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TMI Blog2022 (4) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... g of petroleum crude or natural gas or both Vedanta Limited and support services in such respect are performed by the EPC contract or who have been contracted to and are responsible for all the engineering, procurement, and construction activities to deliver the subject Projects. It is seen that the service code 998621 includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case, it would appear that it is actually the EPC contractor who is giving support services to VL by being responsible for all the engineering, procurement, and construction activities to deliver the completed Projects - the impugned activity is not covered under Heading 998621. Whether the services provided by the Applicant are classified under SI No. 21(ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification? - HELD THAT:- Circular No. 114/33/2019-GST states that the scope of the entry at Sr. No. 21 (ia) under heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Applicant are classified under SI No. 24 (ii) of heading 9986 of the Rate Notification as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 and attracts GST @ 12% in terms of SI. No. 24(11) of Rate Notification? B. Alternatively, whether the services provided by the Applicant are classified under SI No. 21 (ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification? C. Further, if the subject services are not classifiable under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be imposable? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.6 This Project involves Field Development Plan ('FOP') preparation and execution, well facilities, development of surface facilities and well development and covers end to end integrated gas well construction which includes well pad facilities, intro field pipeline networks, facilities at central gathering pad and trunk line to the VL's processing facility. The Development Project covers various fields and project coverage includes Intrafield pipeline augmentation, Development for production ramp up of Development wells surface facilities, etc. The Applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design to commissioning and is inter alio required to review, monitor, manage and control all aspects of the execution of the Project. PMC services 2.7 VL has entered into separate agreements dated 29.05.2018 and 10.01.2019 with the Applicant in relation to Project 1 and Project 2, hereinafter also referred to as Projects' respectively, for supply of PMC services. The PMC services are customized and tailor made to suit the requirements of VL and further require extensive technical and sound experti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present application. B. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS SUPPLY OF SERVICES BY THE APPLICANT SHOULD BE CLASSIFIED AS 'SUPPORT SERVICES TO EXPLORATION, MINING OR DRILLING OF PETROLEUM CRUDE OR NATURAL GAS OR BOTH UNDER SI No. 24(ii) OF HEADING 9986 OF THE RATE NOTIFICATION UNDER SAC 998621 2.10 In the present case, the Applicant provides customized and tailor made PMC services to suit the specific requirements of VL. On account of the unique nature and complexity of the services, the Applicant has the work force of professionally trained engineers who possess the qualification, technical expertise and skill sets required for executing the Projects and achieving the desired objective. Such services are in the nature of operational or administrative assistance in any manner to VL, and merits classification as 'support services to exploration, mining or drilling of petroleum crude or natural gas, or both under SI No. 24 (ii) of heading 9986 of the Rate Notification under SAC 998621'. 2.11 While determining the classification of the subject services under the Rate Notification, reference must be made to the Scheme of Clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; Merriam Websters Dictionary To assist, help; to provide a basis for the existence or subsistence of; to keep (something) going 2.14 A reading of above definitions reveal that the term 'support' signifies anything which helps in sustenance, keeps something going, enables something to exist or continue. Further, as per erstwhile Finance Act, 'support services' would include all operational, administrative, consulting and management services, or any other such support services, which the entities or recipients would carry out themselves, but have outsourced the same to the supplier of such services. 2.15 In the present case, VL has contracted with an EPC contractor for the purpose of development of Raageshwari well pads, pipelines, etc. as well as for execution of development wells and surface facilities to increase prospect of mining and pursuant sale of gas, procured from the fields therefrom. 2.16 VL was required to review, monitor and manage the activities of such EPC contractor for the development Project but has outsourced the same to the Applicant vide separate agreements covering the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Law Lexicon Dictionary, 3rd Edition Mining: the process or business of making or working of mines; the process of extracting from the Earth the rough ore, would seem to be the first step in the process; milling or reducing, the second step, to writ, the further separation of the materials found together, the one from other, and extracting from the mass the particular natural product desired. Mines Minerals (Development and Regulation) Act, 1957 (d) 'mining operations' means any operations undertaken for the purpose of winning any mineral The Oilfields (Development and Regulation) Act, 1948 (b) 'mines' means any excavation for the purpose of searching for or obtaining mineral oils and includes an oil well 2.19 From the above it is submitted that mining is the process of extracting of minerals/petroleum/natural gas, as the case maybe and also includes within its ambit, the ancillary and incidental activities such as extraction, purification, development of existing mining facilities, all of which is in relation to the activity of mining of min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Review/approval of all EPC deliverables with the agreed review cycle with the EPC Contractor 4. Services during construction - Construction, supervision and construction management. - Technical reviews. - Quality assurance and control. - Monitoring the progress of the work and ensure regular updation of master construction schedule by EPC Contractor. - Prior flagging of anticipated bottlenecks and analysis of reasons. 5. Material management Supervise and manage implementation of material Management 6. Commissioning and close out services - Review, approval of engineering drawings, Project Schedules, contractual agreements ensuring the deviations that have taken place during the construction have been incorporated. - Certificate of performance of works of EPC Contractor - Review/approve close-outs reports prepared by EPC Contractor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and approve health, safety and environment related documents for the Project. 12. Information management services - Assist VL and EPC Contractor to maintain appropriate management information systems that provide real time and appropriate quality information to all stakeholders meeting VL corporate requirements with respect to internal reporting. - Responsible for implementing document issue, numbering and distribution throughout the life cycle of the Project as per the established procedures of VL. - Review engineering documentation from EPC Contractor and Vendors, ensuring engineering integrity, validate engineering data/details, accord approval for manufacturing of equipment/systems. 13. Monitoring of project performance - Define key performance indicators for every EPC Contractor based on the EPC Contractor's scope of work - Assist in quality control and assurance of the Project. Conduct periodical reviews to monitor the quality of execution of the Project and the quality of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14/33/2019-GST dated October 11, 2019 has provided clarification on the scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both. While defining the girth of the aforesaid entry, it makes reference to the Explanatory Notes to the Scheme of Classification of Services which is based on the United Nations Central Product Classification and provides that the scope of aforesaid entry shall be, inter alia, governed by the Explanatory Note to service codes 998621 and 998622 (Support services to other mining n.e.c). 2.24 On Plain reading of the relevant extract in the Explanatory Notes to the scheme of classification of services under SAC 998621, it is seen that, the concerned Explanatory Note for 998621 uses the pharse includes and thus has a very wide connotation, thereby giving the Chapter Heading an extensive scope. The said phrase used in the Explanatory Note clearly shows that the Chapter Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard is made to Tetragon Chemie Private Limited and Ors Vs CCE and Ors [2001 (138) ELT 0141 Tri-LB], wherein in the context of interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sl. No. 21 of Rate Notification was inserted vide Notification No. 19/2019 with effect from October 1, 2019 in order to classify particular services such as management and consultancy services relating inter alia mining, and which do not merit classification as support services to mining under Heading 9986 of the SAC. The said entry uses the phrase 'relating to, which signify that any professional, technical and/or business services provided relating to mining, would merit classification under the said entry. The Hon'ble Supreme Court in Doypack Systems (P) Ltd Vs. UOI, [1988 (36) E.L.T. 201 (SC)], has held that the term 'in relation to' is a very broad expression, which pre-suppose another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context. The term relating to has been held to be equivalent to or synonymous with 'concerning with' and pertaining to Therefore, entry (ia) of SI. No. 21 includes a broad range of services which pertain or concern with the activity of mining. 2.29 PMC services provided by the Applicant in relation to the Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and attract GST @ 12%. The Circular thereafter clarifies that 'Geological and geophysical consulting services' and 'Mineral exploration and evaluation' which do not merit classification under Heading 9986, would also get covered under the broad heading of 9983 of the SAC, as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both, and resultantly, attract GST @ 12%. The said Circular has not provided an exhaustive list of services which would merit qualification under SI. No. 21(ia) of Rate Notification. It has merely clarified that certain technical and consulting services which are not specifically covered under the Heading 9986, would get covered within the heading of 9983 of the SAC. Entry (ia) to SI No. 21 of Rate Notification is very wide and the Circular cannot per se restrict the scope of the Rate Notification to cover only few services. 2.31 Therefore, without prejudice to the submissions made above, it is submitted that the supply of services made by the Applicant to VL, in relation to the mining, would merit classification under Heading 9983 of the SAC and attract G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Project (Project1), VL is the operator of the onshore hydrocarbon block - RN-ON-90/1 (hereinafter, referred to as the 'block') for itself and others. In order to execute the aforesaid developmental Project, VL has executed a single contract on Engineering, procurement and construction ('EPC') on the EPC contractor who is responsible for all the engineering, procurement, and construction activities to deliver the completed Project. The Applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design to commissioning and is inter alia required to review, monitor, manage and control all aspects of the execution of the Project. 5.4 The All Development/ Production - Debottlenecking Project (Project 2) involves Field Development Plan ('FDP') preparation and execution, well facilities, development of surface facilities and well development, end to end integrated gas well construction, etc. Even for this project the Applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design to commissioning and is inter alia required to review, monitor, manage an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However subsequent to issuance of Notification No. 19/2019 - Integrated Tax (Rate) dated September 30, 2019, the Applicant is of the belief and contending that the impugned services supplied by them falls under Sr No. 24 (ii) of heading 9986 of the Rate Notification as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621, attracting GST @ 12% and alternatively, falls under Sr No. 21 (ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' attracting GST @ 12%. 5.10 We find that, the work of exploration, mining or drilling of petroleum crude or natural gas or both Vedanta Limited and support services in such respect are performed by the EPC contract or who have been contracted to and are responsible for all the engineering, procurement, and construction activities to deliver the subject Projects. 5.11 The Applicant has submitted that, they provide customized and tailor made PMC services to suit the specific requirements of VL, to continuously review, monitor, manage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI. No. 21(ia) of Rate Notification . 5.12.2 We find that, the applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design to commissioning and is required to review, monitor, manage and control all aspects of the execution of the Project. In other words the applicant has to review, monitor, manage and control all aspects of the execution of the Project undertaken by the EPC Contractor and the impugned activities of the applicant visa vis the scope of work as per the contract with VL includes the activities as under:- a. To continuously review, monitor, manage and control all aspects of the execution of the project on behalf of Vedanta Limited and to manage the projects right from detail design to commissioning project closeout and holding complete responsibility for delivery in agreed schedule cost, and quality. b. To continuously review and report project performances at the level of detail required by Vedanta Limited and investigate performance issues and communicate early warnings in case of deviations. c. To review EPC Contractor's costing schedule, monitoring the project costing register and reporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rate (per cent) 21 Heading 9983 (Other professional, technical and business services) (i) Selling of space for advertisement in print media. 5 (ii) Other professional, technical and business services other than (i) above. 18 5.12.4 The said Sr. No. 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 was amended vide Notification No. 20/2019 CT (Rate) dated 30.09.2019 w.e.f 1.10.2019 and after the amendment the said Sr.No. is as under:- Sr.No. Heading Description of Service Rate (per cent) 21 Heading 9983 (Other professional, technical and business services) (i) Selling of space for advertisement in print media 2.5 (ia) Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both. 6 (ii) Other professional, technical and busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices; evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying; providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magnetometric methods other subsurface surveying methods This service code does not include - test drilling and boring work, cf. 995432 998343 Mineral exploration and evaluation This service code includes mineral exploration and evaluation information, obtained on own account basis Note: This intellectual property product may be produced with the intent to sell or license the information to others. 3.2 The relevant Explanatory Notes for Heading 9986 are as follows: 998621 Support services to oil and gas extraction This service code includes derrick erection, repair and dismantling services; well casing, cementing, pumping, plugging and abandoning of wells; test drilling and exploration services in connection with petroleum and gas extraction; specialized fire extinguishing services; operation of oil or gas extraction unit on a fee or contract basis This service code does not include: - geo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes since, the Notes to service code 998341 is restricted to Geological and geophysical consulting services and the Notes to service code 998343 is restricted to Mineral exploration and evaluation and the impugned services cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services. 5.12.8 In view of the above it is held that the impugned services are not covered under Sr. No. 21 (ia) also of Notification 11/2017-CTR dated 28.06.2017 as amended by Notification No. 20/2019-CTR dated 30.09.2019 (SAC 9983). 5.13 In the subject case as discussed above, even though the impugned services consist of professional, technical and business services, the same are not covered under Sr. No. 21 (ia) (SAC 9983) and Sr. No. 24 (SAC 9986) of Notification 11/2017-CT(R ) dated 28.06.2017 as amended. Therefore, the said professional, technical and business services supplied by the applicant to VL are clearly covered under the residual Entry No. 21 (ii) of Notification 11/2017-CT(R) dated 28.06.2017 as amended, attracting tax rate of 18%. 06. In view of the extensive deliberations as held hereinabove, we pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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