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TMI Blog2018 (11) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... s has not been transferred to PGCIL at the factory gate, supply under the First Contract involves movement and/or installation at the site, and the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to PGCIL or moved to the site for assembly or installation [refer to Section 10(1)(a) & (d) of the IGST Act, 2017]. The First Contract, however, does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for ‘supply of goods’ unless tied up with the Second Contract - the First Contract has “no leg’ unless supported by the Second Contract. It is no executable contract unless tied up with the Second Contract. It is evident that although supplies of goods and services to PGCIL are being made under two separate agreements, they are not executable separately. The First Contract for supply of goods cannot be executed unless tied up with the Second Contract. Unless and until supplies under both the contracts are made and the Tower Package is commissioned, PGCIL is not treating either of the contracts as successfully completed and reserves the right to initiate action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract with M/s Power Grid Corporation of India (hereinafter referred to as PGCIL ) for construction and commissioning of 400 kV D/C (Quad) Jigmeling-Alipurduar line (Indian portion NER) under transmission system for transfer of power from Mangdechhu Hydroelectric Project in Bhutan (hereinafter the Tower Package), has sought a Ruling, in Amendment to Application, dated 03.09.2018, on the applicability of Serial No. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 (hereinafter referred to as the Exemption Notification ) to them. The Applicant s prayer for Amendment of Application is granted and Advance Ruling is admissible on this question under Section 97(2)(b) of the CGST/WBGST Acts, 2017 (hereinafter referred to, collectively, as the GST Act ). The Applicant declares that the issue raised in the application is not pending nor decided in any proceedings under any provisions of the GST Act. The officer concerned has raised no objection to the admissibility of the Application. The Application is, therefore, admitted. 2. The Applicant refers to the Advance Ruling pronounced by this Authority in the case of EMC Ltd (Case No. 07 of 2018 and Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinning Mills (P) Ltd (WP Nos. 4434, 4435, 13652, 13653 of 2009) = 2013 (3) TMI 681 - MADRAS HIGH COURT ; Solid Correct Engineering Works [(2010) 252 ELT 481 (SC)] = 2010 (4) TMI 15 - SUPREME COURT are referred to by the Applicant in support of his Argument. 3. On a careful reading of the contracts between the JV and PGCIL it is seen that, in the present context, the contractual obligation between the JV and PGCIL is for construction, erection and commissioning of the Tower Package and not for the erection of a standalone tower. It includes fabrication and supply of all types of transmission line towers and accessories, supply of earth wire, hardware fittings and conductors, earth wire accessories and OPGW and associated fittings and accessories and Tower Earthing required for complete execution of the Package, inland transportation, insurance, delivery, handling of stores, detailed survey of route alignment, profiling, tower spotting, optimization of tower location, soil testing, geotechnical investigations, piling, casting of foundation for tower footings, installation of Tower Earthing, erection of towers, tack welding of bolts and nuts, painting, fixing of insulator st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove discussion and relevant to the present context is that it is attached to the earth, or permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply. 5. In Triveni Engineering Industries Ltd [(2000) 120 ELT 273 (SC)] = 2000 (8) TMI 86 - SUPREME COURT OF INDIA the Apex Court observes that while determining whether an article is permanently fastened to anything attached to the earth both the intention as well as the factum of fastening has to be ascertained from the facts and circumstances of each case. In S/S Triveni N L Ltd [RN 910, 911 912 of 2001 (All)] = 2014 (4) TMI 842 - ALLAHABAD HIGH COURT Allahabad High Court observes that permanently fastened to anything attached to the earth has to be read in the context for the reason that nothing can be fastened to the earth permanently so that it can never be removed. If the article cannot be used without fastening or attaching it to the earth and is not removed under ordinary circumstances, it may be considered permanently fastened to anything attached to the earth. Furthermore, in the context of the GST Act, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored. This factor is taken into consideration while defining goods under the GST Act, where only those things attached to the earth or forming part of the land are included that are agreed to be severed before supply or under a contract of supply. The rest are left out as immovable property . b) In the case of Solid Correct Engineering Works, (supra), the Apex Court when examining whether a machine, fixed with nuts and bolts to a foundation, with no intent to permanently attach it to the earth, is an immovable property or not, has held that such an attachment without necessary intent to making it permanent cannot be an immovable property. The emphasis is on the intention of the party. The Apex Court observes that the machine in question can be moved and has indeed been moved after the road construction and repair project, for which it was installed, is completed. However, if a machine is intended to be fixed permanently to a structure embedded in the earth, the moveable character of the machine, according to the Supreme Court, becomes extinct. In the present context, it has already been pointed out that the series of transmission towers are being erected under the To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 - ITAT HYDERABAD-B . Reference is also made to Circular No. 47/21/2018-GST dated 08/06/2018 of CBIC to argue that if a supply involves the supply of both goods and services and the value of such goods and services are shown separately, the goods and services are liable to tax at the rates as applicable to them separately. Reference is also made to an e-flyer of CBIC to argue that the trade may well decide whether contractual supplies of goods and services should be treated as a composite supply or various individual supplies. Although integral parts of the contract for the Tower Package, the First Contract and the Second Contract, according to the Applicant, are separate agreements and the two are not naturally bundled. The First Contract stands executed when the goods are delivered to PGCIL at the factory gate. The Second Contract involves all subsequent activities, including transportation etc. and services performed on the goods supplied by the contractee. In this connection the Applicant refers to a Ruling of Karnataka Authority for Advance Ruling (hereinafter referred to as KAAR ) in the case of M/s Giriraj Renewables Pvt Ltd. wherein the contract is for setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements. It mandates the JV to provide insurance cover for the transit risk from the manufacturing works of the JV to the project warehouse at final destination and also the risk from the date of receipt at the site and till the date of operational acceptance, indicating that PGCIL does not own up risk in the goods till they are applied to construction, erection and commissioning of the Tower Package. It is, therefore, abundantly clear that neither the risk in the goods passes to PGCIL at the factory gate nor that the JV will get any payment, other than the advances paid, until and unless the goods are dispatched. Evidently, property in the goods does not pass to PGCIL at the factory gate. The JV needs to move the goods and deliver them at the work site before claiming 60% of the payment for execution of the First Contract. The balance amount is to be paid in phases till completion of erection of all towers of the transmission line. 10. It is immediately apparent from the above discussion that the First Contract cannot be executed independently of the Second Contract. There cannot be any supply of goods without a place of supply. As it is evident from the above discussion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivisible contracts for the bundled supply of goods and services. The ruling of KAAR in the matter of M/s Giriraj Renewables Pvt Ltd is, therefore, not relevant in the present context. It is thus a single source contract for bundled supplies of goods and services for construction, erection and commissioning of the Tower Package an immovable property. 11. The Applicant s reference to several judgments of the apex court is also of little relevance since they are all delivered in the context of situations prior to the 46th Amendment to the Constitution, and are focused on devising the parameters to distinguish between a contract for the sale of goods and works contract. A careful reading of these judgments reveals that the prevailing view of the Apex Court at that time was that no straitjacket formula can be devised that might be applicable under all conditions for distinguishing a contract for the sale of goods from works contract, and it should depend on the facts and circumstances of each case. Dominant intention as reflected in the terms and conditions of the contract and many other aspects are required to be taken into account. The 46th Amendment to the Constitution has en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible composite contract for construction, erection, commissioning etc. of an immovable property. Works contract is, therefore, defined under section 2(119) of the GST Act as a contract for 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. Discussion in the preceding paragraphs establishes that the Applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely the Tower Package, execution of which involves bundled supply of both goods and services. It is, therefore, works contract, as defined under Section 2(119) of the GST Act. 13. The contract for the Tower Package as above, being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act. Reference to Circular No. 47/21/2018-GST dated 08/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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