Copper XLPE cables for petroleum operations don't qualify for concessional GST under Entry 24 of Notification 03/2017-CT

AAR Rajasthan ruled that copper XLPE insulated armoured low tension cables supplied for petroleum operations do not qualify for concessional GST rates under Entry 24 of Notification No. 03/2017-CT. The Authority held that electrical cables cannot be classified as accessories, stores, materials, or consumables for goods listed in entries 1-23 of the notification. The applicant failed to specify which category the cables fall under or provide assurance that their use would be restricted to goods covered under the specified entries, which is essential for claiming the concession.

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Issues Involved:
1. Whether the power cables supplied by the Applicant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CTRs.

Detailed Analysis:

Submission of The Applicant:
The Applicant, a public limited company engaged in manufacturing power cables, supplied Copper XLPE insulated armoured low tension cables to M/S. Vedanta Ltd. for petroleum operations. The Applicant sought an advance ruling on whether these power cables qualify for concessional tax rates under Notification No. 03/2017-CT.

Issues Requiring Advance Ruling:
The Applicant questioned if the power cables supplied would fall under the scope of SI. No. 1 of Notification No. 03/2017-CT, which provides concessional tax rates for certain goods used in petroleum operations.

Applicant’s Understanding:
The Applicant argued that the power cables should be considered as 'material', 'accessories', 'consumables', and/or 'stores' under Sl. No. 1 of Notification No. 03/2017-CT. They contended that these cables are essential for running machines used in petroleum operations.

Applicable Provisions:
Notification No. 03/2017-CT specifies goods eligible for concessional tax rates if used in petroleum operations under specified contracts. The list includes "sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in this List."

Conditions for Concessional Rate:
To qualify for the concessional rate, the following conditions must be met:
1. The goods must be covered under the list in Notification No. 03/2017-CT.
2. The goods must be supplied in connection with petroleum operations under specified contracts.
3. The goods must be supplied to an Indian company or a consortium/contractor thereof in connection with operations under a contract with the Government of India.
4. A certificate from the Directorate General of Hydrocarbons must certify that the goods are required for petroleum operations.

Analysis of Conditions:
1. Condition No. 1: The power cables must be covered by entry no. 24 of the list appended to Notification No. 03/2017-CT, which includes various goods necessary for running, repairing, or maintaining the machines listed.
2. Condition No. 2: The power cables supplied are used for supplying electricity to machines used in petroleum operations under a specified contract.
3. Condition No. 3: The power cables are supplied to Vedanta, an Indian company, for petroleum operations.
4. Condition No. 4: Vedanta provides a certificate from the Directorate General of Hydrocarbons certifying the necessity of the goods for petroleum operations.

Jurisdictional Officer’s Opinion:
The Jurisdictional Officer argued that the Applicant did not specify which machines listed in the notification the power cables would be used for. The Officer concluded that the power cables do not qualify under the notification as the Applicant did not fulfill the condition of specifying the machines.

Findings and Analysis:
- The notification provides concessional rates for goods specified from entry no. 1 to 23 and their corresponding accessories, stores, materials, and consumables (entry no. 24).
- The Applicant failed to specify that the power cables would be used exclusively with machines listed in entries 1 to 23.
- The power cables are general and can be used with various machines, not exclusively those listed in the notification.
- The Applicant did not provide assurance that the power cables would be restricted to use with machines listed in entries 1 to 23.

Ruling:
Under the facts and circumstances discussed, "Electrical Cables" do not fall under Entry no. 24 of the list as 'material', 'accessories', 'consumables', and/or 'stores' of SI. No. 1 of Notification No. 03/2017-Central Tax (Rate) dated 28.06.2017.

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