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TMI Blog2022 (3) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... nd commissioning of a fully functional EPABX system, the EPABX machine is configured and connected to the exchange lines of the Telephone Exchange through cables. A main distribution frame is connected to the EPABX machine through wires/cables. The main distribution frame is terminating point for all the extension lines which are laid through wall, duct, and conduit to connect to the telephones, as per the requirement of the organizations. EPABX machine, main distribution frame, switches, telephones, various cards along with cables laid through wall/conduit/duct (to connect the EPABX machine to main distribution frame and subsequently, to various telephones) are cohesively treated as a fully functional EPABX system. 4. The supplies made by Intellicon to its customers include two types of contracts, as follows: A. Supply, installation and commissioning of EPABX machine along with laying cables through wall, duct, conduit and earthing. B. Supply, installation and commissioning of EPABX machine involving cabling from EPABX machine to main distribution frame. Detailed scope of work is as follows- 5. Supply, installation and commissioning of EPABX system along with laying cables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of execution of work).' 6. Supply, installation and commissioning of EPABX machine involving cabling from EPABX machine to main distribution frame (hereinafter referred to as 'Contract II'): 6.1. Under the contract of this nature, Intellicon sets up a functional EPABX system by supplying, installing and commissioning the EPABX machine and all other equipments such as main distribution frame, media gateway, switches, line cards and cables etc. Intellicon scope of work involves: a. Supply of EPABX machine and all other incidental equipment as stated above; b. Laying of cables to connect the EPABX machine and the main distribution frame and in turn connecting such equipment with extension line cables already available on premises of the customer. 6.2. Intellicon submitted a sample contract No. GEMC-511687702286858 dated 18-821of West Central Railway, Railway in relation to such supply. 7. Intellicon submits that supplies made under Contract I and Contract II are covered under Entry No. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (the Notification), as amended from time to time. Entry No. 3(v) of the Notification reads as follows: Descri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntellicon submits as follows: i. It is engaged in supply to Railways as well as other customers. The present application is filed in relation to the supplies to Railways. ii. Intellicon submits that any contract for erection, installation or commissioning of any immovable property involving transfer of property in goods would qualify to be a works contract as defined under Section 2 (119) of CGST Act. The term immovable property is not defined in the CGST Act, however reference can be drawn to definition of immovable property as defined in Section 2 of the General Clauses Act, which is: "Immovable property shall include land, benefits to arise out of land, and things attached to earth, or permanently fastened to anything attached to the earth" From the above definition of immovable property, it is evident that anything attached to earth or permanently fastened with anything attached to earth becomes an immovable property. Intellicon submits that it is engaged in supply of entire EPABX system which involves supply, installation and commissioning of EPABX machine along with various other equipments. Based on the requirement of the customers, it also undertakes laying of cables t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that matter, a chattel being attached to another chattel. Therefore, it would not be appropriate to term it as a contract for sale on the bedrock that the components are brought to the site, i.e., building, and prepared for delivery. The conclusion, as has been reached in Kone Elevators (supra), is based on the bedrock of incidental service for delivery. It would not be legally correct to make such a distinction in respect of lift, for the contract itself profoundly speaks of obligation to supply goods and materials as well as installation of the lift which obviously conveys performance of labour and service. Hence, the fundamental characteristics of works contract are satisfied. Thus analysed, we conclude and hold that the decision rendered in Kone Elevators (supra) does not correctly lay down the law and it is, accordingly, overruled." v. Intellicon relies on the judgement of the Hon'ble Bombay High Court in case of Otis Elevator Company (India) Ltd. Vs Superintendent of Central Excise, Range-I [2003 (151) ELT 499 (BOM)] wherein the Court held that elevator does not come into existence until it is installed in building and once the same is installed it becomes integral part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Vs Commissioner of Central Excise, Jaipur [2002 (143) ELT 391 (Tri. -Del.)] wherein the Hon'ble tribunal while examining the excisability of Central Airconditioning 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 instant case, the factual position is analogous to that of Triveni Engg. & Industries. Even the Revenue has no case that the CAP was capable of being taken as such to the market for sale. It required to be disassembled or dismantled into its components for the purpose of removal from its site, but then, certain parts would be damaged beyond repair and what could be taken to the market would be only the remaining parts, which would not make a CAP. The marketability test laid down by the Apex Court in Triveni Engg. & Industries is, therefore, not satisfied in the instant case." viii. Intellecon submits that EPABX system once installed ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same are used for a specific function of establishing private telephone network in any organization. Accordingly, the EPABX system and the components of the same would qualify to be machinery and equipment. xiii. Intellecon submits that to qualify under Entry no. 3(v) of the Notification, the supply must not be covered by the items (i), (ia), (ib), (ic), (id), (ie) and (if) of the Entry no. 3 of the Notification. Intellicon submits that based on the bare reading of the said entries, all these entries are in relation to construction services. 9. Intellecon has summarized the conditions fulfilled to cover under the ambit of entry no. 3(v) the Notificationas follows: Condition Fulfillment by Contract I Fulfillment by Contract II Supply pertains to Railways Supplies to East Central Railway Supplies to West Central Railway Supply is in relation to immovable property Intellecon supplies, installs, and commissions the EPABX system including the laying of cables through the walls, conduits, ducts and furniture of the premises of the customer. Installation of entire EPABX system with cabling makes it permanently attached to the immovable property and resultantly, being i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices for which bids have been invited by them, qualifies for concession rate of 12% of GST. Relevant extract of the said PO is as follows: 3.10 The buyer organization is an institution eligible for concessional rates of GST as notified by the Government of India. The goods for which bids have been invited fall under classification of GST concession and the conditions for eligibility of concession are met by the institution. A certificate to this effect will be issued by Buyer to the Seller after award of the Contract. Sellers are requested to submit their bids after accounting for the Concessional rate of GST. Applicable Concessional rate of GST : 12%" 11. Intellicon submitted a Certificate No. GEM Contract No. 511687702286858 dated 2610-21issued by West Central Railway in this regard. Question on which Advance Ruling sought 12. Whether the Entry no. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (the Notification), as amended from time to time, is applicable to supplies by Intellecon under the Contract I and Contract II and resultantly, whether such supplies are subjected to 12% rate of Goods and Services Tax ('GST'). Personal Hearing 13. Persona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled into component parts, the goods would be considered as immovable and therefore not excisable to duty." 19. We find it apt to refer to case law: Municipal Corporation of Greater Bombay & ors. V. Indian Oil Corporation Ltd. [199 Suppl. SCC 18], wherein one of the questions Hon'ble Supreme Court considered was whether a petrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the later part is in the positive then it would be treated as permanently attached to the earth. We find the test of permanency laid down by the Apex Court has been answered in subject case. Further, EPBAX system once installed and commissioned in the building is transferred to the building owner and this involves transfer of property. 20. The subject supply pertains to Railways as it is for supply in railway office. As p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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