9911796707
TMI Blog2023 (4) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter XVII of the Act shall be binding only (a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling; (b) On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. * * * * * Subject: GST - Appeal filed by M/s Transmission Corporation of Telangana Limited (TS Transco), Hyderabad, under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.09/2021 dated 14.09.2021 passed by the Telangana State Authority for Advance Ruling - Order-in-Appeal pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on supply of works contract services provided by the appellant to I&CAD Department to the extent of grants received by the appellant and Tax liability for procuring works contract services by the appellant from a 3rd party in order to supply the same to South Central Railway, has been accepted and not disputed by the appellant. Whether the appeal is filed in time: 4. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 24.06.2020 was received by the appellant on 11.10.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 10.11.2021, which is within the prescribed time-limit. Brief Facts: 5. M/s Transmission Corporation of Telangana Limited (hereinafter referred to as "TS TRANSCO"/ "the Appellant") are a state-owned utility responsible for transmission of electricity in the state of Telangana having its corporate office (head office) located in Vidyut Soudha building (Khairatabad), Hyderabad. All offices including the corporate office are mapped to a single GST registration obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. 8. The appellant filed an application in which the following clarifications were sought.: 1. Eligibility to exemption from tax on the supply of works contract services by the applicant to Greater Hyderabad Municipal Corporation (GHMC). 2. Tax liability with respect to works contract services procured by the applicant from a 3rd party for supplying same services to GHMC 3. Eligibility to exemption from tax on supply of works contract services by the applicant to I & CAD department. 4. Tax liability with respect to works contract services procured by the applicant from a 3rd party for supplying same services to I & CAD department. 5. Tax liability for supply of works contract service by the applicant to south central railway. 6. Tax liability for procuring works contract services by the applicant from a 3rd party in order to supply the same to south central railway. 9. The Authority for Advance Ruling, heard the appellants and their averments submitted and ruled that the services provided by them are taxable @ 18% and they are not eligible to claim the benefits of notification Nos. Notification 12/2017 - CT(R) dated June 28, 2017 and the taxes cannot be levied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant involves significant portion of material and therefore is not a pure service and is a works contract service which shall be taxable @ 18%. c. The Appellant wishes to submit that the Authority on Advance Ruling (in short AAR) has arrived at this conclusion without examining the issue that there is no transfer of property by TS TRANSCO to GHMC despite the appellant repeatedly explaining this fact and vehemently reiterating the same even in the course of personal hearing. d. It would be pertinent to examine whether the services undertaken for GHMC qualify to be called "Works contract Service". The definition of the term "Works Contract Service" is contained in clause (119) of section 2 of CGST act, 2017 which is as under: "(119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" e. On the Basis of this definition, the following can be concluded to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution." j. Implies following conditions must be satisfied in order to avail the exemption from the GST, ● It is a pure service excluding works contract service or other composite supplies involving supplies of goods ● is provided to a Central Government/State Government/ Governmental Authority/Local authority; ● "In relation to" any function enumerated under Article 243G/ 243W of the Constitution; ● Then such a service is exempt from the levy of GST. k. In the instant case for consideration, TS TRANSCO is providing pure service to in terms of alteration of location of the existing transmission assets & replacement of overhead cables with underground cables which is for the purposes of the construction of an elevated corridor (road) by GHMC. The said activity is in the nature of DC works and does not involve transfer of any ownership in the goods thereby constituting pure services and satisfying the 1st condition for the eligibility to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of supplies received by TS TRANSCO from its sub-contractors is taxable at the lower rate of 12% in terms of Notification no. 11/2017-CT(R) dated June 28, 2017 as per Entry No. 3(vi) of the said notification. a. Once more the AAR has arrived at a conclusion without scrutinizing the transaction in its entirety. The authority has stated that Entry 3(vi) of Notification 11/2017 dated 28th June, 2017 exempts specifically only following works of construction, erection, commissioning, etc., are covered for claiming lower rate of tax: i. Civil structures or any other any original works meant predominantly for use other than for Commerce, industry, or any other business or professions. ii. Structures meant for education, clinics, art or cultural establishments. iii. Specified Residential Complexes The authority has failed to examine the definition of "original works" before arriving at this conclusion. The term "Original Works" isset-out in the Clause (zs) of Paragraph 2 of Notification 12/2017-CT(r) dated 28 June, 2017 "Original Works means- i. All new constructions; ii. All types of additions and alterations to abandoned or damaged structures on land that are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection we also place reliance of Supreme Court judgement in the case of K.P. Varghese Vs. Income Tax Officer & ANR (1981) 131 ITR 597 (SC) with regard to the weightage to be given to the contemporaneous understanding in construing an entry in the statute. It is a settled position in law that construction of the statute or the delegated legislation ought to be such as to effectuate to the fullest extent the intention leading to the legislation - ITAT Hyderabad bench in UCO Bank. Similar is the ratio of the judgement in District Mining officer Vs TISCO. d. Following the legal maxim of ejusdem generis industry and commerce necessarily imply profit motive and accordingly only that business which has a profit element is covered by the Entry. This is also supported by the legal maxim of noscitur a sociis to the effect that the true meaning of the expression business is known by its associates. In this connection, the appellant placed reliance on judgement of Supreme Court in Rohit Pulp & Paper Mills Vs. CCE, Baroda (1991) AAR 754 1990 SCR (2) 797 and has also submitted a copy of this case law before the AAR. e. It has been held by the Hon'ble Tribunal that the mere fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I above. b. The appellant has made the submissions as mentioned in point II above which shall apply in the present case also. c. The Appellant submits on practical considerations the unintended consequence of a rigid interpretation of the entry without a cogent reading with the Proviso and Explanation as intended renders the Appellant's projects unviable, considered at a micro level and at a macro level leading to the additional cost to the State's Exchequer resulting in loss. A representative sample analysis of 3 projects delineating the unintended consequences is set out as 'Exhibit G'. IV. In Respect of supplies made to South Central Railways it is the supply of works contract services which is enumerated at entry 3 (vii) of Notification 11/2017 dated June 28, 2017 as amended from time to time and are taxable @ 9% under CGST/SGST Acts. a. The Appellant has submitted that though the contract is a pure supply of service to Central Government (SCR), the exemption mentioned in Entry 3 of Notification 12/2017 CT dated June 28, 2017 may not apply since the civil structures and original works in this case are for the use and purport of a business or commerce activity and is tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority for Advance Ruling passed its order by classifying the services provided by appellant as 'Works Contract Service' leviable to tax @ 18%. Further denied the appellant's claim for classifying the service as 'Pure Service' and allow exemption under Notification No.12/2017 CT (Rate) dated 26.06.2017 as amended. With regard to services procured by the appellant, the Authority denied the concessional rate of tax @12% in terms of Notification No.11/2017 CT(Rate) dated 28.06.2017 as amended. The appellant has agreed on two aspects of the rulings issued by the Authority relating to services provided by the appellant to I&CAD, and services procured by the appellant from 3rd party towards services provided to South Central Railway. The appellant filed an appeal before the Appellate Authority in respect of four issues. We have gone through the written submissions, their contentions and also case laws cited in their support. 17. The appellants vide their letter dated 08.12.2021 submitted relevant documents as discussed during the course of personal hearing conducted on 02.12.2021. We have gone through the synopsis, copies of contracts, and additional submissions made by them. 18. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial value mentioned in the contract is only for arriving at the cost of replacement and there is no transfer of property in such goods from the applicant to GHMC. Therefore, the contract cannot be termed as a works contract. 23. The applicant, as per the request of GHMC has agreed to replace or shift its own electric equipment and cables etc to other place, for the purpose of replacing or shifting such electric equipment the expenditure that is expected to be incurred by the applicant is collected from GHMC. So, the agreement entered between the applicant and GHMC can be classified as 'agreeing to do an act' under SAC '999792'. 24. The applicant claimed that the services provided by them are exempt from tax as per Entry 3 of notification no 12/2017 CT(R) date June 28 2017. Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y laying UG cable, so as to take up the work of elevated corridor from Road No. 45 to Durgam Cheruvu. As per the abstract of estimate of the work order, major portion of value was towards material viz. Cables, OH line and SS. 31. On the above activity, the applicant claimed exemption from payment of tax in terms of Sl.No. 3 of Notfn No. 12/2017-CT(R), dt. 28.6.2017. The said serial number is reproduced below: "3. Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union Territory or local authority or a governmental authority or a government entity by way of any activity in relation to any function entrusted to a panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243G of the Constitution". 32. From plain reading of the above definition, what can be construed is that if the supplies are not in the nature of works contract service or other composite supplies involving supply of any goods, when rendered to authorities mentioned above, would get exempted from payment of tax. However, in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the execution of such contract. Hence there is no hesitation in holding that the applicant is supplying Works Contract Services. 37. Section 3(26) of General Clauses Act, 1897 defines 'Immovable Property' as "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;" 38. It is evident from the work order that the work involves shifting of 132 kv Jubilee Hills - Chandrayangutta DC feeder and 132 Kv Erragadda - Shivarampally SC feeder at 132 Kv SS Jubilee Hills by replacing of 132 Kv Jubilee Hills - Chandrayangutta DC overhead line with 132 Kv DC UG cable and 132 Kv Erragadda - Shivarampally SC UG cable for GHMC for construction of elevation corridor from road No. 45 to Durgam Cheruvu. 39. It is evident from the abstract of estimate that they are supplying and erecting cables, OH line and Stainless Steel (SS) during the course of the work. Therefore, the implication is that the cables are enclosed in such RCC pipes which are kept under the ground at a certain depth and then the entire pipes with the enclosed cables are covered back with filling to make the road as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with goods are handed over to the appellant and there is transfer of property in goods, as discussed in paras 39 and 40 above. Therefore, the services provided by 3rd party i.e., private contractors are classifiable as 'Works Contract Service'. 43. The contention is only with regard to rate of tax and the appellant requests for concessional rate as provided under serial no. 3(vi) of the Notification No. 11/2017-CT (R) dated 28.06.2017 as amended. The relevant extract of notifications viz., 11/2017 CT(R) is required to the examined. The basic notifications have been amended from time to time for appropriate levy of tax keeping in view the changes and activities of businesses and discussions/decisions of GST Council. As such the serial numbers of relevant entries mentioned in notifications have changed. For ease of reference, the same are reproduced as per the latest amendments, as under: Notification No. 11/2017-CT (R) dated 28.06.2017 as amended: Sl.No. Chapter, Section, Heading, Group or service code Description of Service Rate (per cent) Condition (1) (2) (3) (4) (5) 1 Chapter 99 All Services 2 Section 5 Construction Services 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predominantly for use other than for commerce, industry, or any other business or profession. The appellant has contested that they are liable to pay tax @ 6% only, as per serial No. 3(vi)(a) read with the explanation provided therein. The appellants emphasized that the expression "other than" business or commerce" in entry 3(vi) of the notification should be given full effect. They relied on Circular No.152/08/2021-GST dated 17.06.2021 and averred that the test of intended pre-dominant usage has to be with reference to the civil structure created in terms of works entrusted by local authority. They contest that the local authority undertakes the activity as a public authority, the activity shall continue to be so even if it is executed through a Government entity. 46. The appellant's inference that industry and commerce necessarily imply profit motive and accordingly only that business which has a profit element is covered by the entry is a logical fallacy, in the context of the Judgment rendered by the Hon'ble Supreme Court in the case of Bangalore Water-Supply Vs. R. Rajappa & Others, 1978 AIR 548, wherein it was held that: "If any principle can be said to be settled law in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken whether or not for a pecuniary benefit, which removes any scope for exclusion of the activities undertaken by the appellant from the ambit of 'business'. It is immaterial, if the Government entity (Appellant) is running with or without generating any surplus as long as the activity undertaken has commercial implication. In this context, the rulings and the judgements referred to by the appellant are not applicable to the facts of the present case. 50. Further, the circular issued by CBIC vide No.152/08/2021-GST dated 17-06-2021 also supports this view. A similar issue was clarified through the circular, on whether or not the works contract service provided to the Government Entity by way of construction of rope way, falls under entry 3(vi) of Notification 11/2017. It was clarified that the works contract service provided to a Government Entity is taxable @ 18% and is not eligible for 12% rate under entry 3(vi) of Notification 11/2017, the relevant portion of circular is extracted hereunder: "2. According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated 28.06.2017, GST rate of 12% is applicable, inter alia, on- "(vi) Composite supply of works contract as defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the elevated corridor. Therefore, it is of no interest to GHMC if the work of re-construction is taken up or not, hence, it is of the applicant's interest to get re-constructed the civil structure to ensure that there is no hindrance to smooth transmission of electricity. 52. Beyond all other consideration, the applicant appears to have misinterpreted the words "Use" as "Purpose". Purpose is the reason for doing an act, while "Use" is the act of usage. The verbatim used in the construction of the said entry is "meant predominantly for use". In this context, the "purpose" for which the Local authority has entrusted this work has no relevance. Therefore, the purpose for which the work was entrusted will not be the determining factor as to whether the activity falls within the scope of entry, instead, the intended usage of the civil structure/original work so constructed will be the deciding factor. The same was re-affirmed through the CBEC Circular. 53. The applicant has issued contracts to third parties for purpose of installation and erection of electric equipment and transmission lines. The resultant civil structure is thus being used by the applicant for transmission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices provided by the appellant to South Central Railway to be 'Pure Services'. 58. The phrase 'Pure Service' has not been defined under the Act (CGST/SGST), as such it has to be understood in the context of intent for which the phrase has been used in the CGST/SGST Act and notifications issued there under. As a general understanding, any supply which is either deemed as services under Schedule II of CGST Act or which is not covered under the definition of goods shall be categorized as pure services. That is to say, Services without involving any supply of goods would be treated as supply of 'pure services'. In the context of the language used in the notification, supply of services without involving any supply of goods would be treated as supply of 'pure services'. 59. Works Contract has been defined under Section 2 (119) of the CGST Act, 2017: "works contract" means a contract of building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63. The applicant was issued with contracts of installation and erection of electric equipment and transmission lines. The resultant civil structure is thus being used by the applicant for transmission of electricity and for supply of power to various customers for a consideration, meant pre-dominantly for the purpose of business. 64. Thus, the work contract executed by the applicant is meant for the purpose of business. Thus, the facts of the case are analogous to the circular issued by CBIC vide No.152/08/2021-GST dated 17-06-2021. Hence, works contract service provided by M/s TRANSCO by way of construction of the said civil structure meant predominantly for the purpose of business is not covered under Entry 3(vi) of Notification No. 11/2017-CT(R). 65. The documents furnished indicate the service rendered to SCR where the service rendered was for construction of certain transformers for the purpose of extending the power supply including certain telecommunication work. In this context, it would be relevant to bring in the extract of annexure giving scheme of classification of services attached to Notification No. 11/2017-CT(R). Relevant portion is reproduced below: S.No. Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Central Government, State Government, Union territory or local authority, as the case may be 66. It is observed that the above entry 3(vi) of the Notification covers service code 9954. By specific entry, only following works of construction i.e., erection, commissioning, etc., are covered for claiming lower rate of tax. i. Civil structures or any other original works meant predominantly for use other than for Commerce, industry, or any other business or professions. ii. Structures meant for education, clinics, art or cultural establishments. iii. Specified Residential complexes. 67. It is evident that the above entry is specific entry covering only certain construction services. This entry does not cover other works contract services under service head 9954 which include long-distance underground/overland/ submarine pipe lines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works i.e., General construction services. However there is a residual entry at 3(xii) (as brought out at para 55 above) of the above Notification covering all other construction services not mentioned in the preceding entries. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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