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TMI Blog2019 (4) TMI 1623X X X X Extracts X X X X X X X X Extracts X X X X ..... site, the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to the recipient or moved to the site for assembly or installation refer to Section 10(1)(a)and (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 contract at all unless tied up with the Second Contract. Composite nature of the contract is clear from the facts that first Contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee s site. The two contracts for supply of the goods and allied services are not separately enforceable. The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely Works Contract for Supply, for 320 KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system. From the conjoined and harmonious reading of various clauses of first contract and second contact, it Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, Kharghar Node, Navi Mumbai 410210, Maharashtra. The Applicant is a leader in technology solutions for intelligent (smart), sustainable cities, smart grid, building technologies, mobility and power distribution. (ii) The Applicant has a contract with one of the major Public Sector Undertakings in the State of Haryana (herein after referred as the Customer ). (iii) In terms of the said contract, the Customer has placed an order thru their Notification of Award (NOA) vide reference no.CC-CS/698-SR2/HVDC-3249/7/610/R/NOA-V/7217 dated 22 03-2017 for VSC (voltage source converters) based HVDC Terminals between Pugalur and North Trichur. This involves supply of equipment and services both on off-shore as well as on-shore basis. (iv) The subject NOA is awarded to the Joint Venture (JV) of BCS Siemens AG, Germany (Lead Partner) and M/s. Sumitomo Electric Industries Ltd. Japan (other Partner). (v) The scope of the contract is divided into six contracts covering specific and detailed nature of supply of various goods and services. The On shore service contract (VSC part) (herein after referred as Service Contract ) needs to be executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a courier agency; b. by inland waterways NIL NIL (xii) There is a similar exemption which has been provided under the Maharashtra Goods and Services Tax Act, 2017 vide Serial no. 18 in Notification no. 12/2017 - State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017. (xiii) With respect to these local transportation charges as referred in para 6(a) above and recovered by the Applicant from the Customer, the Applicant seeks this Advance Ruling under Section 97(2) of Central Goods and Services Act, 2017 (CGST Act) and the Maharashtra Goods and Services Tax Act, 2017 (SGST Act) on the applicability of tax exemption as provided under serial no. 18 of the Notification No.12/2017-CentraI Tax (Rate) dated the 28th June,2017 as indicated in para 11 above. (xiv) The Applicant has already paid the requisite fee of INR 5,000 vide Challan no SBIN18052700096244 dated 09 May 2018. (xv) The Applicant requests that the name of the customer from the contracts as shared along with this application, being confidential, is not disclosed in the final advance rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore various Courts in past wherein the issue was on applicability of service tax wherein the transporter does not issue any consignment note. (viii) In the matter of M/s Om Telecom Logistics vs. CCE, Delhi (2018-TIOL-1430), Delhi CESTAT = 2018 (4) TMI 723 - CESTAT NEW DELHI has held that a person is to be categorized as a goods transport agent , only when he issues the consignment note in manner prescribed in statute. (ix) Similar view has been taken by the Tribunals in the following matters: a. CCE Guntur vs. Kanaka Durga Agro Oil Products Pvt. Ltd, (2009) 15 STR 399 - Bangalore CESTAT = 2009 (3) TMI 130 - CESTAT, BANGALORE b. South Eastern coal Fields Ltd. vs. CCE, Raipur (2016-TIOL-2773) - Delhi CESTAT = 2016 (8) TMI 677 - CESTAT NEW DELHI c. Birla Ready Mix vs. CCE, Noida (2012-TIOL-2200) - Delhi CESTAT = 2012 (12) TMI 736 - CESTAT, NEW DELHI d. Northern coal Fields vs CCE, Allahabad (2015-TIOL-2459) - Allahabad CESTAT = 2015 (11) TMI 1256 - CESTAT ALLAHABAD e. Nangana Sihori sugar co. Ltd. vs. CCE (MANU/CE/0194/2014) - Delhi CESTAT = 2014 (5) TMI 138 - CESTAT NEW DELHI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payment made by it to the transporters who have issued consignment notes. The Applicant has not claimed credit of input service tax on such services assuming that the subsequent charge of transportation charge by it from the customer will not be subject to further tax. (xii) Considering the above referred legal provisions, past judicial precedents on this topic, and the intention of the Government to continue with the same exemptions as existed prior to implementation of GST, the Applicant is of the view that the charges recovered by the Applicant in terms of the underlying contract with its customer, wherein no consignment note is issued by the Applicant should not be subject to levy of GST under the Central and respective State GST legislation. 3.1 Additional submission of the Applicant dt.11.12.2018. A. Advance Rulings of other applicants/States are not binding. During the hearing held on 12th September, 2018, Department Representative (DR), Shri N.G. Deshmukh made his submissions which were based on another decision of West Bengal AAR in the matter of M/s. EMC Ltd and M/s. IAC Electricals Private Limited. Basis the said decisions, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Training charges As can be seen from the above, the applicant is not providing complete solution to the customer and is only executing a part of the solution. Further, the applicant is not required to carry out any erection or commissioning of goods and with the provision of services stipulated in the service contract it would not result into an immovable property. iii) It is pertinent to mention that the Advance Ruling of M/s. IAC Electricals Pvt. Ltd. (attached as Annexure 3 ), the supply made by the applicant has not been held to be an immoveable property. The Authority held it to be composite supply and refrained from categorizing it as a works contract. B. Contract under consideration is not a works contract as it does not result an immoveable property It is submitted that works contract is defined as a composite supply and includes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Perumal Naicker v. T. Ramaswami Kone and Anr (AIR 1969 Mad 346) = 1967 (9) TMI 147 - MADRAS HIGH COURT , attached as Annexure 7. In view of the aforesaid judgments, the applicant submits that in the instant case, specific goods supplied by the applicant are installed only for the purpose of better functioning of the said goods and are capable of being removed and transferred from one place to another. Hence, the fact that the said goods is firmly but not permanently attached to the land means that the same is not an immovable property. The applicant is also making reference to Circular issued by 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), attached as Annexure 8 wherein after realizing the anomaly in case of plant and machinery assembled at site, issued the Circular clarifying the following: (i) if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent and Nippon Seike Kabushiki Kaisha (N.S.K.). The agreement is in two parts. It is true that the two parts are interdependent but yet the consideration for the sale of trade secrets and consideration of technical assistance is separately provided for and mentioned under separate sections. So far as the consideration for the technical assistance is concerned, its taxability is not in doubt. The only controversy is with respect to the taxability of 1,65,000 U. S. dollars which is stipulated as the consideration for sale of trade secrets. The agreement specifically says that the said sale is effected in Japan. We are unable to see on what basis it can be said that any part of the said amount has been earned in India. Further in the case of Ishikawajma-Harima Heavy Indus. Ltd. Vs Dir. Of Income Tax, Mumbai 2007 (6) STR 3 (S.C.) = 2007 (1) TMI 91 - SUPREME COURT , attached as Annexure 11 , the assessee was to develop, design, engineer and procure equipment, materials and supplies, to erect and construct storage tanks and some other services for Petronet LNG in India. The contract, inter alia, involved onshore services as also offshore services. Separate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the contract is an indivisible contract. As a matter of fact, the work order will show that there are two separate works; supply order and service order. After hearing the parties, and after going through the records, the Hon ble Court had held that we are of the opinion that the matter has to be considered again by the assessing authority. The assessing authority takes the view that in this case, there is indivisible contract. So far as this case is concerned, according to us, it is not indivisible. It contains two parts: supply order and service order . According to us, the Tribunal was not correct in holdi there was only one contract. The work order will show that it contains two parts; supply order and service order. Price is also shown separately. The right of the buyer to inspect the goods before they are transported is also preserved So also, the goods are insured. When the goods were transmitted, the assessee transferred the title to the property to Cominco Binani Zinc Limited. It is submitted that the ratio of the above decisions is squarely applicable in the facts of the present case, since even in the present case it was the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entrusted with the responsibility of delivery of the goods at Customer s site. The contracts should be treated as two separate contracts and since the applicant does not issue any consignment note, no GST is payable in terms of Serial no. 18 of Notification no. 12/2017 - Central Tax dated 28 June, 2017 and Serial no. 18 in Notification no. 12/2017 - State Tax (Rate) dated 29 June, 2017. Hence, the applicant is of the view that the charges recovered by them in terms of the underlying contract with its customer, wherein no consignment note is issued by the applicant, should not be subjected to levy of GST under the Central and respective State GST legislation. Further the applicant would also like to highlight that the onshore service contract was revised on 14.3.2018 (copy Attached as Annexure - 14 ). It could be seen that the contract is predominantly for transportation/ freight charges only and other charges (insurance and other charges) are incidental to transportation/ freight charges. Circular - F. No. 354 / 98/20015-TRU issued by CBEC in this regard is attached herewith as Annexure - 15 . D. GST Council had decided to continue the same rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009) 15 STR 399 - Bangalore CESTAT = 2009 (3) TMI 130 - CESTAT, BANGALORE 3. South Eastern coal Fields Ltd. vs. CCE, Raipur (2016-TIOL-2773) - Delhi CESTAT = 2016 (8) TMI 677 - CESTAT NEW DELHI 4. Birla Ready Mix vs. CCE, Noida (2012-TIOL-2200) - Delhi CESTAT = 2012 (12) TMI 736 - CESTAT, NEW DELHI 5. Northern coal Fields vs CCE, Allahabad (2015-TIOL-2459) - Allahabad CESTAT = 2015 (11) TMI 1256 - CESTAT ALLAHABAD 6. Nandganj Sihori sugar co. Ltd. vs. CCE (MANU/CE/0194/2014)- Delhi CESTAT = 2014 (5) TMI 138 - CESTAT NEW DELHI It is further submitted that the applicant has already discharged service tax on the freight payments made by it to the transporters who have issued consignment notes to the applicant and transported the goods to customer. The Applicant has not claimed credit of input service tax on such services assuming that the subsequent charge of transportation charges by it from the customer will not be subject to further In short since no consignment note is issued by the applicant to its customer the applicant should not be subject to levy of GST under the Central and respective State GST leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur risk, cost and responsibility, either in full or in part and/or recover damages under, this Third Contract as well. However, such default or breach or occurrence in the First Contract and/or Second Contract and/or Fourth Contract and/or Fifth Contract and or: the Sixth Contract , shall not automatically relieve you any of your obligations under this Third Contract. It is also expressly understood and agreed by you that the equipment/materials supplied by you under this Third Contract , by SIEMENS AG on behalf of JV under the First Contract , by SUMITOMO on behalf of JV under the Second Contract and Fourth Contract , as per identified scope of works in respective Contracts, when erected, installed and commissioned by you under the Fifth Contract / by SUMITOMO under the Sixth Contract shall give satisfactory performance in accordance with the provisions of the Contract(s). In clause 3.2 it is mentioned that, Notwithstanding the break-up of contact price, the contract shall at all times be construed as a single source responsibility contract and any breach in any part of the contract shall be treated as breach of the entire contract. Thus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transportation, erection, commissioning etc. In another case decided by the West Bengal authority for Advance Ruling on 27/02/2018 in case of M/S IAC Electricals private limited. It is held that services of transportation, in transit insurance and loading /unloading being ancillary to the principal supply of goods the same shall be treated to taxation under section 8(a) of the GST act and the consideration receivable on that account be taxed accordingly. Incidentally in the both the cases cited above the awarder of the contract is M/S Power Grid Corporation of India and the contracts have been divided as proposed by the applicants into one for supply of goods and the other is for supply of services but the contracts in essence are composite. Though the application is maintainable as stated by the applicant since the question is not decided in any proceeding in the case of applicant under any provisions of the GST Act but the same is no longer res-lntegra in view of decisions of West Bengal authority for Advance Ruling cited earlier. Hence the question should be decided against the applicant that is applicant should not be held to be eligible for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a courtier agency in terms of the said notification. Applicant in support of his exemption claim has strongly relied on the fact that he has not issued consignment notes to the service recipient and thus not a GTA as defined in the said notification. Before we discuss the questions raised in this application, we feel it necessary first to decide whether there exist six different contracts undertaken by the applicant or one entire contract. However, with respect to the activity, we find two different views. The applicant is of the view that the charges recovered by it in terms of the contract from its customer constitute a separate services contract executed through local transporter on payment of GST, whereas the local transportation charges recovered from the customer as per terms of the contract without the consignment note issued by the applicant exempt from levy of GST. Per contra Jurisdictional Officer is of the view that impugned contract is a composite supply of services of works contract as defined u/s 2(119) of the GST Act, of which transportation / freight is merely a component and not a separate supply and thereby applicants supply is not covered by the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed in the Bidding Documents referred to hereinabove. The scope of work under this Contaract inter-alia includes the following: Design, Ex-works supply of equipment and materials including mandatory spares from within India, Type Testing (as applicable), required for the complete execution of the 1320KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu-North Trichur, Kerala), The scope of work under this Notification of Award (NOA) shall also include all such items which are not specifically mentioned in the Bidding Documents and/or the JV s bid but are necessary for the successful completion of the scope under the Contract for 1320KV, 2X1000M WVSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), unless otherwise specifically excluded in the Bidding Documents or in this NOA. 2.2 As per para 1.4 above and as tied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), as set forth in the Bidding Documents.. (d) on you vide our Notification of Award No. CC-CS/698 SR2/HVDC-3249/7/G10/R/NOA-V/7217 dated 22.03.2017 for award of On-Shore Services Contract-I (also referred to as the Fifth Contract ) for the subject package, for performance of all other activities inter-alia including port handling of the Plant and Equipment including mandatory Spares (except +320kV HVDC Cable and some of it s associated items) to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, unloading, storage and handling at site, installation including civil works, testing and commissioning including Performance Testing in respect of all Plant and Equipment supplied under both First Contract and Third Contract and any other services specified in the Bidding Documents; (e) on the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G on behalf of JV under the First Contract, by SUMITOMO on behalf of JV under the Second Contract and Fourth Contract identified scope of works in respective Contracts, when erected, installed and commissioned by you under the Fifth Contract / by SUMITOMO under the Sixth Contract shall give satisfactory performance in accordance with the provisions of the Contract(s). 3.0 CONTRACT PRICE- 3.1. The total Contract Price for the entire scope of work under this Contract shall be EURO 82,463,172 + USD 235,584 + INR 8,345,326,393 (Euro Eighty Two Million Four Hundred Sixty Three Thousand One Hundred Seventy Two plus US Dollar Two Hundred Thirty Five Thousand Five Hundred Eighty Four plus Indian Rupees Eight Billion Three Hundred Forty Five Million Three Hundred Twenty Six Thousand Three Hundred Ninety Three only) as per the following break-up: Sr.No. Prise Component Amount 1. Ex-works Price Component EURO 82,463,172 +USD 235,584 +INR 8,345,326,393 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #Additional Time for Completion shall be subject to levy of Liquidated Damages (LD) as per provisions of Bidding Documents *The Time for Completion (Taking Over) for the Replica along with Real Time Simulator and IPSRTS for real time studies included in the above Facilities will be 45 months. 8.0 This Notification of Award constitutes formation of the Contract and comes into force with effect from the date of issuance of this Notification of Award. 9.0 You shall enter into a Contract Agreement with us within twenty-eight (28) days from the date of this Notification of Award. ii) Second contract --- for On-Shore Services Contract-I Notification of Award for On-Shore Services Contract-I for + 320K V, 2 X 1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu-North Trichur, Kerala) Specification No: CC-CS/698-SR2/HVDC-3249/7/G10/R International Competitive Bidding . Clauses- 2.0 AWARD OF CONTRACT AND ITS SCOPE We confirm having accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated items), to be supplied from abroad including corresponding type tests and training to be conducted abroad, required for the complete execution of the + 320K V, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), as set forth in the Bidding Documents. (b) on the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO, vide our Notification of Award Ref. No. CC-CS698-SR/HVDC-3249/7/G10/R,NOA-11/7214 dated 22.03.2017 for award of Off-Shore Contract-Il (also referred to as the Second Contract ) for the subject package, for design, engineering, manufacture and CIF supply of 320kV HVDC Cable and some of its associated items including mandatory spares (if any), Type Testing and Training to be conducted outside India, required for the complete execution of the +320K V, 2X1000M W VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Performance Testing in respect of all Plant and Equipment supplied under both Second Contract and Fourth Contract and any other services specified in the Bidding Documents. Notwithstanding the award of work under six separate Contracts in the aforesaid manner, the JV shall be overall responsible to ensure the execution of all the six Contracts to achieve successful completion and Taking Over of the works covered under the package and Operational Acceptance by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by the JV that any default or breach by the JV partners under the First Contract and/or Second Contract and/ or the Fourth Contract and/ or the Sixth Contract and/or breach by the Associate of JV-SIEMENS-I under the Third Contract shall automatically be deemed as a default or breach Of this Fifth Contract also and vice-versa, and any such default or breach or occurrence giving us a right to terminate the First Contract and/ or Second Contract and/or Third Contract and/or Fourth Contract and/or the Sixth Contract, either in full or in part, and/or recover damages under those contract(s), sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible bank(s) as described in the Bidding Documents. 6.0 The schedule for Taking Over/Time for Completion of the Facilities by the Employer upon successful completion of the +320KV, 2XIOOOMW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala) and the Additional Time for Completion for all contractual purposes in line with the provisions of the Bidding Documents shall be as follows: Sr.No. Completion (Taking Over) of: Duration from the effective date of contract Time for completion 1. +320KV, two 1000MW Voltage Source Converter (VSC) based HVDC transmission system between Pugalur (Tamil Nadu) and North Trichur (Kerala) a. Monopole 1 and associated Cable system b. Monopole 2 and associated Cable system 38 months 38 months Additional Time for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. 9. The work of Taking Over/time for Completion of the project and handing over to the Employer upon successful completion is to be completed within 38 months. 10. Applicant is one the contract party in this JV to complete the work in stipulated time who is supply of goods and services to complete the project undertaken. He is also equally responsible to this contract to achieve the target within time, otherwise it is breach of contract. Considering above facts and the essence of the contract we find that that the First Contract includes on shore ex works supply of all equipment s and materials. The scope of the works includes testing and supply of Cable Package required for Successful commissioning of VSC based HVDC Terminal and DC XLPE cable system. The second contract includes on shore services i.e. all Other activities like transportation, insurance and all incidental services, installation, training required to be performed for complete execution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allied services are not separately enforceable. The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely Works Contract for Supply, for 320 KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system. For the proposition of law as above, we find support from the judgment of Hon. Supreme Court in case of M/s. Indure Ltd. and Anr vs Commercial Tax Officer and Ors on 20 September, 2010 C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT OF INDIA , wherein the Hon. SC held as under: 11. By way of Letter of Award dated 16.08.1988, N.T.P.C awarded two contracts to the Company for performing the work of erection of aforesaid plant on Turnkey Basis. Even though, two contracts were entered into between the parties but in nutshell it was only one contract for the simple reason that N.T.P.C kept a right with it with regard to cross fall breach clause meaning thereby that default in one contract would tantamount to default in another and whole contract was liable to be cancelled. Thus from the detailed facts of the case as put before us, as per the first and second contracts referred above we have no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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