AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 1453
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....019 (7) TMI 759 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case A. M/s Nikhil Comforts is a Partnership Firm, registered under the Indian Partnership Act, 1932 and having its registered office at 1003, Sampada, Arunodaya Nagar, Mulund (East) Mumbai 400 081 and sales office at Ground & 15` floor, Mulund Utkarsha CHS Ltd., Sajjan Wadi, Mithagar Road, Mulund (East), Mumbai 400 081. The firm is registered under the GST Act having GSTIN No. 27AAAFN0812H1ZP. B. M/s Nikhil Comforts entered into an agreement with Goa State Infrastructure Development Corporation Ltd. (in short GSIDC) for execution of Additional Air-conditioning work for the New building of Director of Education at Porvorim, Goa." GSIDC desires to get air-conditioning work for new building of Directorate of Education at Goa and Nikhil Comforts has agreed to do the works of supply of goods and services for agreed price. C. Goa State Infrastructure Development Corporation Limited (GSIDC)is a wholly owned Government Company of the Government of Goa registered under the Companies Act, 1956, with the Registrar of Companies, Panaji-Goa. The Registrar of Companies has allotted Certificate of Incorpo....
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.... Directorate of Education at Prorvorim, Goa" and shall be deemed to form and read and construed as part of this Agreement" 3. Clouse 6 of the Agreement read thus- "The following documents shall be deemed to form and be read and construed as part of this Agreement viz. i) Tender Documents for "Additional Airconditioning work for the new building of Directorate of Education at Porvorim" Goa" Volume I ii) Tender Documents for "Additional Airconditioning work for the new building of Directorate of Education at Porvorim, Goa" Volume II iii) Tender Documents for "Additional Airconditioning work for the new building of Directorate of Education at Porvorim Goa" Volume Ill 4. Clause GCC 16 of tender document Volume - I speaks about PART OF PERMANENT WORK DESIGNED BY THE CONTRACTOR (pg. 29 -30 of VOL -I) The Contractor shall design part of permanent work, wherever Contract provides, and submit to the Engineer for approval. The cover drawings, calculations, Specifications, operation and maintenance manuals and other information as shall be necessary to satisfy the Engineer as to the suitability and the adequacy of the design. Approval by the Engineer und....
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....d with such tests. All such Tests so carried out by the Engineer shall be at the risk and cost of the Contractor. These tests on completion shall then be deemed to have been carried out in the presence of the Contractor and the results of such tests shall be accepted as accurate. 7. Clause 2.2.2 of vol. I of tender document (page-16) defines SCOPE OF THE WORK The Scope of the Work is defined as "The scope of a "Additional Air Conditioning work for the new building of Directorate of Education at Porvorim, Goa." as defined in BOQ. (page no 16 of the tender document Vol. I) 8. The scope of work as per Bill of Quantity (BOQ) is as below: Item 1. EQUIPMENTS Supply, Installation, Testing and Commissioning (SITC) of the following Indoor and Outdoor units of the VRF/VRV System consisting of Inverter/Fixed scroll compressor. The outdoor unit shall have minimum two scroll compressors with at least One Inverter scroll compressor out of the mand shall be with environment friendly R410 A refrigerant. It should include anti-vibration pads, mounting arrangement, freight, lifting, shifting and positioning of Indoor and Outdoor units at respective locations. Item 2 COPPER RE....
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....plate 600mmx600mmx3mm thick including accessories and providing masonry enclosure with Cl/RCC cover having locking/lifting arrangement and watering pipe etc. (but without charcoal or coke and salt) as required as per the Earthing Drawing provided by the Engineer-In charge. The scope of work includes the following: a) Excavation of pit of size 1.0x1.0x3.0 mtrs(min) and disposal of excavated soil. c) Watering GI pipe, 20 mm Class B, with funnel as per specs. d) Charcoal/salt as per specs(paid separately). e) Refilling the pit of size 1.0x1.0x3.0 mtrs (min) with soft black agriculture soil of minimum resistivity/transportation. e) Masonary chamber with proper foundation, cover plate and locking arrangement. f) Testing of earth value with earth megger and certifications of its value. g) watering arrangement(plumbing will be paid separately). (a) in soil strata Item 6.1 MISCELLANEOUS Supplying and erecting Iron, sheet metal work consisting of CR CA Sheets, Various sections of iron, Plates, Chequered Plates, Rods, Bars, MS pipes, etc. for panel board or any other purposes complete with bending, cutting, drilling and ....
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.... as a plant and cannot be compared with a simple split air-conditioner. * This is 60 TR (72HP) AC plant as per tender BOQ which includes outdoor units and multiple indoor units with specific copper pipe sizes and predetermined pipe route. This system is efficient replacement of Chiller, Air handling units, chilled water piping and ducting etc. With the advent of new technology, Chiller plant is being replaced by VRF system / plant. H. FOLLOWING IS THE SEQUENCE OF ACTIVITIES IN A CHRONOLOGICAL ORDER DURING EXECUTION OR COMPLETION OF AN AIR-CONDITIONING PROJECT * STUDY OF TENDER DOCUMENTS AND SITE SURVEY - Tender documents and drawings are thoroughly studied by HVAC design and planning engineer. The physical site survey is done by the design engineer and draftsman team and taking all the site details like area to be air conditioned, Orientation of building, exposed glasses, walls and its area, beam locations and its height beam, drain locations, outdoor unit locations etc. * HEAT LOAD ESTIMATION - Based on tender Design Basis Report and actual site survey, a fresh Heat-Load estimation is prepared and submitted to consultant for their further approvals. These heat-load cal....
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....er, engineer and site supervisor study the approved shop drawing thoroughly. * The markings are done for indoor unit locations, outdoor unit locations, copper pipes, cable trays and cabling as shown in approved shop drawings. * As per marking, the respective supports are installed for indoor unit, copper pipes, cable trays and drain piping. These supports are permanently fastened to the slab by means of female anchor fasteners, full threaded rod and angles. The supporting activity involves the drilling work in slabs / walls, fabrication works like cutting, welding angles/ full threaded rods. Since supports vary in sizes as well as the entity to be supported. * The back plate of hi-wall unit is properly / rigidly fixed to the wall. Similarly, cassette units are fixed from slab with the help of female anchor fastener and full threaded rod. * Outdoor units are installed on MS Platform / stand which permanently fastened to Concrete foundation with the use Male Anchor Fastners. * IN VRF systems multiple indoor units are connected to bank of outdoor units. The interconnection pipe size and Y-Branch sizes are software generated. The output containing main header copper pipe....
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....r piping, Intermediate connections, Y- branching joints is carried out by using Nitrogen gas. * Apply test pressure in the system as per the OEM Requirement. * Pressure testing is done by holding the pressure for 24 hours and doing soap bubble test for any leakage at the joints. Removal of the insulation at the location of leakage detection. Post which brazing and other process is follow. * Vacuumization of entire VRF Refrigeration system. * Start Commissioning procedure for VRF unit as per OEM guidelines * Check for visual damage to the external casing of the unit or damage to the internal parts. * Confirm room is in a condition fit for commissioning to commence. Room cleaned and free of dust, secure with doors installed. * Start Commissioning procedure for VRF unit as per OEM guidelines * Release Refrigerant gas from outdoor unit. Charge additional refrigerant gas as per the copper pipe sizes and overall length. * Room wise temperature reading is prepared on hourly basis. J. It is summarized that supply/installation/erection and assembly of complete Air Conditioning plants were procured by the com....
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.... components and parts. Though each component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods. Air conditioning units, however, would continue to remain dutiable as per the Central Excise Tariff." 4. The Authority has failed to appreciate the distinction between "Air- conditioner" and Air Conditioning Plant". While "Air-conditioner" is movable item like Refrigerator, Air-cooler etc. "Air-conditioning plant" is immovable item. Totality of the plant cannot be shifted from one place to another, once it is installed at a particular place. It can be shifted only after dismantling the plant, which cannot be called "Air-conditioning plant" after it, is dismantled. 5. The Authority has erred making following statement that "we find their submission and agreement that the contract is considering clear demarcation of goods & services to be provided by the applicant" without considering conjoint reading of the all clauses of agreement, Tender document, Bill of quantity and also over looked the drawings and photographs submitted before the proceedings. 6. Your appellant craves to add, to amend, to alter, to delete any ground ....
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.... Section 2 (f) of the Central Excise Act and to have been mentioned under the Tariff, the goods must necessarily answer the test of marketability affirmatively for being held to be excisable. Classification is only for determining the applicable rate of duty under the Tariff Act, while marketability is the conclusive test for settling the broader issue of excisability of the goods under the Central Excise Act. 12. From the provisions of GST Act, it is clear that the works contract should mean only the contracts in relation to immovable property i.e. in a contract of supply, where the property in goods passes in immovable, the nature of transaction would be "Works Contract". Similarly, under the Central Excise Act where the property in goods passes in immovable there would be no excisablity. Considering the similarity in both the statutes it would be safe to refer to the decisions and authorities under the excise statute for determining the nature of activity whether property passes in immovable or not. To have the attributes of excisable goods as understood in the Excise Law. They are mobility and marketability. The article in question should be capable of being brought and sold....
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....of the ratio of the above case law, we hold that the mud guns and tap hole drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon". In Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise, UP 1995 (75) ELT 17 (SC) = 1994 (12) TMI 75 - SUPREME COURT; the court observed that- "The basic test, therefore, of levying duty under the Act is twofold. One, that any article, must be goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act". In Mittal Engineering Works Pvt. Ltd. Vs. CCE 1996 (88) ELT 622 (SC) = 1996 (11) TMI 66 - SUPREME COURT; the Court was concerned with the exigibility to duty of mono ....
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.... thermocole of PUF, Aluminum or GI cladding, aluminum foils for insulation of piping, ducting and AHU rooms, etc., were purchased from various vendors. All the equipment/ materials/components and parts were brought to the site of the customers. That the appellants undertook the work of design, fabrication, supply assembly, erection, testing and commissioning of the CAP at site of various customers against a contracted price which resulted into a distinct and excisable product which is apart from the equipment/component/ material/parts and accessories that have gone into the manufacture of CAPs. This is identifiable as CAPs in the market and is bought and sold as CAPs as is evident from the contract entered into between the appellant and the customers. This distinct product is not embedded in the ground like a tree or building, at the most some of its equipment/components are fixed by bolting, using nuts and bolts, to secure maximum operational efficiency and safety of the plant as a whole. 13. The case is decided by majority holding that it is immovable by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is the indepe....
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....ning plant could be disassembled into components and taken to the market for sale, all the components which had gone into the assembly of Air conditioning plant would not be available for sale as some essential components and accessories would have been damaged beyond repair and become unfit for being used again for reassembly. It is submitted that the ducts and pipes with their insulations and other accessories were an essential part of the Air conditioning plant and the same would be irretrievably damaged in any dismantling or disassembly of the Air conditioning plant. If at all any dismantled Air conditioning plant could be taken to the market for sale that would be only an assortment of some components viz. VRF 4 -way Cassette units, VRF Hi wall units, VRF Outdoor units etc. but never the Air conditioning plant as a whole. Therefore, it is submitted that since the Air conditioning plant as a whole is not capable of being taken to the market for sale, it was not a marketable item. If the items assembled or erected at site and attached to earth/wall cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be consid....
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....ated 18-10-93 issued under Section 55A of the Gujarat Sales Tax Act, 1969 has observed that - "It would be relevant to ascertain as to what is the meaning of words installation of air-conditioners and A.C. Coolers and for repairs thereof. It is well settled that for interpreting the meaning of the words used in entries of taxing statute, trade meanings as well as dictionary meanings are required to be considered. In the light of dictionary, meanings of the words 'air-conditioner', 'air-conditioning' etc. 9.2. As per the Webster's Encyclopedic Unabridged Dictionary of the English Language, the word 'air-condition' means (1) to furnish with an air-Page 1979 conditioning system; (2) to treat (air) with such a system; the word 'air-conditioner' means an air-conditioning device and the word 'air-conditioning' means (1) a system or process for controlling the temperature, humidity and sometimes the purity of the air in an interior, as of an office, theatre, laboratory, house, or the like; (2) an air-conditioning system or unit. As per The New Shorter oxford English Dictionary on Historical Principles, edited by Lesley Brown, Volume 1 A-M, 1993, the word 'air-conditioned....
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....on in Collector of Central Excise v. Subros Ltd. (1989 (6) TMI 140 - CEGAT, NEW DELHI)." The High court has clearly made distinction between "Air conditioner" and "Air conditioning"; 'air-conditioning' means (1) a system or process for controlling the temperature, humidity and sometimes the purity of the air in an interior, as of an office, theatre, laboratory, house, or the like; 21. In the case of Collector of C. Ex. vs Subros Ltd. on 7 June, 1989 Equivalent citations: 1989 (24) ECR 219 Tri Delhi, 1989 (43) ELT 543 Tri Del = 1989 (6) TMI 140 - CEGAT, NEW DELHI at para 23 Customs and Central excise Tribunal Delhi has given distinction between "Air Conditioner Plant" and "window Air condition machine or Split Air conditioner. "23 Before we come to any conclusion, we would like to refer to McGraw-Hill Encyclopaedia of Science and Technology Vol. I, 5th Division. Relevant extracts from pages 201 and 202 are reproduced below: - "Air conditioning systems. - A complete air-conditioning system is capable of adding and removing heat and moisture and of filtering dust and odorants from the space or spaces it serves. Systems that heat, humidify, and filter only....
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....a heating source, are tied to a central plant that distributes chilled water and hot water or steam, the interconnection is referred to as a district heating and cooling system. This system is especially useful for campuses, medical complexes, and office complexes under a single management. "Conditioning of spaces. - Air temperature in a space can be controlled by radiant panels in floor, walls, or ceiling to emit or absorb energy, depending on panel temperature. Such is the radiant panel system. However, to control humidity and air purity and in most systems for controlling air temperature, a portion of the air in the space is withdrawn, processed, and returned to the space to mix with the remaining air. In the language of the engineer, a portion of the room air is returned (to an air-handling unit) and, after being conditioned, is supplied to the space. A portion of the return air is spilled (exhausted to the outdoors) while an equal quantity (of outdoor air) is brought into the system and mixed with the remaining return air before entering the air handler. "Typically, the air-handling unit contains a filter, a cooling coil, a heating coil, and a fan in a suitab....
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....se duty on such air-conditioning system to any job worker involved for erection of these systems/projects. The grills manufactured by the petitioner are used in air-conditioning systems, ventilation systems, basements, car parking, kitchens, industrial sheds, evaporative coolers and dummy grills for interior decoration in rooms/buildings. However, they cannot be used in the air-conditioning machines, room/split air-conditioners as these are not designed for use therein." After detailed deliberation court has allowed the petition by observing that- "These buyers are job workers engaged in erection/installation of air-conditioning systems, air-cooling systems, heating systems and air ventilation systems etc. These grills bought from the petitioner are fixed in the immovable properties like various rooms, industrial sheds, car parking, toilets, kitchens, etc. for ventilation or for covering the opening of ducts of the air-conditioning systems. After fixing the grills on the buildings they become a part of the building. Many grills are fixed on the walls as dummy grills for beautification and interior decoration of the rooms, which are not used even for passing of the....
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....3 - DELHI HIGH COURT. The petitioners are telecom operators. They availed CENVAT credit of central excise duty paid on telecom towers, parts thereof, and shelters/ pre-fabricated buildings which house transmission equipment used for providing cellular telephone services. The revenue authorities disputed the availment of the credit on the ground that the telecom towers and shelters were immoveable in nature and consequently did not qualify as 'input', as defined under the CENVAT Credit Rules, 2004 (CCR). Further, the said goods did not fall within the specified tariff heading and therefore did not qualify as 'capital goods', as defined under CCR. (ii) Observation of the court on the question of telecom tower as immoveable property: - • The 'permanency test', as established by the Supreme Court in the case of Commissioner of Central Excise, Ahmedabad v Solid and correct Engineering Works & Ors (2010 (5) SCC 122.) = 2010 (4) TMI 15 - SUPREME COURT (Solid and Engineering Works), is to be used to determine whether the equipment qualifies as immoveable property or not. If the machinery or equipment is permanently fastened or embedded to the earth, it qualif....
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....ies. The tribunal failed to appreciate the, permanency test" as laid down by the Supreme Court in Solid and Correct Engineering (supra). 28. In present case also the test of permanency is required to be applied to see whether the machinery or equipment after installation is permanently fastened or embedded to the earth, so that the activity would be treated as "works contract "under GST. 29. The applicant carries out activity of supply/installation/erection and assembly of complete Air Conditioning plants on a building. It is required to ascertain that, merely by piping, drilling, grilling and fixing of the set of Air-conditioners with series pipe and ducts by which a structure like 'Plant' is formed. can this would result into immovable property? 30. In the present case, the fundamental issue which needs to be decided is whether the towers and shelters are movable or immovable property. In this regard, it would be useful to refer to the relevant statutory provisions to examine, what would constitute as moveable or immovable property. The expression "moveable property" has been defined in Section 3 (36) of the General Clauses Act, 1897 as under: "Section 3 (36): "....
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....ng permanency test'. The issue is permanency is already decided by Hon'ble Supreme Court in case of Commissioner of Central Excise, Ahmedabad v Solid and correct Engineering Works & Ors (2010 (5) SCC 122.) = 2010 (4) TMI 15 - SUPREME COURT. Therefore, it is requested to follow the same ratio in present case. If the ratio of Commissioner of Central Excise, Ahmedabad v Solid and correct Engineering Works & Ors (2010 (5) SCC 122.) = 2010 (4) TMI 15 - SUPREME COURT is followed the activity of the applicant will be considered as supply of goods and being a natural bundle of goods+ services the activity would be considered as Composite supply and the rate of tax of principle supply will be applicable. Therefore, it is requested that the activity vide agreement dated 21.08.2018 as referred by the applicant would be termed as composite supply. PERSONAL HEARING 34. A personal Hearing in the matter was conducted on 04.11.2019, which was attended by Sanjay M. Gadkari, on behalf of the Appellant, wherein they reiterated the written submissions previously filed before us. The aforesaid hearing was also attended by Shri P.P. Sawant in the capacity of the Jurisdictional Officer in the insta....
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.... be decided on the basis of the above definition. What stands out from the above is that a contract shall be a works contract only if, amongst other things, it leads to building and erection of immoveable property. 39. The scope of the work is defined as Air Conditioning work for the building. IT is nothing but providing air conditioners on an extensive basis and the same does not change the essential nature of the work which is that of installation of air conditioners. The work is providing of Indoor Outdoor units of the VRF/VRV system which is nothing but installation of air conditioners in the premises with the additional requirements concomitant with that of a larger area. ln the submissions, it is stated by the appellant that the selected machines differ from room to room in terms of capacity and type. This happens even in case of installation of a single Air conditioner unit in a room where the capacity of the AC depends on the size of the room. Also, much emphasis has been laid by the appellant on the fact that the unit is installed on the basis of shop drawings and a study of site. The markings are done for indoor unit locations, outdoor unit locations, copper pipes, cab....
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....r security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. A further argument is made that the entire machinery cannot be bought and sold as it is because the machinery will have to be dismantled before being sold. The Tribunal has pointed out that the appellant had himself bought several items and completed the machinery. It had purchased a large number of components and fabricated a few and manufactured the paper making machine at the site. If it is sold it has to be dismantled and reassembled at another site. We do not find any fault with the reasoning of the Tribunal on this aspect of the matter. ....
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....inciple while discussing the SC judgement in the case of M/s. Sirpur Paper Mills (cited supra). A similar view has been taken by the SC in the case of CCE vs. Solid and Concrete Engg Works & Ors. [2010 (175) ECR 8 (SC)] = 2010 (4) TMI 15 - SUPREME COURT as also the following cases:- • Board of Revenue, Chepauk, Madrasys. K. Venkataswami Naidu [AIR 1955 Mad 620] = 1955 (3) TMI 46 - MADRAS HIGH COURT • Sri Velayuthaswamy Spinning Mills vs. The Inspector General of Registration and the Sub Registrar [2013 (2) CTC 551 = 2013 (3) TMI 681 - MADRAS HIGH COURT • Perumal Naicker vs. T. Ramaswami Kane and Anr. [AIR 1969 Mad 346] = 1967 (9) TMI 147 - MADRAS HIGH COURT 43. In the case of Solid and Concrete Engineering (cited supra) the SC applied the following tests while holding that 'asphalt hot mix plants 'are not immoveable property:- (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stab....
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....-erecting it at another site, is wholly erroneous, and contrary to the test established by the Hon'ble Apex Court. 46. It is also to be noted that the test is not one of whether the items are, in fact, dismantled and moved by an assessee, but whether they are capable of being dismantled and moved from one to another (refer Quality Steel Tubes (P) Ltd. vs. CCE, U.P. [1995 (75) ELT 17 (SC)] = 1994 (12) TMI 75 - SUPREME COURT; Triveni Engineering & Indus Ltd. vs. CCE [2000 (120) ELT 273 (SC)]) = 2000 (8) TMI 86 - SUPREME COURT. Therefore, the reliance placed by the appellant on these cases in fact are in favour of the revenue. 47. The total contract is for Rs. 55,29,555 out of which the value of equipment is Rs. 28,87,782 and the value of copper piping, drain piping is around Rs. 3 lakhs. This shows a preponderance in favor of goods in the total value. So this shows that installation and the entire fabrication is not a key factor in the valuation. Even though there might be works involved in the air conditioning system, the balance tilts considerably in favour of goods. 48. From the discussion made above, we have come to the conclusion that the contract submitted is not immov....