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TMI Blog2019 (11) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... delivers these goods to the site of the client and using these goods the appellant provides services of installation, testing and commissioning of the system. Both the supply of goods and services are dependent on each other and are naturally bundled and done in the course of the business. The AAR has also concluded that this is a composite supply and the principal supply is of goods in the instant case. We agree with the same. The supply of goods and services are conjoint to each other and inter dependent. Moreover, it is an established practice to supply air conditioner units and also provide the installation and therefore it can be construed as naturally bundled and therefore a composite supply, where, needless to say the principal supply is that of goods, which is the air conditioner units. Air Conditioners units fall under Chapter 8415 and are taxable @ 28% and are covered under Schedule IV, Sr no 119 of notification No 1/2017 (CV.T rate) dated 28/06/2017. Hence the principal supply in the composite supply being goods, the appellant is liable to pay GST @ 28% on the whole contract. The contract in the impugned case is though a composite supply not for immoveable property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporation No. U75112GA2001SGC002954 (CIN) dated 20/02/2001. GSIDC has been floated by the Government of Goa as a Special Purpose Vehicle (SPV) for speedy implementation of all the Infrastructural Projects, envisaged by the Government like Roads, Bridges, Fly-Overs, Bus-Stands, Hospitals, Tourism related Projects, etc., all over the State on the similar lines of similar Corporations in other States. This would help in development of infrastructural facilities all over the State of Goa. This Corporation would act as a coordinating agency for implementing all the projects. D. The appellant has sought advance ruling through GST-ARN application no 127 dated 26/02/2019 to determine the nature of transaction and rate of tax under SGST Act/CGST Act the question framed are as follows: Question No 1: The transaction would be classifiable to cover under the definition of works contract liable to CGST/SGST/IGST covered under Sr. No. 3 item no 3 of notification no. 20/2017(Central tax rate) dated 22/08/2017. OR Question No 2: The transaction is Composite supply liable to tax @ 14% being principal goods involved is Air Conditioner which falls to cover under schedule IV, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineer under this clause shall not relieve the Contractor of any responsibilities under this Contract. 5. Clause GCC 48 of tender document Volume - I speaks about MATERIAL AND WORKMANSHIP (pg. 38 Vol -I) A) Manner of Execution All Materials to be supplied shall be manufactured and all Works to be done shall be executed, in the manner set out in the Contract. Where the manner of manufacture and execution is not set out in the Contract, the Works shall be executed in a proper, workmanlike and careful manner with properly equipped facilities and non-hazardous materials and in accordance with recognized good practice. B) Delivery to Site The Contractor shall be responsible for procurement, transportation, receiving, unloading and safekeeping of all materials, Contractor s equipment and other things required for the completion of the Works 6. GCC54 TESTS ON COMPLETION (pg 41 of Vol -I) A) Contractor s Obligation The Contractor shall carry out the tests on completion, if any, in accordance with this clause and the Clause GCC 48 (D) Testing , after providing the documents in accordance with Clause SCC 8 As-Built Drawings and Clause 41 (E) Operation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G Supply, Installation, Testing and Commissioning of Hard Copper Refrigerant Piping including insulation. The insulation for all suction pipes shall be withl9 mm thick and all liquid pipes shall be with 13mm thick Nitrile Rubber Foam in sleeve form. Item 3 DRAIN PIPING Supply and fixing of Hard UPVCD rain piping for the indoor units with Insulation of Nitrile Rubber pipe section thickness of 6 mm as per specification and suitable for following pipe sizes: Item 4.1 ELECTRICAL WORKS Supplying and Erecting approved make 160 kVA,3 phase, 50c/s Oil immersed and naturally cooled outdoor type, Copper wound transformer with Energy Efficiency Level -2, BIS Standard with delta connected. on HV side star connection on LV side with additional neutral brought out on load side, Temp rise should not Exceeding 4000 C by the rmo meter in oil and 4500C by the resistance in winding at full load rating, voltage rating 11/ 0.433 kV with HV tapping(with off load tap changer) Tappings on Transformer For Off Load +5 to -10 in Steps of 2.5%, with standard accessories complete with Test Certificate with losses below 670 watts at 50% load, 1950 watts at 100% load as per IS:118 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th necessary materials duly painted with one coat of red oxide and two coats of enamel paint to match the switchgears or as per directions by the authority. The summery and the cost of above items as per the BOQ is as under: Name of Project: - Additional Air Conditioning work for the new building of Directorate of Education at Porvorim, Goa. BILL OF QUANTITIES - VOLUME III Name of Bidder Nikhil Conforts Item No. Description As per PO Amount (rs.) 1 EQUIPMENTS 2887872 2 COPPER REFRIGERANT PIPING 305645 3 DRAIN PIPING 62869 4 ELECTRICAL WORKS 2015037 5 EARTHING 224882 6 MISCELLANEOUS 33250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g engineer. The physical site survey is done by the design engineer and draftsman team and taking all the site details like area to be air conditioned, Orientation of building, exposed glasses, walls and its area, beam locations and its height beam, drain locations, outdoor unit locations etc. HEAT LOAD ESTIMATION - Based on tender Design Basis Report and actual site survey, a fresh Heat-Load estimation is prepared and submitted to consultant for their further approvals. These heat-load calculations is different for different sites and depends upon application, building orientation, exposed glass area, wall thickness, number of people in the building, lighting and equipment heat generation. PREPERATION AND APPROVAL OF SHOP DRAWINGS - As per approved heat-load estimation, type and capacities of VRF Air-conditioning equipment are selected. Selection of equipment shall also in line with better efficiency, site constraint, it s performance, appropriate space for maintenance and best suitable for hassle free, safe installation. The selected machines differ from room to room in terms of capacity and type. Once machine selections are approved by the consultant, detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plate of hi-wall unit is properly / rigidly fixed to the wall. Similarly, cassette units are fixed from slab with the help of female anchor fastener and full threaded rod. Outdoor units are installed on MS Platform / stand which permanently fastened to Concrete foundation with the use Male Anchor Fastners. IN VRF systems multiple indoor units are connected to bank of outdoor units. The interconnection pipe size and Y-Branch sizes are software generated. The output containing main header copper pipes, branching pipes and Y-branch sizes differ for different combination of indoor units, their sequence. These software outputs are project specific to the project. The change in pipe sizing will affect the working as well as performance of the entire VRF system. Hence it is highly important to follow the shop drawing and software output while installation of copper pipes. The hard copper pipes are cut to exact lengths and bent by using copper elbows and joined by using copper coupling with the help of brazing process to make a continuous one single pipe for suction and other single pipe for liquid gas. The Y branching joints to split the copper piping and take it to next indoor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommence. Room cleaned and free of dust, secure with doors installed. Start Commissioning procedure for VRF unit as per OEM guidelines Release Refrigerant gas from outdoor unit. Charge additional refrigerant gas as per the copper pipe sizes and overall length. Room wise temperature reading is prepared on hourly basis. J. It is summarized that supply/installation/erection and assembly of complete Air Conditioning plants were procured by the company and various equipment/components/material/parts and accessories were brought to the site of the customers GSIDC. The plant is installed /assembled mainly comprising of VRF 4-way Cassette units, VRF Hi wall units, VRF Outdoor units, electrical work, drain pump, interconnecting soft hard copper pipes, cable tray, sheet metal ducts are fabricated at site and installed along with grills and diffusers. The ducts and piping are insulated at site and the plant as a whole is to be handed over to the customer. K. DRAWINGS AND PHOTOGRAPHS a. HVAC LAYOUT for GROUND floor, FIRST floor and SECOND floor, COMMUNICATION LAYOUT and ELECTRICAL LAYOUT is attached herewith and marked as exhibit A , B , C , D and E to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antled. 5. The Authority has erred making following statement that we find their submission and agreement that the contract is considering clear demarcation of goods services to be provided by the applicant without considering conjoint reading of the all clauses of agreement, Tender document, Bill of quantity and also over looked the drawings and photographs submitted before the proceedings. 6. Your appellant craves to add, to amend, to alter, to delete any ground or grounds of appeal PRAYER Appellant prays to modify the impugned order suitably to cover under the definition of works contact under sub section 119 of section 2 of the Maharashtra Goods and Service Tax Act liable to CGST/SGST/IGST covered under Sr. no 3 item no 3 of notification No 20/2017 (Central tax rate) dated 22/08/2017 SUBMISSION 7. The applicant- Company pursuant to the acceptance of its tender, entered into an agreement with M/s Goa State Infrastructure Development Corporation Limited (GSIDC) for design, supply, Installation, testing commissioning of VRF Indoor and Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise Act where the property in goods passes in immovable there would be no excisablity. Considering the similarity in both the statutes it would be safe to refer to the decisions and authorities under the excise statute for determining the nature of activity whether property passes in immovable or not. To have the attributes of excisable goods as understood in the Excise Law. They are mobility and marketability. The article in question should be capable of being brought and sold in the market a test which is too well established by series of decisions of the Court. There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for purposes of that Act. From a combined reading of the definition of immovable property in Section 3 of the Transfer of Property Act, Section 3 (25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anything attached to the earth require determination of both the intention as well as the factum of fastening to anything attached to the earth. It also required to see t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act . In Mittal Engineering Works Pvt. Ltd. Vs. CCE 1996 (88) ELT 622 (SC) = 1996 (11) TMI 66 - SUPREME COURT ; the Court was concerned with the exigibility to duty of mono vertical crystallizers which are used in sugar factories to exhaust molasses of sugar. After considering the material placed on the record it was held that the mono vertical crystallizer has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. This Court, therefore, concluded that mono vertical crystallizers are not goods within the meaning of the Act and, therefore, not exigible to excise duty. In Triveni Eng. Industries [2000 (120) E.L.T. 273 (S.C.)] = 2000 (8) TMI 86 - SUPREME COURT , the question was whether a Turbo-Alternator was excisable or not. The Tribunal had hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the contract entered into between the appellant and the customers. This distinct product is not embedded in the ground like a tree or building, at the most some of its equipment/components are fixed by bolting, using nuts and bolts, to secure maximum operational efficiency and safety of the plant as a whole. 13. The case is decided by majority holding that it is immovable by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is the independent function of the department, as held by the Apex Court in the case of Triveni Engineering and Industries Ltd. v. CCE [2000 (120) E.L.T. 273 (S.C.) = 2000 (8) TMI 86 - SUPREME COURT , to establish the marketability of any goods before subjecting them to levy of duty of excise and the same has got to be discharged by placing on record independent cogent evidence. In the instant case, the department has not been able to establish that the CAPs were capable of being taken as such to the market for being sold. Thus, the majority has held that Central Air conditioner plant fixed in the contract is immovable. Thus, as per the decision of the majority the transaction is of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assortment of some components viz. VRF 4 -way Cassette units, VRF Hi wall units, VRF Outdoor units etc. but never the Air conditioning plant as a whole. Therefore, it is submitted that since the Air conditioning plant as a whole is not capable of being taken to the market for sale, it was not a marketable item. If the items assembled or erected at site and attached to earth/wall cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as movable. 17. It is also pertinent to refer to the order of Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs through its order no 37B Order 58/1/2002-Cx dated 15th January 2002 has issued instructions at para 5 (iii) that- Refrigeration/Air conditioning plants - These are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They are in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable, the refrigeration/air conditioning system as a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning system; (2) to treat (air) with such a system; the word air-conditioner means an air-conditioning device and the word air-conditioning means (1) a system or process for controlling the temperature, humidity and sometimes the purity of the air in an interior, as of an office, theatre, laboratory, house, or the like ; (2) an air-conditioning system or unit. As per The New Shorter oxford English Dictionary on Historical Principles, edited by Lesley Brown, Volume 1 A-M, 1993, the word air-conditioned means having air-conditioning. The word air-conditioner means an apparatus for air-conditioning . The word air-conditioning means the process of cleaning air and controlling its temperature and humidity before it enters a room, building, etc. 9.3 Again, as per The Free Encyclopedia Wikipedia, the air-conditioner is an appliance, system or mechanism designed to extract heat from an area using a refrigeration cycle. The construction of a complete system of heating, ventilation, and air conditioning is referred to as HVAC. Some refer to air conditioner or air conditioning as AC or A/C for short. An air-conditioning system equipment may be (1) window or through-wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Plant and window Air condition machine or Split Air conditioner. 23 Before we come to any conclusion, we would like to refer to McGraw-Hill Encyclopaedia of Science and Technology Vol. I, 5th Division. Relevant extracts from pages 201 and 202 are reproduced below: - Air conditioning systems. - A complete air-conditioning system is capable of adding and removing heat and moisture and of filtering dust and odorants from the space or spaces it serves. Systems that heat, humidify, and filter only, for control of comfort in winter, are called winter air-conditioning systems; those that cool, dehumidify, and filter only are called summer air-conditioning systems, provided they are fitted with proper controls to maintain design levels of temperature, relative humidity, and air purity. Design conditions may be maintained by multiple independent subsystems tied together by a single control system. Such arrangements, called split systems, might consist, for example, of hot-water baseboard heating convectors around a perimeter wall to offset window and wall heat losses when required, plus a central cold-air distribution system to pick up heat and moisture gains as requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maining air. In the language of the engineer, a portion of the room air is returned (to an air-handling unit) and, after being conditioned, is supplied to the space. A portion of the return air is spilled (exhausted to the outdoors) while an equal quantity (of outdoor air) is brought into the system and mixed with the remaining return air before entering the air handler. Typically, the air-handling unit contains a filter, a cooling coil, a heating coil, and a fan in a suitable casing (Fig. 3). The filter removes dust from both return and outside air. The cooling coil, either containing re-circulating chilled water or boiling refrigerant, lowers air temperature sufficiently to dehumidify it to the required degree. The heating coil, in winter, serves a straightforward heating function, but when the cooling coil is functioning, it serves to raise the temperature of the dehumidified air (to reheat it) to the exact temperature required to perform its function, in micro-cosm, in room units in each space, as part of a self-contained, unitary air-conditioner, or it may be a huge unit handling return air from an entire building. The Tribunal has made a distinction that Air cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms etc. These grills bought from the petitioner are fixed in the immovable properties like various rooms, industrial sheds, car parking, toilets, kitchens, etc. for ventilation or for covering the opening of ducts of the air-conditioning systems. After fixing the grills on the buildings they become a part of the building. Many grills are fixed on the walls as dummy grills for beautification and interior decoration of the rooms, which are not used even for passing of the air either in the ventilation system or in the air-conditioning system. It is alleged that air-conditioning systems/projects are different from the air-conditioning machines. The grills manufactured by the petitioner are not part of air-conditioning machines but are accessories of the air-conditioning systems/projects as these are fixed on the ceilings or walls of the building. Hence they are not classifiable under Chapter 8415 of the Central Excise Tariff Act, as they are not attached with any machine nor do they form integral and inseparable part of air-conditioning machine nor change any temperature or humidity. 24. Keeping in view the principles laid down in the judgments and authority noticed above, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as immoveable property: - The permanency test , as established by the Supreme Court in the case of Commissioner of Central Excise, Ahmedabad v Solid and correct Engineering Works Ors (2010 (5) SCC 122.) = 2010 (4) TMI 15 - SUPREME COURT (Solid and Engineering Works), is to be used to determine whether the equipment qualifies as immoveable property or not. If the machinery or equipment is permanently fastened or embedded to the earth, it qualifies as immoveable property. However, if the machine is fastened merely to provide a wobble free operation , it would not qualify as immoveable property. In the present case, the entire tower and shelter is fabricated in the factory of the manufacturer and is supplied in a Completely Knocked Down (CKD) form. The equipment is fastened to the civil foundation for a wobble free operation and to provide greater stability. A fixation which does not involve assimilation of the property and is necessary for a wobble free operation cannot be considered as an immovable property by applying permanency test . The tower/shelter may be unbolted and reassembled without any damage to any other location. There is no intent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the fundamental issue which needs to be decided is whether the towers and shelters are movable or immovable property. In this regard, it would be useful to refer to the relevant statutory provisions to examine, what would constitute as moveable or immovable property. The expression moveable property has been defined in Section 3 (36) of the General Clauses Act, 1897 as under: Section 3 (36): movable property shall mean property of every description, except immovable property. 31. It is obvious that the answer to the question whether installation of Air conditioners and ducts, pipes in question are movable property, would depend upon whether they are immovable property. That is because anything that is not immovable property is by its definition moveable in nature. 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, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 as referred by the applicant would be termed as composite supply. PERSONAL HEARING 34. A personal Hearing in the matter was conducted on 04.11.2019 , which was attended by Sanjay M. Gadkari, on behalf of the Appellant, wherein they reiterated the written submissions previously filed before us. The aforesaid hearing was also attended by Shri P.P. Sawant in the capacity of the Jurisdictional Officer in the instant appeal matter, who also reiterated the written submissions, filed before us. Discussions and Findings 35. We have gone through the submissions of the appellant and the jurisdictional officer and the records of the appellant. The appellant has submitted that they have entered into an agreement with Goa State Infrastructure Development Corporation Ltd (GSIDC) for execution of Additional Air conditioning work for the New building of Director of Education at Porvorim, Goa. The agreement is dated 21 August 2018, is for supply, installation, testing and commissioning of VRF Indoor Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, cabling, Additional Refrigerant and associated electrical wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to room in terms of capacity and type. This happens even in case of installation of a single Air conditioner unit in a room where the capacity of the AC depends on the size of the room. Also, much emphasis has been laid by the appellant on the fact that the unit is installed on the basis of shop drawings and a study of site. The markings are done for indoor unit locations, outdoor unit locations, copper pipes, cable trays and cabling. However, we find that the fact that a study of the site done before the installation of the unit does not make any installation a part of the property or an immoveable property. This cannot be a distinguishing factor as such studies are done even before installation of an air conditioner unit which also involves a study of the size of the room, the location of the window, laying down the piping etc. 40. It is argued by the appellant that the contract is for immoveable property because the Air Conditioning plant cannot be taken as such to the market for sale and totality of the plant cannot be shifted from one place to another, once it is installed at a particular site. It can be shifted only after dismantling the plant which cannot be called Air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being sold. The Tribunal has pointed out that the appellant had himself bought several items and completed the machinery. It had purchased a large number of components and fabricated a few and manufactured the paper making machine at the site. If it is sold it has to be dismantled and reassembled at another site. We do not find any fault with the reasoning of the Tribunal on this aspect of the matter. Lastly, it was contended that the paper making machine was not really manufactured by the appellant. Various components and parts were purchased and a few of the parts were fabricated at the factory and the assessee ultimately assembled various parts of the machine. We are unable to uphold this argument also because it has to be seen whether a final product is something distinct and apart from the components that have gone into its production. What the appellant has erected in its factory is a paper making machine. It may have purchased various components to make the machine but nonetheless what has been produced is something quite different from the components that had been purchased. A new marketable commodity has emerged as a result of the manufacturing activity of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing tests while holding that asphalt hot mix plants are not immoveable property:- (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be attached to the earth within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) 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 road construction or repair project for which it is set up is completed. 44. We find ourselves that the observations, apply to the instant case. In the case before us, the fixation of the air conditioner units along with the pipes, though it is undoubtedly a fixture, is for the beneficial enjoyment of the units and in order to use them for cooling, it has to be attached to the ceiling. The attachment, in such a case, does not make the air conditioning units a part of the land and as immovable property. The instant judgement prescribes the overarching tests for determining whether an it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... around ₹ 3 lakhs. This shows a preponderance in favor of goods in the total value. So this shows that installation and the entire fabrication is not a key factor in the valuation. Even though there might be works involved in the air conditioning system, the balance tilts considerably in favour of goods. 48. From the discussion made above, we have come to the conclusion that the contract submitted is not immoveable property. Also, it is seen that the major part of the contract is supply of goods i.e. VRF Indoor and outdoor units, refrigerant piping, drain piping with insulation, MS parts, cabling etc. The appellant delivers these goods to the site of the client and using these goods the appellant provides services of installation, testing and commissioning of the system. Both the supply of goods and services are dependent on each other and are naturally bundled and done in the course of the business. 49. The AAR has also concluded that this is a composite supply and the principal supply is of goods in the instant case. We agree with the same. The supply of goods and services are conjoint to each other and inter dependent. Moreover, it is an established practice to suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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