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TMI Blog2022 (12) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Railways. (4) Some of these tenders are for supply of works contracts including welding, painting, etc. of the rails so as to do fabrication, completion, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of such lines as immovable property. (5) In accordance with the scope of work detailed in the LOA, the Applicant inter-alia provides the following supplies in respect of construction lines and open lines: A. CONSTRUCTION LINES a. Welding: * The scope of this supply involves joining of new railway tracks, laid down by Indian Railways, by the flash butt welding/aluminothermic (AT) welding process. The entire welding work is undertaken at the site where tracks are being laid down. The Applicant is responsible for welding the rails together to make them fit for traffic movement. * Flash butt welding is a type of resistance welding wherein the pieces of metal, which are to be welded, are set apart at a predetermined distance based on material thickness, material composition and desired properties of the finished weld. In order to weld the said pieces, electrical energy is applied to both the pieces of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the fresh welds are painted. * Rail renewal In case of rail renewal, rails on railway tracks which are approaching the end of their lifecycle are replaced with new rails which are then welded, using flash butt/AT welding method, on to the existing tracks. They are subsequently painted as necessary. In case of rail renewal, essentially the scope of work on Applicant's end remains the same except for the fact that they will be welding new rails provided to them by the Indian Railways on free of cost basis for execution of the works. 3. The applicant has sought advance ruling on following questions as per Form GST ARA-01 - Whether the activities undertaken by the Applicant for the Indian Railways are classified under Entry 3(v)(a) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 and the benefit of concessional rate of GST of 12% can be availed in respect of the said supply? 4. As per declaration given by the applicant in Form GST ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant. 5. The applicant have submitted their interpretation of law as under- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by sub-section (1) subsection (3) and sub-section (4)] of section 5, subsection (1) of section 6 and clauses (iii), (iv) and (xxv) of section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) read with sub-section (5) of section 15 sub-section (1) of section 16 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the integrated tax, on the interstate supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:- Table SI. No. Chapter, Section or Heading Description of service Rate (per cent) Condition (1) (2) (2) (4) (5) ... ... ... ... ... ... ... ... ... ... 3 Heading 9954 (Construction services) (i) ... ... ... ... ... ... (iv) ... & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar property is an immovable property or not is subject to the peculiar facts of each case. (13) It is submitted that Hon'ble Courts have given various decisions laying down criteria for determining whether a property is immovable or not. In this regard, reference is made to the decision of the Hon'ble Supreme Court in the case of Triveni Engineering & Industries Limited v. CCE, (2000) 7 SCC 29. (14) Further, in the case of CCE v. Hutchison Max Telecom P. Ltd. & Anr., 2007 SCC OnLine Bom 702, the issue before the Hon'ble Bombay High Court was whether the Base station controller (BST)/base trans-receiver station (BTS) which are required to be assembled at the site using towers, UPS, cable trays, AC etc. would be treated as movable and therefore, liable to excise duty. The Hon'ble High Court held that the BST/BTS comes into existence in an immovable form and therefore, no excise duty would be leviable on the same. (15) Reference is also made to the decision of the Hon'ble CEGAT, Mumbai in the case of Josts Engineering Co. Ltd. v. CCE, Mumbai -III, 1997 SCC OnLine CEGAT 1547 wherein the Hon'ble Tribunal held that since the parts of the spray/painting syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pers/tiers with the help of fastenings. e. Top ballast: After laying down of rail tracks, a layer of top ballast is put between the sleepers which provide additional stability to the rails. (18) Thus, rail tracks are permanently attached to the earth which cannot be shifted from one location to another without dismantling it. On dismantling, what would be taken out are parts/components of the rail tracks (viz. rails, sleepers, etc.) and not the foundation itself. Therefore, rail tracks will qualify as an immovable property. (19) In view of the above, it can be concluded that the specified activities undertaken by the Applicant are in relation to the immovable property (i.e. rail tracks). Thus, the first condition to qualify as works contract, as mentioned in paragraph 18(a) hereinabove, is satisfied by the Applicant. (20) It is submitted that while executing the contracts of welding (AT welding) along with painting, etc. of the rails, goods, which are transferred are on account of the Applicant. The paint used for painting welds/rails and liquid metal, formed by igniting the exothermic aluminum powder, used for AT welding becomes a part of the railway tracks owned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve itself of the ownership of the same? We would think, it may not be possible. Therefore we would be justified in holding that the effluent and the treated effluent both belonged to the awarder. It is, therefore, into the property of the awarder, namely the effluent that the assessee supplies the chemical. The Apex Court in its decision in Gannon Dunkerley & Co. v. State of Rajasthan ((1993) 1 SCC 364) had, inter alia, held that cost of consumables, such as, water, electricity, fuel etc. used in the execution of the works contract, the property in which is not transferred in the course of execution of a works contract, is to be deducted. In S. 5C also, the words "not involving any transfer of property in goods" have been incorporated. Just like the toner and developer having been put into xerox machine becoming the property of the customer in the case before the Apex Court in Xerox Modicorp Ltd. case and the sale taking place before the goods are consumed, in the same way, the property in the chemical passed to the awarder the moment they are put into the effluent by the assessee and its subsequent consumption is the consumption after sale and it does not detract from the factum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he outset, it may be noted that the said definition is for the purposes of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. However, in the absence of any statutory definition, reference may be made to the said definition to understand the meaning, purport and extent of the term 'original works' used in clause 3(v)(a) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017. (32) On a careful perusal of the above referred definition of original works, it is evident that the said term includes the following: a. all new constructions; b. all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; and c. erection, commissioning or installation of plant, machinery or equipment or structures whether pre-fabricated or otherwise. (33) In the context of construction lines, it is submitted that the Applicant welds the new rails, laid down by the Indian Railways, using flash butt/AT welding method. These new rails are laid down at the site and are joined by the process of welding to form a continuous rail known as track. These welds and/or rails are also painted. Thus, the activities un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Applicant are covered under clause 3(v)(a) of the Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 and will be taxed at the concessional rate of 12%. 6. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter. The Deputy Commissioner, CGST & Central Excise Division-II, Kanpur vide C.No. V(30)02-CGST/R-XII/Div.-II/Legal/2021/473 dated 20.07.2022 submitted his report as under- (i) Applicant is inter alia engaged in the composite supply of works contract to the Indian Railways. (ii) This supply is made by the Applicant in accordance with the Letter of Acceptance (LOA) issued by the Indian Railways to the Applicant. (iii) In accordance with the terms of the LOA, the Applicant is responsible to carry out various activities which inter-alia include Aluminothermic welding of rails. Painting of weld/rails, maintenance of rails, etc., for the Indian Railways. (iv) according to Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017, the composite supplies of works contract, specified in entry 3(v)(a), was subject to the IGST rate of 12% until 17.06.2022. (v) The rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to create a specified gap and the rails are aligned. Thereafter, a refractory mould is fastened around the gap by means of steel mould shoes. Leaks in the moulds are prevented by special luting material. After pre-heating both rail ends, the exothermic reaction of the aluminum powder and iron oxide is started in a re-usable or a 'one-shot' crucible which forms the liquid steel which then flows into the mould. The rail ends are connected by the liquid metal which molten metal edges of the gap to form a weld. (ii) Painting of welds: In some cases, besides welding, the weld is also required to be painted using black paint. The material (i.e. paint) used for this process belongs to the applicant and property in such paint after execution of work shall stand transferred to the Indian Railways. (iii) Painting of rails: In some cases, besides welding, the applicant is required to paint rails. In these cases as well, paint belongs to the applicant and property in such paint after execution of work shall stand transferred to the Indian Railways. B. OPEN LINES (i) Maintenance Activities: Rail lines which are being used by the Indian Railways require periodical mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metro. 14.1. As such, there should be following ingredients for claiming exemption under entry 3(v)(a) of Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017- (i) there should be composite supply of works contract (ii) the said composite supply of works contract should not be covered in entry (i), (ia), (ib), (ic), (id), (ie) and (if) of the above notification. (iii) the supply should be by way of construction, erection, commissioning, or installation of original works (iv) the same should be pertaining to railways, including monorail and metro. 14.2 The term 'composite supply' is defined under clause 30 of Section 2 of the CGST Act, 2017 as under- "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, one of which is a principal supply. 14.3 We find that the applicant is supplying paint and welding material during maintenance of railway tracks as such there is composite supply of goods and service in the instant case. 14.4. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being shifted to another place without having to dismantle the same into constituent components and without causing substantial damaging to such individual components. (iii) The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Ahmedabad Vs. Solid and Correct Engineering Works, (2010) 5 SCC 122 has explained in detail the law relating to Immovable property. In that case the asphalt drum/ hot mix plants were claimed to be immovable property. Hon'ble Court has held that that an Asphalt Drum mix plant was no per se immovable and becomes immovable only when embedded in earth. Further, it was held that the attachment of the plant with nuts and bolts was intended to provide stability and prevent vibration/wobble free operation and the attachment, as such, was easily detachable from the foundation and not permanent, does not qualify for being described as attached to Earth. The observations of the Court in that case as regards immovable property are reproduced below - Para 24-Section 3 (26) of the General Clauses Act includes 'within the definition of the term" immovable property" things attached to the earth or permanently fastened to anything attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e approaching the end of their life cycle are replaced with new rails. As such we are of the opinion that the railway track is not an immovable property. 14.10 For the goods/services supplied by the applicant to be covered in the works contract, it is necessary that the contracts enumerated therein should relate to immovable property. If the contract is otherwise or if the same results in movables, then it may be a composite supply but not the works contract. 14.11 Moreover, "Transfer of property" though not defined in the CGST Act, is defined in Section 5 of the Transfer of Property Act, 1882 as, "Transfer of property" means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself and one or more other living persons. 14.12 Therefore, from what is mentioned above u/s 5 of the Transfer of Property Act, 1882, it is quite clear that, for transfer to take place, there must be "conveyance". However, the root word "convey" or "conveyance" is not defined in CGST Act. The Black's Law Dictionary defines "convey" as. "To pass on or transmit the property from one another, to transfer property or the title to property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 It is submitted that the term 'original works' is neither defined under the GST laws nor in the Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017. Thus, to understand the meaning of the term 'original works', reference is made to clause 2(zs) of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which defines the said term as under: "2. Definitions. - For the purposes of this notification, unless the context otherwise requires, ... .... ... ... ...... ... ...... ...... ... ... (zs) "original works " means- all new constructions; (i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise 14.18 The supply provided by the applicant does not fall under the category of 'new construction' as the applicant is not doing any work relating to new construction. Even in case of work relating to 'construction lines' wherein new railway tracks are constructed, the applicant is not constructing new railway line and only supplying c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; (c) in item (xii), for the brackets and figures "(iii), (iv), (v), (va), (vi), (vii), (viii), (ix)", the brackets and figures "(vii), (viii)," shall be substituted; 17. As such, the entry 3(v) of the Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 has been omitted vide Notification No. 03/2022-lntegrated Tax(Rate) dated 13 July 2022 with effect from 18.07.2022 and entry 3(xii) has been amended to be read as under- Table SI.No. Chapter, Section or Heading Description of service Rate (per cent) Condition (1) (2) (2) (4) (5) ... ... ... ... ... 3 Heading 9954 (Construction services) (i) ... ... ... (xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (iii), (iv), (v), (va), (yi),(vii),(viii),(ix),(x) and (xi) above. 18 .... 18. As such, the question raised by the applicant has no significance in view of omission of entry 3(v) of the Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017 with effect from 18.07.2022. As such, the applicant is not entitled for IGST rate of 12 % after 18.07.2022 or even before 18.07.2022. In our view, the appropriate rate of IGST payable by the applicant on services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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