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TMI Blog2023 (2) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... contract. The activities of Applicant inter-alia involve manufacture of telecom products such as optic liber, optic fiber cable, etc. and services in relation to laying these optic fiber cables (either underground or hung overhead) to create a network, setting up of control centres, installation of equipment, commissioning of network and other ancillary activities that may be necessary for creation of network infrastructure for its customers in the telecom industry. The scope of these activities is contractually stipulated and are typically recognized as a 'turnkey contract'. Therefore, it is clear that supply under consideration meets criteria of civil structure or any other original works . As the network is intended to be used for war fighting operations of Indian Navy, the works contract required therefore is set up with the predominant purpose of defence. In such a case, said works contract is undertaken for a predominant purpose other than commerce, industry, business or profession. The Navy (under the Ministry of Defence, a central government ministry) has entrusted the BSNL. by agreement, works contract to supply, install, commission next generation network a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company incorporated the Companies Act, 1956, having its registered office at E-1, E-2, E-3, MIDC Waluj, Aurangabad, Maharashtra-431 136. (Hereinafter also referred to as 'the Appellant') against the advance Ruling No. GST-ARA-80/2019-20/8-25 dated 18.02.2022. BRIEF FACTS OF THE CASE 3.1 The Appellant is registered under the GST Acts bearing GSTIN 27AACES87I9B1ZC. The activities of Applicant involve manufacture of telecom products such as optic fiber, optic fiber cable, etc. and services in relation to laying of these optic fiber cables (either underground or hung overhead) to create a network, setting up of control centres, installation of equipment, commissioning of network and other ancillary activities that may be necessary for creation of network infrastructure for its customers in the telecom industry. 3.2 Indian Navy, governed by Ministry of Defence (Navy), intended to establish a countrywide IP/MPLS based multiprotocol converged network / Naval Communication Network (collectively referred as network ); as core infrastructure for supporting strategic and operational needs of Navy. Setting up of these networks have been awarded by Navy to Bharat San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipment, Staging area and other operational and administrative buildings. The scope of work includes civil construction, water supply, sanitary and plumbing, electrical installation, landscaping, air conditioning, roads, and firefighting and interior works. All buildings....................... c. Along with the building following additional infrastructure for the complex is also required to me made by appellant:- (i) A power room to house the silent generators also needs to be constructed. (ii) Approach road to building within Naval Station. Provision of security lights around the complex, Security Cameras inside and outside building, Guard post including rest room. Automatic Barrier at main/emergency gates. Access Control Mechanism at entrances to the building. Smoke detector, provisioning of small firefighting appliances PA system. (ii) Underground electrical wiring as per the requirement. All switches, cut out, CBS and wires, cables are to be supplied and fitted. All electrical fittings including air conditioners, fans, tube lights, CEL, exhaust fans, call bells, lightning arrester etc. is to be provided and fitted. False roofing with 2'X2' meshed tub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works contract' as defined under Section 2(119) of the CGST Act. ii. Activities of the Appellant are covered by sub-clause (ii) of Entry No. 3 of the Rate Notification and attract GST al the rate of 18% 3.6.4 The appellant agrees with observation made by AAR in respect of question no. I that the supply rendered by them to BSNL are in nature of Composite Supply of 'works contract' as defined under Section 2(119) of the CGST Act. 3.6.5 Meanwhile, the Rate Notification was amended vide Notification No. 3/2019 Central Tax (Rate) dated March 29, whereby Entry No. 3(ii) as referred in the Previous Order was omitted with effect from April 01.2019. As the amendment Notification deleted Entry No. 3(ii) of the Rate Notification, the activities of Appellant necessitate an analysis qua other relevant entries of the Rate Notification. As a result, the Appellant preferred afresh Application before the Authority for Advance Ruling 18.12.2019 to ascertain whether the activities of these Appellant are covered under Entry No. 3(vi)(a) of the Rate Notification. 3.6.6 Consequently, the Authorities vide its Order No. GST-ARA-80/2019-20/B-34 dated February 18, 2022 ruled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us orders of the same assessee. 4.3.2 The second order ruled that supply of the Appellant would get covered under the residual Entry No. 3 (xii) of the Rate Notification and liable for GST @ 18%, whereas appellant continues to claim that the subject composite supply of works contract services is falling under entry No. 3 (vi) of the Notification No. 11/2017-Central Tax (Rate), Dated 28.06.2017, which prescribes total GST rate of 12%. In support of claim the appellant relied upon the entry 3(vi)(a), which is reproduced below: Sr.No. CHAPIER, SECTION OR HEADING DESCRIPTION OF SERVICE RATE (PERCENT) CONDITION 3 Heading 9954 (Construction services) (vi) Composite supply of works Contract as defined in clause (119) of Section 2 of the central Goods and Service Tax Act, 2017 other than that covered by items (i), (ia), (ib), (ic), (id), (ie), and (if) above, provided to the Central Government, State Government, Union Territory authority local governmental Authority or a Government Entity by way of construction, erection, commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry No. 3(vi) of the rale Notification. 4.3.5 The Appellant further submitted that the term 'original works' as referred in Entry No. 3(vi)(a) is neither defined under Rate Notification nor under the CGST Act. In these circumstances, the Appellant refers to the Notification No. 12/2017 Central Tax (Rate) dated June 28. 2017 ( Notification No. 12/2017 ) having persuasive value which inter alia defines the term 'original works' under clause 2(zs) as under.: (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; 4.3.6 The Appellant submits that, although the definitions provided in paragraph 2 of the said Notification are applicable only for the purpose of the Notification No. 12/2017. Both, the Rate Notifications, i.e.. Notification 11/2017 as well as Notification No. 12/2017 are issued by the Central Government in exercise of its powers conferred under CGST Act. As the contents of both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T OF WORK 7 [U] a thing or things that are produced as a result of work 4.3.11 In view of the above, the term 'original works' together would refer to an activity of creating something that is being brought to existence at the first instance. Having derived the meaning of 'original works' in common parlance, the Appellant refers to the scope of contract which requires it to perform activities to bring structures in the form of buildings, roads, etc. into existence. The Appellant therefore submits that since its activities result in bringing a new structure into existence, these activities indeed qualify as 'original works as referred in Entry No. 3(vi)(a) of the Rate Notification. 4.3.12 Furthermore, reference is drawn to the Advance Ruling by West Bengal Authority and Tamil Nadu Authority in case of ABB India Limited and S T Engineering Electronics Limited Respectively wherein it was pronounced that the term 'original works' is wide enough to cover ambit all activities which include new constructions involving every type of additions/aIterations on the land that are required to make the structure workable. It was also discussed that the term erec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken for a predominant purpose other than commerce, industry, business or profession as excluded under Entry No. 3(vi)(a) of rate Notification. 4.3.15 Accordingly, activities of the Appellant fulfil all the conditions stipulated under Entry No. 3(vi)(a) of the Rate Notification and are duly covered thereunder. This position of law is supported by the cardinal principal of law that if an activity is covered by specific description of an entry. then the same ought to be covered by said specific entry. Reliance in this regard is placed on the decision of Hon'ble High Court of Gauhati in case of CCE v. Jellalpore Tea Estate. [2011 (268) E.LT. 14 (Gau.)] wherein the Hon'ble Court held that what is required to be done in a manner prescribed by law, ought to be done in that manner only or not at all. . Reliance in this regard is also placed on the decision of the Larger Bench of Hon'ble Tribunal in the case of M/s. Avis Electronics Pvt. Ltd. [2000 (117) E.LT. 571 (Tri. -LB)] 4.5 Consequently, activities of the Appellant ought to be covered under Entry No. 3(vi)(a) of the Rate Notification. Accordingly, these activities are required to assessed for GST at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract is not in respect of a civil structure. The second order of the MAAR relied on its earlier order and ruled that on deletion of entry 3 (ii) of Notification No. 11/2017- Central Tax (Rate) the impugned activity would get covered under respective residual entry i.e. Sr. No. 3 (xii) of said Notification as amended by Notification No 03/2019 CGST (Rate) dated 29th March. 2019. Secondly. AAR also placed reliance on the assumption that the appellant had accepted the earlier (first) ruling of this Authority. The MAAR ruled that applicable tax rate on said impugned activity would be 18%. 6.2 Discussion on Merit Issue of Tax Rate For the sake of brevity, Entry No. 3(vi)(a) of Notification No. 11/2017-Cenlral Tax (Rate) dated 28.06.2017. as amended is reproduced below: Sr. No. CHAPIER, SECTION OR HEADING DESCRIPTION OF SERVICE RATE (PERCENT) CONDITION 3 Heading 9954 (Construction services) (vi) Composite supply of works Contract as defined in clause (119) of Section 2 of the central Goods and Service Tax Act, 2017 other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and commercial apartments; b. It must be provided to the Central Government, State Government, Union Territory, a local authority. a Governmental Authority or a Government Entity; c. The contract should be by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a civil structure or any other original works: d. The civil structure or original works must be meant predominantly for use other than for commerce, industry, or any other business or profession: and e. Where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or a local authority, as the case may be. 6.3 We find that there is no dispute in both rulings of MAAR in respect of question no. 1 that the supplies rendered by the appellant to BSNL are in nature of Composite Supply of Works Contract. For the sake of reference, question and reply from first ruling is reproduced as follows: Question :- Whether the supply of goods or services for 'setting up of network' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The company provides telecom services throughout the country excluding Delhi Mumbai. BSNL is a 100% Govt. Of India owned Public Sector Undertaking with an authorized share capital of Rs. 40,000 crore and paid-up capital of Rs. 12,500 crores comprising of Rs. 5.000 crores of Equity and Rs.7,500 crores of Preference share capital. BSNL is a technology oriented integrated telecom service providing company which Provides complete bouquet of telecom services: ................ Thus, BSNL qualifies to be held as Government Entity for the purpose of Entry No. 3(vi)(a). 6.7 Said works contract services should be for a civil structure or any other original works: The term original works has been defined in clause (zs) of para 2 of Notification No. 12/2017 -Central Tax (Rate). Though this definition is given in relation to the Notification No. 12/2017 -Central lax (Rale), the same has persuasive value and can be adopted in relation to Notification No. 11/2017 - Central Tax (Rate) also. On careful examination of the above definition, it is seen that only all new constructions, erection, commissioning or installation of plant machinery, equipment or structures are treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate Limited (cited supra) deals with availment of credit based on original copy of invoice and interplay of duplicate invoice. Hence, said judgment is not seen related to the issue at hand. 6.8.3 As the network is intended to be used for war fighting operations of Indian Navy, the works contract required therefore is set up with the predominant purpose of defence. In such a case, said works contract is undertaken for a predominant purpose other than commerce, industry, business or profession. 6.9 In case supply is to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or a local authority: 6.10. In this case, supply is to BSNL which is held in aforesaid paras as a Government Entity. Hence, for entry at Sr No 3(vi) this condition given in column (5) is applicable in present case. The Navy (under the Ministry of Defence, a central government ministry) has entrusted the BSNL. by agreement, works contract to supply, install, commission next generation network along with all materials, civil structure, equipment, satellite connectivity, routers, switches an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are of the opinion that second ruling should have ruled on merit as to applicability of the claimed notification entry. Other 3 cited cases - Tarun K Roy. Hira Cement. C K gangadharan - for reason of non-filing of appeal cannot be ground for denying benefit. 7. In view aforesaid discussion, we find that supply of services made by appellant to the BSNL is fulfilling all the requirements and conditions of the entry at serial number 3 clause (vi)s(a). Appellant has specifically mentioned (in his AAAR application at para 1.15) the period of application as a 1.4.2019 to 31.12.2021. As per provision of section 103. advanced ruling pronounced shall be binding on the applicant and the jurisdictional officer, if it is not assailed by filling against it. Hence, there is binding effect of the first order of advance ruling till 31st March, 2019. which classified the said supply under entry No 3(ii) taxable at 18%. ORDER In view of the above discussions and findings, we find that the appeal filed by the appellant is allowed and second order of ARA ( Maharashtra Advance Ruling No GST-ARA-802019-20/B-25 dt. 18.02.2022 ) is modified accordingly. The supply under the contract from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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