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TMI Blog2018 (5) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... try no.3(ii) of the Notification No.8/2017-Integrated Tax (Rate) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) or the Notification no. 11/2017 - Central Tax / State Tax (Rate) under the CGST Act and MGST Acts. The rate of tax would be 18% under the IGST Act and 9% each under the CGST Act and the MGST Act, aggregating to 18% of CGST and MGST. Whether parts supplied on standalone basis (when supplied without PV modules)would also be eligible to concessional rate of 5% as parts of solar power generation system? - applicant argues that since the concessional rate of 5% [as clarified to be under Notification no. 1/2017-Integrated Tax (Rate)] is provided to renewable energy products and parts thereof, the same should be applicable to all suppliers providing such products - Held that: - sr. no.234 of Schedule I of Notification No.1/2017 - Integrated Tax (Rate) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) which states is under the notification prescribing the tax rate on 'goods' - We have to observe that the facts of the transactions have to be seen in terms of what the sub-contracting agreement says, what has been supplied, whether the ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar power generation system? Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors? At the outset, we would like to make it clear that the provisions of both the CGST Act and MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to tire CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, hence fourth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- [A] AS SUBMITTED ALONGWITH APPLICATION Statement of the relevant facts having a bearing on the aforesaid clarification(s)/transaction(s) 1. M/s. Fermi Solar Farms Private Ltd. (hereinafter called as Fermi ) is engaged in operation of renewable energy power plant projects. These typically include operation of solar power plants set up across India for generation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, power transformers, inverters, SCADA, complete switchyard, inverter transformers, connectors, earthing lines etc. 7. Please note that the following two scenarios can arise in this context: Case 1 - All goods may be supplied by EPC contractor - In such case, entire contract is executed by EPC contractor and all goods required are supplied by the contractor (including PV modules). Case 2 - Certain goods supplied by EPC contractor - In such case, modules may be procured directly by Project Developer and balance goods would be supplied by EPC Contractor (i.e. the project Developer procures/ imports PV modules on its own and only awards contract for balance goods) 8. A diagrammatic illustration of a solar power system is provided. Statement containing the applicant's understanding of rate of tax in respect of the aforesaid clarification(s)/transaction(s) 1. Legal provisions and applicability 1.1 Rate of solar power generating system Under GST regime, various rates have been prescribed for goods and services. Per, Notification No. 1/2017- Integrated tax (Rate) (The notification is attached herewith as Annexure -A), dated 28th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the definition of composite supply, it emerges that the following conditions must be satisfied for a supply to qualify as a composite supply :- the supplies being made must be taxable supplies the supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business there must be a principal supply 1.4 Our understanding in present context Per the above legal provisions, we understand that in present case, since there are separate contracts for supply of goods and services, the taxability should be as under: Contract for goods wherein solar PV modules are also supplied- Entire contract should qualify as supply of solar power generating system and should be taxable at 5% Contract for goods wherein solar PV modules are not supplied - In such case, the goods which qualify as parts of solar power generating system and are covered under heading 84,85 or 94 should be eligible to concessional rate of 5% Contract for services - Entire contract would be service contract taxable at 18% 2. Meaning of term 'solar power generating system' and applicability when all goods (including PV modul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, Hyderabad it was held that In the present case, the appellants have claimed exemption in respect of inverter charger card as solar power generating system. The appellants actually manufactured SPV lantern. The above lantern required electricity for its working. it is possible to convert solar energy to electricity with the help of inverter charger manufactured by the appellants. The Dy. General Manager has certified that the inverter merger constitutes solar power generating system as it performs the function of generating the required high frequency AC power from Sun-light with, the help of SPV module and supplying it to the compact fluorescent lamp of a solar lantern. In view of the above, expert opinion, we hold that the impugned item can be considered as solar power generating system and is entitled for the benefit of the exemption Notification. Therefore, we allow the appeal with consequential relief. 2.8 In M/s Phenix Construction Technology vs. Commissioner of Central Excise and Service Tax, Ahmedabad-II [2017-TIOL-3281-CESTAT-AHM] the question under consideration was whether the structures and parts of structures cleared for initial setting up of solar power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above, a conclusion can be drawn that where a contract consists of supply of various goods all of which are intended for setting up a solar power plant, the entire contract should be treated as a composite supply for which the principal supply is providing a solar power generating system and hence, entire supply contract (which would include PV modules as well as all other goods ) should be taxable at 5% as 'solar power generation system'. It is further submitted that Ministry of New and Renewable Energy ('MNRE') in various instances has also approved entire BOQ consisting of various parts e.g. cables, module mounting structures, spares, etc. as essential to solar power generating system and hence the concessions applicable have been extended to such parts. Drawing a corollary, concessional rate of 5% should be applicable on all the goods approved under BOQ by MNRE as well. 3. Taxability of parts of solar power generating system 3.1 In certain cases, not all parts of solar power generating system are supplied by EPC contractors (as some parts may be procured separately). For example, PV modules may be procured by the Project Developer directly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. This was also ratified by the Supreme Court [2015 (315) ELT A82 (SC)] In Elecon Engineering Co. Ltd. Vs. Commissioner of Customs [1998 (103) ELT 395 (Tri)] the issue was whether power cables, earthing cables, wind farmer computer will be eligible for benefit of exemption under Notification No. 64/94 - Cus. The Tribunal held that power cables and control cables together form part of inside cabling of wind turbine controller. Since, control cables are eligible for exemption has to be extended to power cables also In Pushpam Forging Vs. CCE, Raigad [2006 (193) ELT 334 (Tri.- Mumbai)]. the Tribunal held that flanges are parts of windmill tower which is inturn a part of Wind Operated Electricity Generators. Once tower is accepted and held to be a part of WOEG, flanges of the tower will be a part of the whole Wine Operated Electricity Generator In CCE Vs. Megatech Control Pvt. Ltd. [2002 (145) ELT 379 (Tri. - Chennai)] , the Tribunal held that control panels are part of wind operated electricity generators and are meant specifically for wine mill and will be eligible for benefit. Vide Circular No. 1005/15/2015 - CX dated October 20, 2015. the CBEC had clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy products and parts thereof, the same should be applicable to all suppliers providing such products as long as it can be established (through certification or otherwise) that these are to be used in solar power generation system. This would also be in line with practice under erstwhile excise law wherein benefit was extended to sub-contractors also through MNRE certification. 5. Taxability of contract for services 5.1 A separate contract is awarded to the EPC contractor for provision of services which consists of the following:- Construction of complete buildings including control rooms and inverter rooms, roads and drainage system, boundary walls/ fencing, bore walls All civil and foundation works for switchyard, solar plant and all other equipment Site enabling facilities Leveling and grading Erection, commissioning and testing for solar modules, mounting structures, power transformers, inverters, SCADA, complete switchyard, inverter, transformers, connectors, earthing lines etc. 5.2 We would like to humbly submit that such contract is a separate contract for services itself and hence, has to be taxed on independent basis. In our understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of setting up solar power generating system. 2) Agreement for engineering and construction services to be provided by supplier to the buyers. (I) Fermi Solar Farms Pvt. Ltd supplies following main equipment to set up solar power generating system. 1) Solar panel consisting of solar cells, i.e. solar photovoltaic cells- 2) Inverter to convert DC power to AC power- 3) HT Switchgear, isolator, circuit breaker. Auxiliary transformer, main transformer- 4) Transmission line- (II) Fermi solar farms Pvt. Ltd supplies following engineering and construction services to the buyer for setting up solar power generating system. 1. Earthing 2. Inverter Room 3. Cable routing 4. Solar panel foundation arrangement. 5. Arrangement of roads and drains. (III) As per Notification dates 15.11.2017 chapter heading 84,85, or 94 following renewable energy device Parts for their manufacture are taxed@ 5% a. Bio-gas plant b. solar power based devices c. solar power generating system d. wind mills, wind operated Electricity Generator e. Waste to energy plants- f. solar lantern/lamp g. Ocean wave/tidal waves energy devices h. Photo volta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eCoopers Pvt. Ltd.) attended and reiterated the contention as made in the written submission. During the hearing on dt. 12.02.2018, copy of the agreements in such types of contracts was submitted and our attention was invited to various clauses therein. The concerned officer holding the post of State Tax Officer was absent on both the occasions. However, a written submission has been reproduced above. 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 sample agreement copies as have been tendered during hearing. It has been submitted by the applicant that the sample agreement is customarily the way in which transactions of the nature as before us are effected. There are two sets of agreements which have been stated to be for - 1. Contract for supply of equipments 2. Contract for supply of services Question no.1 has been framed in respect of these contracts. To answer the question, we look at each of the above agreements thus - CONTRACT CONTENDED TO BE FOR SUPPLY OF EQUIPMENTS The title of the agreement says AGREEMENT FOR SUPPLY O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Acceptance means, the date of commencement of commercial operations of the Plant, provided that if at any point with respect to the supply items are pending as on the date of commencement of commercial operations, the Final Acceptance shall be the date on which all such pending supplies are completed in accordance with the terms of this Agreement, which date shall be intimated in writing by the Buyer to the Supplier; Other Contractors shall mean other contractors engaged by the Supplier to implement, operate and maintain the Plant: Plant/s shall have 60 MW (AC) Solar PV Power Project at __________ , Karnataka; Plant Completion shall mean the date of commencement of commercial operations of 60MW-AC capacity of the Plants and which shall in no event be later than or such other extended date as notified by the Buyer in writing. Plant Site shall mean all those parcels of land located at district ____ in the state of Karnataka on which the plant shall be set up; Scheduled Project Completion Date shall mean the scheduled commissioning date of the Project as notified in writing by the Buyer to the Supplier and which shall in no event be lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided in this Agreement. All Equipments, Spare Parts and Materials supplied shall be new and without defects. Separate prices are specified for different equipments which are supplied under the agreement for commercial convenience. However, as a general trade practice all the equipments which are being are supplied under the agreement are supplied together for setting up a solar power generating system. Further, the document in title of the equipment imported and supplied is directly transferred to the owner by way of High Seas Sale for commercial convenience and in order to avail benefit of concessional customs duty as the benefit of concessional rate of customs duty is only available to the project developers. However, as per this agreement, the risk and liabilities accruing in relation to all those equipment shall remain with the Supplier till the completion of the Project. After the completion of the project, the risk and liabilities are shifted to the Lead Contractor. After the completion of the project, the risk and warranties are shifted to the Owner. 2.1.2. Inspection and Expediting The Supplier shall perform all inspection, expediting, and quality surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtly off shore supply and partly on shore supplies as detailed in Schedule A . The Supplier shall be obligated to adhere to the supply Schedule thereby agreed and any variation there from shall require the prior written consent of the Buyer. Provided that the Buyer may vary the Supply Schedule on account of occurrence of a Force Majeure Event or with prior written notice of 30 (thirty) days to the Supplier. In the event of such variation of such Supply Schedule by the Buyer, the Buyer shall be liable for and shall compensate the Supplier for additional costs agreed in writing by the Buyer on account of such change. 2.4.3 Inspection Not A Release Neither the inspection at the port of entry in India or following delivery at the Plant Site, no matter whether the Buyer's personnel have been present, shall release the Supplier from any of the obligations or Warranties stipulated in this Agreement. 3. SUB-VENDORS 3.1 Subvendors and Equipment Suppliers 3.1.1 All consultants and Sub-vendors providing Equipment, Spare Parts and Materials to the supplier under a subcontract with the Supplier in connection with the Scope of Supplies are herein referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expiry of the afore-mentioned Wait Period, be obliged to pay the Supplier such amounts of the Contract Price as were due and payable on the start of commercial operation of the plant in accordance with Schedule B hereof. 16. INDEPENDENT SUPPLIER 16.1 Supplier as Independent Supplier The Supplier shall be an independent supplier with respect to the Equipment, Spare Parts and Materials and each part thereof, and neither the Supplier nor its Sub-vendors nor the employees of either shall be deemed to be agents, representatives, employees or servants of the Buyer in the performance of the Supplier's obligations hereunder, or any part thereof, or in any manner dealt with herein. Similarly, neither the Buyer nor its Sub-vendors nor the employees of either shall be deemed to be agents, representatives, employees or servants of the Supplier in the performance of the Buyer's obligations hereunder, or any part thereof, or in any manner dealt with herein. The Buyer shall not have the right to control or any actual, potential or other control over the methods and means by which Supplier or any of its agents, representatives, the Sub-vendors or employees conducts its inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de but not limited to the following: Complete supplies required for the construction of the 60MW AC/81 MW DC Solar PV project shall be in the scope of the supplier. The major areas are covered here below. However, it is understood and agreed that any item not listed out below, but required for the completion of the project shall be in the scope. OFFHORE SUPPLIES: - Delivered at Destination port in India a. Solar Modules, which are an assembly of solar cells that helps in converting solar power into electricity. Solar modules constitute more than 60% of the solar power generating system, hence, qualify as one of the most significant parts in the SPP - Delivered at Project Site directly by way of High Seas Sale ONSHORE SUPPLIES: - Delivered at Project site (these supplies constitutes ~20-30% of the entire system) Module mounting Structure Inverters DC Cable PV Connectors and Y connectors Pre fabricated Inverter Rooms (if applicable) Power Transformers Complete Switchyard, Bay extension and remote end works as applicable. Inverter Transformers Auxiliary Transformers 110 kV Transmission line as per connectivity approval SCB, PV Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LE- J SPECIFICATIONS Specifications/ Design Basis for various equipments shall be mutually agreed between Supplier and Buyer during the early engineering period . However, Supplier agrees and confirms that all equipment shall be as per latest engineering/industry practice and shall conform to relevant IEC/IS. SCHEDULE -N LIST OF APPLICABLE PERMITS The parties having the primary responsibility to obtain permits / approvals from appropriate authorities are listed below. Part A: Buyer Permits 1. Import Export Certificate (IEC) 2. KPTCL approval for power evacuation 3. GST Registration Part B: permits to be obtained by the Supplier 1. Local transportation approvals 2. Permission for movement of capital goods A perusal of the above clauses from the agreement leads us to inferences thus - 1. The agreement very clearly mentions that the Buyer desires to purchases an end to end solar power generating system with various integral components as defined in schedule A from the Supplier. Thus, the Buyer has expressed a clear intent to purchase the solar power generating system with the various components and not the components me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Buyer. 6. The payment for this agreement also helps us to understand the nature of the agreement. We see that the payment is linked to the successful completion of the project. This should not have been the criterion if the contract was for supply of 'goods' only. We are convinced that the impugned contract is for supply of a solar power generating system, as a whole, and in addition, further responsibility in respect of execution and implementation of the Project/Plant is also proposed to be undertaken by the Supplier as per terms and conditions of the contract submitted before us. Having certain clauses in the agreement that the Supplier would supply only the equipments or goods would not change the nature of the contract. We need not even go beyond the agreement to look at the actual intention. We say so as clauses in the very agreement present a situation contrary to the claim being laid forth. As is commanded by the Hon. Courts, an agreement has to be read as a whole. Herein we could refer to the decision of the Hon. Bombay High Court in National Organic Chemicals Industries Ltd, v. State of Maharashtra, 2012 SCC OnLine Bom 2128: (2012) 54 VST 271 = 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract. After having gone through the relevant clauses, we are inclined to observe that the said agreement between the applicants and the Assam Gas was a works contract and it could not be divided into two parts, namely, contract to supply the pipes and a contract to lay down the pipelines. The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants in as much as the applicants were required to lay down the tranches and lay down the pipes which would be reaching at site. In order to comply with the contractual obligation cast on the applicants, the applicants were required to do various acts set out in clause 3 scope of work ultimately to see that the HDPE pipes are laid for transportation of natural gas. In our view, the acts to be committed by the applicants could not be divided into two parts, namely, supply of pipes and laying down the pipes. The payment terms set out in the clause 9 clearly indicates that the applicants were entitled to get money from Assam Gas depending upon the performance of various acts required to be done for the successful fulfilment of terms of the contract. The applicants were entitled to have mobil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantity of pipes which would be used to create the pipeline. Same is the case as regards the various items which are mentioned at Sr. No. 2 to 7 in annexure I. We are, therefore, inclined to accept the submission of learned advocate Mr. Joshi that monies payable to the applicants were in regard to the work to be carried out in its entirety. Learned advocate Mr. Joshi's submission with reference to the raising of invoices is required to be accepted to hold that the transaction between the applicants and Assam Gas was indivisible for the purposes of determining the liability under the said Act. A typical invoice at page 47 raised by the applicants was so as to comply with the provisions of the excise duty provisions; Similarly, a typical invoice being commercial invoice raised by the applicants is produced at page 50. The argument advanced by learned advocate Mr. Joshi that the applicants were obliged to raise the invoice at the time: of taking out the pipes out of the factory premises to comply with the excise duty provisions is required to be accepted. The said invoice at page 47, specifically mentions that the articles mentioned in the invoice are for home consumption. This w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occasion to link the payment to the completion of the Project. What more do we need to prove that the impugned agreement contended to be for supply of goods is actually a works contract involving engineering, design, procurement and commissioning of the solar power plant. Having satisfied ourselves that the impugned agreement is actually a works contract agreement, we look at the definition of 'works contract' under the provisions of the GST Act, 'Works contract' is defined in clause (119) of section 2 of the GST Act as - works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; It can be seen that works contract involves activities of building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification , repair, maintenance, renovation, alteration or commissioning. However, these activities are in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at various levels to melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one-metre thickness. Thus, the drilling machine has to drill a hole through one-metre thickness of the refractory brick lining. The drilling machine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in the nature of a concrete platform around ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 not 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 Name Tulaman Manufacturers (P) Ltd. [(1989) 1 SCC172: 1989 SCC(Tax) 64: (1988) 38 ELT 566: 1988 Supp (5) SCR 1 = 1988 (9) TMI 51 - SUPREME COURT OF INDIA ] and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CCE [(1993) 65 ELT 121 (cegat) = 1992 (10) TMI 188 - CEGAT, NEW DELHI ] which held that the issue of immovable property was never raised before the Manufacturers (P) Ltd. [(1989) 1 SCC 172 : 1989 SCC (Tax) 64 : (1988) 38 ELT 566 : 1988 Supp (3) SCR 1 = 1988 (9) TMI 51 - SUPREME COURT OF INDIA ] she found support for her conclusion in the decision of this Court in Municipal Corpn. of Greater B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in position by their own weight, each tank being about 30 feet in height 50 feet in diameter, weighing about 40tons. 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 shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the latter place? If the answer is yes to the former it must be a movable Property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. 22. Applying the permanency test laid down in the aforesaid decision, counsel for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 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 sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed. in the premises and embedded to earth ceased to be goods within meaning of Section 3 of the Act. 25. In Mittal Engg. Works (P) Ltd. v. CCE [(1997) I SCC 203 : (1996) 88 ELT 622 = 1996 (11) TMI 66 - SUPREME COURT OF INDIA ] this Court was concerned with the exigibility to duty of mono vertical crystall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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], Quality Steel Tubes [(1995) 2 SCC372: (1995) 75 ELT 17] and Mittal Engg. Works (P) Ltd. [(1997) I SCC 203: (1996) 88 ELT 622] as also the earlier judgment of this court in Sirpur Paper Mills Ltd. v. CCE [(1998) 1 SCC 400: (1998) 97 ELT 3] . This Court observed: (SCC pp. 35-36, para 14) 14. There can be no doubt that if an article is an immovable property, it cannot be termed as 'excisable goods' for purpose of the Act. From a combined reading of the definition of 'immovable property' in Section 3 of the Transfer of Property Act, Section 3(26) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the excise law. whether an article is permanently fastened to anything attached to the earth requires determination of both the intention as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case. 26. it was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 machine 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 Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it at another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of 'immovable property' as something attached to the earth. We will also look at the decision of the Hon. Supreme Court in the case of Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works [(2010) 5 SCC 122] . The facts in this case were thus- 3. M/s Solid and Correct Engineering Works, M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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 name, quality, usage and character emerged out of the said process. Resultantly, the end product, namely, asphalt drum/hot mix plants became exigible to Central excise duty, which duty Solidmec had successfully avoided The notice also proposed to levy penalties upon all the five concerns under appropriate provisions of the Central Excise Act. The Hon. Court has very elaborately dealt with the issue as can be seen thus - 22. Section 3 of the Transfer of Property Act, 1882 does not spell out an exhaustive definition of the expression immovable property . It simply provides that unless there is something repugnant in the subject or context, immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that a building imbedded in the earth is permanent and cannot be detached without demolition. imbedding of 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, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. It is nobody's case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of either the foundation or the land in which the same is imbedded. 26. In English law the general rule is that what is annexed to the freehold becomes part of the really under the maxim quidcquid plantatur solo, solo cedit. This maxim, however, has no application in India. Even so, the question whether a chattel is imbedded in the earth so as to become immovable property is decided on the same principles as those which determine what constitutes an annexati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 houses. 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 such as glasses and tapestry fixed by tenant, are not affixtures. 31. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reason: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be attached to the earth within the meaning of that expression as defined in section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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 immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. 38. Reliance was placed by Mr Bagaria upon the decision of this Court in Quality Steel Tubes (p) Ltd. v. CCE [(1995) 2 SCC 372: (1995) 75 ELT17] and Mittal Engg. Works (P) Ltd. v. CCE [(1997)1 SCC 203 : (1996) 88 ELT622]. In Quality Steel Tubes (p) Ltd. case [(1995) 2 SCC 372 : (1995) 75 ELT17] this Court was examining whether the tube mill and welding head erected and installed by the assessee for manufacture of tubes and pipes out of duty-paid raw material was assessable to duty under residuary Tariff Item 68 of the Schedule being excisable goods. Answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved 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 dealing with the case of a machine like mono vertical crystallisers which is permanently embedded in the structure of a sugar factory as was the position in Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622]. The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts in order to provide stability from vibrations during the operation. 42. So also in T.T.G. Industries Ltd. v. CCE [(2004) 4SCC 751 : (2004) 167 ELT 501], the machinery was erected at the site, by the assessee on a specially made concrete platform at a level of 25 ft height. Considering the weight and volume of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision of the Division Bench of this Court in the case of Commissioner of C.Ex. Mumbai-IV v. Hutchison Max Telecom P. Ltd., (2008 (224) E.L.T 191 (Bom.) , the issue which fell for consideration of the Division Bench inter alia was pertaining to transmission tower set up by the assessee and whether the setting up of the towers amounted to manufacture as the towers being a new product with a distinct name, characteristics and use and is distinct from the components used in the manufacture as contended on behalf of the Revenue. The Division Bench after making the following observations in paragraphs 7 to 9 held that the towers being not moveable, saleable and marketable, they would not be subject to excise duty. Paragraphs 7 to 9 reads as under:- 7. It is, therefore, clear that the goods must be excisable or that the goods covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lobal 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 the Public network. The entire sub systems of BTSs and BSCs or MSCs and the number of constituents would depend on the Geographical area covered by the Cellular Network and there is no fixed designation numbers to constitute a component of transmission apparatus. It is not necessary to set out the other facts in detail considering the the Tribunal has in extenso set out the facts. The Tribunal relying on para 20 in the case of Triveni Engineering India Ltd. (supra) on the test of marketability, held that the so called BTS/BSC site erected, installed and commissioned by the contractors of the company cannot be construed as marketable goods manufactured by the appellant since they cannot go to the market as such BTS/BSC site are not marketable. It also held that the test of marketability would also not be satisfied f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntennae 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 tire 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 housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different. Further, from the statement of Narayan as set out in the order of the Commissioner, it may be noted that he had stated that regarding installation of BTS the designing team after survey identified the location as per the requirements of the local coverage needs, determining the shelter location, fabrication of I-beam and pole location. It may be possible for us to agree that by installing or erecting, a new product comes into being with a different name in the market from its components. However, as discussed the test of marketability is not satisfied. The product cannot be shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Owner in accordance with the terms and conditions herein specified. (C) The Parties are entering into this Agreement to define their respective mutual rights and obligations and to lay down the terms and conditions of their understanding with respect to execution of the Work by the Contractor. 1.1 Definitions Addenda shall mean changes to the Work before the commencement of the Works; shall mean all plant, machinery, tools, vessels, material, vehicles including but not limited to solar photovoltaic modules and inverters necessary for the completion of the Work to be provided by the Owner; are all supplies, including consumables, used by the Contractor for performance of the Work of Plant; shall mean 60 MW (AC) Solar PV Power Project at Village - ___________ Karnataka; Work Completion Deadline shall have the meaning set forth in Schedule I of this Agreement; Work Completion Certificate shall mean the certificate to be issued by the Owner to the Contractor upon successful completion of Plant; Plant Completion shall mean the date on which installed modules are connected to the external Grid to begin commercial operations of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the event the Work (either in whole or in part) is to be executed by one or more of its Affiliates or Subcontractors, it shall cause and ensure that all such Affiliate(s) and/or Subcontractor(s) (as the case may be), agree to bind itself or themselves (as the case may be) to the terms of this Agreement and that appropriate legally binding agreement(s)/contract(s) are executed by the Contractor with such Affiliate(s) or the Subcontractors, the terms whereof shall be in conjunction and not in contravention to any of the term(s) or provisions of this Agreement. 3.3 In addition to the Work, the Contractor agrees and undertakes that it shall execute and perform all such acts, deeds, works and services as may be conducive, incidental, necessary and requisite for performance of its obligations under this Agreement and for the successful completion and commissioning of Plant on or before the agreed Work Completion Deadline respectively. The equipments shall be arranged by Owner and handed over to the Contractor for performing work as per defined scope. 3.4 The Contractor agrees that it shall at all times execute the Work in accordance with the terms of this Agreement and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.1 The Contractor agrees that it shall be responsible for carrying out, coordinating all tasks and responsibilities associated with the successful completion and commissioning of the Plant on or before the Work Completion Deadline. 13.5 The Contractor agrees and acknowledges that notwithstanding the issue of the Work Completion Certificate it shall not be absolved of its liability for any Defects in Plant (including but not limited to the Equipment and machinery) and Deficiency in execution of Work, even if such Defects and Deficiency existed on or before the issue of Work Completion Certificate. It shall also not affect in any manner any warranties or guarantees in relation to the Work or Plant. 13.6 The Contractor agrees and acknowledges that its liability shall not terminate upon the commencement of commercial operations and that it shall continue to be liable to rectify any Defect in the Plant and be liable and responsible for the Works done and Plant till the expiry of the Defects Liability Period. Upon identification of a Defect, the Contractor agrees and covenants that it shall undertake, at its own costs and expenses, all such acts as may be necessary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in them shall not be reproduced or used by Contractor in connection with any other project. The Contractor agrees that all such documents, as well as any drawings, tracings, specifications, calculations, memoranda, data, notes and other materials that are supplied by the Owner and come into the possession of Contractor for the purposes of performing its obligations under this Agreement, shall be delivered to the Owner upon commissioning of the Plant. 21.5 Use of Drawings by the Contractor The Contractor shall be entitled to retain and use solely and specifically in connection with performance of its obligations under this Agreement a reproducible set of all Design Documents and other documents delivered to the Owner. 24. MISCELLANEOUS 24.11 Execution in Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. SCHEDULE II: SPECIFICATION MANUAL To be submitted after detailed engineering. However the project shall be implemented as the best industry practices and all applicable National Standards shall be followe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work and cabling 24. Module cleaning arrangement as applicable 25. Any other items required for the completion of the agreed scope Handing over of entirely completed 60 MW-AC solar power project as per agreed scope Arranging the land for the complete project, free from all encumbrances shall be the scope of Owner All the major equipments / materials / items shall be procured by Owner and will be handed over to Contractor for erection and commissioning works. However, all the construction material shall be in scope of Contractor TERMINAL POINT: Remote end substation of Karnataka Power Transmission Company Limited (KPTCL) 110kV Switchyard DESIGN BASIS FOR 60 MW AC SOLAR PV POWER PLANT Contractor shall submit the design basis meeting the agreed technical specification to the Owner for his approval. Also the documents /drawings mutually agreed will be furnished for approval, SPECIFIC CRITERIA LIST OF PREFERRED SUPPLIERS/Contractors To be furnished later during project implementation. The following are agreed upon by the Contractor for carrying out above mention scope. 1. Installation and Construction The Contractor shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Quantities for all equipments with quantity, model, maker name, year of manufacturing, specifications, standard etc. b. Detailed project schedule for every step till commissioning. c. General safety, protection, and other terms and conditions. d. Solar Radiation and other weather data measurement methodology, automation, calibration procedures e. Equipment DIAGRAMS AND DRAWINGS SCHEDULE IV: PAYMENT OF CONSIDERATION Contract Price Item No Description Contract Price 1 Engineering, Procurement, Construction and associated works for 60-MW AC Solar PV Project including all tax and GST Total contract price SCHEDULE XI: ACCEPTANCE TESTS Prior to commissioning the Plant, tests shall be conducted on the AC side to ensure trouble-free operation of all components, including but not limited to. Modules, Inverters, transformers, switchyard, switchgear, relays, sensors and monitoring systems. All equipment shall comply with all applicable IEC and IS standards and acceptance reports s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of which, taken together, shall constitute one and the same instrument. We are convinced that both the agreements are for the single works contract of setting up of a solar power plant. The contracts would have different consideration but that should not change the way look at such agreements. The bifurcation into such agreement which themselves reveal the real intent would not impede the interpretation and applicability of the provisions. The contention as made by the applicant reveals that the applicant desires to treat the first agreement as one being for supply of goods, a composite supply for which the principal supply is providing a solar power generating system which attracts tax at 5% as 'solar power generation system'. However we have seen above that the contract of setting up of a solar power generation plant is a works contract in terms of clause (119) of section 2 of the GST Act. In view thereof, we would not enter into any discussion as to the transactions involving a 'composite supply'. Since the transaction is treated as a works contract and not as a composite supply , there would be no relevance of principal supply All the submission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Goods and Services Tax Act, 2017 (IGST Act) or the Notification no. 11/2017 - Central Tax / State Tax (Rate) under the CGST Act and MGST Acts, as reproduced below. The rate of tax would be 18% under the IGST Act and 9% each under the CGST Act and the MGST Act, aggregating to 18% of CGST and MGST. The entry reads thus - SI No. Chapter, Section or Heading Description of Service Rate (per cent.) [CGST + MGST = IGST] Condition 3 Heading 9954 (Construction services) (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. 9 + 9 = 18 - Question 2 Whether parts supplied on standalone basis (when supplied without PV modules) would also be eligible to concessional rate of 5% as parts of solar power generation system? The applicant argues that since the concessional rate of 5% [as clarified to be under Notification no. 1/2017-Integrated Tax (Rate)] is provided to renewable energy products and parts thereof, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for supply of goods and services for a solar power plant, there would be separate taxability of goods as 'solar power generating system' at 5% and services at 18% ? A.1 The agreements tendered in support of this question reveal that the impugned transaction of setting up and operation of a solar photovoltaic plant is in the nature of a works contract in terms of clause (119) of section 2 of the GST Act. 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'. Depending upon the nature of supply, intra-State or inter-State, the rate of tax would be governed by the entry no.3(ii) of the Notification No.8/2017-lntegrated Tax (Rate) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) or the Notification no.11/2017 -Central Tax/State Tax (Rate) under the CGST Act and MGST Acts. The rate of tax would be 18% under the IGST Act and 9% each under the CGST Act and the MGST Act, aggregating to 18% of CGST and MGST. Q.2 Whether parts supplied on standalone basis (when supplied without PV modules) would also be eligible to concessional rate of 5% as parts of solar power ..... X X X X Extracts X X X X X X X X Extracts X X X X
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