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TMI Blog2025 (1) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contrary, the civil foundation has been embedded on earth for better permanent and beneficial enjoyment of the Solar Power Generating Station. The property in question, viz., the Solar Power Generating System would not answer the description of immoveable property. The transaction in question would not fall within the meaning of works contract as defined under Section 2 (119) of the GST Act. The appellate authority relied upon the judgment of the Hon ble Supreme Court in Duncans Industries Limited vs. State of Uttar Pradesh and Ors. [ 1999 (12) TMI 857 - SUPREME COURT] , wherein the Hon ble Supreme Court had taken the view that any property embedded in the earth with an intention of keeping the same embedded permanently, would have to be treated as immoveable property. This view was taken by the Hon ble Supreme Court, on the finding of the High Court that the plant and machinery, in that case, was embedded in the earth. The Hon ble Supreme Court also held that the earlier judgment in Sirpur Paper Mills Limited v. The Collector of Central Excise [ 1997 (12) TMI 109 - SUPREME COURT] would not be applicable as the facts are different. Conclusion - The supply of the Solar generat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the same, the petitioner had approached this Court, by way of the present Writ Petition, contending that the remedy of appeal, to the Tribunal, constituted under the GST Act is not available as no Tribunal has been constituted. 6. This Writ Petition was initially disposed of by this Court, by an order, dated 25.11.2022, holding that the rate of tax could be ascertained on the basis of Circular No.163/19/2021-GST, dated 06.10.2021, and remanded the matter back to the Appellate Authority. 7. Subsequently, the petitioner again moved I.A. No. 1 of 2024 contending that the said circular has not been notified and as such, was not available for adjudication. The learned Government Pleader for Commercial Taxes accepted this contention. In that view of the matter, the review application filed by the petitioner was allowed, by an order, dated 20.09.2024, and the matter was taken up for fresh hearing. 8. Sri N. Govind Reddy, learned counsel for the petitioner, would contend that the Appellate Authority, after accepting that the transactions of the petitioner would amount to composite supply of services, falling under Section 2 (30) of the Central Goods Services Tax Act, 2017 (for short t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Uttar Pradesh and Ors (2000) 1 SCC 633 , to contend that any machinery embedded in the earth on permanent basis would have to be treated as immoveable property and cannot be treated as movable property. Consideration of the Court: 13. Before going into the issues which arise in this writ petition, it would be necessary to consider the scheme of the GST regime by looking at the CGST Act. Section 9 of the Act, which is charging section, provides for levy of tax, on supplies of goods or services or both, with the exception of supply of alcoholic liquor for human consumption. The chargeable event is the supply of goods or services . The term supply is not contained in the definitions provision of Section 2 of the Act. However, Section 7 provides for an inclusive meaning of supply in the following manner: 6. Scope of supply. (1) For the purposes of this Act, the expression supply includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (clauses (aa) to (c) are not germane for our purpose) 14. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, 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; 19. A conjoint reading of Section 2 (30), Section 2 (119), Section 7 and Note-6 of II Schedule to the Act would reveal that a works contract is also a composite supply. However, there could be a composite supply , which does not fall within the ambit of works contract . Section 2 (30) defines composite supply to mean a combination of two or more types of services or two or more types of goods or a combination of goods and services or any combination thereof. The definition of a composite supply is similar to the concept of works contract , as defined under the earlier sales tax laws. In both contracts there is a supply of both goods and services. The question that would arise is what kind of composite contract would amount to only a works contract and what are those combined contracts which answer the description of composite supply but would still fall outside the ambit of works contract. The answer is available in the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plants in question are movable property, would depend upon whether the same are immovable property. That is because anything that is not immovable property is by this very definition extracted above movable in nature. 22. Section 3 of the Transfer of Property Act, 1882 does not spell out an exhaustive definition of the expression immovable property . It simply provides that unless there is something repugnant in the subject or context, immovable property under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) of the General Clauses Act, 1897 similarly, does not provide an exhaustive definition of the said expression. It reads: 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; 23. It is not the case of the respondents that plants in question are per se immovable property. What is argued is that they become immovable as they are permanently imbedded in earth inasmuch as they are fixed to a foundation imbedded in earth no matter only 1 ft deep. That argument needs to be tested on the touchstone of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the judgment in Sirpur Paper Mills Limited v. The Collector of Central Excise , and more specifically paragraph-5 of the said judgment in the following manner: 5. Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the Company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. 26. On the basis of the above principles, the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of sale, had held that the plant and machinery would have to be treated as immoveable property. 29. The judgment of the Hon ble Supreme Court in Sirpur Paper Mills Limited v. The Collector of Central Excise , was cited before the Hon ble Supreme Court. The Hon ble Supreme Court took the view that the principles laid down in the judgment in Sirpur Paper Mills Limited v. The Collector of Central Excise, would not be applicable, as facts and circumstances pertaining to that case, were different. The Hon ble Supreme Court accepted the finding by the High Court that the machinery was permanently embedded in the earth and that there was no intention to remove the plant and machinery for the purpose of any sale. The view of the Hon ble Supreme Court, in this regard, is set out below: 8. Considering the question whether the plant and machinery in the instant case can be construed as immovable property or not, the High Court came to the conclusion that the machineries which formed the fertilizer plant, were permanently embedded in the earth with an intention of running the fertilizer factory and while embedding these machineries the intention of the party was not to remove the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties, relied on a judgment of this Court in Sirpur Paper Mills Ltd. v. CCE [(1998) 1 SCC 400]. In the said case, this Court while considering the leviability of excise duty on paper-making machines, based on the facts of that case, came to the conclusion that the machineries involved in that case did not constitute immovable property. As stated above, whether machinery, embedded in the earth, can be treated as moveable or immovable property depends upon the facts and circumstances of each case. The Court considering the said question will have to take into consideration the intention of the parties which embedded the machinery and also the intention of the parties who intend alienating that machinery. In the case cited by Mr Verma, this Court in para 4 of the judgment had observed thus: (SCC p. 402) In view of this finding of fact, it is not possible to hold that the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to earth like a building or a tree. The Tribunal has pointed out that it was for the operational efficiency of the machine that it was attached to earth. If the appellant wanted to sell the paper-makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of installation of the Solar Power Generating System is not as simple or movable as it is made out to be. It is an entire system comprising a variety of different structures which are installed after a lot of prior work which involves detailed designing, ground work and soil survey. Solar Power Systems tend to be tailored specifically to fit the dimensions and orientation of the needs of the project. It is not easy to move them from one place to the other. Rather moving them from one place to other would be unwise. Thus, the project fulfils both the conditions of an immovable property The mode of annexation shows that the groundwork, being the necessary foundation, is an important part of the project. The object of annexation, cannot be to make it movable from one place to the other. In the present case, based on the photographs submitted by the appellant the detailing of the system being what it is, it cannot be called a simple machine by any stretch of imagination. The solar panel modules may be an important part of the system but what is intended to be bought is not the solar panel modules but an entire system. Thus, it can be concluded that the contract entered into, lead to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the permanent beneficial enjoyment of the structure embedded in the earth. 34. In the present case, the solar power plant is not trees or shrubs, which are rooted in earth or a structure embedded in the earth. The appellate authority also accepts that the solar power module is attached to the civil foundation, which is embedded in the earth. The property, which is attached to a structure embedded in the earth, would also become immoveable property only when such attachment is for the permanent beneficial enjoyment of the structure, which is embedded in the earth. In this case, the civil foundation is embedded in the earth. However, the solar modules and the Solar Power Generating System have not been attached to the civil structure for the purpose of better enjoyment or beneficial enjoyment of the civil foundation. On the contrary, the civil foundation has been embedded on earth for better permanent and beneficial enjoyment of the Solar Power Generating Station. 35. Applying the aforesaid test, it must be held that the property in question, viz., the Solar Power Generating System would not answer the description of immoveable property. The transaction in question would not fall wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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