AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 800
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....pplicant furnishes relevant informations related to the activity as under. 3.1 The Applicant, is a Company, registered under the Goods and Services Act, 2017, engaged in the activity of undertaking civil construction, mechanical structural work, erection of equipment, electrical infrastructure including sub-stations, etc. The applicant also undertakes operation & maintenance of Waste Water Treatment Plants, Flocculation systems, Reverse Osmosis, Effluent Treatment Plants, Drinking water facilities, Zero Liquid Discharge Plants. 3.2 The Applicant (MEIL) is engaged in civil construction, mechanical structural work, erection of equipment, electrical infrastructure including substations etc. MEIL also undertakes operation and maintenance of Waste Water Treatment Plants, Flocculation Systems Reverse Osmosis, Effluent Treatment Plants, Drinking Water Facilities, Zero Liquid Discharge Plants, etc. 3.3 The Applicant regularly bids for the tenders floated by various electricity companies. In the instant case, the applicant participated in the tenders floated by some of the electricity distribution companies based in Karnataka i.e., Hubli Electricity Supply Company Limited (hereinafter re....
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....ction -VII of Volume-I of the tender document. The relevant paras of the scope of work as per the tender document is extracted below: 2.0 The following works are proposed for improvement of Distribution Network under IPDS on Total Turnkey basis in following towns of Udupi Circle. Viz Udupi Town. Saligrama Town, Kundapura Town and Karkala Town. 3.0 The scope of work under the subject package includes site survey, planning, design, engineering, assembly manufacturing, testing, supply, loading, transportation unloading, insurance, delivery at site, handing, Storage, installation, testing, commissioning and documentation, of all items/ material required to complete the Electrification works. 5.0 Any other items not specially mentioned but which are essentially required for satisfactory performance and completeness of work, shall be deemed to be included in the scope of specifications and works and the same shall be executed/carried out by the bidder at no extra cost to the MESCOM. 6.0 The works in each division are handled by concerned engineer in-charge of the O & M Division/ Authorized assistants, The. measurements of the works executed by the contractor should be certified b....
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....r the period of one year in Urban & Rural Sections of Shikaripura O&M Sub-division, Shikaripura O&M division as specified on the bid documents. ii. The Scope of this Proposal is on 'TOTAL TURNKEY BASIS' wherein all the materials/equipment to be supplied shall be as per IS & MESCOM specification and the services required for the completeness of the works as per specifications come under the scope of the contractor. This shall completely cover packing, forwarding, supply of Materials on FOR Site basis including Insurance and Transportation. Erection, Testing at Site and Commissioning. 4.2.2 From the above it is clear that the work under consideration is a turnkey infrastructure work. 4.3. Rural Electrification and System Strengthening works in Udupi District of MESCOM, Karnataka under Deen Dayal Upadhyaya Gram Jyothi Yojana (DDUGY). 4.3.1 The contract for 'detailed work award' comprises of two parts. First part being the supply of goods and second part the supply of services. Para 4 of Schedule-IV of the 'detailed work award' deals with 'scope of works'. As per para 4.1 of the 'detailed work award' the 'scope of work' has been defined in Section -VII of the Volume-I of the tende....
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....ect, has to be returned to corresponding MESCOM Divisional Stores. The Payment In this regard will be admitted only after receipt of store acknowledgement. 4.3.2 A brief scope of work provide under this contract, again, requires MEIL to undertake 'Inland transportation (specified equipment and material) to final destination at site, insurance, taking delivery, unloading, handling, storing and supply including associated civil work, testing and commissioning of all equipment and materials supplied by the contractor and documentation of all items/material required to complete Rural Electrification & System Strengthening works in Udupi District. 5. Contracts with BESCOM 5.1 Contract for the work of providing infrastructure to regularize unauthorized Irrigation Pump (IP) sets in Kolar division. 5.1.1 The contract for providing infrastructure comprises of two parts. First part being the supply of goods and second part the supply of services. 5.1.2 Supply of Goods In terms of para 1 of the proposal number BESCOM/CGM(Proj)/DGM-4/BC-14/17-18/3740-49 dated 16.11.2017, the description of work includes "supply of materials for providing electrical infrastructure to regularize Un-authori....
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....o Electricity Supply Companies (wholly owned Government of Karnataka undertaking) by way of construction, erection, commissioning, installation, etc'. is entry 3(vij(a), which provides for the rate of GST at 12%. The relevant portion of the entry reads as follows: SL. No. Heading Description of Services Rate Condition No. (1) (2) (3) (4) (5) Heading 9954 (vi) Composite supply of works contract as defined in clause (119) if section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory, a local authority or a government, authority 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 that for commerce, industry, or any other business or profession; (b) A Structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule I....
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.... released Explanatory Notes to the Scheme of Classification of Services on 11.06.2018. The Scheme of Classification of Services adopted for the purposes of GST is a modified version of the United Nations Central Product Classification (UNCPC). The Explanatory notes for the said Scheme of Classification of Service is based on the explanatory notes to the UNCPC, and as recommended by the committee constituted for the purpose. The explanatory notes indicate the scope and coverage of the heading, groups and service codes of the Scheme of Classification of Services. These ae used by the assessee and the tax administration as a guiding tool for classification of services. A.2 Heading 9954 covers construction services. Sub-heading 995425 covers general construction services of local pipelines and electricity & communication cables and related works such as local electricity transmission cables and ancillary works such as transformer stations and substations for distribution within local boundaries. Sub heading 995461 covers electrical installation services including electrical wiring & fitting services, fire alarm installation services burglar alarm installation services, which includes ....
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....of property in goods involved while executing such contract? Whether the contract is for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, Maintenance, renovation, alteration or commissioning of any immovable property? B.3. It is submitted that as per the factual matrix, the supply of services is under a contract entered into between MEIL and the electricity distribution companies. It is established from the work orders that there is a transfer of property in goods involved while executing the contracts. B.4. In terms of the above, the third questions needs to be examined critically, as to whether the work undertaken by the applicant results in emergence of an immovable property. There is no definition to the term 'immovable property' under GST legislations. Hence, we need to understand the expression immovable property to the context of taxation laws. B.5. In this regard reference is made to Section 3(26) of the General Clauses Act, 897, which provides definition of immovable property. It reads: "Section 3(260; "immovable property" shall include land, benefits to arise of land, and....
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....rred to Circular No. 58/1/2001-CX., dated 15.01.2002, wherein it was clarified as follows: "... (d) Integrated plants/machines, as a whole, may or may not be 'goods'. For example, plants for transportation of material (such as handling plants) are actually a system or a network of machines, The system comes into being upon assembly of its component. In such a situation there is no manufacture of 'goods' as it is only a case of assembly of manufactured goods into a system. This cannot be compared to a fabrication where a group of machines themselves may be combined to combined to constitute a new machine which has its own identity/ marketability and is dutiable (e.g. a paper making machine assembled a site and fixed to the earth only for the purpose of ensuring vibration free movement). (e) 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 wall, therefore, not be excisable goods." B.10. In T.T.G. Industries Ltd., v. Collector of /Central Excise, Raipur [2001 (167) E.L.T. 501 (S.C.)] = 2004 (5) TMI 77 -....
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....* The works are entrusted by the Government Projects constitute the element of permanency. * It would involve construction of civil structure which cannot be moved and has to be demolished. B.15. In view of the above, it is submitted that the current work is intended to be permanently attached to earth without the intention of removing or such removal is not possible without causing substantial damage to the goods. Therefore, work undertaken by the applicant squarely fails under the category of works contract. B.16. In this regard the applicant also would like to refer to In this regard applicant places reliance on the GST Advance Ruling pronounced by Authority in the State of Maharashtra, in the case of Giriraj Renewables Private Limited [2018-Vll 20-AAR] = 2018 (5) TMI 854 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA, wherein on the issue of supply under a turnkey Engineering, Procurement and Construction [''EPC'] contract for construction of solar power plant, Authority inter alia held that supply of solar power plant qualifies to be a works contract services as the plant results in emergence of an immovable property in terms of Section 2(119) of CGST Act, 2017. The cont....
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....eports of HESCOM, MESCOM and BESCOM are enclosed. C.4 It is submitted that in the Annual Report for the year 2016-17 of BESCOM, Note 2.16 provides the details of shareholder holing more than 5% shares in the Company. In terms of the said Note, the Hon'ble Governor of State of Karnataka holds 54.69 Crores of shares in BESCOM, which constitutes 99.99% of total equity shares of total shares of Rs. 10 each fully paid equity shares as at 31.03.2017. C.5 Similarly, it is submitted that in the Annual Report for the year 217-18 of HESCOM, Note 3 of the said annual report provides the details of shareholder holing more than 5% shares in the Company. In terms of the said details, the Hon'ble Governor of State of Karnataka holds 121.11 Crores of shares in HESCOM, which constitutes 99.99% of total equity shares of total shares of Rs. 10 each fully paid equity shares as at 31.3.2018. C.6 It is also submitted that in the Annual Report for the year 2016-17 of MESCOM, Note IV of the said annual report provides the details of shareholder holing more than 5% shares in the Company. In terms of the said details the Hon'ble Governor of State of Karnataka holds 26.64 Crores of shares in MESCO....
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.... seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State: e) Promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee; f) Adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration; g) Levy fee for the purposes of the Electricity Act; h) Specify State Grid Code consistent with the Grid Code specified under clause (h) of sub section (1) of section 79; i) Specify or enforce standards with respect to quality, continuity and reliability of service by licensees; j) Fix the trading margin in the intra-State trading of electricity, if considered necessary; and k) Discharge such other functions as may be assigned to it under this Act. C.12 Considering the above functions to be entrusted upon the State Electricity Regulatory Commissions under the Electricit....
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....hat subject to control of the State Government in Board may incur expenditure on framing and execution of such housing schemes as may be considered necessary from time to time or as may be entrusted to it by the State Government. Every year, the Board is to prepare a budget in advance for the next year and place it before the State Government for its approval. After sanction is granted by the State Government, the same is published in the Official Gazette. The Board authorized to barrow money for implementation of the projects, as approved with prior approval of the State Government. Section 72 of the Act provides that the State Government shall exercise superintendence and control over the Board and its officers, The aforesaid provisions of the Act clearly show that the Board is a governmental authority, as it is fully under the control of the State Governments." [Emphasis supplied] C.15 In this regard, the Applicant also places reliance on the recent GST Advance Ruling by Authority in the State of Maharashtra, in the case of Leena Power Tech Engineers Pvt. Ltd. [2019) (20) G.S.T.L 309 (A.A.R.-GST] = 2018 (12) TMI 591 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, where it was hel....
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....of contacts it is submitted that the Rural Electrification and setting up of electricity distribution work on turnkey basis and laying of high tension wires and erection of distribution transformers on turnkey basis are original works as it is new additions and installation work. D.4 In this regard, the Applicant refers to the recent GST Advance Ruling given by Authority in the State of Maharashtra, in the case of Leena Power Tech Engineers Pvt. Ltd.[2019 (20) G.S.T.L.309 (A.A.R.-GST)] = 2018 (12) TMI 591 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, where in the work of "development of power supply infrastructure distribution network including 33KV sub-station equipment's & construction of 11/0.4 KV HT sub-stations are allied electrical works on UI we Node, Navi Mumbai" was held to be "original work". E. THE WORKS CONTRACT SERVICES PROUCURED BY THE ELECTRICITY DISTRIBUTION COMPANIES ARE IN RELATION TO WORK ENTRUSTED BY THE CENTRAL GOVERNMENT AND STATE GOVERNMENT E.1 It is submitted that the works contract services are procured by the electricity distribution companies in relation to work entrusted by the Central Government and Government of Karnataka, E.2 It submitted that MESC....
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....) on 20.11.2014, The main component of the scheme are as follows: i. Separation of agriculture and non-agriculture feeders facilitating judicious rostering of supply to agricultural and non-agricultural consumers in the rural area; and ii. Strengthening of augmentation of sub-transmission & distribution infrastructure in Rural areas, including metering of distribution transformers / feeders /consumers. iii. Rural electrification, as per CCEA approval dated 01.08.2013 for completion of the targets laid down under RGGVY for 12 and 13% plans by carrying forward the approved outlaw for RGGVY to DDUGJY. E.8 The Monitoring Committee of Ministry of Power has approved the projects under DDUGJY for the State of Karnataka amounting to Rs. 1754.32 Crores. Out of this, the details of cost approved for the electricity viz, BESCOM, MESCOM and HESCOM are given hereunder: Sl.No. Name of ESCOM DDUGJY Sanctioned Cost (Amount in Rs. Crores) 1. BESCOM 235.36 2. MESCOM 395.67 3. HESCOM 331.85 Total 962.88 E.9 It is clear from the above that the IPDS and DDUGJY schemes are implemented by Ministry of Power, Government of India and therefore, it is submitted that the projects....
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....ity distribution companies are formed and established by the State Government of Karnataka with 99.99% participation by way of equity or control to carry out function of distribution of electricity under the Electricity Act,20013. Therefore, the other works undertaken by MESCOM, BESCOM and HESCOM are entrusted by the Government of Karnataka. F. THE WORKS CONTRACT SERVICES PROVIDED TO ELECTRICITY COMPANIES BY MEIL ARE MEANT PREDOMINATLY FOR USE OTHER THAN FOR COMMERCE, INDUSTRY, OR ANY OTHER BUSINESS OR PROFESSION F.1 It is submitted that the works contract services provided to electricity distribution companies by MEIL are meant predominantly for use other than for commerce, industry or any other business or profession. The relevant definitions have been discussed infra to substantiate the submissions. F.2 The meaning of "commerce" as given by the Concise Oxford Dictionary is "exchange of merchandise, specially on large scale". In ordinary parlance, trade and commerce carry with them the idea of purchase and sale with a view to make profit. F.3 The definition of 'Industry' as provided in Section 2(j) of the Industrial Disputes Act, 1947 read as under, "Industry" means any bus....
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....III and such company or companies shall be deemed to be transmission licensees under this Act. F.9 In terms of Section 39(2) of the Electricity Act, the functions of the State Transmission Utility shall be- a) to undertake transmission of electricity through intra-State transmission system; b) to discharge all functions of planning and co-ordination relating to intra- State transmission system with- i. Central Transmission Utility; ii. State Governments; iii, Generating companies; iv. Regional Power Committees; v. Authority; vi. Licensees; vii. Any other person notified by the State Government in this behalf; c) To ensure development of an efficient, co-ordinated and economical system of intra-State transmission lines for smooth flow of electricity from a generating station to the load centres; d) To provide non-discriminatory open access to its transmission system for use by. F.6 It is also submitted that electricity distribution companies are not formed with an objective making profit. In this regard reference can be made to the object clause of the Electricity Act,2003, which reads as follows: "An Act to consolidate the laws relating to generation, ....
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....under Article 12 of the Constitution. B.17 Reliance is also placed on the decision of Hon'ble Supreme Court in the case of Som Prakash Rekhi v. Union of India and Ors., MANU/SC/0582/1980 = 1980 (11) TMI 113 - SUPREME COURT, wherein the Court observed that, "if only fundamental nights were forbidden access to corporations, companies, bureaus, institutes, councils and kindred bodies which act as agencies of the administration there may be breakdown of the rule of law and the constitutional order in a large sector of governmental activity carried on under the guise of jural persons" and held that a public corporation (Bharat Petroleum Corporation) would fall under the definition of Article 12. F.18 Reliance is also placed on the decision of Hon'ble Himachal Pradesh High Court in the case of Chanana Steel Tubes Pvt.Ltd. v. H.P.S.I.D.C., AIR 2003 HP 36 = 2003 (11) TMI 353 - HIGH COURT OF HIMACHAL PRADESH, wherein on the issue of cancellation of recovery process, it was discussed that when 'company' is a wholly State Government owned company incorporated under the Companies Act,1956, the Government has got pervasive control over this company. Its managing Director is appointed by t....
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.... it was held that the LILC Housing Finance Limited and LIC Mutual Fund Asset Management Co, Ltd, would qualify as "Public authorities" under the RTI Act. It was held that LIC is a body established, constituted, owned and controlled by Central Government. LIC is a public authority having been constituted by an Act of Parliament, And ,since the Chairman and Managing Director for both LIC and LICHFL is the same, and since LIC has 40.497% of the LIC Housing Finance Limited and LIC Mutual Fund Asset Management Co. Ltd. would be regarded as a "public authority" for the purpose of the RTI Act. F.24 In view of the above, it is also submitted that the electricity distribution companies are State in which they are engaged as Public Authority. G. MEIL IS THEREFORE ELIGIBLE FOR REDUCED RATE OF GST FOR WORKS CONTRACT SERVICES PROVIDED TO ELECTRICITY DISTRIBUTION COMPANIES UNDER ENTRY 3(vij(a) TO NOTIFICATION NO.8/2017- INTEGRATED TAX (RATE)DATED 28.06.2017 G.1 It is submitted as stated above that the services supplied by the Applicant to the electricity distribution companies are in the nature of construction services failing under heading 9954 of the scheme of classification of service unde....
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....6.2017 as amended from time to time liable to tax at 12% (CGST + SGST together) or not. 11.3 The entry no, 3(vi)(a) of the Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 as amended reads as under: SL. No. Heading Description of Services Rate Condition No. (1) (2) (3) (4) (5) Heading 9954 (vi) Composite supply of works contract as defined in clause (119) if section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory, a local authority or a government, authority 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 that for commerce, industry, or any other business or profession; (b) A Structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act,2017. Ex....
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....nmental Authority or a Government Entity (c) The contract should be by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a civil structure or any other original works. (d) The civil structure or original works must be meant predominantly for use other than for commerce, industry, or any other business or profession (e) Where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or a local authority, as the case may be. 11.5 The works contract has been defined in clause (119) of section 2 of the CGST Act, 2017 and the same reads as under: "(119) "works contract" means 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 of such contract;" The contracts the applicant is executing are ....
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....lause (17) of section 2 of the CGST Act and it reads as under: "(17) "business" includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) . .. . .; (f) . . . .; (g) . . . .; (h) . . . .; and (i) . . . .; 11.11 From the definition of business, it is clear that any activity of trade, commerce, manufacture, etc or any other similar activity is included in the definition of business and it is immaterial whether it is done for a pecuniary benefit, and any activity done in connection with or incidental or ancillary to such activity is also included in the scope of "business". 11.12 The Electricity Distribution Companies are involved in the supply of goods as already explained and h....