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TMI Blog2018 (5) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... rform as effectively as it would have when without damage? The questions itself would give the answers. - The definition of the word "Commissioning" as found in the agreement brings out the enormity of the scale of operations and how the transaction would fall in the scope of an immovable property. An overview of all above makes us observe that the impugned transaction for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning is a "works contract" in terms of clause (119) of section 2 of the GST Act. Ruling:- The plants in question were not immovable property so as to be immune from the levy of GST duty - Since the transaction is treated as a "works contract" and not as a "composite supply" , there would be no relevance of "principal supply". And therefore, there arises no occasion to answer the question as to what would be the "principal supply" in the impugned transaction - In the absence of any documents before us, we would not be able to deal with the issue of benefit of concessional rate of 5% of solar power generation system and parts thereof. - GST-ARA-01/2017/B- 05 - - - Dated:- 17-2-2018 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Applicant to do end to end setting up of a solar power plant which includes supply of various goods (such as modules, structures, inverter transformer etc) as well as complete design, engineering and studies transportation, unloading, storage and site handling, installation and commissioning of all equipments and material, complete project management as well as supply and construction related to various other packages for complete PV plants. 3. Accordingly, the contract entered into by the Applicant includes end to end activities i.e. supply of various goods and services intended for setting up, operation and maintenance of a solar power plant. 4. The intent of the contract is that the entire contract would be undertaken by the Applicant for supply of both goods and services and setting up of the solar power plant as well as transmission lines for transmission of the electricity generated up to the storage or the GRID. 5. There may be a single lump sum price for the entire contract for supply of both goods and services and payment terms may be defined depending on various milestones. 6. A diagrammatic illustration of a solar power system is provided. Statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply'. Section 2(90) defines principal supply as principal supply means 'the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary' , Further, mixed supply has been defined under the Act as mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply . Hence, for mixed supply there should be a single price and entire contract gets taxed at the supply with highest rate of tax. 1.3 Concept of works contract Works contract has been defined under Section 2 (1 19) Of CGST Act as follows: a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a composite or a mixed supply, shall be determined in the following manner, namely:- (a)a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply' Per the above, the essential conditions for a supply to qualify as composite supply can be highlighted as under: 2 or more taxable supplies of goods or services or both The taxable supplies should be naturally bundled The taxable supplies should be supplied in conjunction with each other One taxable supply should be a principal supply In such case, the supply which is the principal supply is treated as the main supply and the entire transaction is taxed as per the principal supply. In the present case, the Applicant would like to submit that the main intent of the contract is provision of the solar power generation system which consists of various components such as modules, structures, inverter transformers, cables, SCADA, transmission lines, etc. Services like civil construction are merely incidental to provision of such goods and form an ancillary part of the contract. It is submitted that service portion of the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forming a function. In the present case, the term system should include all goods provided under the contract which help in end to end generation as well as transmission of electricity. Further, under erstwhile law also, solar power generating systems have not been defined. However, under erstwhile excise law, various exemptions were extended to non-conventional energy devices which included solar power generating systems - List 8 of Notification no. 12/2012-CentraI Excise, dated 17 March 2012. Reference is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics Instruments Ltd. vs. Commr. Of C. Ex., Jaipur wherein it was held that '7.The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. Therefore, the denial of benefit of notification by the adjudicating authority is not sustainable. The impugned order is set aside and the appeals are allowed' Further, in the case of Bangalore Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guide issued by the CBEC in the year 2012 ('the Education Guide'). The relevant extract of the Education Guide is reproduced as under for ease of reference: Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of 'bundled service' would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determination of value of two services for the purpose of charging service tax is different, The Education Guide also clarifies that in cases of composite transactions, i.e. transactions involving an element of provision of service and an element of transfer of title in goods in which various elements are so inextricably linked that they essentially form one composite transaction then the nature of such transaction would be determined by the application of the dominant nature test. Further, the following was provided in the Education Guide: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each other. Also, such composite supply is supplied in the ordinary course of business. The composite supply would qualify as supply of the principal supply. Taxes would be applicable as on such principal supply. Drawing reference to the above, it is submitted that the customer perceives the entire contract is for supply of solar power generating system as the intent of both the parties is supply of the goods/ system which would help in generation of electricity. Hence, the entire contract (both goods and services) and bundled and linked wherein the main intent is provision of the goods which constitute solar power generating system. 2.4 . Global Jurisprudence - Meaning of Composite Supply The concept of 'composite supply' is a global concept and has been discussed in various countries. Provided below is relevant extract from various countries regarding the same: 2.4.1. Australia In terms Of Goods and Services Tax Ruling 2001 /8 issued under Australia, Composite Supply means a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. Composite supply is treated as supply of one thing. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT'). In the case of Card Protection Plan Ltd. Vs. C E Commrs [1994] BVC 20 , the ECJ held that 'a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied . Per the above principal, in the present case also, what the customer wishes or intends to obtain is the main supply of solar power generating system and services are only a means to enjoy the same and hence, services are incidental to the main supply of goods. 2.4.3. United Kingdom Under the UK VAT laws, a multiple supply (also known as a combined or composite supply) involves the supply of a number of goods or services. The supplies may or may not be liable to the same VAT rate. If a supply is seen as insignificant or incidental to the main supply, then for the purposes of VAT it is usually ignored - the liability is fixed by the VAT rate applicable to the main supply (or supplies). In the case of Tumble Tots (UK) Ltd v R C Commrs [2007] BVC 179. Members of a playgroup received a T-shirt (children's clothing is potentially zero rated) and a magazine (potentially zero ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of parties is to procure a solar power generating system to which the activity/ services of erection/ commissioning etc are only incidental. In the present case, even if the contract qualifies as composite contract, the principal supply would be that of provision of solar power generating system and not provision Of works contract services. This is because as highlighted above, the principal supply or dominant intent is provision of goods as solar power generating system and hence, entire contract should be taxable as the principal supply itself. 5. Whether benefit would also be available to sub-contractor 5.1 In certain cases, the turnkey contractor engages various sub-contractors (manufacturers/ supplies/ subcontractors) who further supply the goods to such contractor or engage in provisioning of certain portion of the turnkey contract. 5.2 Further, there may be cases wherein the Developer divides the EPC contract between two separate EPC Contracts of construction of solar power generation system. 5.2 Notification no. 1/2017-lntegrated Tax (Rate), which provides concessional rate on solar power generating system does not specify the persons who would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power Plant. Further, Clause B of the draft Agreement provides as following: B. Owner has appointed the Contractor for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning of the Plant as per scope defined in relevant schedule of this Contract, as per Applicable Law and Technical Specifications 1.8. Additionally, reference can be made to the Schedule I of the agreement defines the scope of work to be executed by the Contractor ie the Applicant. The said schedule clearly outlines the entire scope to be undertaken and provides that the Applicant would be responsible for supply of Solar Power Plant. The Contractor would be responsible for Supply of Equipment and undertake all necessary activities ancillary to such supplies (such as erection, civil work etc) to ensure complete supply of Solar Power Plant... 1.9. Typically the said contract is entered into for supply of solar power generating system which involves supply of equipment and undertaking certain services. Separate prices are specified for different equipment which are supplied under the agreement for commercial convenience suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plant and make it an immovable property. 1.13.2 Reliance is placed on a judgment by the Hon'ble Supreme Court in the matter of Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998 1 SCC 400) = 1997 (12) TMI 109 - SUPREME COURT OF INDIA , wherein in case of a paper making machine, it was held that merely because the machinery was attached to the earth for operational efficiency, it does not automatically become an immovable property. If the appellant wanted to sell such goods, it could always remove it from the base and sell it. Relevant extract from the judgment is reproduced below for ease of reference: 'The Tribunal held that the machine was attached to earth for operational efficiency. The whole purpose behind attaching the machine to a concrete base was to prevent wobbling Of the machine and to secure maximum operational efficiency and also for safety. The tribunal further held that the paper making was saleable and observed if somebody to purchase, the whole machinery could be dismantled and sold to him in parts . In view of this finding of fact, it is not possible to hold that the machinery assembled and erected by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pauk, Madras v. K. Venkataswami Naidu (AIR 1955 Mad 620, 1955 CriLJ 1369), held that if something is temporarily embedded in the earth, it cannot be termed as immovable property. The relevant extract of the judgement is reproduced as under: '2. The answer to the question depends upon whether the equipment of the touring cinema would fall within the category of immoveable Property. We have no hesitation in holding that it does not. In the question referred to us, the properties are described as collapsible and capable of being removed. In the very nature of things, properties of that nature cannot be immoveable property. The expression permanently fastened occurring in the question is a little misleading Actually some of the machinery or the poles of the tent may be imbedded in the earth, but they are imbedded only temporarily and not permanently, If they were permanently fixed, the equipment would not form part of a touring cinema. 1.13.5. Further, it is worthwhile to note that the Madras High Court in the matter of Sri Velayuthaswamy Spinning Mills v. The Inspector General of Registration and the Sub Registrar (2013 (2) CTC 551), while deciding whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of transferring the Plant: (xiii) Any costs incurred by the Contractor for any changes made in the land/premises of the Owner, while development of Plant, due to the requirement of transferring the Plant to another location, would be borne by the Owner. Such costs incurred would be charged by the Contractor from Owner separately and does not form part of the Contract price highlighted in Schedule 3 of the Contract. The amount to be charged due to the changes will be mutually decided between the parties. 1.13.9. Reliance is also placed on the Chartered Engineer Certificate which clearly provides that Solar Power Plant if required can be shifted to another location and is highly moveable. The same is annexed herewith as Annexure C. 1.13.10 The Central Board of Customs and Excise ('CBEC'), vide 37B Order No. 58/1/2002 - CX issued under F.No.154/26/99 - CX4 dated 15 January, 2002 ('the Circular'), after realizing the anomaly in case of plant d machinery assembled at site, issued the Circular clarifying the following: (v) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply will be treated as supply of such principal supply. The relevant para of Section 8 of the CGST Act provides as follows: 8. Tax liability on composite and mixed supplies, - The tax liability on a composite or a mixed supply, shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply 1.17. Per the above, the essential conditions for a supply to qualify as composite supply can be highlighted as under: a. 2 or more taxable supplies of goods or services or both b. The taxable supplies should be naturally bundled c. The taxable supplies should be supplied in conjunction with each other d. One taxable supply should be a principal supply In such case, the supply which is the principal supply is treated as the main supply and the entire transaction is taxed as per the principal supply. 1.18. The Applicant would like to highlight that mounted Photovoltaic module (PV module) comprises around 60%-70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in any manner dilute the responsibility of the Contractor. 1.23. Further, there is a definition in the draft agreement, Major Equipment [1.1.67] which clearly identifies PV Modules as the Major Equipment Major Equipment(s) means PV solar modules which is an assembly of solar cells that helps in converting solar power into electricity and all other Equipments specified in Schedule 3 (Contract Price and Payment Milestones) for facilitation of Payment under this Contract; 1.24. Reference in this regard is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics Instruments Ltd. vs. Commr. Of C. Ex., Jaipur wherein a Solar Photovoltaic Module was held to be a Solar Power Generating System. Relevant extract of the judgement is reproduced below for ease of reference : 7. The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence whole system is a Solar Power Generating System and is entitled for the benefit of notification. Therefore, the denial of benefit of notification by the adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced verbatim, could be seen thus- In support to their claim that EPC contract for construction of solar power plant is purely a Composite Supply and it should not be treated as works contract, they have submitted draft agreement, various case laws. In this connection, I am submitting by submission as under: M/s Giriraj Renewables Pvt Ltd is engaged in the work of construction of a solar power plant. This work is taken on Engineering, Procurement and Construction (EPC) basis. The dictionary meaning of ECP contract is Engineering, Procurement, and Construction (EPC) is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner. Section 2(1 19) of GST Act defines works contract as a contract for building construction fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioner of any immovable property wherein transfer of property in goods (whether as goods or in some other form) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, question of principal supply does not arises and so GST tax rate of Solar Power Generating system is not applicable to EPC contract. As the principal contract is treated as works contract, applicability of concessional rate of tax to the subcontractor does not arise. 04. HEARING The case was taken up for hearing on dt.17.01.2018 and on dt.12.02.2018 when Sh. Prashant Agarwal (Partner, PricewaterhouseCoopers Pvt. Ltd.) attended and reiterated the contention as made in the written submission. During the hearing on dt.12.02.2018, a sample copy of the agreements in such types of contracts was submitted and our attention was invited to various clauses therein. Sh. Pravin Chavan, the concerned officer holding the post of State Tax Officer was also present during both the hearings. He requested time till dt.15.02.2018 to give a written submission in the matter 05. OBSERVATIONS We have gone through the facts Of the case. The issue put before us is the classification of a future transaction which would be effected on the lines of a sample agreement copy as tendered during hearing. It has been submitted by the applicant that the sample agreement is customarily the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be restricted to immovable property only. It is with this distinctive difference that the applicant puts before us the contention that the transaction of supply of the Solar Power Plant ( SPP as would be henceforth referred to) does not result into transfer of an 'immovable property' as the SPP is a 'movable property'. With this background, we proceed to see the clauses of the agreement: WHEREAS: Owner intends to develop a 60 MWAC/ 81 MWDC solar power plant ( Plant / Plant ) in------------ Karnataka ( Plant Site ), for onward sale of power to its consumers. Owner has appointed the Contractor for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning (as defined later) of the Plant as per scope defined in relevant schedule of this Contract, as per Applicable Law and Technical Specifications. The Contractor is an entity involved in the business of supply and setting up of complete solar power generating system in various states of India. The document in title of the equipment imported and supplied is directly transferred to the Owner by way' of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into electricity and all other Equipments specified in Schedule 3 (Contract Price and Payment Milestones) for facilitation of Payment under this Contract; 1.1.77. Plant shall have its meaning under Recital B; 1.1.78. Plant Site shall have its meaning under Recital B; 1.1.80. punch List shall have its meaning under Clause 15.6; 1.1.81. Punch List Completion shall have its meaning under Clause 15.6; 1.1.87. SPP shall mean 60MWAC/ 81MWDC Solar Power Plant to be Supplied, installed and commissioned at the plant site by the Contractor, which is forming part of the solar power generating system; 1.1.89. Supply means supplying of Equipment to the Plant Site in accordance with the Technical Specification and the terms of this Contract, for the purposes of installation, testing and Commissioning as part of the Works; and the term Supplied shall be construed accordingly; 1.1.96. Works mean the work to be performed by the Contractor including mainly (not limited to) supply of the equipment and also ancillary activities of installation, testing and Commissioning of the Plant, as per the terms of this Contract; 3. SCOPE OF THE CONTRACT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance of (any part or whole) of the Scope of Contract by the Contractor, and shall not relieve the Contractor of any of its obligations under this Contract, solely on the basis of such aforesaid payments being made by the Owner. 6.6. Final Payment The Contractor expressly agrees that the final payment shall be released by the Owner only upon completion of the necessary obligations as set out in the final Payment Milestone as set out under Schedule 3 (Contract Price and Payment Milestones). 7.4. Performance Bank Guarantee Upon Commissioning of the Plant, the Contractor shall provide an unconditional and irrevocable performance bank guarantee to the Owner for 5% (five percent) of the Contract Price from a nationalized or scheduled commercial bank ( PBG ) with respect to the Contractor's Defects Liability obligations under this Contract, which shall be valid for a period of 1 (one) year from the date of Commissioning of the Plant. The Performance Guarantee shall be immediately payable on demand and the Owner shall have the right to drawdown the PBG to recover any amounts due and payable by the Contractor in accordance with the terms of this Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being present at the Commissioning ( Notice Of Commissioning ). In this regard, the following shall be the pre-requisites for achievement of Commissioning: (a) successful installation, testing and Commissioning including generation of electrical energy and charging of 100% DC capacity of Relevant MW size of the Plant; (b) the Plant is mechanically and electrically completed meeting minimum functional, technical and safety requirements; (c) the data acquisition system has been commissioned and able to log data as required by the utility; (d) that the Plant has been continuously running for a minimum period of 3 days except for minor faults and Grid non- availability. (ii) Upon receipt of the Notice of Commissioning, the Owner or Owner's Representative shall remain available for witnessing Commissioning. Upon inspection of the Commissioning, the Owner shall either: endorse the commissioning certificate ( Commissioning Certificate ) certifying that the Works (or the Works in respect of any particular unit of the Plant) is Commissioned, as per the format in Schedule 9; or notify the Contractor in writing, detailing the shortfall or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and function of the Plant as envisaged under the terms of this Contract and/or which would prevent the achievement of Functional Guarantees. (ii) The Owner shall within 10 (ten) Business Days of receipt of notice under Clause 15.6 (i) from the Contractor, inspect and verify that all items in the Punch List have been duly completed by the Contractor as per Technical Specifications and terms of this Contract. In the event that the Owner notifies any Defect or any failure in implementing any Punch List item, then the Contractor shall promptly rectify such Defect or carry out the item so that it confirms to Technical Specification and terms of this Contract. If that the Punch List items have been rectified and/or completed, the Owner shall within 7 (seven) Business Days thereafter endorse the punch list completion certificate ( Punch List Completion Certificate ), as per the format in Schedule 10. The date of endorsement of the Punch List Completion Certificate shall be the date when the SPP is finally accepted by the owner ( Final Acceptance Date ). However, if the Punch List items have not been completed within the aforesaid time period, the Contractor shall be required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities accruing in relation to all those equipment shall remain with the Contractor tilt the completion of the Plant. 20.2. After the completion of the Plant, the risk and liabilities shall shift to the Owner after completion certificate is duly issued. 22.1. Risk, Custody and Care All risk of the Contractor in the Equipment's, Work and SPP shall stand transferred to the Owner from and upon Commissioning of the Relevant MW size of the Plant. However, Contractor shall be responsible for any damage in Equipment (excluding Free issue Material), Work and Plant due to any act by the Contractor or its representatives till Punch List Completion. 22.2. Title Transfer All the risk and title of the Contractor in the Equipment and the Plant forming part of the Supply), including every proprietary interest in the Equipment, shall be transferred to the Owner upon Commissioning of the Plant. SCHEDULE 1 SCOPE OF WORK The Contractor would be responsible for Supply of Equipment and undertake all necessary activities ancillary to such supplies (such as erection, civil work etc) to ensure complete supply of Solar Power Plant. Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is undisputed that duty was paid in respect of the components manufactured at its workshop in Chennai, but no duty was paid on manufacture of the aforesaid mudguns and drilling machines which were erected and Commissioned on site. We can now look at how the judgment has been delivered - 8. In their reply to the show-cause, the respondents explained the processes involved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719-cubic-metre capacity and the size of its outer diameter is 10.6 metres, and the height 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticing these facts observed that it is a physical and engineering impossibility to assemble mudguns or the tap hole-drilling machines elsewhere in a fully assembled condition and thereafter erect or install the same at a height of 25 feet on the cast floor of the blast furnace. She found that even the adjudicating authority conceded the fact that the equipments have to be assembled/erected on the base frame projection of the furnace. She also accepted the submission urged on behalf of the appellant that if the machines are to be removed from the blast furnace, they have to be first dismantled into parts and brought down to the ground only by using cranes and trolley ways considering the size, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole-drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers (P) Ltd. [(1989) 1 SCC 172 : 1989 SCC (Tax) 64 : (1988) 38 ELT 566 : 1988 Supp (3) SCR 1] and also noticed the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Each tank rested on a foundation of sand having a height of 2 feet 6 inches with four inches thick asphalt layers to retain the sand. The steel plates were spread on the asphalt layer and the tank was put on the steel plates which acted as bottom of the tanks which rested freely on the asphalt layer. There were no bolts and nuts for holding the tanks on to the foundation. The tanks remained in position by their own weight, each tank being about 30 feet in height, 50 feet in diameter, weighing about 40 tons. The tanks were connected with pump house with pipes for pumping petroleum products into the tank and sending them back to the pump house. The question arose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allowing the appeal this Court observed: (SCC p. 33, para 32) 32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o earth and installing them to form a part of the tube mill and purchasing certain components from the market and assembling and installing them on the site to form part of the tube mill which was also covered in the process of welding facility. After noticing several decisions of this Court, the Court observed that the twin tests of exigibility of an article to duty under the Excise Act are that it must be a goods mentioned either in the Schedule or under Item 68 and must be marketable. The word goods applied to those which can be brought to market for being bought and sold and therefore, it implied that it applied to such goods as are movable. It noticed the decisions of this Court laying down the marketability tests. Thereafter this Court observed: (SCC p. 376, para 5) The basic test, therefore, of levying duty under the Act is twofold. One, that any article must be goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immovable and do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 (8) TMI 86 - SUPREME COURT OF INDIA ] a question arose regarding excisability of turbo alternator. In the facts of that case, it was held that installation or erection of turbo alternator on a concrete base specially constructed on the land cannot be treated as a common base and, therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be an excisable goods falling within the meaning of Heading 85.02. In reaching this conclusion this Court considered the earlier judgments of this Court in Municipal Corpn. of Greater Bombay [1991 supp (2) SCC 18 = 1990 (11) TMI 407 - SUPREME COURT ] , Quality steel Tubes [(1995) 2 SCC 372 : (1995) 75 ELT 17] = 1994 (12) TMI 75 - SUPREME COURT OF INDIA and Mittral Engg. Works (P) Ltd. [(1997) 1 SCC 203 : (1996) 88 ELT 622 = 1996 (11) TMI 66 - SUPREME COURT OF INDIA ] as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. CCE [(1998) 1 SCC 400 : (1998) 97 ELT 3 = 1997 (12) TMI 109 - SUPREME COURT OF INDIA ] . This Court observed: (SCC pp. 35-36, para 14) 14. There can be no doubt that if an article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case in hand and the facts in Mittal Engg. [(1997) 1 SCC 203 : (1996) 88 ELT 622] and Quality Steel Tubes [(1995) 2 SCC 372 ; (1995) 75 ELT 17] and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor is it practicable to shift them frequently. Counsel for the appellant submitted before us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate. It is not necessary for us to express any opinion as to whether the mudguns and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of goods within the meaning of the term in the Excise Act. Thus, it can be seen that the Hon. Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four manufacturing units of having wrongly declared and classified parts and components being manufactured by them as complete plants/systems, even when they were merely parts and components and not machines or plants functional by themselves. The erroneous classification and declaration was, according to the notice, intended to avoid payment of higher rate of duty applicable to parts of such plants and machinery at the material point of time. The notice also pointed out that the units manufacturing parts and components of the plants had availed benefit of exemption wrongly and in breach of the provisions of Rules 9(1) and 173-F and other rules regulating the grant of such benefit. 6. Insofar as Solidmec marketing company was concerned, the show-cause notice alleged that Solidmec was engaged in the manufacturing of asphalt batch mix and drum mix/hot mix plants by assembling and installing the parts and components manufactured by the manufacturing units of the group. According to the notice the process of assembly of the parts and components at the site provided by the purchasers of such plants was tantamount to manufacture of such plants as a distinct product with a new na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earth as in the case of walls or buildings or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1 = feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition, Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the option to pull it down. A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built. 30. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the and or building. Machinery for metal-shaping and electro-plating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty even when the embedding was meant only to provide a wobble free operation of the machine. Repelling that contention this Court held that just because the machine was attached to earth for a more efficient working and operation the same did not per se become immovable property. 34. The Court observed: (Sirpur Paper Mills Ltd. case [(1998) I SCC 400] , SCC p. 402, para 5) 5. Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine Can be sold in the market, The Tribunal has found as a fact that it can be sold In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on pipes, loose bend angles, coil supports, railing stands, intermediate platforms, drive frame railings and flats, oil trough, worm wheels, shafts, housing, stirrer arms and support channels, pipes, floats, heaters, ladders, platforms, etc. The Court noted that the mono vertical crystallisers have to be assembled, erected and attached to the earth on a foundation at the site of the sugar factory and are incapable of being sold to the consumers in the market as it is without anything more. 41. Relying upon the decision of this Court in Quality Steel Tubes (P) Ltd 2 SCC 372 : (1995) 75 ELT 17] , the erection and installation of mono vertical crystallisers was held not dutiable under the Excise Act. This court observed that: [Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622] , SCC p. 208, para 10] 10 The Tribunal ought to have remembered that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were. This decision also, in our opinion, does not lend any support to the case of the assessee in these appeals as we are not dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. Our answer to Question 1 is accordingly in the affirmative. Thus, we see how the Hon. Courts have evolved the term 'immovable property' when faced with the question of what constitutes movable and immovable property. It is seen that the applicant, too, has referred to this decision but has failed to appreciate the decision in the correct sense. Though not issued for the purposes of the GST Act, we may as well mention herein the reference by the Hon. Bombay High Court in M/s. Bharti Airtel Ltd. (Earlier known as Bharti Tele-Ventures Ltd.) v. The Commissioner of Central Excise (2014 SCC OnLine Bom 907 : (2015) 77 VST 434) with regard to a Circular being issued by the Central Board of Excise Customs in a decision of the same Hon. Bombay High Court - (i) In the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner further held that with the assembly of various equipment installed what emerges is a commodity with a distinct name, identity, character and use; distinct from inputs and classifiable under chapter 8525 of Central Excise Tariff and the same is distinct and separate from the various equipments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was nor immovable property. 8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS BSCs) Which are networked With the operation support subsystem (constitued MSCs) which networked with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is whether this new commodity is marketable. We have already considered the test of marketability as laid down by the Supreme Court in Triveni Engineering India Ltd. (supra) and also Moti Laminates Pvt. Ltd. (supra). At this stage, we also note that we proceed on the footing by ignoring the second finding of marketability recorded by the Tribunal namely that BTS/BSC is not marketable as licence is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself All the components of the new product cannot be shifted as an illustration the room housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and has a permanent location. Such a plant would, therefore, have an inherent element of permanency. Further, here the output of the project i.e the power would be available to an identifiable segment of consumers. Thus, this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the Plant elsewhere at frequent intervals. The project would be using goods which would be imported. Are such high end equipments frequently dislocated? Would there not be damage to the materials if moved places frequently and if so, would it perform as effectively as it would have when without damage? The questions itself would give the answers. The definition of the word Commissioning as found in the agreement brings out the enormity of the scale of operations and how the transaction would fall in the scope of an immovable property The agreement clauses also refer to a definition of GO - means government order issued by Karnataka Renewable Energy Development Limited for development of the Plant. Such a renewable energy project would invariably have an essential element of permanency. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign, procurement, supply, development, testing and Commissioning is a works contract in terms of clause (119) of section 2 of the GST Act. The case laws cited by the applicant in support of the argument that the transaction is not related to 'immovable property' need not be dealt with as we have so elaborately discussed the very case law in Solid and Correct Engineering Works (cited supra) on which reliance has been placed by the applicant. And we have observed earlier that the applicant has not understood the case law in the correct sense. Further, we have to observe that each judgment has to be understood in terms of the facts as available therein. The applicant has not appreciated the case laws in the sense in which they should have been understood. Like in Solid and Correct Engineering Works (cited supra), the Hon. Court has held the product as 'movable property' for the reason that the plant was not intended to be permanent at a given place and the plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. Such are not the facts of the instant case as has been explained above. We see that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of the applicant that the impugned transaction is a transaction of supply of 'goods'. We have elaborately dealt with earlier as to how the impugned transaction is a 'works contract' u/ s 2(119) the GST Act and further that, that para 6 of SCHEDULE II [ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES] treats works contracts u/ s 2(119) as supply of 'services'. In view thereof, there arises no occasion to visit the entries prescribing tax rates for 'goods'. Since the transaction is treated as a works contract and not as a composite supply , there would be no relevance of principal supply . And therefore, there arises no occasion to answer the question as to what would be the principal supply in the impugned transaction. We proceed to the third question. Question 3 Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors? We find that the applicant has informed that in certain cases, the contractor engages various sub-contractors (manufacturers/ supplies/ sub-contractors) who further supply the goods to such contractor or engage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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