of customized Intra-field pipelines MIPA project. The contract obliges the Appellant to handover the complete system including Non Process Buildings, road, drains, Pipeline, after completing the construction, erection, installation and commissioning work. Thus, we observe that the supplies proposed to be undertaken by the Appellant relate to the new facilities being awarded by M/s Vedanta Limited for enhancement of capacity and production. Therefore, the existing production from the existing facilities cannot be taken to be related to the expansion being undertaken under the instant EPC Contract. As can be seen the contract in the instant case is an Engineering, Procurement and Construction (EPC) Contract awarded by Mls Vedanta Limited for provision of services for augmentation of pipelines along with Surface Facilities at MPT within RJ-ON-90/1 block and the Appellant have been assigned the responsibility to develop the infrastructure for surface facilities. The scope of the work described in details in the contract clearly established that the supplies relate to construction of new facilities/ infrastructure for oil gas extraction which are quite distinct from the support services to oil and gas extraction. What has been included in the support services under Heading 998621 by way of inclusion clause has to be viewed with reference to support services and cannot be so interpreted to relate it to construction services. In that view of the matter, whether it be derrick erection or repair and dismantling services, well casing, cementing pumping, plugging and abandoning of well, all these activities have to be understood in the nature of support services only and none of them relates to creation of infrastructure or facilities for oil and gas extraction by way of construction, erection and commissioning of the new facility. The Appellant have not been assigned activity of type mentioned in Heading 998621 rather the contract is for enhancement of new facility and infrastructure for extraction of oil and gas. Hence, we do not find force in the arguments advanced by the Appellant. Conclusion and findings In view of these observations we hold that - (i) Based on the analysis of activities, the Appellant are required to carry out in pursuance of the EPC Contract and keeping in view the true nature of supplies proposed to be undertaken by the Appellant, the proposed supplies are appropriately classifiable under SAC Heading No. 9954 answering to description Construction Services which are in the nature of composite supply defined as works contract. (ii) The proposed supplies are specifically covered by SAC Heading No. 9954 and the claim that Construction Services of SAC Heading No. 9954 is a general description of the supplies and support services of SAC Heading No. 998621 is more specific to describe the proposed supplies is not supported by the EPC Contract as discussed. (iii) The proposed supply is covered by the scope of Construction Services of SAC Heading No. 9954 and neither the inclusions given under SAC Heading No. 998621 for Support Services nor the description of Heading 9983 covers the scope of the proposed supply, Hence, the claim for classification under SAC Heading No. 998621 or alternatively under Heading 9983 is not sustainable. (iv) The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at SI. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017. Thus, we hold that the Ruling dated 15.09.2021 of the AAR for Rajasthan in respect of the Appellant needs no interference up to the extent mentioned in item (i) to (iii) above and the same are hereby modified to the extent mentioned in item (iv) above of Part K of this order. The appeal is disposed of accordingly.
Issues Involved:
1. Classification of services under SAC Heading 998621. 2. Classification of services under SAC Heading 9983. 3. Classification of services under SAC Heading 9954. 4. Rate of tax applicable to the services provided. Summary: Issue 1: Classification under SAC Heading 998621 The Appellant contended that their services for the Mangala Intra-field Pipelines Augmentation Project should be classified under SAC Heading 998621, which pertains to support services to oil and gas extraction. They argued that the services provided, including design, supply, and installation of pipelines, are integral to petroleum operations and should fall under this heading. However, the Appellate Authority found that the services provided by the Appellant are for the creation of infrastructure for oil and gas extraction, which is distinct from support services. Therefore, the classification under SAC Heading 998621 was rejected. Issue 2: Classification under SAC Heading 9983 As an alternative, the Appellant suggested that their services could be classified under SAC Heading 9983, which includes other professional, technical, and business services relating to exploration, mining, or drilling of petroleum crude or natural gas. They argued that their services involve project management, design, and planning, which should fall under this heading. The Appellate Authority, however, found that the services provided by the Appellant are related to the construction of new facilities and infrastructure, which do not fit under the professional, technical, and business services described in SAC Heading 9983. Therefore, this classification was also rejected. Issue 3: Classification under SAC Heading 9954 The AAR had classified the services under SAC Heading 9954, which pertains to construction services, and the Appellate Authority agreed with this classification. The services provided by the Appellant, including the construction of pipelines, electrical work, and instrumentation, were found to be construction services. The Appellate Authority also noted that the services involve the transfer of property in goods, making it a composite supply treated as a works contract under Section 2(119) of the CGST Act, 2017. Therefore, the classification under SAC Heading 9954 was upheld. Issue 4: Rate of Tax The AAR had applied a rate of 18% GST under entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), which was omitted with effect from 01.04.2019. The Appellate Authority noted that the correct rate of tax for the services, classified under SAC Heading 9954, should be 18% as per item (xii) of entry at Sl. No. 3 of Notification No. 11/2017-CT(R), as amended. Therefore, the rate of tax applicable to the services provided by the Appellant was confirmed to be 18%. Conclusion: The Appellate Authority upheld the classification of the services under SAC Heading 9954 as construction services and confirmed the applicable GST rate of 18%. The appeal was disposed of accordingly, with modifications to the AAR's ruling to reflect the correct rate of tax.
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