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TMI Blog2022 (3) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... property has been answered positive in subject case and we hold that subject Plant is an immovable property. The Cattle Feed Plant once installed and commissioned in the premises is transferred to the customer, thereby involving transfer of property. The Plant installation comprises cabling and fastening to earth/ foundation and all the equipment/parts are interlinked to constitute a functioning Plant that it cannot be moved as such without dismantling/ dismembering - The supply hinges on providing a functional and operational cattle feed plant which has passed the test of permanency and thereby an immovable property. The supply interalia involves transfer of property to the customer and the subject supply merits consideration under works contract service. Supply of a functional Cattle Feed Plant, inclusive of its Erection, Installation and Commissioning and related works involved for both the supplies, is Works Contract Service Supply, falling at SAC998732 attracting GST leviability at 18%. - GUJ/GAAR/R/2022/14 - - - Dated:- 14-3-2022 - ATUL MEHTA AND ARUN RICHARD, MEMBER Present for the applicant : Shri Hardik Shah, CA and Shri Kumar Parikh, CA Brief Facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipment. 6. IDMC submitted that the price is agreed for entire work with relevant bifurcation of goods and services. It has following responsibilities with respect to plant execution. Supply of cattle feed equipment such as pellet mill, hammer mill etc. Supply of other ancillary equipment/ goods such as MS Structural, MS chequered plates, Conveyors for transporting raw material in the plant, Electrical switch boards and cables etc. Services relating to commission, installation erection of equipment. Undertaking trial runs on the machinery installed and testing of output received. 6.1 IDMC submits that the intention of agreement is supply and install cattle feed plant and this arrangement does not include any civil work / services. 6.2 IDMC submits that as per their understanding the present case qualifies to be composite supplies. 6.3 The applicant further submits that the present supply would not qualify as works contract service. The definition of works contract has been provided in the CGST Act which has been reproduced hereunder for easy reference: (119) works contract means a contract for building, construction, fabrication, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an immovable property. 8. IDMC submits that the supply of cattle feed plant in the present case does not create any immovable property. Moreover, in present case, the plant is not rooted to earth but same is fixed with the help of nut bolt. Further, even if same is embedded to earth, it is just to ensure efficient operation of plant. Considering above discussion, IDMC believes that present supply does not qualify to be works contract supply. 9. IDMC has submitted that since the project involves supply of various machineries and equipment and various services, it is necessary to look into the type of supply in order to determine appropriate classification and applicable tax rate. 10. IDMC submits that under the GST regime, the concepts of composite supply have been newly introduced. The definition of the term is provided in Section 2 of the CGST Act which is reproduced as follows: (30) composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its that the contract in the present case is agreed by the customer to receive cattle feed plant and not individual machineries or equipment and services. Accordingly, the contract in the present case cannot be construed to receive individual services or machineries or equipment. It ought to be construed to receive a functional cattle feed plant. 11. IDMC submits that various machineries and services would support the cattle feed plant and are ancillary to the plant. IDMC places reliance on T.I. Miller Ltd. Vs Union of India and Another [1987 (31) ELT 344)] that a thing is a part of the other only if the other is incomplete without it. In present case, it is submitted that all the machinery / equipment and services, though ancillary, are required for completing and operationlised plant. The aim of the customer is to procure cattle feed plant and not the individual machinery. Thus, the machineries and services are ancillary supplies supporting an operational cattle feed plant. 12. Further, IDMC place reliance on the Gujarat AAR in the case of Silcher Technologies Ltd. (GUJ/GAAR/R/07/2021) wherein the Authority had occasion to deal with the question whether Design, Engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each other and therefore, third condition is also satisfied. IDMC submits that the supply of cattle feed plant would be contemplated as composite supply. 16. IDMC has submitted that to determine the classification and taxability, it is important to refer Section 8 of the CGST Act which is reproduced hereunder: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and 17. Further, the term principal supply is defined to mean 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. IDMC submits that supply of cattle feed plant is the principal supply in the present case because the ultimate intention of the customer is to get a fully functional cattle feed plant. 18. IDMC has referred ruling of Gujarat AAR in the case of Air Control and Chemical Engineering Company Ltd. [2021-TIOL-85-AAR-GST] wherein supply, Testing and Commissioning of 160 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. The flap gates, POS machines and manual swing gates are attached with screws and bolts at the entry gates of the bus station. These flap gates can be easily removed without damaging such gates and re-attached to some other locations. Hence, it cannot be said that such gates are permanently embedded to the bus stations and, hence, should be considered as an immovable property. Further, the flap gates are just a part of the AFC system and is not the main equipment of the AFC system. Even if, it is argued that the flap gates are permanently fastened to the earth and form part of the immovable property, it cannot be construed that the whole AFC system would form part of the immovable property. 26. The applicant further submitted that in case of city buses, hand held ETM machines with electronic payment integration are provided for the AFC system. In certain cases, Pole Validators with the AFC system are installed on the buses. Considering that the buses are movable properties, such equipment would not be construed as immovable property. Further, the purpose and function of the AFC system installed on the city buses and BRTS bus stations is the same i.e. fare collection and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically covers machinery for preparing animal feeding stuffs. The relevant extract of the Customs Tariff has been reproduced hereunder: Tariff Item Description of goods 8436 OTHER AGRICULTURAL, HORTICULTURAL, FORESTRY, POULTRY-KEEPING OR BEE-KEEPING MACHINERY, INCLUDING GERMINATION PLANT FITTED WITH MECHANICAL OR THERMAL EQUIPMENT; POULTRY INCUBATORS AND BROODERS 8436 10 00 - Machinery for preparing animal feeding stuffs 24. Moreover, notes to Section XVI provides that composite machines consisting of two or more machines fitted together to form a whole machine designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. The relevant extract has been provided hereunder for your ready reference. 3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of supply of cattle feed plant involving supply of installation, testing and commissioning services with civil work. 29. IDMC submits that in this case they receives order for design, installation, testing and commissioning of cattle feed plant ( plant ). They quote and agree separate prices for supply of equipment and installation commissioning of equipment. The Applicant further submit that the bill of material / bill of quantity specifies number of equipment required for cattle feed plant including accessories thereof and all the goods are offered to customers at their respective rate even if there is one contract for supply of cattle feed plant. Furthermore, it issues separate invoices for supply of goods and supply of services. It is submitted that all equipment are vital for operation of cattle feed plant and the plant would not work in absence of any of the equipment. Further this project involves civil work. 30. IDMC submits that they want to understand whether the present case qualifies to be works contract or not. If the supply would qualify as works contract, then what would be HSN classification applicable rate thereon. 31. IDMC submits that one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission. Additional Submission: 36. IDMC vide letter dated 4-3-22 has submitted as follows: During the course of hearing, your good office has sought Photographs of cattle feed plant in order to determine ruling on questions asked in the application. In this regard, we are enclosing herewith sample photographs showing various parts equipment of cattle feed plant in respect of question raised for Part A of application. We would like to inform that we have highlighted the portion of plant which is supplied by IDMC and same is movable in nature. Further, as seen from photographs, all the equipment are fastened to earth by nut-bolts to ensure wobble free and efficient operation of plant. We would also like to submit that the foundation/ civil work on which plant is fastened would be outside the scope of the IDMC and our responsibility is limited to supply, erection, installation commissioning of cattle feed plant (i.e. machinery) only. Considering above, we would request your good office to kindly consider the photographs on record oblige. Following photographs are pasted as follows : Revenue s submission: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding civil construction work, including drawings of civil structure. v. The mechanical installation comprises supply and installation of structural platforms and tables. vi. The supply comprises final adjustment of the foundations including alignment and dressing of foundation surface, embedding and grouting of anchor bolts and bedplates. vii. IDMC shall only after the alignment has been checked by it and witnessed by the Purchaser, then afterwards only, permanently bolt down the equipment to foundations/ structure. viii. IDMC shall supply, fix and maintain, at its own cost, during the erection work, all the necessary centering, scaffolding, staging required not only for proper execution and protection of the said work but also for protection of the surrounding plant and equipment. ix. IDMC shall supply box type platforms, pipe support bridges/ gantry. x. IDMC shall install all pipes, valves and specialities being procured from other sources. xi. The supply includes Testing and Commissioning of the Plant. xii. Supply comprises Installation and Commissioning of Electrical System. xiii. The supply includes trial runs of the Plant. 42. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, we find it apt to refer to CBEC Order No. 58/1/2002-Cx dated 15-1-2002 issued for the purpose of uniformity in connection with classification of goods erected and installed at site. We find this CBEC order s rationale applies to our subject matter. This said CBEC order was issued in wake of plethora of judgments appear to have created some confusion with the assessing officers, the matter was examined by the Board (CBEC) in consultation with the Solicitor General of India and the matter was clarified vide said Order and the relevant extract is reproduced as follows and we hold that its rationale and concept are relevant under GST scheme of law also. CBIC in Para (e) has clarified that, (e) If items assembled, or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. 44. We find that our view is in compliance to Judicial Discipline as laid down vide the following case laws: 4.5 In Triveni Engineering Industries Ltd. [2000 (120) E.L.T. 273 (S.C.)] the Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd installation of lifts is to be treated as sale of goods, as opposed to a works contract. However, the Larger Bench of the Hon ble Supreme Court overruled the said decision of three judges bench and held that the said contract in question is not merely a sale of goods since the same does not involve chattel (lift) sold for chattel. The Larger Bench of the Supreme Court upheld that the contract in question as a works contract since the same did not involve sale of chattel simpliciter but involved installation of chattel at site amounting to chattel being attached to another chattel. In this context, it was remarked that: 64. ..It is necessary to state here that if there are two contracts, namely, purchase of the components of the lift from a dealer, it would be a contract for sale and similarly, if separate contract is entered into for installation, that would be a contract for labour and service. But, a pregnant one, once there is a composite contract for supply and installation, it has to be treated as a works contract, for it is not a sale of goods/chattel simpliciter. It is not chattel sold as chattel or, for that matter, a chattel being attached to another chattel. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir submission and the issue is squarely covered against the Revenue that once the item has been held to be an immovable property, then, for the purpose of valuation the cost of construction and proportionate escalation charges cannot be added in the assessable value, as such, the impugned communication dated 20th August, 1987 of the respondent No. 1 is quashed and set aside and it is declared that the erection of lift is not excisable under Tariff Item No. 68 of the First Schedule to the said Act. 46.1 We note our views in compliance to ratio decidenci laid down vide the Hon ble Tribunal in the matter of Blue Star Limited Vs Commissioner of Central Excise, Jaipur [2002 (143) ELT 391 (Tri. -Del.)] wherein the Hon ble tribunal while examining the excisability of Central Air-conditioning Plant ( CAP ), held that CAPs cannot be taken as such to the market for sale. In order to take it to the market, the same would require to be dismantled in components and parts, and which will not remain as a complete CAP. Hence, the Hon ble Tribunal held that the CAP is an immovable property and hence, not marketable. The relevant extract of the said judgement is as follows: In the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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