TaxTMI 
TaxTMI 
2020 (4) TMI 667
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....) TMI 1623 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case A. M/s Siemens Limited (hereinafter referred as the 'Appellant') 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 Appellant is a leader in technology solutions for intelligent (smart), sustainable cities, smart grid, building technologies, mobility and power distribution. B. The Appellant has entered into six contracts with one of the major Public Sector Undertakings in the State of Haryana (herein after referred as 'the Customer') for on - shore and offshore supply of goods and services on a joint venture ('J V') basis with M/s Siemens AG, Germany as the Lead Partner and M/s Sumitomo Electric Industries Ltd. Japan as another Partner. C. The six contracts cover specific and detailed nature of supply of various goods and services. Out of which two contracts are required to be executed by the Appellant as a JV's Associate. The Third Contract vide Ref. No. CC-CS/698 - SR2/HVDC - 3249/7/G10/R/NOA-III/7215 dated 22.03.2017 (hereinafter referred to as 'o....
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....i. a goods transportation agency; ii. a courier agency; b. by inland waterways NIL NIL I. There is a similar exemption which has been provided under the Maharashtra Goods & 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. J. With respect to the local transportation charges and recovered by the Appellant from the Customer, the Appellant sought the Advance Ruling under Section 97(2) of Central Goods & Services Act, 2017 as amended ('CGST Act') and the Maharashtra Goods & Services Tax Act, 2017 as amended ('SGST Act') on the applicability of tax exemption as provided under Serial no. 18 of the Notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017. Questions for Advance Ruling: a. Whether the freight charges recovered by the Appellant under the aforesaid contract from the customer without issuance of consignment note will 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? b. Whether the freight charges recovered by the Appellant unde....
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....at there cannot be any 'supply of goods' without a place of supply. As the goods to be supplied under the First Contract involves movement and/ or installation at the site, the place of supply shall be location of the goods at the time when movement of goods terminates for delivery to the recipient or moved to the site for assembly or installation refer to Section 10 (7) (a) and (d) of the IGST Act, 2017. The First Contract however does not include the provision and cost of such transportation and delivery. Therefore, it 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. vi. That although awarded under two separate contract agreements, clauses under both them make it abundantly clear that notwithstanding the breakup of Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Application shall remain responsibility to ensure execution of both the contracts to achieve successful competition. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vice versa. vi....
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....the Appellant in order to avail the benefit of the exemption: (i) Services are to be provided by way of transportation of goods by road. (ii) Services are not that of Goods Transportation Agency ('GTA'). 2.1 In order to determine whether the aforementioned conditions get satisfied, it is relevant to refer to the term 'GTA'. In this regard, the term 'GTA' is defined in para 2 (ze) of the Exemption Notification to mean any person who provides service in relation to transport of goods by road and issues consignment note. The extract of para 2(ze) is reproduced below: '(ze) "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;' 2.2 This position on taxability of GTA services is very similar to the erstwhile Service Tax regime wherein Service Tax was applicable on GTA, provided the service provider issues a consignment note to the service recipient. 2.3 In light of the above, it is amply clear that a GTA clearly includes any person who provides services in relation to transportation of goods by road and who issues a consignment note. Accordingly, i....
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.... Appellant provides services in relation to transport of goods by road and recovers charges for local transportation from the customer. 2.8 In light of the above, it is can be seen that any person who provides services in relation to transport of goods by road and issues consignment notes will be covered under the ambit of service category of GTA services. 2.9 In the present case, it can be seen that the Appellant is purely providing the service of transportation of goods to the customer and is not issuing any consignment note. Accordingly, it is clear that the services provided by the Appellant are that of transportation of goods by road and not that of GTA. Accordingly, given that the conditions specified in the Exemption Notification are satisfied, the Appellant is eligible for exemption contained in Entry No. 18 of the Exemption Notification. 2.10 Lastly, the Appellant also submits that it is a settled principle in law that exemption notifications have to be accorded a liberal interpretation. In this regard, the Appellant places reliance in the judgement of Commissioner of Cus. (Prv.), Amritsar Vs Malwa Industries Ltd [2009 (235) E.L.T. 214 (S.C] = 2009 (2) TMI 41 - SU....
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.... • The contract is a composite supply of services of works contract as defined under Section 2(119) of the CGST Act, wherein the transportation is merely a component of the same and not a separate supply. Since the contract for on-shore supply of goods cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee's site, the recipient has not contracted for ex-factory supply of material but for the composite supply. • The two contracts are linked by a cross fall breach clause, thus, any breach in either of the two contracts will result in a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages accordingly. Thus, the 'cross fall breach clause' present in the contract, settles unambiguously that supply of goods, their transportation to the contractee's site delivery and related services are not separate contracts, but only forms part of an indivisible composite works contract supply. • Reliance is placed on M/s Indure Ltd. V. CTO in Order dated 20.09.2010 in C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT and AAR Ord....
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....Equipment including mandatory Spares (except +- 320kV HVDC Cable and some of it's associated items) to be supplied from abroad, loading, inland transportation & insurance for delivery at site, insurance, unloading, storage & 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' any other services specified in the Bidding Documents referred to hereinabove.' 3.0 CONTRACT PRICE S. No. Price Component Amount i) Local Transportation, Insurance and other Incidental Services (VSC Portion) INR 623, 073, 872 ii) Installation Charges (VSC Portion) INR 2,174, 363, 480 iii) Training Charges Included Total for Fifth Contract (i+ii+iii) INR 2,797, 437, 352 2.18 Further, given that the transaction with the customer is on ex-works basis where the ownership in the goods is transferred at the premises of the Appellant, it can be said that the Fifth Contract would commence only when the ownership in the goods is transferred to the customer. 2.19 Therefore, in light of the above, it is eviden....
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.... appellant thereunder would also be different. 32. This case is clearly distinguishable from the facts of the present case, since the payment for the offshore and onshore supply of goods and services were in itself clearly demarcated and cannot be held to be a complete contract that has to be read as a whole and not in parts. 48. We would in the aforementioned context consider the question of division of taxable income of offshore services. Parties were ad idem that there existed a distinction between onshore supply and offshore supply. The intention of the parties, thus, must be judged from different types of services, different types of prices, as also different currencies in which the prices are to be paid.' 2.22 Similarly, reliance is placed on the decision of Linde Engineering Division v. Income Tax, (2014) 365 ITR 1 = 2014 (4) TMI 975 - DELHI HIGH COURT, wherein the Hon'ble Delhi High Court relied on the decision of Ishikawajima (supra) and held that the impugned contract for different scope of works ranging from supply of equipment to the services, is not a composite contract and the same can be split for the purposes of taxation. 2.23 Moreover, the H....
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....pervision of installation and commissioning and for recoating maintenance.' 6. The parties themselves had no doubt to the nature of the arrangement they had entered into and have specifically provided for the payment of the excise duty, sales tax and all other statutory levies by the buyer. 7. It is unfortunate that the Tribunal, instead of examining the contract with reference to the various clauses therein has thoroughly mislead itself into embarking on discussion of the law relating to works contract without first making sure that this is a contract which can come within the category of works contract. The Tribunal has completely overlooked the clauses providing for the maintenance charge irrespective of the period for which the TVA were to be maintained as also to the charges payable for the supervising engineer. It is clear from a reading of this contract that the parties intended to sell the goods, viz., titanium anodes had also entered into another arrangement for the supervision of the erection and installation of the anodes, as also the maintenance for which separate charges were payable.' 2.25 Thus, in view of the abovesaid decision, it is submitted t....
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....g 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 business, one of which is a principal supply;' 2.29 On a plain reading of the aforesaid extract of Section 2(30) of the CGST Act, it can be seen that in order to qualify as a composite supply, the supply would have to be bundled in the ordinary course of business. 2.30 The concept of naturally bundled services was explained in the Education Guide issued by the CBEC in the year 2012 ('the Education Guide'). In this regard, the relevant extract of the Education Guide is reproduced as under for ease of reference: 'Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of 'bundled service' would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determi....
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.... any other party/person for availing the service of transportation of goods by road. However, the customer has chosen to enter into the Service Contract with the Appellant for the said transportation in an independent capacity. Services provided by the Appellant are not in relation to immovable property 2.33 The Advance Ruling Order has stated that the contract qualifies as a works contract as defined under Section 2 (119) of the CGST Act. In this regard, the Appellant humbly submits that the Order is grossly incorrect in holding that the services provided by the Appellant are in the nature of works contract services on account of the following submissions in the ensuing paragraphs. 2.34 It i relevant to refer to the term 'works contract' as defined in Section 2 (119) of the CGST Act as amended. As per the said term, works contract inter alia includes a contract for building, construction, fabrication, completion, erection, installation 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 extract of Section 2(119) of the CGST Act is reproduced below: ....
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....ed which was enough for the machine to not be classified as an immovable property. 2.39 Similar view is also taken in the following judicial pronouncements: - Commissioner of Central Excise v. Solid and Correct Engg. Works & Ors. [2010 (175) ECR 8 (SC)] = 2010 (4) TMI 15 - SUPREME COURT - Sri Velayuthaswamy Spinning Mills v. The Inspector General of Registration and the Sub Registrar [(2013 (2) CTC 551)] = 2013 (3) TMI 681 - MADRAS HIGH COURT - Perumal Naicker v. T. Ramaswami Kone and Anr. (AIR 1969 Mad 346) = 1967 (9) TMI 147 - MADRAS HIGH COURT 2.40 In view of the aforesaid judgements, it can be said that goods cannot be termed as immovable property for the following reasons: - Such plants/systems cannot be said to be 'attached to the earth'. - The fixing of the plants/ systems to a platform/foundation is meant only to give stability to the plant/ system and keep its operation vibration free. - The setting up of the plant/ system itself is not intended to be permanent at a given place. 2.41 In view of the aforesaid judgments, the Appellant submits that the aforesaid parameters/factors governing determination of immova....
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....e Contract' which is purely for the transportation activities. Thus, the Ruling Authority has erroneously read the Third Contract for supply of goods and Fifth Contract for supply of services, conjointly, to observe that the independent 'Service Contract' covers the obligations of the Appellant as promised in the Fifth Contract for the on-shore supply of services. However, the same was not the intention of the parties. 2.44 Appellant submits that in the present case, the various contracts entered by the parties are to fulfil distinct and separate obligations. It was merely for the ease of functioning and commercially viability that all the six contracts for different transactions were entered with the JV, where the Appellant was one-on-one party to impugned contracts. As an industry practice, the particular range of contracts were awarded to the Appellant. The same does not necessarily mean or imply that they are interlinked or cannot exist independent of each other. It is further submitted that as a cardinal principle of interpretation of contracts, a commercially sensible construction of a contract must be favoured. 2.45 It is thus submitted that, the interpretation by the ....
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....al deserves to be and is hereby dismissed with costs, which we quantify at Rs. 10,00% []'. (emphasis supplied)' 2.48 The aforesaid position has also been adopted by various Courts and Tribunals in the following decisions: * Mirah Exports Pvt. Ltd. vs. Collector of Customs [1998 (98) E.L.T. 3 (S.C.)] = 1998 (2) TMI 124 - SUPREME COURT * Rajasthan Spg. & Wvg. Mills ltd. vs. Commissioner of C. Ex., Jaipur [2001 (131) E.L.T.594 (Tri.-Del.)] = 2001 (4) TMI 118 - CEGAT, COURT NO. I, NEW DELHI, as affirmed by the Hon'ble Supreme Court in [2007 (218) E.L.T. 641] = 2007 (11) TMI 19 - SUPREME COURT * S.S. Associates vs. Commissioner of C. Ex., Bangalore [2010 (19) S.T.R. 438 (Tri.-Bang.)] = 2009 (12) TMI 152 - CESTAT, BANGALORE 2.49 Therefore, in the view of above, it is submitted that the understanding of the Ruling Authority is flawed as the intentions of the parties are clear to the extent that Third and Fifth Contract are independent in nature. Decisions relied upon by Ruling Authority are inapplicable in the present case 2.50 It is submitted that Department has placed reliance on the decision of Hon'ble Apex Court in M/s Indure Ltd. V. CTO in Order....
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....hird Contract involves movement and/or installation at the site, the place of supply shall be the location of the goods at the time when movement of goods terminates for delivery to the recipient or moved to the site for assembly or installation in term of Section 10 (1) (a) and (d) of the Integrated Goods and Services Tax Act, 2017 ('IGST Act') as amended. 2.55 The Ruling Authority has further observed that, since the Third Contract 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 Fifth Contract. The Third Contract has 'no leg' unless supported by the Fifth Contract. 2.56 The Appellant submits that the observations of the Ruling Authority is based on the incorrect understanding of the contractual terms and statutory provisions governing the concept of 'place of supply'. It has erroneously observed that there is no 'supply of goods' in the present case as there is no place of supply. With the understanding that the Third Contract involves movement and/ or installation at the site, the Ruling authority has observed that the place of supply shall be location of ....
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....e Contract. Hence, the understanding of the Ruling Authority is flawed in the present matter. 2.60 Similarly, with respect to clause (d) of Section 10 of IGST Act, it is submitted that the Third Contract for the supply of goods nowhere mentions that the installation and other related activities are to be carried out by the Appellant. The Ruling Authority has merely attributed such obligations based on the presumption that the Third and Fifth Contract are dependent on each other. 2.61 The abovesaid is further strengthen by the fact that the Appellant has a separate Service Contract and raise invoices for the exclusive transportation activities undertaken by a third party. It is submitted that, had the transportation activities been part of the Third Contract, the said price for the Third Contract would not have been on ex-works, but on cost+ insurance + freight basis. However, the same is not the case here. Thus, the observations of the Ruling Authority that there is no place of supply in case the goods are cleared from the factory premises of the Appellant is wrong. 2.62 Reliance in this regard is place on the decision of CCE, Nagpur v. Ispat Industries, 2015 (324) ELT 670....
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....ed below are without prejudice to the submissions already made by the Appellant in the Appeal filed before the Hon'ble AAAR. Decisions relied upon by the Ruling Authority are not applicable to the present case. 3. It is submitted that the Ruling Authority has placed reliance on the decision of the Hon'ble Apex Court in M/s Indure Ltd. V. CTO in Order dated 20.09.2010 in C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT- copy attached as Annexure 1 to observe that both the contracts i.e. third and fifth contract having cross fall breach clauses, are in the nature of composite supply of works contract, which is a service and is therefore taxable at the rate of 18% Goods and Services Tax ('GST'). 4. The Appellant submits that the reliance placed on the aforementioned decision is erroneous as the facts and legal issue involved therein are completely different from the present case. 5. In the case of lndure, the issue which came up for determination was when can a transaction of sale be considered as one in the course of import as contained in Section 5 (2) of the Central Sales Tax Act, 1956 ('CST Act'). In this regard, the Hon'ble Apex Court observed that there....
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.... and DC XLPE Cable system. In this regard, the relevant extract as mentioned in the Impugned Order is as follows: 'Thus from the detailed facts of the case as put before us, as per the first and second contracts referred above we have no doubt to rule that both the contracts having cross fall breach provisions are in the nature of 'Composite supply of Works Contract' which is a service and would be taxable @ 18% in terms of Notification No. 11/2017 - Central tax (Rate) dated 28.06.2017. This is our consistent view as evidenced from the ruling Order No. GST-ARA- 36/2017-18/8-43 dated 04.06.2018 = in case of Shri Dinesh Kumar Agarwal = 2018 (7) TMI 1691 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA and the reasoning ana decision as arrived in that case is as below.' 'From the conjoined and harmonious reading of various clauses of first contract and second contact, it can be safely concluded that the agreement for setting up for+ 320KV, 2 X1000MW 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,....
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.... Moreover, the nature and description of the goods are such that the installation of the goods are not intended to be permanent at a given place. In this regard, sample photographs of the goods installed at the Project site have been attached herewith. Accordingly, it is submitted that there is no element of permanence associated with the installation of goods at the Project site. 14. As a matter of fact, there have been instances in past, that incase of any fault in the installed transformer, it is removed from the site without causing any damage to it for repair and re- installed after the repair work is complete. The Appellant wishes to place on record one such instance with Power Grid Corporation itself (Annexure 4). 15. It has been highlighted in various pronouncements by the judicial authorities that in cases where an object is installed/fastened to the land for better/improved efficiency running of the said object, and not for the benefit of land, such object will not be considered as immovable property. Further, it has been held that if fixing of a plant to a foundation is only for providing stability to the plant and where there is no intention to make such plant per....
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.... installed at site (example paper making machine) are capable of being sold or shifted as such after removal from the base and without dismantling into its components/parts, the goods would be considered to be movable and thus excisable. The mere fact that the goods, though being capable of being sold or shifted without dismantling, are actually dismantled into their components/parts for ease of transportation etc., they will not cease to be dutiable merely because they are transported in dismantled condition 20. Though, in terms of Section 103 of the CGST Act, advance ruling is binding only on the applicant and the concerned officer, the Ruling Authority has gone ahead and placed reliance on the AAR Order No. GST- ARA-36/2017-18/B-43 dated June 4, 2018 in case of Shri Dinesh Kumar Agarwal = 2018 (7) TMI 1691 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA which is not applicable in the appellant's case. 21. Further, it is pertinent to mention that in a similar case the same Ruling authority while deciding the case of M/s. NR Energy Solutions India Pvt. Ltd. (GST-ARA-83/2018-19/B-03 dated 8.01.19) = 2019 (6) TMI 1171 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA - copy attach....
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....int venture associate, has entered into contract with M/s Power grid corporation of India Ltd (in short 'PGCIL'), one of the major Public Sector Undertakings in the State of Haryana (herein after referred as 'PGCIL') on a joint venture ('.J\/') basis along with M/s Siemens AG, Germany as the Lead Partner and M/s Sumitomo Electric Industries Ltd. Japan as another Partner. The contract entered by appellant with PGCIL is for on-shore and off-shore supply of goods and services for complete execution of +320KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur. The said contract of supply of goods and services is divided into 6 contracts by Joint Venture. The six contracts cover specific and detailed nature of supply of various goods and services to be executed by members of JV. Out of these 6 contracts two contracts i.e. third and fifth contract are required to be executed by the Appellant as a JV's Associate. The Third Contract (hereinafter referred to as 'on-shore Supply Contract/ Third Contract') provides for supply of equipment and materials including mandatory spares except +320kV HVDC Cable (including some of its associated items) ....
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....ices Act, 2017 as amended ('CGST Act') and the Maharashtra Goods & Services Tax Act, 2017 as amended ('SGST Act'), on the applicability of tax exemption as provided under Serial no. 18 of the Notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017. 28. In terms of Serial no. 18 of Notification no. 12/2017 - Central Tax Rate, 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- c. by road except the services of- iii. a goods transportation agency; iv. a courier agency; d. by inland waterways NIL NIL Applicant submitted before the Advance Ruling Authority that an exemption from payment of GST has been provided for services by way of transportation of goods by road other than services of GTA and a courier agency in terms of the said notification. Applicant in support of his exemption claim has strongly relied on the fact t....
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....he Second Contract, and vice versa. That the two contracts are linked by a cross fall breach clause deeming that any breach in either of the contracts is to be considered to be a breach of the other contract as well. Thus, it provides the recipient with an absolute right to either terminate both the contract or claim damages accordingly. That the 'cross fall breach clause', settles unambiguously that supply of goods, their transportation to the contractee's site delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as defined under Section 2 (119) of the GST Act, with single source responsibility. That the composite nature of the contract is clear from the facts that first Contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee's site. The two contracts for supply of the goods and allied services are not separately enforceable. The recipient has not contracted for ex - factory supply of material, but for the composite supply, namely Works Contract for Supply for VSC based HVDC Terminal and DC XLPE Cable System. Reliance was placed on decision o....
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....ing the entire contact. More specifically, out these six contracts, the present issue relates to two contracts i.e. Third Contract and Fifth Contract for the supply of goods and the supply of services respectively, awarded to the appellant as associates of JV. 34. The relevant portions of the Third and Fifth contracts are reproduced hereunder for the better understanding of the terms of contracts. (i) The First contract - for On-Shore Supply Contract-I- Sub.: Notification of Award for On-Shore Supply Contract-I for 320KV, 2 X 1000MW 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) Specification No: CC-05/698-SR2/HVDC-3249/7/G10/R International Competitive Bidding. Clauses - 2.0 AWARD OF CONTRACT AND ITS SCOPE -- 2.1 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 conjunction with all the specifications, terms and conditions of the Bidding Documents including Record Notes of Clarifica....
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....covering inter-alia, all works to be performed in countries outside India including CIF supply of all equipment and materials including mandatory spares except +320kV HVDC Cable(including some of its associated items), to be supplied from abroad including corresponding type tests and training to be conducted abroad, required for the complete execution of the + 320KV, 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. (b) 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-11/7214 dated 22.03.2017 for award of 'Off-Shore Contract-ll (also referred to as the 'Second Contract') for the subject package, for design, engineering, manufacture and CIF supply of +320kV HVDC Cable and some of its associated items including mandatory spares (if any), Type Testing and Training to be conducted outside India, required for the complete execution of t....
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....d 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 'Second Contract and 'Fourth Contract and any other services specified in the Bidding Documents, Notwithstanding the award of work under six separate Contracts in the aforesaid manner, the JV shall be overall responsible to ensure the execution of all the six Contracts to achieve successful completion and Taking Over of the works covered under the package and Operational Acceptance by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by the IV that any default or breach by the JV partners under the 'First Contract' and/or 'Second Contract and/or the 'Fourth Contract and/or the 'Sixth Contract and/or breach by the Associate of JV- SIEMENS-I under the 'Fifth Contract shall automatically be deemed as a default or breach of this 'Third Contract' also and vice-versa, and any such default or breach or occurrence giving us a right to termin....
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....t advance amount, as detailed at APPENDIX (NOA)-3. Further, please note that furnishing of all the Contract Performance Securities under the 'First Contract', 'Second Contract, 'Third Contract', 'Fourth Contract, 'Fifth Contract' and 'Sixth Contract by the JV and Contract Performance Securities under "Third Contract' and 'Fifth Contract' by you (Associate of the JV i.e. SIEMENS-I) shall be one of the conditions precedent for release of advance under this Contract. 7.0 The schedule for Taking Over/Time for Completion of the Facilities by the Employer upon successful completion of the +320KV, 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) and the Additional Time for Completion for all contractual purposes in line with the provisions of the Bidding Documents shall be as follows: Sr. No. Completion (Taking Over) of: Duration from the effective date of contract Time for Completion 1. +320KV, two 1000MW Voltage Source Converter (VSC) based HVD....
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....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 referred to hereinabove. 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 S320KV, 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), 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: m (a) on the Lead Partner of 11/ 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-1/7213 dated 22.03.2017 for award of 'Off-Shore Contract-l' (a....
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....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/N0A-1V/7216 dated. 22.03.2017 for award of 'On-Shore Supply Contract-II' (also referred to as the 'Fourth Contract) for the subject package, for supply of some items including mandatory spares (if any) for +320kV HVDC Cable system from within India and Type Testing (as applicable), required for the complete execution of +320KV, 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. (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/N0A-VI/7218 dated 22.03.2017 for award of 'On-Shore Services Contract-Ir (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 HVD....
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....ions 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 Thousand Three Hundred Fifty Two only) as per the following break-up: Sr. No. Price Component Amount I Local Transportation, Insurance and other Incidental Services (VSC Portion) INR 623,073,872 II Installation Charges (VSC Portion) INR 2,174,363,480 III Training Charges Total for Fifth Contract (i+ii+iii) Included INR 2,797,437,352 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. 4.0 You are required to furnish, at the earliest, the Performance Securities for an amount equal to 10% (Ten percent) of the Contract Price as detailed at APPENDIX (NOA)-2, in line with provisions of the Bidding Documents. 5.0 All the bank guarantees shall be furnished from eligible bank(s) as described in the Bi....
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.... joint ventures, performance securities, bank guarantees, price components, pricing mechanism, raising of invoices, time period for completion of services, duration of the contract, etc. As exclusive clauses and conditions are clearly outlined in the Third and Fifth Contract respectively, the two contracts are separate and distinct in nature. The Third Contract contains terms governing supply of goods and the Fifth Contract contains terms governing supply of services. Further, given that the transaction with the PGCIL is on ex-works basis where the ownership in the goods is transferred at the premises of the Appellant, it can be said that the Fifth Contract would commence only when the ownership in the goods is transferred to the PGCIL. Therefore, in light of the above, it is evident that each of the activities to be carried on by the Appellant under the aforementioned two contracts are independent and distinct. Accordingly, the two contracts cannot be regarded as one single contract. Both the contracts have different scope of work, separate consideration and separate invoices. Therefore, in no circumstances, the two contracts can be said to form one composite contract and sh....
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....te Contracts in the aforesaid manner, the JV shall be overall responsible to ensure the execution of all the six Contracts to achieve successful completion and Taking Over of the works covered under the package and Operational Acceptance by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by the JV that any default or breach by the JV partners under the 'First Contract' and/or 'Second Contract and/ or the 'Fourth Contract' and/ or the 'Sixth Contract and/or breach by the Associate of JV-SIEMENS-1 under the 'Third Contract shall automatically be deemed as a default or breach of this 'Fifth Contract also and vice-versa, and any such default or breach or occurrence giving us a right to terminate the First Contract' and/ or 'Second Contract and/or 'Third Contract and/or 'Fourth Contract and/or the 'Sixth Contract', either in full or in part, and/or recover damages under those 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....
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....he project and handing over to the Employer upon successful completion is to be completed within 38 months. 40. The Contractee is aware of such interdependence of the two contracts. Although there is breakup of contract price for supply of goods & supply of services and also awarded under two separate contract agreements, clauses under both of these contracts 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. Thus these two contracts for supply of goods & supply of services are naturally bundled under the whole contract. It is expressly understood and agreed by the appellant along with JV partners that while entering into Fifth contract of supply of services that any default or breach by the IV partners under the 'First Contract' and/or 'Second Contract and/ or the 'Fourth Contract' and/ or the 'Sixth Contract and/or breach by the Associate of JV-SIEMENS-1 under the 'Third Contract shall automatically be deemed as a default or breach of this 'Fifth Cont....
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.... contract, the obligation of the appellant under both the contract ceases only after the turnkey project becomes operational and after the final payment is made both for supply of material and for erection of the system. The appellant is entrusted with the work mainly for their expertise in erection and installation of the plant and the execution of turnkey project. The function relating to the supply of material and the rendering of services of erection and installation are integrally connected and interdependent. The terms of supply clearly show that the implementation schedule is not only for supply but also for erection, testing and commissioning of the project. 43. Thus, from the above it is seen that the supply of the goods and the supply of services are inextricably linked with each other. 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. The term 'composite supply' is given under clause 30 of Section 2 of the CGST Act. "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or servic....
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.... two supplies are naturally bundled and one supply being principal supply & other being ancillary supply to principal supply. Even if the considerations for two taxable supplies are separately quoted or there is single consideration for two supplies, both types of scenarios are covered under composite supply till the conditions as mentioned above for composite supply are fulfilled (i.e. naturally bundled supplies and one being principal supply and other ancillary supply to principal supply). The entire transaction of providing the goods and the services is naturally bundled and hence this is clearly a case of composite supply of goods and supply of services. 45. The appellant on the issue of divisibility of contract has relied on judgments which are M/s, lshikawajma-Harima Heavy Indus. Ltd. Vs Dir. Of Income Tax, Mumbai 2007 (6) STR 3 (S.C.) = 2007 (1) TMI 91 - SUPREME COURT, M/s. Linde Engineering Division v. Income Tax, (2014) 365 ITR 1 = 2014 (4) TMI 975 - DELHI HIGH COURT, M/s. Siemens India Limited vs. State of Kerala 2003-(132)-STC-0418 = 2002 (9) TMI 806 - KERALA HIGH COURT, M/s. Titanium Equipments and Anode Manufacturing Corporation, (1998) 110 STC 4 = 1997 (8) TMI 4....
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....hority also examined the question whether there can be a sale in transit, or a sale in the course of import, in a transaction of works contract. He held that, from the nature of the contracts awarded, it could be seen that the petitioner was required to supply the goods as per the supply contract; they were also required to execute the works themselves; the intention of both the contractor and the contractee was completion of the works involving supply of goods as well as labor and therefore the transaction is a 'works contract. The Court observed- .. "In turn-key projects, more particularly of the kind involved in this batch of Writ Petitions, the same person has been entrusted with the responsibility of procuring material, and of erection and installation of equipment. While in-built safeguards are provided in all the contracts to ensure quality of the material, and effective performance of the erection contract, the supply contracts, in substance, do not absolve the petitioners-contractors of their obligations of erection and installation of equipment after the goods are sold by them to the owner. The petitioners-contractors obligations, under both the supply and erecti....
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.... 793 - SUPREME COURT, Union of India v. Mahindra and Mahindra [1995 (76) E.L.T. 481 (S.C.)] = 1995 (3) TMI 88 - SUPREME COURT and Mirah Exports Pvt. Ltd. vs. Collector of Customs [1998 (98) E.L.T. 3 (S.C.)] = 1998 (2) TMI 124 - SUPREME COURT Rajasthan Spg. & Wvg. Mills ltd. vs. Commissioner of C. Ex., Jaipur [2001 (131) E.L.T.594 (Tri.-Del.)] = 2001 (4) TMI 118 - CEGAT, COURT NO. I, NEW DELHI, S.S. Associates vs. Commissioner of C. Ex., Bangalore [2010 (19) S.T.R. 438 (Tri.-Bang.)] = 2009 (12) TMI 152 - CESTAT, BANGALORE. The sum & substance of these decisions is that the Department cannot question the commercial wisdom of the parties entering into an agreement and must proceed on the basis that what is stated in the contract reflects the true nature of the intent and transaction and that it is therefore impermissible for the tax authorities to go behind the language of the contract or act contrary to it without producing evidences. In this respect we refer to the Supreme Court judgment in the case of Bhopal Sugar Industries Ltd vs. Sales Tax Officer, Bhopal on 14 April, 1977 (Equivalent citations: 1977 AIR 1275, 1977 SCR (3) 578) = 1977 (4) TMI 151 - SUPREME COURT. The Apex Court ....
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.... fact that the nature of supplies under contracts being composite supply under Goods and Services Tax Act, and the supply of transportation services cannot be considered in isolation in determining the levy of tax. 2. Another contention made by the appellant is that the Contracts entered into by the Appellant are not composite supply of services as work contract and Services provided by the Appellant are not in relation to immovable property 49. Before deciding the taxation of aforesaid composite supply as per section 8 of GST Act we have to see whether the contracts/agreement before us is a 'works contract' as defined in clause (119) of section 2 of the CGST Act or otherwise. The definition of works contract is reproduced below. (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; Clause 6 of the Schedule II lists the two composite supplies which sh....
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....MI 109 - SUPREME COURT, Commissioner of Central Excise v. Solid and Correct Engg. Works & Ors. [2010 (175) ECR 8 (SC)] = 2010 (4) TMI 15 - SUPREME COURT, M/s. Sri Velayuthaswamy Spinning Mills v. The Inspector General of Registration and the Sub Registrar [(2013 (2) CTC 551)] = 2013 (3) TMI 681 - MADRAS HIGH COURT, M/s. Perumal Naicker v. T. Ramaswami Kone and Anr. (AIR 1969 Mad 346) = 1967 (9) TMI 147 - MADRAS HIGH COURT. After going through same, we find that the following principles emerge:- If a machine is attached for operational efficiency, it does not become immoveable property. 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 English law attaches greater importance to the object of annexation which is determined by the circumstances of each case. One of the important considerations is founded on the interest in the land wherein the person who causes the annexation possesses articles that may be removed without structural damage and even ar....
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....d designing, ground work. Appellant has also submitted few photographs of the project which clearly shows that the structure is attached to the earth with the help of civil work. The photographs indicate the magnitude of the work done. Further foundations in cement concrete, cement concrete walls as well as cement concrete structures are constructed during the execution of the project. The mode of annexation shows that the groundwork, being the necessary foundation, is an important part of the project. The object of annexation, as said earlier, cannot be to make it movable from one place to the other. It simply cannot be equated to the Asphalt mix (the issue in Solid & Concrete Engg case) which was intended to be moved from one place to other. Hence considering the scope of the work and the facts revealed by the photographs, it can be very well said that completion of the installation, erection of the total project is resulting into immovable property. Hence the total project assigned to the appellant is nothing but composite supply of works contract as envisaged u/s 2 (119) of GST Act. 54. We shall refer to certain judgments in this regard. The first judgment is the Supreme Cou....
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.... to shift them frequently. 55. The court also referred to its own judgments in the case of Quality Steel Tubes (P) Ltd. 75 ELT 17 (SC) = 1994 (12) TMI 75 - SUPREME COURT and Mittal Engineering Works (P) Ltd. 1996 (88) ELT 622 (SC) = 1996 (11) TMI 66 - SUPREME COURT. In the case of Quality Steel Tubes (cited supra), the court held that goods which are attached to earth and thus become immovable did not satisfy the test of being goods within the meaning of the Act. It held that tube mill or welding head is immovable property. In the case of Mittal Engineering Works, the issue was whether mono vertical crystallizers is goods (in which case it would be excisable or immovable property). The mono vertical crystallizers is fixed on solid RCC Slab. It consists of bottom plates, tanks, coils, drive frames, supports etc. It is a tall structure rather like a tower with a platform. It was decided by the Court that the said product has to be assembled, erected and attached to the earth by a foundation and therefore not goods but immovable property. 56. We shall also refer to the Supreme Court decision in the case of Duncans Industries Ltd vs State Of U.P. & Ors on 3 December, 1999 = 1999 ....
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....ME COURT. are squarely applicable to the present case since the nature of contracts and its execution show without any doubt that the complete setup of the project in between Pugalur and North Trichur is permanent with a view to operate the project by PGCIL and not to dismantle and remove the same for any purpose at any point of time in future. 57. Further in additional submission the appellant has relied on the Order of Advance Ruling Authority in case of M/s. NR Energy Solutions India Pvt. Ltd. (GST-ARA-83/2018-19/B-03 dated 8.01.19) = 2019 (6) TMI 1171 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA and submitted that- "The Advance Ruling Authority had taken divergent view and held that supply of Relay & Protection Panels and Substation Automation System {SAS), complete design, manufacture, packing, insurance, transport and delivery to sites, training, installation, testing and commissioning of protection panels with SAS compatible to IEC 61850 protocol, to control and operate the 220 KV, 132 KV & 33 KV feeders, Power Transformers and equipment cannot be treated as works contract." From the order of the Advance Ruling Authority in case of M/s. NR Energy Solutions Indi....