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TMI Blog2018 (9) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as 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. The Solar Power Plant is a big project and has a permanent location as it is meant for onward sale of power to the consumer. Such plant would therefore have an inherent element of permanency - The output of the project i.e. power, would be available to an identifiable segment of consumer. 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 Solar Power Plant cannot be shifted to any other place without dismantling the same. Further it is a tailor made system which cannot be sold as it is to the other person - Solar Power Plant includes civil work such as development of site, structure Structure for 110kv transmission , building ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wari Note: Under Section 100 of the RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of RGST Act 2017, within a period of 30 days from the date of service of this order. The Issues raised by the applicant is fit to pronounce advance ruling as they fall under ambit Of the Section 97(2)(a) and (e), they are as given under: (a) Classification of any goods or services or both; (e) Determination of the liability to pay tax on any goods or services both; Further, the applicant being a registered person, GSTIN is 08AAICR3819D1ZE, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is 'admitted' to pronounce advance ruling. 1. SUBMISSION OF THE APPLICANT: M/s. RFE Solar Private Limited is engaged in business of developing power projects in India. It is undertakes development, design, engineering, supply, installation, testing and commissioning to establish solar power plant at various states in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r almost all ingredients of the Solar Power Plant (except some civil work) can be effectively shifted from one location to another in case it is required to do so. No substantial damage shall be caused to any of the components of the Solar Power Plant. Thus the plant is effectively movable and can be reinstalled on any other piece of land. The assessee wants to understand that whether supply under consideration is Supply of Goods or Supply of Service. That Section 9 of the CGST Act 2017 which is charging section of Goods Services Tax states: 9(1) Subject to provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations Of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. The term goods has been defined under section 2(52) as goods means every kind of movable property other than money and secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixed 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. On-going through the terms of the terms of the contract and definition of composite and mixed supply, the given work can be classified as composite supply only. Since the contract is in relation to solar plant (supply and installation) they are bundled in ordinary course of business. To further decide whether the principal supply is of goods or service, the concept of works contract can be explored first. Works contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc. are involved along with transfer of property in goods. However under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 house-holder 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 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. Further in case of Municipal Corporation of Greater Bombay Ors. v. Indian Oil Corporation Ltd. [1991 Suppl. (2) SCC 181, = 1990 (11) TMI 407 - SUPREME COURT one of the questions SC Court considered was whether a petrol tank, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Coimbatore reported in 2016 (335) E.LT. 62 (Tri. -Chennai) = 2016 (2) TMI 65 - CESTAT CHENNAI can be referred. It was held by Hon'ble CESTAT that Energy device/system (Non-conventional) - Clearance of in knocked down condition as parts - Exemption Notification No. 6/2002-C.E. - Denial of- Serial No. 16 of List 9 to said notification covering complete device and not parts during relevant period - HELD : Impugned device consisting of Agro based fired steam generator meant for producing energy from waste covered under description of non-conventional energy system in Serial No. 16 of Notification No. 6/2002-C.E. which is wide and comprehensive enough to cover all types of conversion devices - When a description is wide without excluding any specific category of items, denial of exemption on the basis of description of individual parts not permissible - All individual items supplied in knocked down condition contribute to ultimate product. namely boiler/generator which cannot be supplied in one lot - Following ratio of decision in case of Hemraj Gordhandas [1978 (2) E.L. T. (J350) (S.C.)] = 1968 (9) TMI 112 - SUPREME COURT OF INDIA. items cleared in parts have individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de earlier in Advance Ruling Application. 4. Findings and analysis: As per copy of contract submitted by the applicant the contractor i.e. M/S RFE Solar Private Limited has to execute a Composite EPC Contract . After going through the Written submissions, copy of contract and Other additional statements following findings and analysis is made: a) It is a composite EPC contract Which has been entered between Kushtagi Solar Power Private Limited (owner) and RFE Solar Private Limited (contractor) on 01.03.2018 for setting up of Solar Power Plant where the contractor has to, inter alia. design, engineer, procure, transport, deliver, develop, erect, install, test and commission the project. b) The contract is to set up a Solar Power Plant and related interconnection facilities (including 110 KV transmission line, 110 Kv pooling substation, main control room and bay extension) and other related infrastructure for evacuation of power (Evacuation Infrastructure) at Kushtagi village, Karnataka. c) Contract includes civil work such as development of site, structure foundation, Structure for 110kv transmission, building cable trenches, civil work relating to invertors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property only , then it will classify as works contract only. Hence it means that aforesaid activities if they are undertaken for a movable property then it will not be a works contract service. j) Applicant has relied upon following judgments in furtherance of their arguments of solar power plant being movable property and not immovable: i) Sirpur Paper Mills Ltd. v. Collector - 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 - SUPREME COURT OF INDIA ii) Municipal Corporation of Greater Bombay Ors. v. Indian Oil Corporation Ltd. [1991 Suppl. (2) SCC 181, = 1990 (11) TMI 407 - SUPREME COURT iii) Shree Venkateswara Engg. Corporation Versus C.C.E., Coimbatore reported in 2016 (335) E.LT. 62 (Tri. -Chennai) = 2016 (2) TMI 65 - CESTAT CHENNAI iv) CBEC circular number 58/1/2002-cx dated 15/1/2002 v) Board of Revenue, Chepauk, Madras v. K. Venkataswami Naidu (AIR 1955 Mad 620, 1955 CriLJ 1369) = 1955 (3) TMI 46 - MADRAS HIGH COURT vi) Commissioner of Central Excise v. Solid and Correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bhilai Steel Plant. For this purpose, it imported several components and also manufactured some of the components at their factory in Marai Malai Nagar, Chennai. These components were transported to the site at Bhilai where the manufacture and commissioning of the aforesaid machines took place. It 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 . 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 exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then lifting them to a height of 25 feet for taking to the cast house floor and then to the platform over which it is mounted and erected. These machines cannot be lifted in an assembled condition. The judicial member noticing these facts observed that it is a physical and engineering impossibility to assemble mudguns or the drill tap hole 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 resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructures 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 its 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 :- 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. Permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbedding them to 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 exgibility 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 :- The basic test therefore, of levying duty under the Act is two fold. One, that any article, must be a 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 immoveable 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Corporation of Greater Bombay, Quality Steel Tubes and Mittal Engineering Works Pvt. Ltd. (supra) as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad - 1998 (97) E.L.T. 3 (S.C.). = 1997 (12) TMI 109 - SUPREME COURT OF INDIA This Court observed :- There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for purposes of the Act. From a combined reading of the definition of 'immovable property' in Section 3 of the Transfer of Property Act, Section 3(25) 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 ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 mudgun 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 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 as 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. 5. In light of above judgements and scope of work it is observed: 1) That the Solar Power Plant is a big project and has a permanent location as it is meant for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arise and so GST tax rate of Solar power Generating System under notification No 01/2017-CT (Rate) dated 28.06.2017, at S. No. 234, under HSN Classification 84, 85 and 94 is not applicable. Based on above facts along with provisions of law, the ruling is as follows: RULING 1. As per the statement of facts submitted by the applicant, the scope of work in respect of Tumkey EPC Contract includes civil works, procurement of goods and erection and commissioning. Accordingly, Turnkey EPC Contract are not getting covered under supply of 'Solar Power Generating System' under Entry 234 of Schedule I of the Notification no. 1/2017-Integrated Tax (Rate), Entry 234 of Schedule I of the Notification no. 1/2017 - Central Tax (Rate) both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification no 1/2017 -State Tax (Rate) dated 29 June, 2017. EPC Contract for Solar Power plant comes under the purview of Works Contract as per Section 2(119) of GST Act. 2. The contract for Erection, Procurement and Commissioning of Solar Power Plant falls under the ambit Works Contract Services (SAC 9954) of Notification no. 1 1/2017 Central Tax (Rate) dated 28 June, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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