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TMI Blog2020 (4) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ING, MAHARASHTRA. Brief Facts of the Case A. M/s Siemens Limited (hereinafter referred as the 'Appellant') is registered under the Central and State GST legislations vide GSTIN 27AAACS0764L1Z6 and is situated at Plot No 2, Siemens Limited, Sector 2, Kharghar Node, Navi Mumbai 410210, Maharashtra. The Appellant is a leader in technology solutions for intelligent (smart), sustainable cities, smart grid, building technologies, mobility and power distribution. B. The Appellant has entered into six contracts with one of the major Public Sector Undertakings in the State of Haryana (herein after referred as 'the Customer') for on - shore and offshore supply of goods and services on a joint venture ('J V') basis with M/s Siemens AG, Germany as the Lead Partner and M/s Sumitomo Electric Industries Ltd. Japan as another Partner. C. The six contracts cover specific and detailed nature of supply of various goods and services. Out of which two contracts are required to be executed by the Appellant as a JV's Associate. The Third Contract vide Ref. No. CC-CS/698 - SR2/HVDC - 3249/7/G10/R/NOA-III/7215 dated 22.03.2017 (hereinafter referred to as 'on-shore Supply Contract/ Third Contract') prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a similar exemption which has been provided under the Maharashtra Goods & 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. J. With respect to the local transportation charges and recovered by the Appellant from the Customer, the Appellant sought the Advance Ruling under Section 97(2) of Central Goods & Services Act, 2017 as amended ('CGST Act') and the Maharashtra Goods & Services Tax Act, 2017 as amended ('SGST Act') on the applicability of tax exemption as provided under Serial no. 18 of the Notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017. Questions for Advance Ruling: a. Whether the freight charges recovered by the Appellant under the aforesaid contract from the customer without issuance of consignment note will be eligible for exemption from CGST as prescribed in Serial no. 18 of Notification no. 12/2017-Central Tax Rate F. No. 334/1/2017, dated 28 June 2017? b. Whether the freight charges recovered by the Appellant under the aforesaid contract from the customer without issuance of consignment note will be eligible for exemption from SGST as prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place of supply shall be location of the goods at the time when movement of goods terminates for delivery to the recipient or moved to the site for assembly or installation refer to Section 10 (7) (a) and (d) of the IGST Act, 2017. The First Contract however does not include the provision and cost of such transportation and delivery. Therefore, it 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. vi. That although awarded under two separate contract agreements, clauses under both them make it abundantly clear that notwithstanding the breakup of Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Application shall remain responsibility to ensure execution of both the contracts to achieve successful competition. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vice versa. vii. That the two contracts are linked by a cross fall breach clause deeming that any breach in either of the contracts is to be considered to be a breach of the other contract as well. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to determine whether the aforementioned conditions get satisfied, it is relevant to refer to the term 'GTA'. In this regard, the term 'GTA' is defined in para 2 (ze) of the Exemption Notification to mean any person who provides service in relation to transport of goods by road and issues consignment note. The extract of para 2(ze) is reproduced below: '(ze) "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;' 2.2 This position on taxability of GTA services is very similar to the erstwhile Service Tax regime wherein Service Tax was applicable on GTA, provided the service provider issues a consignment note to the service recipient. 2.3 In light of the above, it is amply clear that a GTA clearly includes any person who provides services in relation to transportation of goods by road and who issues a consignment note. Accordingly, it can be said that the key determining factor for qualifying as a GTA is the issuance of a consignment note. In this regard, the Appellant submits that once a consignment note is issued, there can be no doubt that the service qualifies as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be covered under the ambit of service category of GTA services. 2.9 In the present case, it can be seen that the Appellant is purely providing the service of transportation of goods to the customer and is not issuing any consignment note. Accordingly, it is clear that the services provided by the Appellant are that of transportation of goods by road and not that of GTA. Accordingly, given that the conditions specified in the Exemption Notification are satisfied, the Appellant is eligible for exemption contained in Entry No. 18 of the Exemption Notification. 2.10 Lastly, the Appellant also submits that it is a settled principle in law that exemption notifications have to be accorded a liberal interpretation. In this regard, the Appellant places reliance in the judgement of Commissioner of Cus. (Prv.), Amritsar Vs Malwa Industries Ltd [2009 (235) E.L.T. 214 (S.C] = 2009 (2) TMI 41 - SUPREME COURT, wherein the Honourable Supreme Court had held that an exemption notification should be read literally and the same is to be construed liberally if it is found that the notification is applicable to the assessee. In this regard, the relevant extract of the judgement is reproduced belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered to the contractee's site, the recipient has not contracted for ex-factory supply of material but for the composite supply. * The two contracts are linked by a cross fall breach clause, thus, any breach in either of the two contracts will result in a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages accordingly. Thus, the 'cross fall breach clause' present in the contract, settles unambiguously that supply of goods, their transportation to the contractee's site delivery and related services are not separate contracts, but only forms part of an indivisible composite works contract supply. * Reliance is placed on M/s Indure Ltd. V. CTO in Order dated 20.09.2010 in C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT and AAR Order No. GST - ARA - 36/2017 -18/8 - 43 dated 04.06.2018 in case of Shri Dinesh Kumar Agarwal = 2018 (7) TMI 1691 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA, to observed that the first and second contracts have cross fall breach clause and thus, they are in nature of 'composite supply of works contract' taxable @18%. Divisibility of Contracts 2.14 At the outse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract' and 'Third Contract' any other services specified in the Bidding Documents referred to hereinabove.' 3.0 CONTRACT PRICE S. No. Price Component Amount i) Local Transportation, Insurance and other Incidental Services (VSC Portion) INR 623, 073, 872 ii) Installation Charges (VSC Portion) INR 2,174, 363, 480 iii) Training Charges Included Total for Fifth Contract (i+ii+iii) INR 2,797, 437, 352 2.18 Further, given that the transaction with the customer is on ex-works basis where the ownership in the goods is transferred at the premises of the Appellant, it can be said that the Fifth Contract would commence only when the ownership in the goods is transferred to the customer. 2.19 Therefore, in light of the above, it is evident that each of the activities to be carried on by the Appellant under the aforementioned two contracts are independent and distinct. Accordingly, the two contracts cannot be regarded as one single contract. 2.20 Both the contracts have different scope of work, separate consideration and separate invoices. Therefore, in no circumstances, the two contracts can be said to form one composite contract. 2.21 Reliance in this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties were ad idem that there existed a distinction between onshore supply and offshore supply. The intention of the parties, thus, must be judged from different types of services, different types of prices, as also different currencies in which the prices are to be paid.' 2.22 Similarly, reliance is placed on the decision of Linde Engineering Division v. Income Tax, (2014) 365 ITR 1 = 2014 (4) TMI 975 - DELHI HIGH COURT, wherein the Hon'ble Delhi High Court relied on the decision of Ishikawajima (supra) and held that the impugned contract for different scope of works ranging from supply of equipment to the services, is not a composite contract and the same can be split for the purposes of taxation. 2.23 Moreover, the Hon'ble High Court of Kerala in a matter concerned with an identical issue in the case of the Appellant [Siemens India Limited vs. State of Kerala 2003 (132) STC-0418] = 2002 (9) TMI 806 - KERALA HIGH COURT, held that when two separate contracts have been entered into by either parties, identifying two separate works viz. supply and service, then it is wrong in holding the same as indivisible contract. In this regard, the relevant extract of the judgement is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to works contract without first making sure that this is a contract which can come within the category of works contract. The Tribunal has completely overlooked the clauses providing for the maintenance charge irrespective of the period for which the TVA were to be maintained as also to the charges payable for the supervising engineer. It is clear from a reading of this contract that the parties intended to sell the goods, viz., titanium anodes had also entered into another arrangement for the supervision of the erection and installation of the anodes, as also the maintenance for which separate charges were payable.' 2.25 Thus, in view of the abovesaid decision, it is submitted that the view of the Ruling Authority that the Third Contract is a composite supply of works contract as defined u/s 2 (119) of the GST Act, of which transportation is merely a component and not a separate supply is erroneous. In the present case, the contractual terms of both the contacts for supply of goods and services are different from each other with different prices and conditions thereof. Hence, the Third Contract is merely for the supply of goods and is distinct vis-a-vis the terms and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Education Guide issued by the CBEC in the year 2012 ('the Education Guide'). In this regard, the relevant extract of the Education Guide is reproduced as under for ease of reference: 'Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of 'bundled service' would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determination of value of two services for the purpose of charging service tax is different.' 2.31 The Education Guide also clarifies that in cases of composite transactions, the nature of such transaction would be determined by the application of the dominant nature test. Further, the Education Guide lays down the manner to determine whether services are bundled in the ordinary course of business or not. In this regard, the Education Guide specifies that the same would depend upon the normal or frequent practices followed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Appellant are in the nature of works contract services on account of the following submissions in the ensuing paragraphs. 2.34 It i relevant to refer to the term 'works contract' as defined in Section 2 (119) of the CGST Act as amended. As per the said term, works contract inter alia includes a contract for building, construction, fabrication, completion, erection, installation 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. The extract of Section 2(119) of the CGST Act is reproduced below: '(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;' 2.35 On a plain reading of the Section 2 (119) of the CGST Act, it can be clearly seen that the term 'works contract' is in relation to immovable property. Given this, it is relevant to refer to the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gements, it can be said that goods cannot be termed as immovable property for the following reasons: - Such plants/systems cannot be said to be 'attached to the earth'. - The fixing of the plants/ systems to a platform/foundation is meant only to give stability to the plant/ system and keep its operation vibration free. - The setting up of the plant/ system itself is not intended to be permanent at a given place. 2.41 In view of the aforesaid judgments, the Appellant submits that the aforesaid parameters/factors governing determination of immovable property are per se not fulfilled by the Appellant as the goods specified in the contracts are not such that would be attached to the earth and are not intended to be affixed permanently. Further, in the present case, specific goods supplied by the Appellant 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 are firmly but not permanently attached to the land, clearly means that the goods in question do not per se come under the ambit of immovable property. Underlying intention of the parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six contracts for different transactions were entered with the JV, where the Appellant was one-on-one party to impugned contracts. As an industry practice, the particular range of contracts were awarded to the Appellant. The same does not necessarily mean or imply that they are interlinked or cannot exist independent of each other. It is further submitted that as a cardinal principle of interpretation of contracts, a commercially sensible construction of a contract must be favoured. 2.45 It is thus submitted that, the interpretation by the Ruling Authority of the contract being in the nature of composite supply of goods and services is merely a semantic and syntactical analysis of a commercial contract, which has led to a conclusion that flouts the commercial sense of the business. Thus, the contract should be interpreted in a way where it must be made to yield to business sense. 2.46 Reliance is also placed on the decision of the Hon'ble Supreme Court in VISA International Limited v. Continental Resources (USA) Limited, [2009 (2) SCC 55] = 2008 (12) TMI 793 - SUPREME COURT, wherein it was held that what is required to be gathered is the intention of the parties from the surroun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 438 (Tri.-Bang.)] = 2009 (12) TMI 152 - CESTAT, BANGALORE 2.49 Therefore, in the view of above, it is submitted that the understanding of the Ruling Authority is flawed as the intentions of the parties are clear to the extent that Third and Fifth Contract are independent in nature. Decisions relied upon by Ruling Authority are inapplicable in the present case 2.50 It is submitted that Department has placed reliance on the decision of Hon'ble Apex Court in M/s Indure Ltd. V. CTO in Order dated 20.09.2010 in C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT to observe that both the contracts i.e. Third and Fifth Contract having cross fall breach provisions, are in the nature of composite supply of works contract, therefore taxable at the rate of 18% GST. 2.51 The Appellant submits that the reliance place on the decision in Indure's case is erroneous as the facts and legal issue involved therein are completely different from the present case. The main issue in the Indure's case was whether the import of MS Pipes and supply thereof by assessee was an inseparable part of the Contracts entered by the assessee with the other party, and the consequent eligibility to claim benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that the observations of the Ruling Authority is based on the incorrect understanding of the contractual terms and statutory provisions governing the concept of 'place of supply'. It has erroneously observed that there is no 'supply of goods' in the present case as there is no place of supply. With the understanding that the Third Contract involves movement and/ or installation at the site, the Ruling authority has observed that the place of supply shall be location of the goods at the time when movement of goods terminates for delivery to the recipient or moved to the site for assembly or installation in terms of Section 10 (1) (a) and (d) of the IGST Act. 2.57 The Appellant submits that the present on-shore contract for supply of goods is on the basis of ex-works price, wherein the 'place of supply' is the premise of the Appellant who is the supplier. In this regard, firstly, it is pertinent to analyze the definition of place of supply as given in Section 10 of IGST Act: '10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,- (a) where the supply involves movement of goods, whether by the supplier or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Third Contract, the said price for the Third Contract would not have been on ex-works, but on cost+ insurance + freight basis. However, the same is not the case here. Thus, the observations of the Ruling Authority that there is no place of supply in case the goods are cleared from the factory premises of the Appellant is wrong. 2.62 Reliance in this regard is place on the decision of CCE, Nagpur v. Ispat Industries, 2015 (324) ELT 670 (SC) = 2015 (10) TMI 613 - SUPREME COURT in relation to the erstwhile Service Tax law, wherein it was held that the buyer's place cannot be 'place of removal' in case of the Ex-works contract. Drawing an analogy from the said decision, it can be said that the buyer's place cannot qualify to be the 'place of supply'. Thus, the actual place of supply in the present case is the Appellant's premise as oppose to the buyer's premise considering the contract being ex-works in nature. The ownership of the goods to be supplied stands transferred once the goods are cleared from the Appellant's premise. Thereafter, the transportation activity is handed over to the third party and the charges are collected from the customers in this regard. Hence, the Ruling Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision is erroneous as the facts and legal issue involved therein are completely different from the present case. 5. In the case of lndure, the issue which came up for determination was when can a transaction of sale be considered as one in the course of import as contained in Section 5 (2) of the Central Sales Tax Act, 1956 ('CST Act'). In this regard, the Hon'ble Apex Court observed that there must be an integral connection or inextricable link between the first sale following the import and the actual import, provided by an obligation to import arising from the statute, contract or mutual understanding or nature of the transaction which links the sale to import. 6. The Apex Court held that the Department has failed to establish that the imported goods were not used in the plant of National Thermal Power Corporation. Further, it was held that the assessee had imported the goods into India for completion of the project and that the benefit claimed under Section 5 (2) of the CST Act was allowed. In this regard, the relevant extract of the decision is reproduced below: 'Conversely, in order that the sale should be one in the course of import, it must occasion the import and to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various clauses of first contract and second contact, it can be safely concluded that the agreement for setting up for+ 320KV, 2 X1000MW 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, Kera/a) Specification No: CC-CS/698- SR2/HVDC 3249/7/G10/R International Competitive Bidding Project is a single indivisible contract. As the contract consists of two or more taxable supplies of goods and services and their combination, is a composite supply as defined u/s 2(30) of the GST Act. For the proposition of law that the first contract and the second contract is one single individual contract, we may find support from the decision of Supreme Court of India in case of M/s. Indure Ltd. and Anr vs. Commercial Tax Officer and Ors on 20 September, 2010 CA. No. 1123 of 2003.' 9. The Appellant submits that the observations made by the Ruling Authority is erroneous as the aforesaid extract as contained in the Impugned Order does not find any mention in the Ruling Order No. GST-ARA-36/2017-18/B-43 dated June 4, 2018 = 2018 (7) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led/fastened to the land for better/improved efficiency running of the said object, and not for the benefit of land, such object will not be considered as immovable property. Further, it has been held that if fixing of a plant to a foundation is only for providing stability to the plant and where there is no intention to make such plant permanent, the foundation provided would not change the nature of the plant and make it an immovable property. 16. Reliance in this regard can also be placed on the judgement of the Hon'ble Supreme Court in the matter of Sirpur Paper Mills vs. CCE, Hyderabad [1998 (1) SCC 400] = 1997 (12) TMI 109 - SUPREME COURT - copy attached as Annexure 5, wherein in case of a paper making machine, it was held that merely because the machinery was attached to the earth for operational efficiency, it does not automatically become an immovable property. If the appellant wanted to sell such goods, it could always remove it from the base and sell it. Hence, in this case as well, there was no movement indeed, however, the machine was capable of being moved which was enough for the machine to not be classified as an immovable property. 17. The Appellant would like to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the appellant's case. 21. Further, it is pertinent to mention that in a similar case the same Ruling authority while deciding the case of M/s. NR Energy Solutions India Pvt. Ltd. (GST-ARA-83/2018-19/B-03 dated 8.01.19) = 2019 (6) TMI 1171 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA - copy attached as Annexure 7 had taken a divergent view and held that supply of Relay & Protection Panels and Substation Automation System {SAS), complete design, manufacture, packing, insurance, transport and delivery to sites, training, installation, testing and commissioning of protection panels with SAS compatible to IEC 61850 protocol, to control and operate the 220 KV, 132 KV & 33 KV feeders, Power Transformers and equipment cannot be treated as works contract." 22. In view of the aforesaid submissions and clarifications relied upon, the Appellants submits that the goods installed at the Project site are not permanently affixed to the earth and can be dismantled/removed upon termination of the contract entered into with customers if any or at the time of carrying out repairs on the said goods. Therefore, it is submitted that the services provided by the Appellant are not in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be executed by the Appellant as a JV's Associate. The Third Contract (hereinafter referred to as 'on-shore Supply Contract/ Third Contract') provides for supply of equipment and materials including mandatory spares except +320kV HVDC Cable (including some of its associated items) from within India and Type Testing (as applicable), required for the complete execution of +320KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur. The Fifth Contract termed as 'on shore Service Contract (VSC part) (NOA-V)' (hereinafter referred to as 'on-shore Service Contract/ Fifth Contract') provides 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 its 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 ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for services by way of transportation of goods by road other than services of GTA and a courier 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. Applicant also submitted that support taken by the Advance Ruling Authority of Advance Rulings of other States are not binding and Contract under consideration is not a works contract as it does not result in an immoveable property. The applicant has separate contracts for supply of goods and services and cross fall breach clause in the two contracts does not alter the nature of contracts to composite supply. Applicant supported his above contention by various judgment & documents which are reproduced in the first part of this order under the heading "Grounds of appeal". ORDER PASSED BY THE ADVANCE RULING AUTHORITY 29. Advance ruling was issued by the advance ruling authority wherein both the questions put forth by the Appellant regarding the applicability of Exemption Notifications under MGST Act & CGST Act were answered in negative. In order to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not contracted for ex - factory supply of material, but for the composite supply, namely Works Contract for Supply for VSC based HVDC Terminal and DC XLPE Cable System. Reliance was placed on decision of Hon'ble SC in case of M/s Indure Ltd. Vs. CTO in Order dated 20.09.2010 in C.A. No 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT and also on AAR Order No. GST-ARA-36/2017-18/B-43 dated 04.06.2018 in case of Shri Dinesh Kumar Agarwal = 2018 (7) TMI 1691 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA. It is held that the first and second contracts have cross fall breach clause and thus, are in nature of 'Composite Supply of Works Contract', therefore should be taxable @18%. 30. Aggrieved by the order of Maharashtra Authority for Advance ruling, the appellant has filed present appeal before us. Appellant has further stated that, he could not submit the appeal application online as the status of order is not yet updated on GST portal and hence is filing the application manually. OBSERVATIONS 31. In this matter, the core issue raised before us is related to the applicability of exemption from levy of tax as provided under entry Sr. 18 of Notification No. 12/2017 of CGST Act, on the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith all the specifications, terms and conditions of the Bidding Documents including Record Notes of Clarification Meetings referred to at para 1.3, 1.5 and 1.6 above (hereinafter referred to as "Bidding Documents') and specific confirmations recorded in the Record Notes of Post Bid Discussions (referred to at para 1.10 above), and award on you, the 'On-Shore Supply Contract-I' (also referred to as the 'Third Contract') for the subject package, for supply of equipment and materials including mandatory spares except +320kV HVDC Cable (including some of its associated items) from within India and Type Testing (as applicable), required for the complete execution of +320KV, 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 detailed in the Bidding Documents referred to hereinabove. The scope of work under this Contract 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to be conducted outside India, required for the complete execution of the +320KV, 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; (c) 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-CS/698-SR2HVDC-3249/7/G10/R/NOA-IV/7216 dated 22.03.2017 for award of 'On-Shore Supply Contract-II' (also referred to as the 'Fourth Contract) for the subject package, for supply of some items including mandatory spares (if any) for +320kV HVDC Cable system from within India and Type Testing (as applicable), required for the complete execution of +320KV, 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 Ref. No. CC-CS/69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each or occurrence giving us a right to terminate the 'First Contract and/or 'Second Contract and/ or 'Fourth Contract and/ or 'Fifth Contract and/or the 'Sixth Contract, either in full or in part, and/or recover damages under those contract(s), shall give us an absolute right to terminate this Contract at your 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 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 Completion#: 30 weeks #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. 35. ii) Second contract - for On-Shore Services Contract-I Notification of Award for On-Shore Services Contract-I for + 320KV, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countries outside India including CIF supply of all equipment and trials including mandatory spares except +320kV HVDC Cable(including some of its associated items), to be supplied from abroad including corresponding type tests and training to be conducted abroad, required for the complete execution of the + 320KV, 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 IV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO, vide our Notification of Award Ref. No. CC-CS/698-SR/HVDC-3249/7/G10/R/NOA-11/7214 dated 22.03.2017 for award of 'Off-Shore Contract-II (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 +320KV, 2X1000MW FSC based HVDC Terminals and DC XLPE Cab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, 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 '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-1 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 Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem 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 38 months b. Monopole 2 and associated Cable system 38 months Additional Time for Completion#: 30 weeks # 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. 7.0 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. 36. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignment note. Services provided by the Appellant are that of transportation of goods by road and not that of GTA. Accordingly, given that the conditions specified in the Exemption Notification are satisfied, the Appellant is eligible for exemption contained in Entry No. 18 of the Exemption Notification. No. 12/2017 - Central Tax (Rate) dated 29 June 2017. In support of this appellant has relied on no of judgments which are reproduced in grounds of appeal. Whole line of arguments of the appellant regarding exemption on the transportation of service is in fact without considering the terms and obligations created under the both contracts of supply of goods and services and is based on the theory that the supply of service contract is in total isolation from the whole contract. Here appellant is isolating transportation services not only from other services envisaged under on-shore service contract (Fifth contract) but also isolating it from whole contract of supply of goods and services allotted to the JV in which appellant is an associate. Hence here most important questions is to verify whether the transportation services and other services provided by the appellant are altog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied by you under the 'Third Contract, by SIEMENS AG on behalf of iv 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 this 'Fifth Contract'/ by SUMITOMO under the 'Sixth Contract shall give satisfactory performance in accordance with the provisions of the Contract(s).. Regarding pricing of the contract, 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." Further in para 6.0 time period assigned for completion of contract is for whole contract of supply goods and services along with commissioning of the project and no separate time period is mentioned for supply of goods and supply of services. 38. It is seen that these paras are included in both of these contracts i.e. Third and Fifth contracts of supply of goods and supply of services resp. The contracts are awarded to the JV of SIEMENS AG and SUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give us an absolute right to terminate this Contract at your risk, cost and responsibility, either in full or in part and/or recover damages under this Fifth Contract as well. Thus from the terms of the contract it is crystal clear that the transportation services provided by appellant which are the part of Fifth service contract is not only integrally connected with Third contract of supply of goods but it is also connected with the other contracts (First, Second, Fourth and Sixth contracts) which are performed by the JV partners other than the appellant. 41. The 'cross fall breach clause', settles unambiguously that supply of goods, their transportation to the contractee's site delivery and related services of insurance, unloading and handling at site, installation including civil work, testing etc. are not separate contracts, but only form parts of an indivisible composite supply of goods and services with single source responsibility. 42. 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. It is important that these two contracts if wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a composite supply and supply of goods is a principal supply; It is important to see the definition of 'principal supply' and goods along with the same. "principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; A reading of the definition of 'composite supply' shows that there should be a. Two or more taxable supplies; b. Of goods or services or both; c. Or in combination thereof; d. Which are naturally bundled and supplied in conjunction with each other; e. In the ordinary course of business. f. One of which is a principal supply. 44. The Contracts involve two supplies, one for the supply of goods and the other for the supply of services. The contracts fulfill the conditions of the 'composite supply'. There is supply of goods and services. They are naturally bundled in the sense that both the goods and services may require to fulfill the intention of the buyer in giving the contract. The supply of goods and services are provided as a package and if one or more is removed, the nature of the supply would be affected. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the provisions of law by which contract is governed i.e. Income Tax Act or other Acts. In the paras of judgments relied by the appellant nowhere the concept of overriding effect of one contract on other, cross fall clause in the contract are discussed. Further the judgments are under Income Tax Act or pre-GST Acts where concept of composite supply (as explained aforesaid) as incorporated under GST was not present. Further in present case the indivisibility of contract or composite contract is not required to be decided by interpreting terms of contract but there is clear cut mention of the same in the terms of agreement that notwithstanding the award of work under six separate contracts, 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 and notwithstanding the break-up of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic clause in the agreement as below- ..."Appendix-H of the L & T Vemagiri supply agreement stipulates that 5% of the price shall be paid on successful test for the identified packages as per the pricing and technical specifications; 5% of the price on provisional acceptance; and 5% of the price on final acceptance. Provisional acceptance is defined under the supply agreement to mean the achievement of provisional acceptance as defined in the civil works and erection agreement, and in accordance with the terms thereof. It is evident, therefore, that 10% of the payment under the supply agreement is required to be made only after provisional and final acceptance as stipulated under the erection agreement'. The Court concluded- . "The goods supplied to the owner, under the supply contracts, are tailor made goods, and cannot be bought off the shelf. Such goods cannot, ordinarily, be sold to another except for its use in turnkey projects of a similar nature. The petitioners have been entrusted with the work mainly for their expertise in erection and installation of plants in the execution of turn-key projects. As they were entrusted with the work of erection and installation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be conferred. Thus, the mere formal description of a person as an agent or buyer is not conclusive, unless the context shows that the parties clearly intended 'to treat a buyer as a buyer and not as an agent." It is clear from the observations made by this Court that the true relationship of the parties in Such a case has to be gathered from the nature of the contract, its terms and conditions, and the terminology used by the parties is not decisive of the said relationship." Thus, what the Supreme Court says above is that the form of the agreement is not important, it is rather the substance which has to be seen. The parties may use any words they like to suit their intention and it is therefore imperative that the agreement may not be taken as it is but its nature/substance has to be seen to arrive at the correct conclusions. 48. The appellant in support of his claim of exemption related to transportation services has relied on some judgments like Bharathi Soap Works vs. CCE&C, Guntur [2008 (9) STR 80 (Tri-Bang)] = 2007 (9) TMI 55 - CESTAT, BANGALORE; Essar Logistics Ltd. vs. CCE, Surat [2014 (33) STR 588 (Tri-Ahmd)] = 2014 (6) TMI 763 - CESTAT AHMEDABAD etc. and Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with PGCIL i.e. Third contract and Fifth contract which are the part of the whole contract of on-shore and off-shore supply of goods and services for complete execution of +320KV, 2X 1000 MW, VSC Based HVDC Terminals and DC XLPE Cable System between Pugalur and North Trichur, results into immovable property or not. Regarding this issue of immovability appellant in the grounds of appeal has contended that... "The goods specified in the contracts are not such that would be attached to the earth and are not intended to be affixed permanently. Further, in the present case, specific goods supplied by the Appellant 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 are firmly but not permanently attached to the land, clearly means that the goods in question do not per se come under the ambit of immovable property." It can be seen from the definition that works contract involves activities of building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of the plant itself is not intended to be permanent at a given place and if the plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed, then also it cannot be termed as 'Immoveable property'. 52. So, what to be seen above is that in deciding whether a property is movable property or otherwise, we have to see what is the mode of necessary annexation and the object of annexation. If object is so annexed that it cannot be removed without causing damage to the land then it gives a reasonable ground for holding that it was intended to be annexed in perpetuity. Also whether the intention of the parties while erecting the system was that the plant has to be moved from place to place in the near future would also make a difference. We have to see by relying upon the above principles i.e. 1) mode of object of annexation 2) mode of annexation whether the plant was installed merely to make it wobble free or it is affixed to the earth. Also, it needs to be seen whether 'the setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the project for which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd having regard to the facts of this case, we have no doubt in our mind 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. We have earlier noticed the processes involved and the manner in which the equipment were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and 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." In the above case, the Supreme Court took note of the fact that the various components of the Mudguns and the Drilling machines are mounted piece by piece on a metal frame, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertilizer plant in the instant case, are definitely embedded permanently with a view to utilize the same as a fertilizers plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show that the purpose for which these machines were embedded was to use the plans as a factory for the manufacture of fertilizer at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted." Thus, what can be seen from the above is that when machines are embedded with no visible intention to dismantle t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur and North Trichur. Hence ratio of advance ruling in case of M/s. NR Energy Solutions India Pvt. Ltd. is not applicable to present case before Accordingly, we pass the following order: ORDER In view of the above discussions and findings and in terms of Section 101 (1) of the CGST Act 2017 and MGST Act 2017, we hold that- 58. From the conjoined and harmonious reading of various clauses of Third contract and Fifth contract awarded to the appellant and their interdependency under the whole contract comprising of six contracts, it can be safely concluded that the agreement for setting up for + 320KV, 2 X1000MW 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) is a composite works contract as defined u/s 2(119) of GST Act and taxable @ 18% and hence- i. transportation services provided by the appellant being part of the whole works contract will be taxable @ 18% as works contract services and will not be eligible for the exemption as provided in Serial no. 18 of the Notification No. 12/2017-Central Tax (R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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