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2019 (4) TMI 1544 - AAAR - GSTClassification of supply - Maintenance Contract - Equipment Parts Supply and Services Agreement - mixed supply or not - challenge to AAR decision - HELD THAT - Under the second Agreement i.e. Equipment Parts Supply and Services Agreement , both the supplies i.e. supply of services and supply of parts are not integral to each other unlike supplies involved in Agreement-1. Hence, it is not a case of two or more taxable supplies which are naturally bundled and supplied in conjunction with each other in the ordinary' course of business, one of which is a principal supply. The activities performed under the impugned Agreement, though comprises of two or more individual supplies of goods or services, cannot be held as Composite Supply . Consequently, such activities will fall under the category of Mixed Supply as per definition of Mixed Supply, under Section 2(74) of CGST Act, 2017. Thus, the activities performed by the Appellant under Agreement-2 will fall under the category of Mixed Supply .
Issues Involved:
1. Classification of activities under Agreement-1 as "Composite Supply". 2. Classification of activities under Agreement-2 as "Mixed Supply". 3. Interpretation of the terms and intention of Agreement-2. 4. Applicability of judicial precedents and rulings. Issue-wise Detailed Analysis: 1. Classification of activities under Agreement-1 as "Composite Supply": The Rajasthan Authority for Advance Ruling (AAR) classified the activities under the "Comprehensive Maintenance Agreement" (Agreement-1) as "Composite Supply" where the principal supply is the maintenance services. The Appellant agreed with this classification and did not contest it further. 2. Classification of activities under Agreement-2 as "Mixed Supply": The AAR classified the activities under the "Equipment Parts Supply and Services Agreement" (Agreement-2) as "Mixed Supply" under Section 2(74) of the CGST/RGST Act, 2017. The Appellant contested this classification, arguing that the activities should be classified as "Composite Supply" with maintenance services as the principal supply. 3. Interpretation of the terms and intention of Agreement-2: The Appellant argued that the AAR misinterpreted the clauses of Agreement-2 and the intention of the parties. They contended that the supply of parts is incidental to the primary supply of maintenance services, and the main intention is to ensure continuous operation of the equipment. The Appellant emphasized that the consideration is based on the output produced by the equipment, not on the parts supplied. The AAR, however, held that the parts and services under Agreement-2 are separately identifiable and can be supplied individually, thus qualifying as "Mixed Supply". The AAR pointed out that the Agreement explicitly mentions the supply of parts and services separately and that the Appellant is aware of the parts needing replacement, as indicated in Schedule-D. 4. Applicability of judicial precedents and rulings: The Appellant cited several judicial precedents and rulings to support their argument that the activities under Agreement-2 should be classified as "Composite Supply". They referred to previous rulings by the AAR in similar cases and various case laws under erstwhile indirect tax laws. However, the appellate authority noted that these precedents and rulings are not binding and may not be directly comparable due to differences in the nature of agreements and the specific facts of each case. Final Judgment: The appellate authority upheld the AAR's ruling that the activities performed under Agreement-2 constitute "Mixed Supply" as defined under Section 2(74) of the CGST Act, 2017. The appeal filed by the Appellant was dismissed, and the classification of activities under Agreement-2 as "Mixed Supply" was confirmed.
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