TaxTMI 
TaxTMI 
2019 (4) TMI 1623
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the customer without issuance of consignment note will be eligible for exemption from SGST as prescribed in Serial no. 18 in Notification no. 12/2017-State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017. At the outset, it is made clear that since the provisions of both the CGST Act and the MGST Act are the same except for a few provisions, a reference to the CGST Act would also mean a reference to the MGST Act, unless specified otherwise. 2. FACTS AND CONTENTIONS - AS PER THE APPLICANT: (i) M/S Siemens Limited (herein after referred as the "Applicant") is registered under the Central and State GST legislations vide GSTIN 27AAACS0764L1Z6 and is situated at Plot No 2, Siemens Limited, Sector 2, Kharghar Node, Navi Mumbai 410210, Maharashtra. The Applicant is a leader in technology solutions for intelligent (smart), sustainable cities, smart grid, building technologies, mobility and power distribution. (ii) The Applicant has a contract with one of the major Public Sector Undertakings in the State of Haryana (herein after referred as "the Customer"). (iii) In terms of the said contract, the Customer has placed an order thru the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Rate F. No. 334/1/2017, dated 28 June 2017, an exemption from Central GST has been provided for services by way of transportation of goods. The relevant extract of the notification is given below: Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (percent) Condition 18 Heading 9965 Services by way of transportation of goods - a. by road except the services of i. a goods transportation agency; ii. a courier agency; b. by inland waterways NIL NIL (xii) There is a similar exemption which has been provided under the Maharashtra Goods and Services Tax Act, 2017 vide Serial no. 18 in Notification no. 12/2017 - State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017. (xiii) With respect to these local transportation charges as referred in para 6(a) above and recovered by the Applicant from the Customer, the Applicant seeks this Advance Ruling under Section 97(2) of Central Goods and Services Act, 2017 (CGST Act) and the Maharashtra Goods and Services Tax Act, 2017 (SGST Act) on the applicability of tax exemption as provided under serial no. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der issues a consignment note to the service recipient. (vii) This matter has come up before various Courts in past wherein the issue was on applicability of service tax wherein the transporter does not issue any consignment note. (viii) In the matter of M/s Om Telecom Logistics vs. CCE, Delhi (2018-TIOL-1430), Delhi - CESTAT = 2018 (4) TMI 723 - CESTAT NEW DELHI has held that a person is to be categorized as a "goods transport agent", only when he issues the "consignment note" in manner prescribed in statute. (ix) Similar view has been taken by the Tribunals in the following matters: a. CCE Guntur vs. Kanaka Durga Agro Oil Products Pvt. Ltd, (2009) 15 STR 399 - Bangalore CESTAT = 2009 (3) TMI 130 - CESTAT, BANGALORE b. South Eastern coal Fields Ltd. vs. CCE, Raipur (2016-TIOL-2773) - Delhi CESTAT = 2016 (8) TMI 677 - CESTAT NEW DELHI c. Birla Ready Mix vs. CCE, Noida (2012-TIOL-2200) - Delhi CESTAT = 2012 (12) TMI 736 - CESTAT, NEW DELHI d. Northern coal Fields vs CCE, Allahabad (2015-TIOL-2459) - Allahabad CESTAT = 2015 (11) TMI 1256 - CESTAT ALLAHABAD e. Nangana Sihori sugar co. Ltd. vs. CCE (MANU/CE/0194/2014) - Delhi CESTAT....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payment made by it to the transporters who have issued consignment notes. The Applicant has not claimed credit of input service tax on such services assuming that the subsequent charge of transportation charge by it from the customer will not be subject to further tax. (xii) Considering the above referred legal provisions, past judicial precedents on this topic, and the intention of the Government to continue with the same exemptions as existed prior to implementation of GST, the Applicant is of the view that the charges recovered by the Applicant in terms of the underlying contract with its customer, wherein no consignment note is issued by the Applicant should not be subject to levy of GST under the Central and respective State GST legislation. 3.1 Additional submission of the Applicant dt.11.12.2018. A. Advance Rulings of other applicants/States are not binding. During the hearing held on 12th September, 2018, Department Representative (DR), Shri N.G. Deshmukh made his submissions which were based on another decision of West Bengal AAR in the matter of M/s. EMC Ltd and M/s. IAC Electricals Private Limited. Basis the said decisions, learned DR tried to classify the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....charges As can be seen from the above, the applicant is not providing complete solution to the customer and is only executing a part of the solution. Further, the applicant is not required to carry out any erection or commissioning of goods and with the provision of services stipulated in the service contract it would not result into an immovable property. iii) It is pertinent to mention that the Advance Ruling of M/s. IAC Electricals Pvt. Ltd. (attached as 'Annexure 3'), the supply made by the applicant has not been held to be an immoveable property. The Authority held it to be composite supply and refrained from categorizing it as a works contract. B. Contract under consideration is not a works contract as it does not result an immoveable property • It is submitted that works contract is defined as a composite supply and includes a contract 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne and Anr (AIR 1969 Mad 346) = 1967 (9) TMI 147 - MADRAS HIGH COURT, attached as Annexure 7. • In view of the aforesaid judgments, the applicant submits that in the instant case, specific goods supplied by the applicant are installed only for the purpose of better functioning of the said goods and are capable of being removed and transferred from one place to another. Hence, the fact that the said goods is firmly but not permanently attached to the land means that the same is not an immovable property. • The applicant is also making reference to Circular issued by Central Board of Customs and Excise ('CBEC'), vide 37B Order No. 58/1/2002-CX issued under F. No. 154/26/99-CX4 dated 15 January, 2002 ('the Circular), attached as 'Annexure 8' wherein after realizing the anomaly in case of plant and machinery assembled at site, issued the Circular clarifying the following: "(i) if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore. not be excisable goods. ......
X X X X Extracts X X X X
X X X X Extracts X X X X
.....). The agreement is in two parts. It is true that the two parts are interdependent but yet the consideration for the sale of trade secrets and consideration of technical assistance is separately provided for and mentioned under separate sections. So far as the consideration for the technical assistance is concerned, its taxability is not in doubt. The only controversy is with respect to the taxability of 1,65,000 U. S. dollars which is stipulated as the consideration for sale of trade secrets. The agreement specifically says that the said sale is effected in Japan. We are unable to see on what basis it can be said that any part of the said amount has been earned in India." • Further in the case of Ishikawajma-Harima Heavy Indus. Ltd. Vs Dir. Of Income Tax, Mumbai 2007 (6) STR 3 (S.C.) = 2007 (1) TMI 91 - SUPREME COURT, attached as "Annexure 11', the assessee was to develop, design, engineer and procure equipment, materials and supplies, to erect and construct storage tanks and some other services for Petronet LNG in India. The contract, inter alia, involved onshore services as also offshore services. Separate prices were mentioned in the contract. One of the contentio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... there are two separate works; supply order and service order." After hearing the parties, and after going through the records, the Hon'ble Court had held that "we are of the opinion that the matter has to be considered again by the assessing authority. The assessing authority takes the view that in this case, there is indivisible contract. So far as this case is concerned, according to us, it is not indivisible. It contains two parts: supply order and service order. According to us, the Tribunal was not correct in holdi there was only one contract. The work order will show that it contains two parts; supply order and service order. Price is also shown separately. The right of the buyer to inspect the goods before they are transported is also preserved So also, the goods are insured. When the goods were transmitted, the assessee transferred the title to the property to Cominco Binani Zinc Limited." • It is submitted that the ratio of the above decisions is squarely applicable in the facts of the present case, since even in the present case it was the intention of the parties to regard each of the activities as distinct and separate. • A similar qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contracts and since the applicant does not issue any consignment note, no GST is payable in terms of Serial no. 18 of Notification no. 12/2017 - Central Tax dated 28 June, 2017 and Serial no. 18 in Notification no. 12/2017 - State Tax (Rate) dated 29 June, 2017. • Hence, the applicant is of the view that the charges recovered by them in terms of the underlying contract with its customer, wherein no consignment note is issued by the applicant, should not be subjected to levy of GST under the Central and respective State GST legislation. • Further the applicant would also like to highlight that the onshore service contract was revised on 14.3.2018 (copy Attached as 'Annexure - 14'). It could be seen that the contract is predominantly for transportation/ freight charges only and other charges (insurance and other charges) are incidental to transportation/ freight charges. Circular - F. No. 354 / 98/20015-TRU issued by CBEC in this regard is attached herewith as 'Annexure - 15'. D. GST Council had decided to continue the same rate of GST on services as were applicable in pre GST regime • In para 8 and 9 of our application, we have quoted a few ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CESTAT NEW DELHI 4. Birla Ready Mix vs. CCE, Noida (2012-TIOL-2200) - Delhi CESTAT = 2012 (12) TMI 736 - CESTAT, NEW DELHI 5. Northern coal Fields vs CCE, Allahabad (2015-TIOL-2459) - Allahabad CESTAT = 2015 (11) TMI 1256 - CESTAT ALLAHABAD 6. Nandganj Sihori sugar co. Ltd. vs. CCE (MANU/CE/0194/2014)- Delhi CESTAT = 2014 (5) TMI 138 - CESTAT NEW DELHI It is further submitted that the applicant has already discharged service tax on the freight payments made by it to the transporters who have issued consignment notes to the applicant and transported the goods to customer. The Applicant has not claimed credit of input service tax on such services assuming that the subsequent charge of transportation charges by it from the customer will not be subject to further In short since no consignment note is issued by the applicant to its customer the applicant should not be subject to levy of GST under the Central and respective State GST legislation being covered by the scope of notification as mentioned above . REPLY TO APPLICANT'S SUBMISSION- The applicant as an associate of the Joint Venture of M/S SIEMENS AG, GERMANY (lead partner) and M/S SUMITOMO IND....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ixth Contract', shall not automatically relieve you any of your obligations under this Third Contract. It is also expressly understood and agreed by you that the equipment/materials supplied by you under this 'Third Contract', by SIEMENS AG on behalf of JV under the 'First Contract', by SUMITOMO on behalf of JV under the 'Second Contract' and 'Fourth Contract', as per identified scope of works in respective Contracts, when erected, installed and commissioned by you under the 'Fifth Contract'/ by SUMITOMO under the 'Sixth Contract' shall give satisfactory performance in accordance with the provisions of the Contract(s). In clause 3.2 it is mentioned that, "Notwithstanding the break-up of contact price, the contract shall at all times be construed as a single source responsibility contract and any breach in any part of the contract shall be treated as breach of the entire contract. Thus it is seen that, i. The contract awarded in substance and essence is a composite contract as defined in section 2(30) of the C.G.S.T. Act, 2017 for supply of goods and services. ii. The third contract cannot be executed by the applicant independent of fifth contract that is the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the same shall be treated to taxation under section 8(a) of the GST act and the consideration receivable on that account be taxed accordingly. Incidentally in the both the cases cited above the awarder of the contract is M/S Power Grid Corporation of India and the contracts have been divided as proposed by the applicants into one for supply of goods and the other is for supply of services but the contracts in essence are composite. Though the application is maintainable as stated by the applicant since the question is not decided in any proceeding in the case of applicant under any provisions of the GST Act but the same is no longer res-lntegra in view of decisions of West Bengal authority for Advance Ruling cited earlier. Hence the question should be decided against the applicant that is applicant should not be held to be eligible for exemption from CGST as prescribed in Serial no. 18 of Notification no. 12/2017-Central Tax Rate F. No. 334/1/2017, dated 28 June 2017 and also for exemption from SGST as prescribed in Serial no. 18 in Notification no, 12/2017 - State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017 and should be held liable to tax as a wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... undertaken by the applicant or one entire contract. However, with respect to the activity, we find two different views. The applicant is of the view that the charges recovered by it in terms of the contract from its customer constitute a separate 'services contract' executed through local transporter on payment of GST, whereas the local transportation charges recovered from the customer as per terms of the contract without the consignment note issued by the applicant exempt from levy of GST. Per contra Jurisdictional Officer is of the view that impugned contract is a composite supply of services of works contract as defined u/s 2(119) of the GST Act, of which transportation / freight is merely a component and not a separate supply and thereby applicants supply is not covered by the exemption at sr. No. 8 of Notification No. 12/2017 Central Tax (Rate), F No. 334/1/2017 dated 28th June, 2017. In this view of the matter, the issue raised before us is related to the applicability of rate notification entry Sr. 18 of notf.12/2017 to the transaction carried out as per the contract made by the applicant. The issue is very limited. Before deciding the applicability of notification e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estern region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu-North Trichur, Kerala), The scope of work under this Notification of Award (NOA) shall also include all such items which are not specifically mentioned in the Bidding Documents and/or the JV's bid but are necessary for the successful completion of the scope under the Contract for 1320KV, 2X1000M WVSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), unless otherwise specifically excluded in the Bidding Documents or in this NOA. 2.2 As per para 1.4 above and as tied up in Clarification Meetings, we have also notified the following Notifications of Awards: (a) on the Lead Partner of JV i.e. SIEMENS AG on behalf of JV of SIEMENS AG and SUMITOMO vide our Notification of Award Ref. No. CC-CS/698 SR2/HVDC-3249/7/G10/R/NOA-17213 dated 22.03.2017 for award of 'Off-Shore Contract-I' (also referred to as the 'First Contract') for the subject package, covering inter-alia, all works to be performed in countries outside India including....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kage, for performance of all other activities inter-alia including port handling of the Plant and Equipment including mandatory Spares (except +320kV HVDC Cable and some of it's associated items) to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, unloading, storage and handling at site, installation including civil works, testing and commissioning including Performance Testing in respect of all Plant and Equipment supplied under both 'First Contract' and 'Third Contract and any other services specified in the Bidding Documents; (e) on the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO vide our Notification of Award Ref. No. CC-CS/698-SR2/HVDC- 3249/7/G10/R/NOA-V1/7218 dated 22.03.2017 for award of 'On-Shore Services Contract-II (also referred to as the Sixth Contract) for the subject package, for performance of all other activities inter-alia including port handling of the Plant and Equipment including mandatory Spares for +/-320kV HVDC Cable and some of its associated items to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, un....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8,345,326,393 (Euro Eighty Two Million Four Hundred Sixty Three Thousand One Hundred Seventy Two plus US Dollar Two Hundred Thirty Five Thousand Five Hundred Eighty Four plus Indian Rupees Eight Billion Three Hundred Forty Five Million Three Hundred Twenty Six Thousand Three Hundred Ninety Three only) as per the following break-up: Sr.No. Prise Component Amount 1. Ex-works Price Component EURO 82,463,172 +USD 235,584 +INR 8,345,326,393 2. Type Test Charges Total for Third Contract (1+2) Included EURO 82,463, 172 +USD 235,584 +INR 8,345,326,393 3.2. Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. 5.0. For release of advance payment (admissible as per the Bidding Documents) equal to 10% of the Ex-works Price component of the Contract Price for Main Equipment (excluding spares), you are, inter-alia, required to furnish Bank Guarantee for the equivalent advance amount, as detailed at APPENDIX (NOA)-3. Further, please note that furnishing of all the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2.0 AWARD OF CONTRACT AND ITS SCOPE We confirm having accepted the Bid of the JV of SIEMENS AG and SUMITOMO (referred to at para 1.4, 1.7 and 1.9 above) read in conjunct all the specifications, terms and conditions of the Bidding Documents including Record Notes of Clarification Meetings referred to at para 1.3, 1.5 and 1.6 above (hereinafter referred to as "Bidding documents") and specific confirmations recorded in the Record Notes of Post Bid Discussions (referred to at para 1.10 above), and award on you, the 'On-Shore Services Contract-I' (also referred to as the 'Fifth Contract) for the subject package, for performance of all other activities inter-alia including port handling of the plant and Equipment including mandatory Spares (except +320kV HVDC Cable and some of its associated items) to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, unloading, storage and handling at site, installation, including civil works, testing and commissioning including Performance Testing in respect of all plant and Equipment supplied under both 'First Contract' and 'Third Contract' and any other services specified in the Bidding Docum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), as set forth in the Bidding Documents; (c) On the Associate of the JV i.e. M/S. Siemens Limited, India (SIEMENS-I), vide our Notification of Award Ref. No. CC-CS/698-SR2HVDC 3249/7/G10/R,NOA-II/7215 dated 22.03.2017 for award of 'On-Shore Supply Contract-r (also referred to as the 'Third Contract') for the subject package, for supply of equipment and materials including mandatory spares except +/-320kV HVDC Cable (including some of its associated items) from within India and Type Testing (as applicable), required for the complete execution of +320K V, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu-North Trichur, Kerala), as set forth in the Bidding Documents; (d) On the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO vide our Notification of Award Ref. No. CC-CS/698-SR2/HVDC-3249/7/G10/R/NOA-IV/7216 dated 22.03.2017 for award of 'On-Shore Supply Contract-Il' (also referred to as the 'Fou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e contract(s), shall give us an absolute right to terminate this Contract at your risk, cost and responsibility, either in full or in part and/or recover damages under this Fifth Contract as well. However, such default or breach or occurrence in the First Contract' and/ or 'Second Contract and/or 'Third Contract and/or 'Fourth Contract' and/ or 'Sixth Contracts, shall not automatically relieve you any of your obligations under this 'Fifth Contract. It is also expressly understood and agreed by you that the equipment/materials supplied by you under the 'Third Contract, by SIEMENS AG on behalf of JV under the 'First Contract, by SUMITOMO on behalf of JV under the 'Second Contract and Fourth Contract', as per identified scope of works in respective Contracts, when erected, installed and commissioned by you under this 'Fifth Contract'/ by SUMITOMO under the 'Sixth Contract shall give satisfactory performance in accordance with the provisions of the Contract(s).. 3.0 CONTRACT PRICE - 3.1 The total Contract Price for the entire scope of work under this Contract shall be INR 2,797,437,352 (Indian Rupees Two Billion Seven Hundred Ninety Seven Million Four Hundred Thirty Seven Thou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Contract Agreement with us within twenty-eight (28) days from the date of this Notification of Award. For and on behalf of Power Grid Corporation of India Ltd., From the above terms of the contract, we find as under, 1. The subject NOA is awarded to the JV of SIEMENS AG and SUMITOMO. The applicant is lead partner of this contract. 2. The contracts are for supply of goods and services or both. 3. There are total six types of contracts which covers the Scope of supply of goods and service shore and off on shore basis to complete the project. 4. All the contracts are interdependent. 5. The scope of work is a package, for performance of all other activities inter-alia including port handling of the plant and Equipment including mandatory Spares (except +320kV HVDC Cable and some of its associated items) to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, unloading, storage and handling at site, installation including civil works, testing and commissioning including Performance Testing in respect of all Plant and Equipment supplied 6. The contract is awarded for total Contract Price for the entire scope of wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t however does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for 'supply of goods' unless tied up with the Second Contract. The First Contract has 'no leg' unless supported by the Second Contract. It is no contract at all unless tied up with the Second Contract. The Contractee is aware of such interdependence of the two contracts. Although awarded under two separate contract agreements, clauses under both them make it abundantly clear that notwithstanding the breakup of the Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Applicant shall remain responsible to ensure execution of both the contracts to achieve successful completion. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vice versa. The two contracts are, therefore, linked by a cross fall breach clause deeming that any breach in either of the contracts to be a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages. The 'cross fall breach clause', settles unambiguo....