TaxTMI 
TaxTMI 
2019 (6) TMI 1062
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....he rate of tax applicable to the supplies made under the contract? At the outset, we would like to make it clear that the provisions of both the CGST Act & the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any 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, the expression 'GST Act' would mean CGST Act and MGST Act. 02 FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACIS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 1. This Application is being preferred by Sterlite Technologies Limited ("Company" / " Applicant"), a company incorporated in India under the provisions of the Companies Act, 1956. having its registered office at E-1, E-2,0-3, MIDC Waluj, Aurangabad-431136, Maharashtra, India.. 2. 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") an....
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.... Network Architecture Tier I. Tier I would interconnect 11 major locations of the Indian Navy across the country over defence owned OFC and DWDM network infrastructure ... Tier II. The remaining 33 locations of the Indian Navy would be connected over defence owned OFC and DWDM network infrastructure Tier III. Tier Ill consists of the regional metro aggregation network at Delhi, Mumbai, Vizag, Kochi, God, Chennai and Port Bloir. The regional metro aggregation network for Tier III shall be present at few locations at various metro cities across the country. These locations would be connected over a DWDM infrastructure that the bidder will have to provide Civil Infrastructure 1. A central building would need to be built at very site to house Type 1/Type 2 Type 3 Infrastructure, Telepresence equipment Networking Equipment Optic fibre Equipment, Staging ored and other operational and administrative buildings. The scope of work includes civil construction, water supply, sanitary and plumbing, electrical installation, landscaping, air conditioning, roads, and fire fighting and interior works. All the buildings should be construct....
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....ure and re-install all the necessary equipment and re-engage the same with the optical fiber cables at such other place. 7. In furtherance of the tender bid, BSNL has entered into a contract with Applicant which stipulates Applicant's responsibility to set up the network including the responsibility to supply all the material and services required for setting up of network, training services to operate the same and supply of satellite connectivity vehicles [le, a mobile vehicle mounted with various satellite equipment) required for ensuring seamless connectivity during breakdown of network. 8. The entire project as per contract between Applicant and BSNL is bifurcated into different packages and the purchase order is presently raised by BSNL with reference to cost break up of each of the material and services required to be supplied by Applicant under these packages. Such cost break-up for indigenous procurements relating to imports as well as domestic procurement is specified in annexures to the purchase order. 9. Based on the above facts, the present application is being preferred before the Hon'ble Authority for Advance Ruling to determine the issue referred in Annexure....
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....of the system depends upon its installation or not, 1.5. It is summited that the activity of setting up of network envisages, constructing various types of buildings and civil infrastructures which can house all the equipment necessary to provide the connectivity. The scope of the entire set up to be developed by Applicant also covers in its fold creating the ancillary infrastructure such as water supply, plumbing, electricity supply, access roads, back-up power generator etc. it is important to note that the entire set up together contributes to effective and seamless operation of the network for information exchange. Based on the infrastructure to be developed in the course of setting up of network, all the determinative parameters referred above are answered in positive which are elaborated in ensuing paragraphs. Network to be set up comes into existence as permanently affixed to land 1.6. Applicant submits that network to be set up comes into existence only when all the equipment's are installed in the data centers, nearline data centers, disaster recovery station, satellite data center and are inter connected with each other. Thus, network, as it comes into existence ....
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....cture has time and again been recognized as an immovable structure by various judicial precedents. 1.11. Reliance in this regard, is placed on the decision of the Hon'ble Supreme Court in the case of Municipal Corporation of Greater Bombay vs Indian Oil Co. Ltd. (AIR 1991 SC 686) = 1990 (11) TMI 407 - SUPREME COURT relevant portion of which is reproduced below: 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 moveable 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. 1.12. Reliance in this regard is also placed on the decision of Hon'ble Supreme Court in the case of T.T.G, Industries Ltd. v. Collector of Central Excise [(2004) 4 SCC 751] = 2004 (5) TMI 77 - SUPREME COURT wherein a machine was treated as immovable owing to permanency in its installation. Relevant portion is reproduced below: "We are not impressed by this reasoning, because it ignores the evidence brought on record as to, the nature of processes em....
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....mponents 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. 1.18. Based on the judicial precedents referred above Applicant submits that, the 'network to be set up by it partakes the character of an immovable property in as much as the network as it comes into existence is firmly attached underground and permanently becomes a part of the land itself, in such a case, the activities to be undertaken by, applicant as outlined in the contract are: classifiable as 'composite supply of works contract as per Section 2(119) of the CGST Act and attract the assessment of GST liability accordingly, 1.19. The submissions in the forgoing, paragraphs are also supported by the decisions of Hon'ble Appellate Authorities for Advance Ruling in the case of Giriraj Renewables Private Limited - (TS 461- AAAR-2018-NT) = 2018 (9) TMI 1183 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA wherein a turnkey contract involving engineering, design, procurement, supply, development, testing and commissioning is held to....
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....or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply 2.2. On a bare perusal of the definition it can be inferred that a composite supply is a supply of two or more naturally bundled supplies made in conjunction with each other. We note that determinant factor to analyse a supply qua composite supply is whether the supplies when made together are naturally bundled or not. If the bundled supply answers affirmative, it qualifies as a composite supply. 2.3. In the present case we note that supply of material and services for setting up of network, supply of satellite connectivity vehicle and supply of service by imparting training services are to be made in conjunction with each other with a purpose of setting up and effective operation of network and to ensure seamless connectivity. This purpose is also evident from the overview and scope of contract as provided in the tender document, relevant portion of which is reproduced below: Plan and Design a secure and reliable Navy-wide voice, video and data networking environment that meets the war fighter's ne....
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....e submissions in the forgoing paragraphs is also supported by the decisions of Hon'ble Appellate Authorities for Advance Ruling in the case of Giriraj Renewables Private Limited (supra) wherein a turnkey contract involving engineering, design, procurement, supply, development, testing and commissioning is held to naturally bundled and therefore in the nature of a composite supply under Section 2(30) of the CGST Act. Relevant portion of the said ruling is reproduced below: 39. The contract fulfills the condition of composite supply. There is a supply of goods and services. They are naturally bundled in the sense that the goods and services may be required to fulfill the intention of the buyer in giving the contract. The supply of goods and services are provide as a package and the different elements are integral to flow of supply....... ....Thus, from a reading of the entire contract as well as from the definition of composite supply what can be easily gathered is that the buyer has given a contract for setting up Solar Power Generating Supply to the appellant and therefore it is single composite supply of goods and services and installation thereof. 40....
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....f material as well as services underlying such works contract is to be treated as supply of service itself. The rate Of GST applicable for supply of services are notified vide Notification No. 11/2017 - Central Tax (rate) dated June 28, 2017 (as amended from time to time) (rate Notification') which prescribes rate of GST on works contract services depending upon the nature of work to be carried out. 3.2. Based on the nature of works contract services and its usage by Indian Navy, Entry no. 3 (vi)(a) of rate Notification merits anal sis which is reproduced below for easy reference: Sl.No. Chapter Section or Heading Description of Service Rate (Per Cent. Conditions 3 Heading 9954 (Construction Services) (vi). Services provided to the Central Government, State Government, Union Territory, a local authority, a governmental authority or a government entity by way of construction, erection; commissioning, installation completion, fitting out, repair, maintenance renovation, or alteration of- (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b)......... ....
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....ation No. 11/2017 prescribes GST at rate of 12% (CGST at the rate of 6% and SGST at the rate of 6%) for services which inter alia qualify as 'original works'. Accordingly, in furtherance of the submissions advanced earlier, the Applicant herein wishes to make further additional submissions in support of its contention that service to be provided by it qualify as 'original works' and is indeed covered by Entry No. 3(vi)(a) of Notification No. 11/2017. These additional submissions made in the ensuing paragraphs are being made without prejudice to each other, as well as Applicant's earlier submissions: THE TERM 'ORIGINAL WORKS' AS NOTIFICATION NO. 17/2017 CENTRAL TAX (RATE) POSSESSES PERSUASIVE FORCE AND CAN BE REFEREED TO DETERMINE SCOPE OF THE TERM 'ORIGINAL WORKS' AS REFERRED IN NOTIFICATION NO. 11/2017 CENTRAL TAX (RATE) 1.1. Applicant submits that the term 'original works' as referred in Entry No. 3(vi)(a) of Notification No. 11/2017 is neither defined under Notification No. 11/2017 nor under the Central Goods and Service Tax Act, 2017 ('CGST Act'). In these circumstances, the Applicant refers to the Notification No. 12/2017 Central Tax (Rate) dated June 28, 2017 ('Notifica....
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....determine the meaning of 'original works' as referred to in Entry No. 3(vi)(a) of Notification No. 11/2017. 1.6. In view of the above Applicant further submits that the term 'original works' as defined in Notification No. 12/2017 as well as Service tax valuation rules inter alia covers activities in the nature of erection, commissioning or installation of machinery or structure. At this juncture the Applicant refers to the scope of contract which inter alia necessitates the Applicant to build structures in the form of buildings, roads, etc. and undertake the activity of installing the equipment therein. Relevant portion of the contract is reproduced below for easy reference: CLAUSES OF THE CONTRACT Civil Infrastructure: 1. A central building would need to be built at very site to house Type 1/Type 2 Type 3 Infrastructure, Telepresence equipment, Networking Equipment, Optic fibre Equipment, Staging area and other operational and administrative buildings. The scope of work includes civil construction, water supply, sanitary and plumbing, electrical installation, landscaping, air conditioning, roads, and firefighting and interior works All the building....
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.... 9. Counsel then relied upon section 5 of the Colliery Control Order, 1945, in order to show that the Legislature there had dealt with coal in its strict and technical meaning. He also relied upon certain other statutory provisions with a view to show that the Legislature has all along been using the word 'coal' as a mineral product only. The Colliery Control Order deals with collieries and obviously, therefore, the term 'coal' there is used as mineral product. It is a well-settled principal that in construing a word in an Act caution is necessary in adopting a meaning ascribed to that word in other statues. As Lord Loreburn stated in Macbeth v. Chislett (1910) A.C. 220, "it would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone! 1.10. Hon'ble Supreme Court noted that use of a word in another statute may have its etymological or scientific meaning attuned to that statute and thus would not be applicable to any other statute. Accordingly, it held the reference of Colliery C....
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....tion of the subject matter. If a statute uses the ordinary words in every days use, such words should be construed according to their popular sense. 7. The result emerging from these decisions is that while construing the word 'coal' in Entry I of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and consumers purchasing it as fuel would give to that word. A sales tax statute is being one levying a tax on goods must in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance. 1.13. It is submitted that binding force in 'law of the land' as pronounced by Hon'ble Supreme court in the above referred case has only increased to a great extent as it has time and again adopted the same position of law in its subsequent decisions. We refer few of these decisions being the case of Union of India (1101) and Ors. Vs. R.C. Jain and Ors., AIR 1981 (SC) 951 = 1981 (2) TMI 200 - SUPREME COURT wherein Hon'ble Supreme Court noted that it is not a sound rule of interpretation to refer to meaning of a term used ....
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....l works' in its common parlance. 1.16. Applicant therefore refers to the 'Oxford Advanced Learner's Dictionary' which explains the term 'original' to mean 'existing at the beginning' while the term 'works' is explained to mean activities or putting efforts to use materials and achieve a desired result. Relevant portion of the dictionary is reproduced below: Original, Adj.: 1 [only before a noun) existing at the beginning of a particular period, process or activity Works, HAVE RESULT/ EFFECT 10 (VN) to cause or produce something as a result of efforts; USE MATERIAL 11 (VN) sth (in to sth) to make a material into a particular shape of form by pressing, stretching, hitting it, etc. EFFORT 6 [U] the use of physical strength or mental power in order to do or make something PRODUCT OF WORK 7 [U] a thing or things that are produced as a result of work 1.17. In view of the above, the term 'original works' together would refer to an activity of creating something that is being brought to existence at the first instance. Having derived the meaning of 'original works' in common parlance, Applicant refers to the scope of contract whic....
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....tionary, ninth edition, which explains the term 'new' to mean 'something that came recently into being'; while the term construction is explained to mean the act of combining or arranging parts or elements; relevant portion of the dictionary is reproduced below: New, adj: 1. (Of a person, animal or thing) recently came into being Construction,: 1. The act of building by combining or arranging parts or elements, the thing so built 1.22. In view of the above, the Applicant submits that the term 'new construction' covers in its fold an act or process by which a thing or a structure is brought into existence. The use of the adjective 'new' essentially refers to such structure to be something that did not exist earlier but came into existence only as a result of the act or process referred to. 1.23. At this juncture the Applicant refers to the scope of contract which inter alia necessitates the Applicant to build structures in the form of buildings, roads, etc. and undertake the activity of installing the equipment thereunder. Accordingly, the activity to be undertaken by the Applicant indeed results in building a structure, which would come, in....
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....to also cover in its fold things other than civil structure. In such a case, the services of Applicant which cover in its fold activities relating to developing civil structure as also installation and commissioning of equipment to set up the network, is duly covered within the scope of the term 'original work'. Accordingly, the activities of Applicant are indeed covered by Entry No. 3(vi)(a) Of the Notification No. 11/2017 and merits GST at the rate of 12% (CGST at the rate of 6% and SGST at the rate of 6%). PRAYER In view of the submissions made above, it is most humbly prayed that Hon'ble authorities may kindly pass a ruling to clarify as follows: a. The Activities to be undertaken by Applicant in accordance with its contract with BSNL attracts GST at the rate of 12% vide Entry No. 3(vi)(a) of the Notification No. 11/2017-CGST (Rate) dated June 28, 2017 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- The application can be accepted U/ s. 98 (2) of MGST Act, 2017. "Particular Remarks HSN CODE & GST TAX RATE CLASSIFICATION OF GOODS, & SERVICES SINGLE MODE OPTICAL FIBER HS CODE 90011....
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....ouse data centers, nearline data centers, disaster recovery station, satellite data center and connectivity equipment at various Naval ports; Installing rack, stack in the buildings and other civil infrastructures necessary to house the equipment and enable operation of all the centers/ ports; Assemble / install all equipment and powering it up by connecting with power supply and back-up 'generators; and Interconnecting and configuring all the equipment in all the data centers, nearline data centers, disaster recovery station, satellite data center, etc. with each other to enable information exchange across the network as desired. The applicant has also submitted that BSNL has entered into a contract with them stipulating Applicant's responsibility to set up the network including the responsibility to supply all the material and services required for setting up of network, training services to operate the same and supply of satellite connectivity vehicles [like, a mobile vehicle mounted with various satellite equipment) required for ensuring seamless connectivity during breakdown of network. The applicant has further submitted that the entire project as per the contract is bifur....
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....plicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract. The salient features in respect of the subject supply includes as under :- The tender envisages (a) construction of a central building at every site to house Type 1/Type 2 /Type 3 Infrastructure, Telepresence equipment Networking Equipment Optic fibre Equipment, Staging ored and other operational and administrative buildings and the scope of work includes civil construction, water supply, sanitary and plumbing, electrical installation, landscaping, air conditioning, roads, and fire fighting and interior works, etc. (b) construction of approach road to buildings within Naval Station, Provision of security lights around the complex, Security cameras inside and outside building, Guard post including rest room, Automatic Barrier at main/emergency gates. Access Control Mechanism at entrances to the building, Smoke detector, provisioning of small fire fighting appliances, PA system, (c) doing of underground electrical wiring, supply of switches, cutout, CBS and wires, cables, air conditioners, fans, tube lights, CFL, exhaust fans, call bells, lightning arrester....
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....o make them workable; iii) Erection, commissioning or installation of plant, machinery or equipment or structures, whether pre- fabricated or otherwise. Taking into consideration the nature of contracts. As per para 1.3.1 of CPWD Manual, 2014, "original works" means (i) all new constructions, (ii) all types of additions, alterations and/or special repairs to newly acquired assets, abandoned or damaged assets that are required to make them workable. (iii) major replacements or remodeling of a portion of an existing Structure or installation or other works, which results in a genuine increase in the life and value of the property. We find from the proposed contracts that the tender is intended to setup a Next Generation Network which will support net-centric operations a key enabler for the administrative operations/ war fighting operations of the Indian Navy. The term 'original works' as defined in Notification No. 14/2017 covers activities in the nature of erection, commissioning or installation of machinery or structure. The scope of the subject proposed contract necessitates the Applicant to build structures in the form of buildings....