2019 (11) TMI 1256 - AAAR - GST

Classification of supply - supply of goods or supply of services - supply of Silver Sand - composite supply - challenge to AAR decision - HELD THAT - As per the work orders issued by MBL, the Appellant is required to fill in the foundation or plinth by silver sand in layers and consolidate the same. Further the job also involves filling in the compound tank and other lying areas with sand and good earth and consolidating the same by ramming and dressing. The activities undertaken by the Appellant amount to improvement and modification of land future construction. In the circumstances, it is not case of composite supply where principal supply constitutes of sand as argued by the Appellant but a case of transfer of property in goods in course of site preparation construction of Central Correctional Home Baruipur. There are no infirmity in the ruling pronounced by the West Bengal Authority Advance Ruling in the matter and hence there is no reason to interfere with it - appeal dismissed.

Summary

Issues:
Classification of supply as works contract or supply of goods, nature of job being site preparation, classification of supply as composite supply, consideration of the principal contractor as a government entity.

Analysis:
1. Classification of supply as works contract: The Appellant contended that the supply should be classified as the supply of silver sand and earth, not as a works contract for site preparation. They argued that they are not engaged in site preparation services. However, the WBAAR concluded that the contract involved transfer of property in goods during site preparation for construction, falling under the definition of a works contract as per section 2(119) of the GST Act.

2. Nature of job being site preparation: The Appellant emphasized that the major portion of the contract value was for the supply of sand, constituting over 90% of the total work order. They argued that the service portion, such as compacting and leveling the sand, was ancillary to the principal supply of sand. The Appellant referenced a similar ruling by the Authority for Advance Ruling, Jharkhand, to support their argument. However, the Respondent maintained that the nature of the job involved activities essential for site preparation, making it a works contract under SAC 9954.

3. Classification of supply as composite supply: The Appellant claimed that the supply should be considered a composite supply under section 2(30) of the GST Act, with the principal supply being silver sand and earth. They argued that since the value of the sand constituted the majority of the contract, it should be taxed at the rate applicable to sand. However, the WBAAR found that the activities undertaken by the Appellant, including filling and consolidating the land, were aimed at preparing the site for construction, not constituting a composite supply as argued.

4. Consideration of the principal contractor as a government entity: The Appellant raised concerns regarding the classification of MBL as a State Government Company and argued that the Principal Contractee, WBPHIDCL, was a government authority. They contended that this should impact the classification of the supply. However, the WBAAR did not find this argument compelling and maintained its classification based on the nature of the activities performed by the Appellant.

In conclusion, the Appellate Authority upheld the ruling of the WBAAR, finding no errors in the classification of the supply as a works contract for site preparation. The appeal was dismissed, and the original ruling was maintained. Both parties were informed of the decision.