TaxTMI 
TaxTMI 
2018 (10) TMI 1046
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....lication is 'admitted' to pronounce advance ruling. 1. SUBMISSION OF THE APPLICANT: 1.1 Solairedirect India LLP undertakes Engineering, Procurement and Construction ('EPC')activities for Group companies as well as third parties for setup of solar power generating system where contract for commissioning of solar power generating system involves simultaneous supply of goods and services. 1.2 The solar power generating system installed by the Applicant under the EPC contract consists of various components like solar photovoltaic panels, solar inverters, transformers, module mounting structure, cables, connectors and other accessories where solar panels which account for approximately 70% to 75% of the total cost. 1.3 In a typical contract, the customers of the applicant acquire the land for the set-up of the solar power generating system and access is granted to the Applicant for executing the project on turnkey basis. 1.4 The steps involved in execution of a contract by the Applicant are as below: 1.4.1 Planning for the project The Applicant submits the Implementation schedule which is approved by the purchaser. The Applicant remains responsible for ensuring comp....
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....pplied by Applicant classifiable under Chapter Heading 8541are covered under Schedule I of the said Notification and accordingly liable to 5% IGST. 1.7 Applicant wishes to understand whether the solar panels could be said to be the principal supply and the supply of solar power generating system along with all components could be said to composite supply and could get classified under Schedule I of the above referred notification. 2. OUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT Applicant has sought ruling to be pronounced under section 97(2) (a) of the CGST Act 2017, on the following questions: Whether EPC contract for set up of solar power generating system be considered as a composite supply with PV modules being the principal supply and be taxed at a rate of 5% (i.e. tax rate applicable on the P. V. modules)? 3. APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE OUESTION RAISED 3.1 The Applicant has made a detailed submission to demonstrate eligibility of solar modules to be classified as principal supply in the composite supply of solar power generating system and requests a ruling to be pronounced. The applicant has stated that the EPC Contract for the ....
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....p power generating system wherein the installation/ assembly services are also included for the supply of goods. Accordingly, it can be seen that the goods and services are naturally bundled in the ordinary course of business with the primary intention being to get a complete and operational solar power generating system. The Applicant in support of his submission has also stated certain overseas GST and VAT jurisdictions like United Kingdom ('UK'), European Union ('EU') and Australia. 3.2 The Applicant submitted that the supply of solar panels is the principal supply in the composite supply of solar power generating system hence the tax rate applicable on the solar panels is 5% under the heading 8541 should be applicable to the entire contract value and has relied on the following Entry: Entry number 234 of Schedule I of IGST Rate Notification reads as under: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 84, 85 or 94 Following renewable energy devices & parts for their manufacture (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operat....
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....ion of whether solar generating system is movable or immovable property the Applicant has placed reliance on the following judicial precedents : • Commissioner of Sale Tax Vs Bombay Sound Service (and others) = 1998 (9) TMI 636 - BOMBAY HIGH COURT. • Sri Velayuthaswamy Spinning Mills (P) Ltd Vs The Inspector General of Registration =2013 (3) TMI 681 - MADRAS HIGH COURT. • Commissioner of Central Excise, Ahmedabad Vs Solid & Correct Engineering Works =2010 (4) TMI 15 - SUPREME COURT. • Selvel Advertising Private Limited Vs Commercial Tax Officer, Alipore Charge = 1992 (5) TMI 182 - WEST BENGAL TAXATION TRIBUNAL. • Jaiprakash Industries Limited Vs Commissioner of Commercial Taxes, Uttarakhand = 2010 (7) TMI 884 - UTTARAKHAND HIGH COURT. • Sirpur Paper Mills Ltd. Vs Collector of Central Excise, Hyderabad =1997 (12) TMI 109 - SUPREME COURT OF INDIA. • Essar Telecom Infrastructure Pvt. Ltd. Vs Union of India etc = 2011 (4) TMI 234 - KARNATAKA HIGH COURT. In the light of the above discussion, the Applicant submitted that that the solar power generating system cannot be said to be "attached to th....
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....egorised as under:- i) Turnkey EPC Contract in which the Applicant is required to undertake all activities, civil or otherwise, designing, procurement and supply of all equipment/ components for the power plant their Assembly, erection, and commissioning and Operations and Maintenance of the plant . ii) Other EPC Contract in which the Applicant is required undertakes all activities of turnkey projects except civil work. iii) In Supply Contract, the Applicant is required to supply the power plant on complete knocked down condition in piecemeal at project site. Customer engages a third party contractor or the Applicant for assembly, erection, and commissioning of the plant under a separate contract. iv) In Balance of Plant Supply Contract, the Applicant is required to supply goods and services stated above, except solar panels. Solar panels procured by the customer are made available by the customer to the Applicant for assembly and erection. As per submissions made in Advance Ruling Application the applicant undertakes Engineering, Procurement and Construction ('EPC') activities for Group companies as well as third parties for setup of solar power generating system wh....
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....pplicant undertakes end to end responsibility of supply of equipments of solar power plant including designing, engineering, supplies, installation to technical specification, testing and commissioning of a functional solar power plant as well as laying of transmission lines for transmission of the electricity generated up to storage or the grid. e) Under contract like these all risk and liabilities accruing in relation of works (temporary or permanent), and of all equipments, machinery, materials, shall be with contractor until occurrence of the Final Acceptance. f) In terms and condition of "Composite EPC Contract" contractor has to undertake works of installation, testing and commissioning of Solar Power Plant as per specific demands of owner. So it is not something sold out of shelf. g) Under these kinds of contracts there is a single lump sum price for the entire contract. h) The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.NO. 234, under HSN Classification 84, 85 and 94 and has argued that under EPC contact he is supplying Solar Power Generating System which is the principal supply in the composite supply where installati....
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....ke activities from engineering, design, to procurement of the material and has also to test and commission a functional plant before Final Acceptance. In contracts of such a nature, the liability of the contractor doesn't end with the procuring of materials but it extends till the successful testing and commissioning of the system. The transaction is not of mixed or composite supply but is of a 'work contract' but it is for us to decide whether it is a 'work contract' in terms of GST Act also, so, we come to the crux of the issue, which is as to whether the transaction results into any immovable property. The term 'immovable property' has not been defined under the GST Act. However, there are a plethora of judgments of the Hon. Supreme Court and the Hon. High Courts which have helped understand the term 'immovable property'. 1. In decision of Allahabad High Court in Official Liquidator v. Sri Krishna Deo and Ors. [AIR 1959 All. 247] = 1958 (5) TMI 35 - HIGH COURT OF ALLAHABAD, wherein, the Court held that a machinery fixed to their bases with bolts and nuts although easily removable are not movable property when they have been set up with definite object of running an oil mill a....
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....achine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in the nature of a concrete platform around the furnace. The cast house floor is at a height of 25 feet above the ground level. On this platform concrete foundation intended for housing drilling machine and mudgun are erected. The concrete foundation itself is 5 feet high and it is grouted to earth by concrete foundation. The first step is to secure the base plate on the said concrete platform by means of foundation bolts. The base plate is 80 mm mild sheet of about 5 feet diameter. It is welded to the columns which are similar to huge pillars. This fabrication activity takes place in the cast house floor at 25 feet above ground level. After welding the columns, the base plate has to be secured to the concrete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base plate could be moved to the concrete platform and secured. The same trolley helps in the movement of various components to their determined position. The various components of the mudgun and drilling machine are mounted piece by piece on a metal frame, which is weld....
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....f Greater Bombay & Ors. v. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18 = 1990 (11) TMI 407 - SUPREME COURT; and held that the twin tests laid down by this Court to determine whether assembly/erection would result in immovable property or not were fully satisfied in the facts of this case. She concluded :- "The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and drill tap hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above. Accordingly applying the test laid down by the Supreme Court we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, ther....
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....he 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 undertaken by the appellant was an immovable property. It cannot be moved from the place where it is erected as it is, and if it becomes necessary to move it, it has first to be dismantled and then re-erected at another place. This factual position was also accepted by the Adjudicating Authority. The technical member, however, held that the aforesaid decision was of no help to the appellant inasmuch as a leading international manufacturing firm had offered such machines for export to different parts of the world. He further observed that though on account of their size and weight, it may be necessary to shift or transport them in parts for assembly and erection at the site in the steel plant, they must nevertheless be deemed as individual machines having specialized functions. We are not impressed by this reasoning, because it ignores the evidence brought on record as to the nature of processes employed in the erection of the machine, the manner in which it....
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....y 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 crystaliser is fixed on a solid RCC slab having a load bearing capacity of about 30 tons per square meter. It is assembled at site in different sections and consists of bottom plates, tanks, coils, drive frames, supports, plates etc. The aforesaid parts were cleared from the premises of the appellants and the mono vertical crystalliser was assembled and erected at site. The process involved welding and gas cutting. The mono vertical crystalliser is a tall structure, rather like a tower with a platform at its summit. This Court noticed that marketability was a decisive test for dutiability. It meant that the goods were saleable or suitable for sale, that is to say, they should be capable of being sold to consumers in the market, as it is, without anything more. The Court then referred to the decision in Quality Steel Tubes (supra) and distinguished the judgment in Narne Tulaman (supra) holding that the contention that the weigh bridges were not goods within the meaning of the Act was neither....
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....CEGAT therein, that the whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and also safety. In view of those findings it was 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. Keeping in view the principles laid down in the judgments noticed above, and having regard to the facts of this case, we have no doubt in our mind that the mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected....
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....eer, procure, transport, deliver, develop, erect, install, test and commission of project, as there is a single lump sum price for the entire contract. Hence the said EPC contract cannot be split in two separate contracts one of supply of goods and another that of services and taxed accordingly. n) Explanations covered under point i) and m) of 5. Findings, Analysis and Conclusion satisfactorily addresses additional queries raised by applicant during personal hearing. 6. Based on above facts along with provision of law it is observed: - 1) That the Solar Power Plant is a big project and has a permanent location as it is meant for onward sale of power to the consumer. Contract between an EPC contractor and the counter-party is entered into on the premise that the plant would continue to be situated at the place of construction. Such plant would therefore have an inherent element of permanency. 2) The output of the project i.e. Electricity, would be available to an identifiable segment of consumer. Thus this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at fr....