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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 ..... to earth. - As per Section 3 of the Transfer of Property Act 1882, the phrase attached to earth means- (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. The goods involved in repair and maintenance of 'open line' as well as in 'construction line' are welding material and paints are consumed purely during the execution of contract and hence the same shall not be treated as 'transfer of property in goods', as lawful convey and absolute transfer of ownership of the said property i.e. consumable goods does not take place. 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 completion and finishing services in respect of 'construction lines' wherein the applicant has to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 metal and as a result of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding method. Thereafter, 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 submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rate) New Delhi, the 28th June 2017 G.S.R. 683(E). - In exercise of the powers conferred 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstand the meaning of the term 'immovable property', reference is also made to definition of the term 'immovable property' as given in General Clauses Act, 1897 which is reproduced hereunder- Section 3(26) - Immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. (12) A plain reading of the above referred definition suggests that 'immovable property' would include land and the things which are attached to or embedded in the land such as buildings, bridges, etc. However, not everything that is attached to the land would automatically constitute an immovable property. That whether a particular 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. Hutch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevented. This ground prepared for laying down rail track is known as subgrade. b. Bottom Ballast: Once the subgrade is prepared, a layer of ballast i.e. sharp-edged rocks, is spread on it. Ballast provides stability to the rail tracks and it also spreads the wheel load to the entire foundation. c. Laying down of sleepers/ties: On the layer of ballast, sleepers or ties made of concrete or wood are laid down. These sleepers or ties are used to hold the rails in place and transmit the load from rails to ballast. Sleepers along with the ballast and subgrade constitute the formation of rail tracks. d. Laying down of rails: At the end, the rails are laid down on the sleepers/ties. Rails are joined in series by fish plates and bolts which are fixed to the sleepers/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 part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............. 31. When the assessee has used it, will it remain the owner of the chemical any longer ? Will not the property in the goods pass to the awarder ? We would think that the moment the assessee pours the chemicals into the effluent, he will cease to be the owner and at that point of time the awarder must be deemed to have taken delivery of the same. In our view the fact that upon it being poured into the effluent, it loses its identity and that it is consumed will not detract from the fact that there is delivery of the same to the awarder. The assessee does not have a case that the effluent belongs to the assessee. He do not think that it can be their case that the effluent does not belong to the awarder. Let us pose a question, if a complaint by a third party is raised about the treated effluent, can the awarder absolve 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 Gan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or installation of original works. (30) It is submitted that the term 'original works' is neither defined under the GST laws nor in the Notification No. 8/2017-Integrated 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; (31) At the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have worn out or are reaching the end of their usable life. Thus, by efflux of time, the welds or rails, as the case may be, have lost their effectiveness, soundness or value and therefore, they have become damaged structure. (37) It is thus submitted that it is necessary to replace these damaged welds or rails to make the track continuously workable without any interruptions. Thus, the maintenance activities undertaken by the Applicant on the open lines are in the nature of additions and alterations to damaged structures to make them workable which also amounts to an original work. (38) In light of the above discussion, it can be concluded that the activities undertaken by the Applicant are in the nature of works contracts which are supplied by way of construction, erection, commissioning or installation of original works pertaining to Railways. Therefore, the activities undertaken by the 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/verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the applicant and have examined the explanation submitted by them. We find that the issue raised in the application is squarely covered under Section 97(2)(a) (b) of the CGST Act 2017 being a matter related to classification of goods and applicability of notification issued under the provisions of the CGST Act, 2017. We therefore, admit the application for consideration on merits. 11. The applicant has submitted that they have provided following two types of supply to the Railway. A. CONSTRUCTION LINES (i) 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. AT welding is a type of welding where the molten steel is poured into a mould surrounding the gap between the rail ends to be joined. The molten steel is formed by the applicant by igniting the exothermic aluminimum powder. The ends of the rails are cut 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 end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) ... ... ... ... ... 3 Heading 9954 (Construction services) (i) ... ... ... ... ... ... (iv) ... ... ... (v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above supplied by way of construction, erection, commissioning, or installation of original works pertaining to,- (a) railways, including monorail and metro; (b) ...................... 12 ... ... ... (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 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efits arising out of land and things attached to earth, or permanently fastened to anything attached to earth. 14.6 As per Section 3 of the Transfer of Property Act 1882, the phrase attached to earth means- (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. 14.7 The applicant has submitted that the 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. 14.8 We find that the term 'immovable property' has been examined by the various courts. Some of the relevant case laws are given below- (i) In case of M/s Sirpur Paper Mills Ltd. Vs. Collector of Central Excise, Hyderabad (1998 (97) ELT 3 (SC)), CEGAT recorded finding that whole purpose behind attaching machine to a concrete base was to prevent wobbling o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bolts to a foundation not more than one and half feet deep intended to provide stability to the working of the plant and preventing vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in the earth. It is also not synonymous to imbedding in the earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can easily be detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. It is nobody's case that the attachment of the plant to the fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, goods which have by incorporation become part of immovable property are deemed as goods . 14.14 The goods involved in repair and maintenance of 'open line' as well as in 'construction line' are welding material and paints are consumed purely during the execution of contract and hence the same shall not be treated as 'transfer of property in goods', as lawful convey and absolute transfer of ownership of the said property i.e. consumable goods does not take place. 14.15 In this connection, we would like to refer to the case law of Delhi High Court in case of VPSSR FACILITIES VERSUS COMMISSIONER OF VALUE ADDED ANR. [2017 (2) TMI 814-DELHI HIGH COURT] , Kerala High Court's decision in M/s. Enviro Chemicals Versus State of Kerala-2011 (2) TMI 1296-KERALA HIGH COURT, and the Apex Court decision of Xerox Modicorp Ltd. Versus State of Karnataka-2005 (8) TMI 359-Supreme Court wherein it was held that, no property in the consumable goods passes on to the contractee and consequently the said goods are not eligible to tax. 14.16 The entry 3(v)(a) of Notification No. 8/2017-lntegrated Tax (Rate) dated 28.06.2017 prescribes that the supply sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the category of ' all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable' in case of construction lines. Even in case of Open Lines, the railway lines which are replaced on completion of shelf life are not abandoned or damaged structures. Further, there is no erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise during execution of contracts by the applicant. 15. As such, the applicant is not entitled to benefit of entry 3(v)(a) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 because- (i) there is no contract for building, construction, fabrication, completion, erection, Installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property. (ii) there is no transfer of property in goods (whether as goods or in some other form) involved in the execution of contracts. (iii) The supply is not by way of construction, erection, commissioning, or installation of original works. 16. Further, the Notification No. 8/2017-Integrated Tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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