TaxTMI 
TaxTMI 
2020 (10) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
....0/B-107 dated 04.10.2019 = 2019 (10) TMI 481 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case 1.1 The Appellant having its corporate head office at Mumbai is, inter-olio, engaged in the manufacture of various types of UPS systems, which serve as an alternate source of power for a specific period of time in the event of power failure. The Appellant also supplies installation commissioning and maintenance and other services to its customers. 1.2 A UPS is typically used to protect hardware such as computers, data centers, telecommunication equipment or other electrical equipment where an unexpected power disruption could cause injuries, fatalities, serious business disruption or data loss. UPS units range in size from units, designed to protect a single computer without a video monitor, to large units, powering entire data centers or buildings. 1.3 The appellant is manufacturing UPS and its components at its manufacturing unit located at Ambernath and Pune in the state of Maharashtra. Some of the UPS components like battery and cables are either manufactured by the applicant or purchased by the applicant from third party vendors. The applicant has, inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....installation, testing and commissioning of the UPS System; * Presentations, reviews and audit support as specified in the Specification; Transportation, Handling and Storage of the material; * Insurance Cover for the material supplied till taking over by Employer; User's Certificates and Test Reports as per specifications; * Documentation; (Chapter 15) * Provide all information, documents requested by Signaling, Telecommunication and AFC Contractors; * Interface management as specified in the Specification; * System operations and maintenance support services; * Training for operations and maintenance staff; * Preparation of Operation, Maintenance and Training Manuals; * Decommissioning, removal and/ or disposal of Temporary Works; * Design, manufacture, delivery and installation of foundations/ fixtures for equipment; *Warranty period and defect liability support after commissioning; * Providing necessary support and documents required including compliance for getting approval of the UPS system from Commissioner of Railway Safety; * Maintenance support, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it Unit rate (INR) Price (INR) Part - 1 Part - 2 1 Trainer's man days 60 0 Man-days 8,000 4.80,000.00 2 GRAND TOTAL 30,50,00.001.00 1.7 A copy of the contract entered with DMRC has been enclosed along with this appeal. 1.8 A perusal of the above tender document and contract makes it clear that the appellant is required to supply the UPS systems to DMRC. Further, the appellant is also required to undertake the erection, installation and commissioning of the UPS system at the sites designated by DMRC. Further, separate consideration for supply of goods and services have been provided. 1.9 Further, the UPS system are manufactured from the appellant's factory at Mumbai. Thus, the goods are supplied by the appellant from its Maharashtra GSTIN. However, the service portion of the contract i.e. erection, installation and commissioning service are rendered by the New Delhi branch of the appellant, which is separately registered under GST law. 1.10 In view of the above, the appellant has been treating the supplies made to DMRC as under: • supply of UPS from the state of Maharashtra as su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as supply of works contract under Section 2(119) of the Central Goods and Services Tax Act, 2017 ("CGST Act, 2017"). ii. If yes, whether such supply made to DMRC would be taxable at the rate of 12% in terms of Sr. No. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended w.e.f. 25.01.2018. Advance Ruling passed by Ld. AAR, Maharashtra 3.1 The Ld. AAR, has considered the application filed by the appellants and gave a ruling vide Order no. GST-ARA-17/2019-20/B-107 dated 4.10.2019 = 2019 (10) TMI 481 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA (hereinafter referred to as the "Impugned Ruling") wherein it has been held as under- (i) The Ld. AAR has held that the supply of UPS system made by Appellant to DMRC does not qualify as works contract service and therefore the benefit of concessional rate of 12% in terms of Sr. No. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended w.e.f. from 25.01.2018) would not be available to the appellant. (ii) Further, it has been held that even though the supply of g....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Id. AAR in the impugned ruling has transcended its scope and jurisdiction by holding that the supply amounts to be a composite supply, which is beyond the questions posed in the application filed by the appellant. 5. The Appellant submits that the appellant had filed the application for seeking a ruling only in respect of the following questions: • Whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as a supply of 'works contract' under Section 2(119) of the CGST Act? • If yes, whether such supply made to DMRC would be taxable at the rate of 12% in terms of Sr. no. 3(v) of Notification No. 11/2017 - C.T. (Rate), as amended w.e.f. 25.1.2018? 6. Therefore, the Appellant submit that the only issue for consideration for Ld. AAR was whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system would qualify as 'works contract' and accordingly would be subject to GST at the rate of 12%. 7. However, after answering the first issue to state that the supply made by the appellant would not qualify as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly of UPS Systems (i.e. goods) and the supply of erection, installation and commissioning service. 11. The appellants submit that the Ld. AAR has rightly held that the supply of UPS and its erection and installation would not qualify as a 'works contract' service under Section 2(119) of the CGST Act. 12. The appellant submits that the goods i.e. UPS system are dispatched to DMRC from its Ambernath factory in Maharashtra. As and when the goods are removed, the appellant issues a tax invoice in the name of DMRC for such supply under Maharashtra GSTIN. The lorry receipt issued by the transporter also mentions DMRC as the consignee. 13. The appellant submit that the goods once removed from the factory and consigned to DMRC's location cannot be diverted by the appellant for supply to any other customer. Thus, at the time of removal of the goods from the factory, the goods are appropriated towards the contract entered into with DMRC. This proves that the property in the goods stands transferred to DMRC once the said goods are dispatched by the appellant from the factory and the supply of goods is completed. Subsequently, the appellant submits that Delhi GSTIN provide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of business; (ii) only one out of the various supplies should be a 'principal supply'. 19. The Appellant submits that for a supply to be composite supply, there should be supply of two or more taxable goods or services which are naturally bundled and supplied in conjunction with each other. The Longman Dictionary of Contemporary English defines conjunction to mean - "used with someone or something else". 20. In the present case, the supply of goods and services made by the appellant under the said contract entered with DMRC are independent in nature. Further, the contract also provides separate break-up of the consideration receivable for supply of UPS system and installation services. Further, the appellant also issues separate invoices for supply of goods and services. Therefore, the appellants submit that the supply made by the appellant is not 'in conjunction with each other' as required by the definition of composite supply. 21. Further, the Appellant submits that appellant may supply the UPS system and erection and installation services either independently or in or along with each other. The customer always has the option to avail either of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 2(30) of the CGST Act, 2017. 27. Therefore, the finding of the Ld. AAR to such extent is not tenable and the impugned ruling is liable to be modified to that extend. The supply of UPS System and erection and installation services are provided by two distinct persons viz. Maharashtra GTIN and Delhi GSTIN. Thus, the said supplies cannot be clubbed together to make them a "composite supply". 28. The Ld. AAR, in the impugned ruling has held that although the erection and installation services are supplied from Delhi GSTIN, the contract with DMRC is one single contract which is entered into by the Maharashtra GSTIN of the appellant. Thus, the supply would be considered as composite supply in terms of Section 2(30) of the CGST Act, 2017, subject to GST at the rate of 18% i.e. the rate applicable to the supply of UPS system (the principal supply). 29. The appellant submit that the aforesaid finding of the Ld. AAR is incorrect for the following reason. 30. Section 25(4) of the CGST Act, 2017, inter alia, states that a person who is required to obtain GST registration, in more than one State or Union territory shall, in respect of each such registration, would be treate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'composite supply' under Section 2(30). 37. The appellant submits that the Ld. AAR has failed to appreciate the aforesaid legal position and held the supply made by the appellant to be a composite supply merely because the said supply is made under a single contract. 38. The appellant submits that in the normal course of business transaction, it is natural for a buyer to enter into a single contract with the supplier for multiple supplies, at an entity level. The appellant submit that the Maharashtra GSTIN and the Delhi GSTIN are treated as distinct persons only because of the deeming fiction created by Section 25(4) of the CGST Act for the purpose of GST, and otherwise constitute a part of the same legal entity. Therefore, DMRC could not have entered into separate contracts with the Maharashtra GSTIN and Delhi GSTIN. 39. The Appellant submits that the supply of UPS System (goods) and erection and installation services are two independent supplies agreed to be executed under one single contract, by two distinct persons under GST. Merely because there exists one contract for two different supplies, the supply made under such contract cannot partake the characteristi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ify as 'works contract'. Hence, the discussion is not in isolation. Para B.1 to B.4: Facts are narrated and hence does not require any comments. Para B.5 to B.14: The appellant has basically challenged the findings of the Ld. AAR in the impugned rulings. They had discussed the provision of section 2(30) of the CGST Act, 2017 i.e. definition of the 'composite supply', Section 2(90) of CGST Act, 2017 i.e. definition of the 'Principal Supply' and the combined reading of the both the definitions. It was argued that the supply of UPS system and erection and installation services can be done by the appellant independently or along with each other. Hence, the Ld. AAR had erred in holding that without the supply of goods i.e. UPS systems, the services of erection and installation commissioning cannot be supplied by the appellant. The Appellant had further relied on the Circular No. 47/21/2018-GST dated 08.06.2018 issued by CBIC, at Sr.No.2 on the question of 'supply of goods (spare parts) and supply of service (labour) in servicing of the car. The issue before the Ld. AAR as sought by the appellant was whether the contract entered into with DMRC for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the 'composite supply and mixed supplies' The tax liability on composite and mixed supply shall be, determined in the following manner: - (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of the that particular supply which attracts the highest rate of tax. The term, principal supply, has been defined in Section 2(90) of CGST Act, 2017, which states as under: - '(90) "Principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;' Based on the above definition, irrespective of the location of the supplier, the rate of tax in a composite supply has to be the same. Based on the contract in question, there can be no dispute that the supply is a composite supply. The definition of the composite supply does not restrict or imposes any conditions about the location of the supplier in respect of the composite supply. 42. The Respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Section 2(119) of the Central Goods and Services Tax Act, 2017. In response to the above- mentioned question, the AAR held that the said supply of the UPS systems and its erection, installation, commissioning, testing, etc. would not be construed as works contract service as interpreted by the Appellant, Subsequently, The AAR went on to hold that the said supply of UPS systems and its erection, installation, commissioning, testing, etc. would be rather considered as the 'Composite Supply' in terms of section 2(30) read with section 2(90) of the CGST Act, 2017. Now, the Appellant has preferred appeal over this very observation of the AAR, wherein they held that the impugned supply made by the Appellant to DMRC in terms of the subject agreement would be considered as Composite Supply in accordance with the provision of section 2(30) read with section 2(90) of the CGST Act, 2017. 45. Now, having regard to the above facts and circumstances, the only moot issue, before us, is as to whether the aforesaid said supply would be construed as Composite Supply or not. At the outset, we would like to first examine the meaning of 'Composite Supply' as provided under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....another Delhi unit, undertaking the task of the erection, commissioning, installation, testing, etc. of the UPS systems, which is manifest from the separate invoices raised by the Maharashtra and the Delhi unit of the Appellant for the supply of goods and supply of services respectively. The presence of two taxable persons in the present case would clearly preclude the impugned supplies from being in the nature of the Composite Supply as discussed above, wherein one of the essential conditions is that there should a single taxable person, who is undertaking all the supplies involved in particular transaction, which is clearly not the case here. 48. It is further argued by the Appellant the supplies under the present case are not being made in the conjunction with each other, as the supply of services i.e. erection, commissioning, installation, testing etc. are undertaken only after the supply of the goods, i.e. UPS systems and other accessories, have been effected to the recipient of the goods, i.e. DMRC after carrying out all the inspection procedures by the persons, authorized by the Recipient in this regard. It is also argued by the Appellant that services of erection, commis....