TaxTMI 
TaxTMI 
2018 (10) TMI 1144
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt : l. The present application for advance ruling has been filed to seek decision on the rate of GST applicable on the installation of solar power generating system. 2. Ws. Frizo India Private Limited (hereinafter referred to as the "Applicant") is engaged in supply of solar power generating system and its installation at the site. The applicant submitted that the solar power generating system is covered under entry no. 234 of the notification no. 01/2017-Central Tax (Rate) dated 28.06.2017 which prescribes the CGST rate of 2.5% on the supply of solar power generating system. 3. The applicant stated that if the definition of composite supply of works contract is pursued, it is found that in the GST regime, only works contract services of immovable property are covered under section 2(119) of the CGST Act, 2017. 4. Applicant stated that installation of solar power generating system which is affixed to Earth is not of any immovable property and so cannot be considered as supply of composite works contract attracting GST rate of 18%. 5. The applicant further contents that the GST rate prescribed at serial no. 3(ii) under notification no. 11/2017-Central Tax (Rate) dated 28.06.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ernment is to promote and encourage use of solar energy for power generation and consequently, lower rates have been prescribed for the solar power generating system. If the interpretation that installation of solar power generating system being affixed to Earth is composite supply of works contract attracting GST rate of 18% in accepted, it will be against the intention of the legislature. In this regard, the applicant places reliance on the following judicial pronouncements:- BALWANT SINGH VERSUS JAGDISH SINGH [2010(262) E.L.T. 50 (S.C.)]:- COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS RALSON INDIA LTS. [2006(202) E.L.T. 759 (P&H)] The analysis of above decisions of hon'ble Supreme Court and High Court makes it clear that the intention of the law makers is to be kept in mind while interpreting any provision. If any interpretation defeats the intention of the law makers, it should be avoided. In the present case also, if the interpretation that supply of solar power generating system is works contract attracting GST rate of 18% is taken, it will be against the intention of the government to promote and encourage use of solar energy as means of power generation. Therefore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cided as per the submission made earlier in Advance Ruling Application. The jurisdictional officer in his comments has stated that the contract given to the applicant is of supply, installation, commissioning of Solar power generating system in which the dealer has to deliver a functional solar system which in turn is immovable property. Hence it is to be treated as works contract as per section 2(119) of the RGST Act and taxed @ 18% under GST. 9. Findings and analysis: Applicant has not submitted any specific copy of contract along with the Advance Ruling Application on which he would like to seek the Ruling. As per submissions made in Advance Ruling Application the applicant has declared that he is engaged in supply of solar power generating system and its installation at the site and involves simultaneous supply of goods and services. Various kinds of contracts usually prevalent for execution of the nature of work specified by applicant can broadly be categorized 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 Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....frastructure). vii. Apart from installation the contractor has to successfully test run the plant over certain period of time to check and ensure the optimum output (generation of electricity) as agreed upon in contract. viii. Final acceptance and payment is done only after successful test run as per condition laid down in contract. d) Under these contracts the intention of the owner is not to procure goods (devices and parts) of solar power generating system but to procure a completely functional solar power generating system as a whole wherein applicant undertakes end to end responsibility of supply of equipments of solar power generating system including designing, engineering, supplies, installation to technical specification, testing and commissioning of a functional solar power plant as well as at times 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 Cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on or commissioning is only for immovable property, then it will classify as works contract only. Hence it means that aforesaid activities if they are undertaken for a movable property then it will not be a works contract service. k) Relying on judgements and citations submitted in Advance Ruling Application the applicant contends that as the solar generating system, once installed is capable of being removed and transferred from one place to another without substantial damage hence same should qualify as movable property. Thus in view of above precedence and facts of the case, the given supply should be treated as supply of Solar Power Plant Only. l) As per the terms and conditions usually laid in EPC Contract the contractor i.e. the applicant has to undertake 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 does not end with the supplying 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bled and erected as also their specifications 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 descr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accepted the submission urged on 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 Name Tulaman Manufacturers Pvt. Ltd. (supra) and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Manufacturing (Weaving) co. Ltd. vs. CCE 1993 (65) ELT 121; 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. Vs. 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 result in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 :- "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? Ifthe 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". 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 undertaken by the appellant was an immovable property. It can not be moved from the place where it is erected as i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the Act is twofold. 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". In Mittal Engineering Works Pvt. Ltd. Vs. CCE 1996 (88) ELT 622 (SC); 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 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 par....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 circumstances of each case" It was also held that the decision of this Court in Sirpur Paper Mills Ltd. must be viewed in the light of the findings recorded by the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ached to the earth. m) The applicant in his Advance Ruling Application and later in additional statement has stated that they are engaged in supply of solar power generating system and its installation at the site which involves simultaneous supply of goods and services under a single contract.. As per submissions made by them the nature of work undertaken by them can be best categorized as Composite turnkey EPC contract . All arguments and submission put forth by applicant categorically classify the nature of work to be supply of solar power generating system and its installation at the site. But the query raised by Applicant in Advance Ruling Application is regarding "Applicable GST Rate on supply of Solar Power Generating System." Hence it is not clear whether the applicants wants clarification of GST rate applicable on "supply of Solar Power Generating System" under a supply contract or wants clarification of GST rate applicable on execution of contract of "supply of solar power generating system along with its installation at the site . n) In case, if the clarification is sought for "Applicable GST Rate on supply of Solar Power Generating System." then the goods should be su....