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TMI Blog2019 (6) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... h is transferred in the execution of the contract. For items listed in Sr. No. 1 to 16 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 17 and 18 of the Schedule included services tax. Thus the PO also has clearly bifurcated the contract into a supply of goods and supply of services. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 21 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 22 and 23 of the Schedule included services tax. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/ equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 17 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by M/s. NR Energy Solutions India Pvt. Ltd., the applicant, seeking an advance ruling in respect of the following questions. I. Whether the transaction/ contract referred in the present application to M/S APTRANSCO is in the nature of Works Contract Services and therefore liable to GST @ 18% under the HSN Code 995461 ? II. If the answer to above is in negative, whether the said transaction is Supply of Goods ? a) If yes, liable to GST at what rate of tax and under which HSN Code ? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting and commissioning of protection panels with Substation Automation System compatible to IFC 61850 protocol, to control and operate the 220 K V, 132 KV 33 KV feeders, Power Transformers and equipments . [ Refer Clause 2 of above specified POs ] 4. As per Schedule-A of the above referred PO, separate prices are indicated for each of the activity for supply of various materials and the activity for installation, testing commissioning etc. [ Refer Clause 6 and Schedule A of above specified PO s ] 5. The above prices are inclusive of all the taxes such as Excise Duty, Central Sales tax and Service Tax as applicable from time to time. [ Refer Clause 6 and Schedule A of above specified PO s ] 6. A control relay panel are designed for controlling monitoring of electrical equipments such as transformers, generators and circuit breakers. 7. Substation automation is the act of automatically controlling the substation via instrumentation and control devices. It refers to using data from Intelligent electronic devices (IED), control and automation capabilities within the substation, and control commands from remote users to control power-system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for giving the effect of GST in the contract price, mentioned that the GST rate applicable on above contract shall be 18% under the HSN (SAC) code - 995461. [Refer revised schedule / annexure for process of each component of material and installation, testing etc] 13. The applicants charged and collected GST as described below in the initial period from M/s. APTRANSCO : NATURE OF SUPPLY HSN CODE RATE OF GST Supply of materials / goods - as specified in Schedule A of the agreement i.e. power transformers, relay panels etc 8537 2000 Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517 28% Supply of services - as specified in Schedule A of the agreement i.e. installation, testing, commissioning etc 9954 61- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter render training. 1.3) Thus, the final outcome or deliverable is ready to operate Substation Automation System, which can control and operate the 220kv, 132kv 33kv feeders Power Transformers. It essentially emerges that applicant here are involved in supply of goods services which are naturally bundled and are supplied in conjunction to each other. Infact, the applicant are providing end to end activity, which involves vide range of activities to be carried out for setting up Substation Automation system to control and operate the Power Transformers. 1.4) The term works contract is defined in section 2(119) of CGST Act, 2017 as under : 2(119)- 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; 1.5) In the instant case, the applicants are required to design and manufacture, erection of the control relay pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or located in special-purpose buildings. To put it in simple words, substation is itself a civil structure which is a place constructed on land and is immovable. 1.14) Therefore, installation of various devices, equipments and control relay protection panels in a substation forms part of the substation and therefore inherits the characteristics of an immovable property . 1.15) In view of above, the supply, installation, testing and commissioning activity of various equipments and control relay panels carried out by applicant for electrical substations belonging to principal at various location, is a transaction of works contract and covered within definition of section 2(119) of the Act. 1.16) As per Section 7(1) (d) read with Entry No.6(a) of Schedule II, the activity of composite supply of works contract is treated as Supply of Service . 1.17) The applicant draws your honours attention to various judicial pronouncements, wherein it is held that equipment and devices fastened to the earth, for its beneficial enjoyment will partake the character of immovable property . 1.18) The Hon ble Constitution Bench of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht before us, there is a composite contract for the purchase and installation of the lift. The price quoted is a composite one for both. As has been held by the High Court of Bombay in Otis Elevator (supra), various technical aspects go into the installation of the Iift. There has to be a safety device. In certain States, it is controlled by the legislative enactment and the rules. In certain States, it is not, but the fact remains that a lift is installed on certain norms and parameters keeping in view numerous factors. The installation requires considerable skill and experience. The labour and service element is obvious. What has been taken note of in Kone Elevators (supra) is that the company had brochures or various types of lifts and one is required to place order regard being had to the building, and also make certain preparatory work. But it is not in dispute that the preparatory work has to be done taking into consideration as to how the lift is going to be attached to the building. The nature of the contracts clearly exposit that they are contracts for supply and installation of the lift where labour and service element is involved. Individually manufactured goods such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Drum Mix Plant using duty paid components amounts to manufacture or not observed that Machines intended to be fixed permanently to structures embedded in earth. Moveable character of machine becomes extinct once fixed, embedded or assimilated in permanent structure. Such machine not treatable moveable is not dutiable. The Hon ble Apex Court has made following observations: Para 17 : 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 property under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) Of the General Clauses Act, 1897, similarly does not provide an exhaustive definition of the said expression. It reads : Section 3(26) : immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. 18. is not the case of the respondents that plants in question are per se immoveable Property. What is argued is that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd machineries installed within industrial unit purchased has held that the revenue authority is correct in holding that stamp duty was chargeable on entire sale consideration at the rates applicable to land and building, including the plant and machineries installed therein. The Hon ble Apex Court observed that : 14. Whether plants and machinery set up in a factory premises, fastened to earth or things attached to earth, can be held to be a moveable or immoveable property, came to be considered before this Court in Official Liquidator Vs. Sri Krishna Deo and Ors. , AIR 1959 All 247 = 1958 (5) TMI 54 - ALLAHABAD HIGH COURT . The Court appointed an Advocate Commissioner to inspect premises of company to ascertain whether machinery and plants were fixed and attached to earth or not. The report submitted shows that plants and machinery of company were either embedded in the earth or permanently fastened to things attached to earth. On behalf of State, argument was raised that most parts of machinery are fixed to their bases with bolts and ruts, and can be removed by removing the nuts. It thus cannot be said that such machineries are permanently fastened inasmuch as, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r can it be said that the plant and machinery could have been transferred by delivery of possession on any date prior the date of conveyance of the title to the land. 18. In the present case it is not disputed that besides plants and machinery, entire land and building was sold and there was no provision/ agreement that plants and machinery shall be severed or removed from earth. In fact, the industrial unit has been leased out for the purpose of running. Removal of plants and machinery would not have allowed the factory to run. There is no agreement between parties that plants and machinery shall be severed or removed from earth. 19. Even according to definition of goods under Sale of Goods Act, in my view it cannot be included therein. One has to understand the concept of fastening of plants and machinery to earth or its fixing or attached to earth in a reasonable and practicable manner. Scientifically speaking, nothing can be treated immoveable. In the context of plants and machinery, where it is permanently fastened or attached to earth, it has to be seen from the point of utility also. If it cannot be used without being attached to earth, it may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract for design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace of the Bhilai Steel Plant held that : The mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. Having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of the CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as goods within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts of the case in hand and the facts in Mittal Engineering and Quality Steel Tubes and the principles underlying those decisions must apply to the facts of the case in hand. In Quality Steel Tubes (P) Ltd. vs. Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of excisability of plant and machinery assembled at site is referred. It laid down following guidelines to determine the excisability of plant and machinery assembled at site which is enumerated as under : a) For goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from the inputs/ components that have gone into its production. Further, such resultant goods should be specified in the Central Excise Tariff as excisable goods besides being marketable i.e. they can be taken to the market and sold (even if they are not actually sold). The goods should not be immovable. b) Where processing of inputs results in a new products with a distinct commercial name, identity and use (prior to such product being assimilated in a structure which would render them as a part of immovable property), excise duty would be chargeable on such goods immediately upon their change of identity and prior to their assimilation in the structure or other immovable property. c) Where change of identity takes place in the course of construction or erection of a structure which is an immovable property, then there would be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e record, one SCN dt.29.12.2014 amounting to ₹ 1,59,179/- regarding wrong availment and utilisation of cenvat credit, was issued to the assessee which was adjudicated and the duty amount was appropriated alongwith interest and assessee has also paid the applicable penalty. (4) On going through the application received, it is observed that the question on which Advance Ruling is sought by the applicant is - whether the transaction/contract referred in the present application to M/s. APTRANSCO is in the nature of Works Contract Services and therefore liable to GST 18% under the HSN Code 995461 ? If the answer to above is in negative, whether the said transaction is Supply of Goods? a) If yes, liable to GST at what rate of tax and under which HSN Code ? (5) On perusal of the documents submitted by the applicant M/S NR Energy Pvt. Ltd, Mumbai It appears that they have been awarded three (3) turnkey project by M/s. Transmission Corporation of Andhra Pradesh Ltd. havin contracts details are as under- Sr.No Purchase Order (PO) No./Date Site/ Locations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Value of Services (Rs.) 1. 236-PMM/2016/CE/Const./SE/P MM/DE2/SAS/PMM22-e-17-2016 dated 28.10.2016 4,58,24,810/- 4,45,94,310/- 12,30,500/- 4,37,02,763/- 4,27,82,363/- 9,20,400/- Total 8,95,27,573/- 8,73,76,673/- 21,50,900/- 2. 235-PMM/2016/CE/Const./SE/P MM/DE2/SAS/235-PM M22-e-14-2016/D.No.239/2016 dated 28.10.2016 4,67,81,760/- 4,54,01,760/- 13,80,000/- 2,60,16,546 2,53,08,546/- 7,08,000/- Total 7,27,98,306/- 7,07,10,306/- 20,88,000/- 3. 328-PMM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on 12.12.2018, Sh. Rajiv Luthia, C.A., appeared and argued as per submissions. The Jurisdictional Officer Sh. D.A. Bhusari, Asstt. Commissioner CGST CX, Raigad Commissionerate and Sh. Virendra Kothari, Suptt., appeared and made written submissions. 05. OBSERVATIONS 5.1. We have gone through the facts Of the case, documents on record and submissions made by both, the applicant and the jurisdictional officer. 5.2 The questions raised by the applicant is with respect to turnkey projects awarded to them by M/s. TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED (hereinafter referred to as M/S APTRANSCO ) for supply, installation, testing and commissioning of Relay Protection Panels with Substation Automation System (SAS) at various sites/ locations. The applicant has further submitted that the scope of the work involves complete design, manufacture, packing, insurance, transport and delivery to sites, training, installation, testing operate the 220 KV, 132 KV 33 KV feeders, Power Transformers and equipments . They have also submitted that in the PO that they have entered into with their client separate prices are indicated for each of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term 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 5.5 Thus what we need to find out is whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract. The applicant has submitted that their contracts with M/S APTRANSCO is an turnkey project wherein they are under an obligation to (a) complete design, manufacture of equipments, (b) packing, insurance, transport and delivery of equipments to various sites and (c) installation, testing and commissioning of various equipment at Substation and thereafter render training. Thus, they have submitted that, the final outcome or deliverable is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services. 5.8 Finally in PO NO. 328 dated 26.05.2017, submitted by the applicant, the contract value is ₹ 3,57,01,707/- and para 4 (GENERAL CONDITIONS) mentions that all the terms and conditions stipulated in the specification No. PMM22-3-017/2016 are binding (i.e PO No. 236 mentioned above) . For items listed in Sr. No. 1 to 17 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 18 of the Schedule included services tax. Here too, the PO envisages separate payment for supply of works and for supply of materials/equipments and there appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services. 5.9 Thus we find from all the three POs that the contracts are considering a clear demarcation of goods and services to be provided by the applicant but such supplies are naturally bundled and in conjunction with each other. Hence we now refer to the definition of Composite Supply as mentioned in sub-section (30) of Section 2 of CGST Act, 2017 and which is as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate rate after classification under the appropriate heading. The applicant has submitted that a Substation Automation , is a system which is used by an electric utility to remotely monitor, control and coordinate the distribution components installed in the substation. An electrical substation is the part of a power system in which the voltage is transformed from high to low or low to high, for transmission, distribution, transformation and switching. We find that the final deliverable is nothing but ready to operate substation Automation System, which can control and operate the 220kv, 132kv 33kv feeders Power and are required for the substation to function. The applicant have themselves accepted that they were collecting GST on these goods classifying the same under chapter Sub-Heading No. 85372000. However they have submitted that as against the said sub heading they have been collecting GST @ 28%. We find from the GST Tariff that goods falling under the said sub heading are taxable @ 18%. We also find from their submissions and as accepted by them that the goods supplied by them are in the form of Boards, Panels, etc equipped with 2 or more apparatus of heading 8535 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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