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TMI Blog2022 (4) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... for supply of WOEG consisting of Nacelle, Hub, Controller, Transformer, Set of 3 Rotor Blades and hybrid Lattice Tower - a component of Renewable Energy Device / Wind Operated Electricity Generator in respect of a Wind Farm Project. 5. Suzlon receives a consolidated contract for supply of Wind Turbine Generator consisting of WOEG (nacelle including hub, controller - microprocessor, accessories, set of 3 rotor blades, hybrid tower) and supply of transformer. A copy of Order: Supply/001/SMEIPL dated 30-8-21 entered with Shree Malaiamman Energy India Private Limited was submitted 6. Suzlon submits that the transformer supplied by it is specially designed for WOEG application and is installed on the ground adjoining to each Wind Operated Electricity Generator. Its transformer performs dual function of a Step-Down Transformer and a Step-Up Transformer unlike a normal Transformer. In as much as it performs dual function, it is different from other general use transformers like used by the State Electricity Board, which have a single function of either stepping down or stepping up the voltage, and does not perform both the functions simultaneously. 6.1 Step-Down function: To activate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as follows: Type of transformer → Features ↓ Power transformer Distribution transformer Wind turbine transformer Transformer for PV Solar IEC standard IEC 60076-1 IEC 60076 IEC 60076-16 IEC 61378 IS standard IS 2026-1 IS 1180-1 IS 2026-16 IS 2026-1 Loading Continuous Continuous Cyclic Cyclic Average annual loading 60% - 100% 80% - 100% 30% - 40% 20% - 30% Category Oil insulated transformer Oil insulated / dry type transformer Oil insulated / dry type transformer Oil insulated / dry type transformer Installation Outdoor Indoor / Outdoor Indoor / Outdoor Indoor / Outdoor Mounting Ground mounted Ground / Plinth mounted Ground / Plinth / Nacelle / Tower mounted /Inside enclosure Ground / Plinth mounted / Inside enclosure Cooling type Oil natural / Oil forced / Air natural / Air forced /combination of above Oil natural / Air natural / Air forced / combination of above Oil natural / Air natural / Air forced / combination of above Oil natural / Air natural / Air forced / combination of above Ambient temperature correction No correction In case of enclosure mounting In case of enclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectro technical Division Council." 7.4 Suzlon submits that Transformers manufactured and supplied by them complies with the aforementioned IEC and IS. 8. Suzlon submits that Sr. No. 201A to the Schedule - II to Notification No. 1/2017-Central Tax (Rate) dated 28-6-17 (hereinafter referred to as the said Notification) read with Notification No. 1/2017-State Tax (Rate) dated 30-6-17 issued under the Gujarat GST Act, 2017 as amended vide Notification No. 8/2021-Central Tax(Rate) dated 30-921 wherein the rate of GST is 6% + 6% which earlier vide Entry No. 234 to Schedule I was 2.50% + 2.50%. The said entry for Chapter No. 84, 85 or 94 reads as follows: 'Following renewable energy devices & parts for their manufacture: (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Solar lantern / solar lamp (g) Ocean waves/tidal waves energy devices/plants (h) Photo voltaic Cells, whether or not assembled in Modules or made up into panels. Explanation: If the goods specified in this entry are supplied, by a supplier, along with supplies of other go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plants and devices including WTEP. This entry does not cover goods falling under other chapters, say a transport vehicle falling under Chapter 87 that may be used for movement of waste to WTEP. 12. Suzlon submits that as evident from the above, what is being perceived from the above clarification is that the concessional rate is being extended for the machineries, equipment etc. falling under Chapter 84, 85 and 94 and used in the initial setting up of renewable energy plants. It is a fact that a specially designed Transformer for WOEG is always being required to set up a Wind Farm and accordingly it believes that the specially designed Transformer supplied along with WTG as a part of WOEG be liable to CGST and SGST at the rate of 2.5% up to 30th September, 2021 and 6% thereafter. 13. Suzlon submit that to determine the applicability of Sr No. 234 up to 30th September, 2021 and Sr. No. 201A with effect from 1st October, 2021 for Specially Designed Transformers, what is important is whether the specifically and specially designed transformers to be used for WOEG application be considered as 'Devices and / or Parts' because the Windmill and WOEG have neither been defined in the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators and are eligible for exemption under Notification No. 6/2006, dated 1-3-2006.' 16. Suzlon submits that the above findings leads to the conclusion that if something is specially or specifically designed, it should be treated as part of that item for which it is specifically or specially designed. In the case of Suzlon, the Transformers are specially or specifically designed to be used along with WOEGs and hence be considered as parts liable to CGST and SGST at the rate of 2.5% each up to 30th September, 2021 and CGST and SGST at the rate of 6% each thereafter with effect from 1st October, 2021. 17. Suzlon submitted a copy of contract, as mentioned in para 5 along with the Annexure to the said contract, for supply of WTG: 'WTG" shall mean a 2.1 MW S111_140 type wind turbine consisting of nacelle, hub and control systems, blades (set of three blades), tubular towers, lightning protection, cables, aviation lights (if required) and transformer and any other equipment required to commission the WTG as per prevailing Grid standards and as per the technical specifications for the WTG' 18. Suzlon cites case law of M/s. Elecon Engineering Co. Ltd., Vs Commissioner of Customs [1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omething which has an individual function. The said Notes further explain that a machine which cannot perform its function unless it is mounted on another machine or appliance, or is incorporated in a more complex entity, is considered as a 'part' and not a machine. Thus, there is a twin test i.e. (a) the function performed by such machine is not distinct from that which is performed by the entity wherein it is to be incorporated, and (b) it plays an integral and inseparable part in the operation of such entity. 22. Suzlon submits that said HSN Explanatory Notes also give the example of a carburettor for an internal combustion engine and that the function performed by carburettor is distinct from that of engine, but it is not an individual function, as the operation of the carburettor is inseparable from that of the engine. Hence, the carburettor is considered as a part of the engine as opposed to an independent machine. Another similar example has been provided in the relation to mechanical or hydraulic shock absorbers. 23. Suzlon cites the judgment of Hon'ble Supreme Court in the case of CCE Vs. Insulation Electrical (P) Ltd. reported at 2008 (224) ELT 512 (SC), wherein the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d inferred that the transformer is a part for manufacture of WOEG and the rate of 2.5% each towards CGST and SGST be applicable to the specially designed Transformers up to 30th September, 2021 and 6% each towards CGST and SGST thereafter. 26. Suzlon submits that the Transformer also needs to be looked upon from the angle of the general principles of interpretation. The general principles of interpretation, which are meant for interpreting sections in the taxing statutes, are required to be adopted for interpreting the definitions also but at the same time when the word 'Wind Mills' and 'WOEGs' have not been defined in the Act as well the Rate Notification it is also equally well established principles of law that in the absence of such definitions in the statutes, they should be understood in their popular meaning and as per the definition in the market or commercial parlance and if the goods are by themselves technical or if there is no definition available in the market parlance, it is the scientific definition which requires to be adopted. 27. Suzlon cited the Honourable Karnataka High Court in case of Enercon (India) Ltd. vs. State of Karnataka (ILR) 2004 KAR 4020 wherein wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No(s). 1954/2006, pronounced on 8th March, 2016 wherein the Honourable Supreme Court considered the Transformer as Part of the Windmill considering the fact that Windmill was never defined in the erstwhile existing VAT Regime and the same is the case with erstwhile existing Central Excise Act and GST Act, 2017 as well read with Notification No. 08/2021-Central Tax (Rate) dated 30th September, 2021 read with Notification No. 08/2021-State Tax(Rate) dated 30th September, 2021. The relevant extracts of the above Ruling of the Honourable Apex Court is reproduced as follows : 'The High Court taking Note of the provisions of Section 8 and Entry 57 has observed that meaning of the words 'Windmills' is not defined under the Act and, therefore, some meaning has to be assigned to the same. It has further observed that since Section 8 of the Act exempts certain categories of 'goods' which are specified in the Fifth Schedule of the Act, it is only those items which qualify as goods are to be exempted. Thereafter, an endeavour is made to point out what would be the goods falling within the expression ''Wind Mill." It has been held that the expression "Wind Mill" would include rotor consistin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the GGST Act. 35. We have carefully studied all the submissions. The issue before us hinges on determination of GST rate on said transformers. We record out findings, as follows, in Part A & B. (A) whether Transformers are part of WOEG to determine entry at sr no 201A of schedule II of said Notification. (B) Determination of GST rate on said Transformers. A. Transformers, whether part of WOEG. 36. We refer to sr no. 234 of schedule I of Notification 1/2017-CT (Rate) dated 28-617; and sr no 201A of schedule II of said Notification, as follows: i. The Serial number 234 of Schedule I of said Notification, notifying CGST @ 2.5%, as per the following table. This Serial number 234 was omitted vide NT 8/21-CT(R) dated 30-9-21, w.e.f. 1-10-21 and a new serial number 201(A), notifying CGST rate for the same description @ 6% was inserted Sr.No. Description Sr. No. 234 to Schedule I of Notification No. 1/2017-CT (Rate) Sr. No. 201(A) of Notification No. 1/2017-CT (Rate) 1. Following renewable energy devices & parts for their manufacture &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without which the solar energy generated by such plant cannot be put to consumer use and since in the present case as per the contract between the applicant and the client Focal Energy Solar India One (P) Ltd. and Globus Steel and Power Pvt. Ltd. construction of sub-station, its connection of solar plant and successful transmission of power from plant to sub-station is an essential condition of contract. Thus in the instant case, supply of sub-station equipment being a part of contract for construction/installation of solar power generation plant, such equipments are also covered by exemption under item No. 10 of Entry No. 71 of Schedule I of the MPVAT Act, 2002. Para 8 The petitioner has stated that solar power generating system is incomplete without a substation or a grid and entire object of grant of exemption stands defeated on account of the order passed by the learned Commissioner. Para 14, 15, 16. According to Oxford Dictionary, system means a set of things work together as parts of a mechanism or a interconnecting work. The power system as per the Advance Law Laxicon by P. Ramanatha Aiyar, General Editor Hon'ble Shri Justice Y.V. Chandrachud reads as under : ""Power sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open and work and has been classified as operating system under entry relating to computer itself. Para 18 ... this Court is of the opinion that power generating system includes all components even the grid/goods related to sub-station, without which, the system cannot work.' 38.1 This case law drives home the point that solar power generating system includes solar power generator and other devices of transmission, and distribution. Thus solar power generator and solar power generating system are not one and the same. The said Notification 1/2017-CT(R) used wording solar power generating system ( vide sr no 234 of Schedule I, omitted w.e.f. 1-10-21) and used the wording solar power generator w.e.f. 1-10-21( vide sr no 201A in Schedule II). 38.2 We hold that the wordings of the Notification should be strictly interpreted. These Wording when clear, plain and unambiguous and only one meaning can be inferred, we are bound to give effect to the said meaning. We give due regard to the clear meaning of words and matter should be governed wholly by the language of the notification. We cannot allow any scope for intendment. We find that our view of strict interpretation of the wordings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Transformer is not mentioned as a part of WOEG. Relevant para 3 of the said Government Circular reads as follows: 3. Ministry of New and Renewable Energy had earlier clarified to CBEC on the subject that the following are parts of Wind Operated Electricity Generators. (i) Tower : which supports the nacelle and rotor assembly of a wind operated electricity generator. (ii) Nacelle : which consists of gear-box, generator, yaw components, flexible couplings, brake hydraulics, brake calipers, sensors, nacelle plate, nacelle cover and other smaller components. (iii) Rotor : consists of blades, hub, nosecone, main shaft, special bearings. (iv) Wind turbine controller, nacelle controller and control cables. 38.6 Our views in GST era are in line with para B-16 of CBEC Instruction dated 7-12-2015 issued vide FNo. 96/85/2015-CX.1 which are the Minutes of Central Excise Tariff Conference for clarifications on technical issues of classification and assessment, which reads as follows: "B-16: Issue: There exists ambiguity regarding exemption to parts of wind-mill in light of Tribunal's order in the case of M/s. Gemini Instratech Pvt. Ltd. V/s. Commissioner of C. Ex., Nashik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WOEG stands for Wind operated electricity generator. Whereas, transformers for WOEG is installed on the ground adjoining to WOEG to make the electrical energy generated by WOEG usable for consumption or distribution purpose. We note that the transformers are neither placed in nacelle nor tower but on the ground beside the WOEG. Suzlon's submission in this regard that transformers are placed in nacelle/ tower at para 6 is not correct. 38.8 WOEG and transformer inclusive devices to form a wind power system/ wind generating system/ project. But WOEG per se is capable of generating electricity with wind. Now if a specially designed transformer with step down function is designed to rotate the blades/fan in WOEG that does not make it a part of WOEG, but makes the transformer per se a dual function transformer with step up and step down function. For if we go by Suzlon's submission that WOEG needs transformer as its part for its operation to generate electricity, we may as well rename the 'wind operated generator' to 'transformer operated generator'. A Dual function transformer does not alter the status of WOEG per se. We note the word used in the said Notification is WOEG, which is gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e registration in every State or Union Territory from where the Taxable supplies of Goods and / or Services are made, on our PAN : AADCS0472N are currently registered in the States / Union Territory of Karnataka, Maharashtra, Tamil Nadu, Telangana, Madhya Pradesh, Delhi, Puducherry, Andhra Pradesh, West Bengal, Dadra and Nagar Haveli and Daman and Diu along with the State of Gujarat having GSTIN: 24AADCS0472N1Z8 from where the impugned Application seeking Advance Ruling has been made by us. 2. Nacelle including Hub, Controller and Accessories are manufactured in Dadra and Nagar Haveli and Daman and Diu, Pondy (Puducherry) and Padubidri located in the State of Karnataka. The Rotor Blades are manufactured at Dadra and Nagar Haveli and Daman and Diu, Pondy (Puducherry), Padubidri located in the State of Karnataka, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra and Andhra Pradesh. Hybrid Tower are manufactured in the state of Gujarat, Maharashtra and Tamil Nadu and the Specially Designed Dual Function Transformers for which the impugned Ruling has been sought for are being manufactured in Gujarat. Thus, in the Agreement with M/s. Malaiamman Energy India Pvt Ltd referred to in the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 01/2017 dated 30th June, 2017 issued under Gujarat GST Act, 2017 and that the benefit of concessional rate of 5% GST up to 30th September, 2021 is applicable on the specially designed Transformers and 6% each towards CGST and SGST with effect from 01st October, 2021 by virtue of omission of the said entry and addition of Entry No. 201A to Notification No. 01/2017-Central Tax (Rate) dated 28th June, 2017 vide Notification No. 08/2021-Central Tax (Rate) dated 30th September, 2021 read with Notification No. 08/2021-State Tax(Rate) dated 30th September, 2021 applicable from 01st October, 2021." 40. We find that Suzlon, Vadodara ( the applicant) is supplying Transformers directly to recipients, on Principal to Principal basis and the invoices produced before us are not bill to ship with reference to Transformers supplied. Also that there is no tripartite agreement between Suzlon Daman, Suzlon Vadodara (applicant) and Malaiamman (recipient). Also that Suzlon Daman has no contract/ sub contract entered with the applicant for supply of transformers to Malaiamman. Further, the phrase 'Bill to Ship to' is misleading and incorrect with respect to Transformers, as the 'bill ..... X X X X Extracts X X X X X X X X Extracts X X X X
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