TaxTMI 
TaxTMI 
2018 (9) TMI 1106
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....re, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/MGST Act would be mentioned as being under the "GST Act" 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - "STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH THE, ADVANCE RULING IS REQUIRED 1. This Application is being preferred by Precision Automation & Robotics India Limited ("Company"/"Applicant"), a company incorporated in India under the provisions of the Companies Act, 1956 having its registered office at Gat No.463-A,463-B and 464, Pune-Bangalore Highway, Mouje Dhangarwadi, Tal : Khandala, Dist Satara. 4128011[MS]. 2. The applicant is engaged in providing goods and services which qualify as 'supply' as per provisions of the Central Goods and Service Tax Act, 2017 ("CGST Act") and is duly registered thereunder bearing GSTIN 27AABCP2572Q1ZW. 3. The Company is engaged in the....
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....nsor, car loading sensor are also required to be installed Car parking system cannot be made functional unless all the aforesaid steps have been completed and assembled at site. After installation and assembling of the parts, the Company is required to undertake testing of the car parking system at customer's premises to verify smooth and safe functioning of the same. 6. The erection of a car parking system involves elaborate work and has to be correlated with and tailored, to meet the needs and requirements of a particular building/premises, Therefore, none of the car parking systems can be a readymade assembled unit and its erection cannot be done in a routine manner. 7. For ease of understating of the complex process of installation of Car parking system, we have depicted the same by way of a diagram: Drawing & design of the car parking system is prepared according to the requirement of the customer ¯ Manufacture, build, test, dismantle, packing and supply steps ¯ Buildings specific foundation (either in the basement of building or on land) as per the requirement of the car parking to be installed ¯ Steel structure frame work (and/or RCC....
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....e fact that whether supply and installation of car parking system qualifies as immovable property (or movable) and would qualify as works contract under Section 2(1 19) of the CGST Act. 2.2 As far as the analysis of a transaction for its qualification as 'works contract' is concerned, it is relevant to note that the concept of *works contract' qua immovability has been subjected to intense judicial scrutiny over the years. Based on the past judicial precedents and relevant provisions; following determinative parameters have been derived for examining the nature of a transaction: • Whether it is a permanent fixture attached to building/land or not; • Whether dismantling of the parts is mandatory for movement or not; • Whether the functionality of the system depends upon its installation or not. In the paragraphs below all the above three parameters are examined in reference to the facts presented by the Applicant. Supply & installation of car parking system is a permanent fixture attached to building/land wherein it is erected 2.3 It shall be noted that the term 'immovable property' has not been defined under the CGST Act. Thus, ref....
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....property and hence....." II. Quality Steel Tubes (P) Ltd. V/s. Collector of Central Excise. (U.P.) [1995 (75) ELT 17 (S.C.)] = 1994 (12) TMI 75 - SUPREME COURT OF INDIA "Goods which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act." 2.5 On cumulative reading of the above, it is evident that immovable property means a property that is attached to land and is a part and parcel of land itself. In the present facts, the car parking system is installed either in the building or vacant land. One of the essential requirement of the car parking system is specific foundation and steel structure/civil structure which is erected in the building or on land Thus, after installation, the said car parking system would form part of the building. 2.6 In this regar....
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....excisable goods. If any goods installed at site (example paper making machine) are capable of being sold or shifted as such after removal from the base and without dismantling into its components/parts, the goods would be considered to be movable and thus excisable. The mere fact that the goods, though being capable of being sold or shifted without dismantling, are actually dismantled into their components/parts for ease of transportation etc., they will not cease to be dutiable merely because they are transported in dismantled condition. Rule2(a) of the Rules for the Interpretation of Central Excise Tariff will be attracted as the guiding factor is capability of being marketed in the original form and not whether it is actually dismantled or not, into its components. Each case will therefore have to be decided keeping in view the facts and circumstances, particularly whether it is practically possible (considering the size and nature of the goods, the existence of appropriate transport by air, water, land for such size, capability of goods to move on self propulsion -ships- etc.) to remove and sell the goods as they are, without dismantling into their components. If the goods are ....
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.... components. Car parking system cannot be functional unless it becomes permanent fixtures to land/building 2.12. Immovable properties are created/made after installation/assembling of various parts in a systematic manner. Unless all the requisite parts have been assembled or installed in the specified manner, the immovable property does not come into existence and cannot be made functional. Parts of the immovable property in its singular form Cannot be considered as immovable property. 2.13. In this context, reference is made to the Hon'ble Supreme Court judgment in the case of Kone Elevator India Private Limited Vs. State of Tamil Nadu [2014 (304) ELT 161 (SC)] = 2014 (5) TMI 265 - SUPREME COURT wherein the issue of immovability of lift was discussed. Relevant extract or the judgment is reproduced below: "The lift basically comprises components like lift car, motors, ropes, rails, etc. having their own identity even prior to installation. Without installation, the lift cannot be mechanically functional because it is a permanent fixture of the building having been so designed. These aspects have been elaborately discussed in Otis Elevator (supra) by the High Court of Bo....
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....ork involved (wall, building, telecom network) viz. immovable property remains the same as that of car parking system. 2.18. Attention is invited to the following judgments wherein the aforesaid activities have been held as immovable in nature: Judgment Summery CCE, Indore Vs. Virdi Brothers [2007 (207) ELT 321 SC] = 2006 (12) TMI 3 - SUPREME COURT OF INDIA It has been held that assembling of central air conditioning system amounts to immovable property. Craft Interiors Private Limited Vs CCE, Bangalore [2006 (203) ELT 529 SC] = 2006 (10) TMI 2 - SUPREME COURT OF INDIA It has been held that storage units, running counters, overhead unit, rear and side unit, wall unit, pantry unit, kitchen unit are ordinarily immovable and cannot be removed without cannibalizing CCE, Mumbai Vs. Josts Engineering Company Limited [2002 (146) ELT 29 SC] = 2002 (8) TMI 107 - SUPREME COURT OF INDIA It has been held that spray paint booth is considered as immovable property based on the following factors i) the outside portion of the structure is embedded to the earth ii) it can never be dismantled without damaging the portions iii) the system is touching the earth iv) the....
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.... reproduced herein as under- Chapter Heading/Sub-heading/Tariff Item Description of Goods 8428 Other lifting, handling, loading or unloading machinery (For example, lifts, escalators, conveyors teleferics) Further, it may be seen that the service portion of installation of said items i.e. lifts and escalators is covered under the Service Codes (Tariff) (SAC) NO. 995466 under Installation Services Group. The entry Of Group NO. 995466 is reproduced herein as under- Group No. Installation Services 995466 Lift and escalator installation services 4.3 From the above it is clear that under GST Regime the manufacturing of Car parking System is covered under HSN code 8428 and the installation and commissioning of the same is covered under SAC code 995466. In the instant matter It is obvious that the applicant generally receive composite order for manufacturing and installation of car parking system. Therefore, the same is to be considered as composite supply as defined under clause (30) of Section 2 of Central Goods and Services Tax Act, 2017. The text of clause (30) of Section 2 of the said Act is reproduced herein as under: SECTION 2. Definitions.- .....
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....tenance, 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; As can be seen from the words underlined above, a works contract under the GST Act is in relation to 'immovable property'. It is, therefore, that we see that all submission by the applicant is directed to convince us about the activity of supply and installation of 'car parking system' being resulting into 'immovable property'. While we see that the jurisdictional officer has offered comments as to the activity being a "composite" supply as defined under clause (30) of section 2 of the GST Act, with the supply of car parking system being the principal supply, we feel inclined to answer the question in the affirmative. Our reasons follow thus - At the cost of repetition, we reproduce the activities that go into supply and installation of 'car parking system' hereinbelow for immediate reference - Drawing & design of the car parking system is prepared according to the requirement of the customer ¯ Manufacture, build, test, dismantle, packing and supply steps ¯....
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.... or RCC structure, which is a basic frame work of the parking system, is erected in such foundation. It is further informed that this specific foundation and structure is a pre-requisite for successful installation and effective working of the car parking system. With an overview of the activity, we turn to the definition of 'works contract' as appearing in the GST Act. We see that the same includes activities 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 the contract. When the activity is to be performed in respect of a pre-existing building or an under-construction building, the plans showing the location of the car parking system, the load-bearing, etc. would have to be got approved from the jurisdictional urban bodies or revenue authorities. Same would also apply to a car parking system to be set up on a vacant plot of land. Such systems have a longevity of existence in terms of the aspect that these are not set u....
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....cations in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719 m cubic metre capacity and the size of its outer diameter is 10.6 metres, and the height 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at various levels to melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one metre thickness. Thus, the drilling machine has to drill a hole through one metre thickness of the refractory brick lining. The drilling machine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in....
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....behalf of the appellant that if the machines are to be removed from the blast furnace, they have to be first dismantled into parts and brought down to the ground only by using cranes and trolley ways considering the size, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers Pvt. Ltd. (supra) and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd. v. CCE - 1993 (65) E.L.T. 121; = 1992 (10) TMI 188 - CEGAT, NEW DELHI which held that the issue of immovable property was never raised before the Supreme Court in Narne Tulaman Manufacturers Pvt. Ltd. She found support for her conclusion in the decision of this Court in Municipal Corporation of Greater Bombay & Ors. v. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18; and held that the twin tests laid down by this Court to determine whether assembly/erection would r....
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.... sending them back to the pump house. The question arose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allowing the appeal this Court observed :- (SCC p. 33, para 32) "32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. If the answer is yes to the latter it is attached to the earth." 22. Applying the permanency test laid down in the aforesaid decision, counsel for the appellant contended that having regard to the facts of this case which are not in dispute, it must be held that what emerged as a result of the processes underta....
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....able. It noticed the decisions of this Court laying down the marketability tests. Thereafter this Court observed :- (SCC p.376, para 5) "The basic test therefore, of levying duty under the Act is two fold. One, that any article, must be a goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act." 26. In Mittal Engineering Works Pvt. Ltd. v. CCE - 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 - SUPREME COURT OF INDIA; this Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. The material on record described the functions and manufacturing process. A mono vertical crysta....
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....Supp (2) SCC 18)] = 1990 (11) TMI 407 - SUPREME COURT, Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP - 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 - SUPREME COURT OF INDIA and Mittal Engineering Works Pvt. Ltd. v. CCE - 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 - SUPREME COURT OF INDIA as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad - 1998 (97) E.L.T. 3 (S.C.). = 1997 (12) TMI 109 - SUPREME COURT OF INDIA This Court observed :- "14. There can be no doubt that if an article is an immovable property, it cannot be termed as "excisable goods" for purposes of the Act. From a combined reading of the definition of 'immovable property' in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anything attached to the earth require determination of both the intentions as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circums....
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....el for the appellant submitted before us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate, it is not necessary for us to express any opinion as to whether the mudgun and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of "goods" within the meaning of the term in the Excise Act. Thus, it can be seen that the Hon. Supreme Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling them and then re-erecting them at another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of 'immovable property' as something attached to the earth. We would also look at the dec....
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....he material point of time. The notice also pointed out that the units manufacturing parts and components of the plants had availed benefit of exemption wrongly and in breach of the provisions of Rules 9(1) and 173F and other rules regulating the grant of such benefit. 6. In so far as Solidmec marketing company was concerned, the show cause notice alleged that Solidmec was engaged in the manufacturing of Asphalt Batch Mix, Drum Mix/Hot Mix Plant by assembling and installing the parts and components manufactured by the manufacturing units of the group. According to the notice the process of assembly of the parts and components at the site provided by the purchasers of such plants was tantamount to manufacture of such plants as a distinct product with a new name, quality, usage and character emerged out of the said process. Resultantly the end-product; namely, Asphalt Drum/Hot Mix Plants became exigible to Central Excise duty, which duty Solidmec had successfully avoided. The notice also proposed to levy penalties upon all the five concerns under appropriate provisions of the Central Excise Act." The Hon. Court has very elaborately dealt with the issue and it would be useful to ....
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....e 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 earth. It is also not synonymous to imbedding in 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 be easily 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 foundation is meant for permanent beneficial enjoyment of either the foundation or the land in which the same is imbedded. 26. In English law the general rule is that what is annexed to the freehold becomes part of the realty under the maxim quidc....
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....ts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures. 31. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in....
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....402, para 5) "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 house-holder 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 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." 38. Reliance was placed by Mr. Bagaria upon the decision of this Court in Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP - 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 - SUPREME COURT ....
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....e frame railings and flats, oil trough, worm wheels, shafts, housing stirrer arms and support channels, pipes, floats, heaters. ladders, platforms. etc. The Court noted that the mono vertical crystallisers have to be assembled. erected and attached to the earth on a foundation at the Site of the sugar factory and are incapable of being sold to the consumers in the market as it is without anything more. 41. Relying upon the decision of this Court in Quality Steel Tubes Case [(1995) 2 SCC 372 : (1995) 75 ELT 17] = 1994 (12) TMI 75 - SUPREME COURT OF INDIA, the erection and installation of mono vertical crystallisers was held no/ dutiable under the Excise Act. This Court observed that: [Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 EL T 622] = 1996 (11) TMI 66 - SUPREME COURT OF INDIA]. SCC p. 208, para 10] "10. ......The Tribunal ought to have remembered... that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event marketable as they were." This decision also, in our opinion, does not lend any support to the case of the assessee in these ap....
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....because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. Our answer to Question 1 is accordingly in the affirmative." Thus, we see how the Hon. Courts have evolved the term 'immovable property' when faced with the question of what constitutes movable and immovable property. Though not issued for the purposes of the GST Act, we may as well mention herein the reference by the Hon. Bombay High Court in M/s. Bharti Airtel Ltd. (Earlier known as Bharti Tele-Ventures Ltd.) v. The Commissioner of Central Excise (2014 SCC OnLine Bom 907 : (2015) 77 VST 434) = 2014 (9) TMI 38 - BOMBAY HIGH COURT with regard to a Circular being issued by the Central Board of Excise & Customs in a decision of the same Hon. Bombay High Court - "(i) In the decision of the D....
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.... installed at site were individual machine was rejected. The Commissioner further held that with the assembly of various equipment installed what emerges is a commodity with a distinct name, identity, character and use; distinct from inputs and classifiable under chapter 8525 of Central Excise Tariff and the same is distinct and separate from the various equipments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property. 8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS, & BSCs) which are networked with the ....
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.... distinct name from the components from which it was assembled. The question is whether this new commodity is marketable. We have already considered the test of marketability as laid down by the Supreme Court in Triveni Engineering & India Ltd. (supra) and also Moti Laminates Pvt. Ltd. (supra). At this stage, we also note that we proceed on the footing by ignoring the second finding of marketability recorded by the Tribunal namely that BTS/BSC is not marketable as licence is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the compone....