TaxTMI 
TaxTMI 
2019 (6) TMI 1171
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.... under which HSN Code ? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, 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- "ANNEXURE STATEMENT OF FACTS (Clause 15 of Form GST ARA-01] 1. M/s. NR Energy Solutions Pvt Ltd (hereinafter referred to as "the Applicant) is engaged into the business as Manufacturer, Exporter & Supplier of Electrical Control Panels, Power System, protection, automation, flexible AC transmission system, HDVC transmission etc. 2. They have been awarded turnkey projects by M/s. TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED (hereinafter referred to as "M/S APTRANSCO') for supply, installation, testing and commissioning....
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....rdinate the distribution components installed in the substation. 8. The pictures of the Control & Relay Protection panels erected & installed in the SAS control room and SAS architecture drawing are enclosed herewith at Annexure G. 9. The process involves erection of panels in the control room. Thereafter, control cable and fibre optic cable are laid, to connect the substation with the panels. The installation of control panels also includes computers and printers for the purpose of automation process. 10. In the pre GST era, the applicants levied excise duty and central sales tax along with applicable cess on the value of various equipments supplied and levied service tax on installation, testing and commissioning charges recovered under the category of "Erection, Commissioning and Installation services". [Refer Clause 7 of above specified PO's]. The sample copies of sale invoices raised during pre-GST regime are enclosed herewith at Annexure H. 11. The above specified PO's were amended by M/s. APTRANSCO, in order to commensurate the implications of GST in the contract price. The details of the revised / amended PO's and contract values is given as under: SR.NO. ....
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....volved in the execution of the said Substation Automation System [SAS] gets transferred to M/s. APTRANSCO. The copy of said letters is enclosed herewith at Annexure L 15. The applicant has issued credit notes for refund of GST charged @ 28% on supply of equipments / goods and thereafter issued revised invoice levying GST@ 18% under HSN code 995461. The sample copies of sale invoices, corresponding credit notes and revised invoices are enclosed herewith at Annexure M. 16. The applicant therefore is filing present application before Hon'ble Authority for Advance ruling. ANNEXURE "C": STATEMENT CONTAINING THE APPLICANTS INTERPRETATION OF LAW AND / OR FACTS [Clause 16 of Form GST ARA-01] I. THE CONTRACT BEING INSTALLATION, COMMISSIONING OF COMPLETE AUTOMATION SYSWM WITH THE CONTROL & RELAY PANELS WITHIN A SUBSTATION, IT RESULTS INTO COMPOSITE SUPPLY IN NATURE OF "WORKS CONTRACT" 1.1) As per Section 7(1) of the CGST Act, 2017 ("the Act"), the term "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or fur....
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....be noted that all the control devices, relay & protection panels and other equipments are installed in the substation. The same cannot be dismantled and removed after installation without substantially damaging the entire substation. As a result, it is more or less in the nature of permanent installation of equipments within the substation & becomes part of the substation. 1.9) The term "immovable property" is not defined under the CGST Act, 2017. As per Section 3(26) of the General Clauses Act, 1897, "immovable property" shall include land, benefits of arise of land and things attached to the earth or permanently fastened to anything attached to the earth. 1.10) As per Section 3 of Transfer of Property Act, 1882, "immovable property" does not include standing timber, growing crops or grass. 1.11) As per Section 2(6) of the Registration Act,1908, "immovable property" includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass. ....
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....ontemplated in Article 366(29-A). The court relied on the Larger Bench decision of SC in case of Larsen and Toubro, the question arose whether taxing of sale of goods in an agreement for sale of flat which is to be constructed by the developer-promoter is permissible under the Constitution. The three- Judge Bench opined that though the ultimate transaction between the parties may be sale of the flat, yet it cannot be said that the characteristics of works contract are not involved in that transaction because the term "works contract" is nothing but a contract in which one of the parties is obliged to undertake or to execute the work and such an activity of construction bears all the characteristics and elements of works contract. Coming back to the present case, it is perceivable that the three-Judge Bench has referred to the statutory provisions of the 1957 Act and thereafter referred to the decision in Hindustan Shipyard Ltd. 2000 (7) TMI 864 - SUPREME COURT, and has further taken note of the customers' obligation to do the civil construction and the time schedule for delivery and thereafter proceeded to state about the major component facet and how the skill an....
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.... of the lift from a dealer, it would be a contract for sale and similarly, if separate contract is entered into for installation, that would be a contract for labour and service. But a pregnant one, once there is a composite contract supply and installation, it has to be treated as a works contract, for it is not a sale of goods/chattel simpliciter. It is not chattel sold as chattel or, for that matter, a chattel being attached to another chattel. Therefore, it would not be appropriate to term it as a contract for sale on the bedrock that the components are brought to the site, i.e., building, and prepared for delivery. The conclusion, as has been reached in Kone Elevators (supra), is based on the bedrock of incidental service for delivery. It would not be legally correct to make such a distinction in respect of lift, for the contract itself profoundly speaks of obligation to supply goods and materials as well as installation of the lift which obviously conveys performance of labour and service. Hence, the fundamental characteristics of works contract are satisfied. Thus analysed, we conclude and hold that the decision rendered in Kone Elevators does not correctly lay down the law ....
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....it is attached. 20. 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 21. In English law the general rule is that what is annexed to the freehold becomes part of the realty under the maxim "quid quid plantatur solo, solo cedit". This maxim, however, has no application in India. Even so, the question whether a chattel is imbedded in the earth so as to become immovable property is decided on the same principles as those which determine what constitutes an annexation to the land in English law. The English law has evolved the twin tests of degree or mode of annexation and the Object Of annexation. In Wake v. Halt (1883) 8 App Cas 195 Lord Blackburn speaking for the Court of Appeal observed : "The degree and nature of annexation is an important element for consideration; for where a chattel is so annexed that it cannot be removed without great damage to the land. it affords a strong ground for thinking that it was intended to be annexed in perpetuity to the land." The copy of said decision is enclosed herewith at A....
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.... Court that the plant and machinery in the instant case are immovable properties. The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily the court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such c was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the same as a fertilizer plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show t....
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....URT vis a vis availment of cenvat credit of duty paid on items such as towers/ prefabricated buildings with antenna, Base trans receiver station etc classifying it under rule 2(1) of CCR, 2004 i.e. Capital goods held that said items are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. It was further observed that : They are immovable structures, non-marketable and non excisable. They could not be capital goods also as they were neither components, spares and accessories of goods falling under any of Chapters or Headings of Central Excise Tariff as specified in sub- clause (i) of definition of capital goods in Rule 2(a)(A) of Cenvat Credit Rules, 2004. It was held that tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment. It was further observed that it may not be necessary if suitable alternate support is available. Such towers by no stretch of imagination can be considered parts of telecom equipment or as telecom equipment by themselves and it was thus held that tower and parts thereof do not qualify as capital goods ....
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....unsel for the appellant submitted before us that once they are erected and assembled they continue to operate om where the 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" The copy of said decision is enclosed herewith at Annexure R. 1.23) The Hon'ble Supreme Court in case of M/s Ibex Gallagher Pvt Ltd Vs. CCE, Bangalore = 2007 (8) TMI 14 - SUPREME COURT held that erection of electric power fencing system by use of solar power is not leviable to excise duty and observed as under : "The adjudicating authority was not justified in holding that fabrication of the plants in question out of duty paid bought out items amounts....
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....isable goods." The copy of said decision is enclosed herewith at Annexure S. II. APPLICANTS INTERPRETATION & CONCLUSION OF THE IMPUGNED TRANSACTION 2.1) Based on the above facts, analysis of legal provisions supported by various judicial pronouncements, the applicants hereby submit that the contract of design, manufacture, supply, installation, testing & commissioning of various equipments at electrical substation of principal i.e. M/S APTRANSCO, is transaction of supply of works contract and leviable to GST @ under HSN Code 995461." 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- It is submitted that, Issue on which advance ruling is required: (2) In this connection, this is to inform you that the copy of application made before the Advance Ruling Authority by M/s. NR Energy Solutions Pvt. Ltd., was not received by this office. Therefore a copy of the same was obtained from the assessee on 06.12.2018 late evening under the acknowledgement. (3) The applicant M/S. NR Energy Solutions Pvt Ltd., has stated In their additional submission dated 05.1.2018 to the Advance Ruling Authorities (point No.8)....
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....nd supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply'. (8) Therefore, it appears that the transaction involved in the said projects is covered under the composite supply and not under the works contract as claimed by the applicant. (9) On going through the contract value of the above projects, it is observed that the value of the goods supplied for completion of the projects comprising of more than 97.5% of the project value and the rest 2.5% cost is towards supply of services. Thus the supply of goods for completion of project is covered under principal supply having HSN code 85372000 attracting 28% of GST. Sr.No. Purchase Order (PO) No./Date Revised Contract value (Rs.) Value of Goods (Rs.) Value of Services (Rs.) 1. 236-PMM/2016/CE/Const./SE/P&MM/DE2/SAS/PMM22-e-17-2016 dated 28.10.2016 4,58,24,810/- 4,45,94,310/- 12,30,500/- 4,37,02,763/- 4,27,82,363/- 9,20,400/- Total 8,95,27,573/- 8,73,76,673/- 21,50,900/- 2. 235-PMM/2016/CE/Const./SE/P&MM/DE2/SAS/235-PM M22-e-14-2016/D.No.239/2016 dated 28.10.2016 4,67,81,760/-....
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....d Commissionerate and Sh. Virendra Kothari, Suptt., appeared and made written submissions. 05. OBSERVATIONS 5.1. We have gone through the facts Of the case, documents on record and submissions made by both, the applicant and the jurisdictional officer. 5.2 The questions raised by the applicant is with respect to turnkey projects awarded to them by M/s. TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED (hereinafter referred to as "M/S APTRANSCO') for supply, installation, testing and commissioning of Relay & Protection Panels with Substation Automation System (SAS) at various sites/ locations. The applicant has further submitted that the scope of the work involves complete design, manufacture, packing, insurance, transport and delivery to sites, training, installation, testing operate the 220 KV, 132 KV & 33 KV feeders, Power Transformers and equipments". They have also submitted that in the PO that they have entered into with their client separate prices are indicated for each of the activity for supply of various materials and the activity for installation, testing & commissioning etc. The applicant has also explained what a control panel and substation automation is, in....
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...., 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 such contract" 5.5 Thus what we need to find out is whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract. The applicant has submitted that their contracts with M/S APTRANSCO is an turnkey project wherein they are under an obligation to (a) complete design, manufacture of equipments, (b) packing, insurance, transport and delivery of equipments to various sites and (c) installation, testing and commissioning of various equipment at Substation and thereafter render training. Thus, they have submitted that, the final outcome or deliverable is ready to operate Substation Automation System, which can control and operate the 220kv, 132kv & 33kv feeders & Power Transformers. Their contention is that all the control devices, relay & protection panels and other equipments are installed ....
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.... mentions that "all the terms and conditions stipulated in the specification No. PMM22-3-017/2016 are binding (i.e PO No. 236 mentioned above)". For items listed in Sr. No. 1 to 17 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 18 of the Schedule included services tax. Here too, the PO envisages separate payment for supply of works and for supply of materials/equipments and there appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services. 5.9 Thus we find from all the three POs that the contracts are considering a clear demarcation of goods and services to be provided by the applicant but such supplies are naturally bundled and in conjunction with each other. Hence we now refer to the definition of 'Composite Supply' as mentioned in sub-section (30) of Section 2 of CGST Act, 2017 and which is as under:- 'Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of bus....