TaxTMI 
TaxTMI 
2020 (9) TMI 1237
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Authority for Advance Ruling, Andhra Pradesh. 1. Brief Facts of the Case: 1. The appellant is engaged in supply of comprehensive range of oilfield related services such as drilling services, exploration and mining related services, etc. to oil exploration and production companies across the globe. 2. One of the goods supplied by the appellant in the course of supplying drilling services is drill bits. Drill bits are cutting tools used to remove material to create holes of circular cross -section in the extraction of natural gas, or petroleum, for the injection of a fluid from surface to a subsurface reservoir. 3. The appellant was awarded a contract by ONGC to supply drill bits on consignment basis i.e. sale on approval basis at ONGC's twelve different locations based on the call out orders received from ONGC. 4. Pursuant to the above, the Appellant imports drill bits and avails the benefit under Sr.404 of Notification No.50/2017- Cus. Dt: 30.06.2017. Subject to satisfying the conditions at Sr. No. 48, i.e. on filing the Essentiality certificate obtained from the Director General of Hydrocarbons, Noida. Accordingly the Appellant pays total customs duty at the rate of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wo separate ECs are required. The Authority for Advance Ruling Andhra Pradesh in ruling orders in AARNo.07/AP/GST/2020 dated 25.02.2020 held: 1. That the Import and subsequent Supply to ONGC on consignment basis i.e. on approval basis are two distinct Supplies as prescribed under the Customs Act and GST Acts. 2. As the Import and Supply to ONGC are distinct supplies, the applicant needs to furnish different Essentiality Certificates that is to say one at the time of import to the Custom Authorities and another at the time of supply to ONGC to the GST Authorities, to avail the Concession/Exemption. Aggrieved by the order of Authority for Advance Ruling dated 25.02.2020 the Appellant has filed the present Appeal, inter alia, on the following grounds which are urged without prejudice to each other: 2. Grounds of Appeal: A. It is submitted that the impugned ruling passed by the Ld. Authority is ex-facie untenable and unsustainable in law and is liable to be set aside. IMPORT OF DRILL BITS MANUFACTURED BY HESI IS INEXTRICABLY AND DIRECTLY LINKED TO CONTRACT ENTERED INTO WITH ONGC. B. As stated in the facts above, the Appellant has entered into a contract with ONGC for supply of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the IGST Act, the supply of goods imported into territory of India, till they cross the customs frontiers of India shall be treated to be a supply of goods in the course of inter - state trade or commerce. iii) Till the clearance by the customs authorities i.e. issuance of out of charge, the supply of goods shall be treated as 'inter-state supplies' and in terms of the proviso to Section 5 of the IGST Act, the IGST on the goods imported shall be levied and collected in accordance with the provisions of the Section 3 of the Customs Tariff Act, 1975. iv) Once the goods imported are cleared by the Customs Authorities, all the provisions of the customs law ceases to be applicable or extendable to such goods. v) It is, therefore, clear that the activity of import of drill bits is a distinct activity of supply of goods in the course of inter-state trade or commerce. G. It is submitted that in compliance with the above observations the Appellant paid the applicable Customs duty at the time of import of goods and the CGST/SGST or UTGST or IGST (As applicable) on the supply of said imported goods to 12 different locations of ONGC, as agreed to in the contract. H. It is subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A. Petroleum operations referred to in sub-clause (ii) of clause (a) and have been imported under the contract referred to in that sub-clause, or B. Petroleum operations or coal bed methane operation referred to in sub-clause (iii) of clause (a), as the case may be, and have been imported under a contract signed under the New Exploration Licensing policy or the Coal Bed Methane Policy or the Marginal Field Policy, as the case may be; and". M. The specimen EC dated 20 September 2017 issued by the DGH, as reproduced in statement of facts at para 9 above, certifies that the imported goods are required for petroleum operations undertaken under petroleum exploration licenses or mining licenses granted to ONGC. The said EC is addressed to the concerned Deputy Commissioner at the port of import and bears reference to Customs Notification. N. Similar to the above, vide Central Tax Notification exemption is provided to indigenous goods supplied for specified petroleum and other explorations and productions under the various schemes from so much of the central tax leviable thereon under section 9 of the CGST Act, as is in excess of the percentage prescribed, and subject to the relevant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... certificate. Q. Admittedly, the recommendation for granting of the EC is made by ONGC for the goods to be imported by the appellant and to be supplied to ONGC which would be required for the petroleum operations. As submitted above, the same goods which are imported by the appellant are required for the petroleum operations carried out, by ONGC. R. Is it submitted that the DGH issues the EC qua the Goods. Once it is established that the same imported goods are supplied by the appellant to ONGC, there cannot be any requirement for procuring a new EC from the DGH for the further supply of the same imported goods. S. It is submitted that the DGH also recognizes this concept and issues only 1 EC for the same goods. ONGC, as well does not make further recommendation/ application for issuance of a second EC in respect of the same imported goods further supplied domestically. T. It is submitted that the appellant agrees with the finding of the Ld. Authority that the benefits or exemption of a Notification (conditional in nature) is available or eligible to the goods, only if the conditions specified therein are fulfilled or complied with. U. It is submitted that the Ld. Authority ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound to be eligible and EC is issued, the same cannot be challenged or cancelled. In the present case too, once the EC is issued, the CGST officer has to honor the same for the purpose of extending the benefit of the exemption notification. Drawing ratio from the ruling of the Court, EC is qua the goods and not qua the transaction. Y. It is submitted that the Ld. Authority in the Ruling has merely observed that for claiming the benefit under Central Tax Notification, the conditions attached to the Notification are required to be fulfilled. It has not gone into the issue as to whether the EC issued by the DGH in respect of the same goods, which has been accepted by the Customs Authorities for applying concessional customs duty rate, is sufficient for compliance of the condition prescribed under the Central Tax Notification as well. Z. In view of the aforesaid submissions, it is clear that the EC issued by the DGH is qua the goods involved in present dispute and the same EC can be used for complying with the conditions both under the customs Notification and Central Tax Notification. AA. In view of the above, the Ruling of the Ld. Authority should be modified to suggest that the E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and GST laws. The said EC is issued on an application or recommendation made by ONGC. The said EC is consignment specific and specifies the details of each consignment, including Purchase order number, Operator's name, importer's name, CIF value, Invoice number, blocks (i.e. place of use), description of goods, quantity, mining lease details. 5. The objective of mentioning all these details is to ensure that the goods are tracked right from entry into India till its intended use in petroleum operations and are not diverted elsewhere. In other words, it is implicit while granting the EC that the goods will be used in specified petroleum operations as mentioned in the EC. In practice, DGH issues only one EC per consignment. 6. With the above background and being aggrieved by the Impugned Order, specifically with respect to question (b) at para 2 above, the Appellant is before this Hon'ble Appellate Authority of Advance Ruling. SUBMISSIONS: 1. The appellant reiterates the submissions made in the appeal memorandum. 2. As can be seen from the whole scheme of things, i.e. exemption notifications, EC issued that e import is allowed only for the purpose of consequent suppl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt and the objective of the Notification No. 50/2017-Cus. issued under the Customs Act and the Notification No. 3/2017-CT Rate) issued under the CGST Act and other corresponding Notifications issued under the IGST Act and the APGST Act is the same i.e. to permit the import/subsequent supply of goods for petroleum operations at concessional rate with an objective of reduction in fuel exploration costs and making the fuel available to general public at a reduced price. 7. The Ld. AAR is right in holding in its answer to question (a) framed before it that the transaction of import and subsequent supply are two distinct transactions i.e. distinct supplies as prescribed under the Customs/ GST Acts. However, it is undeniable that they still continue to form an inextricable link between each other. The transactions are coterminous. 8. It is submitted that both the supplies are arising out of a single contract awarded to the Appellant by ONGC. It is a fact on record that the execution of contract of providing drilling services to ONGC has occasioned the import of drill bits into India and its subsequent supply to ONGC for usage during providing of services to ONGC is in continuation of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(SC). b. Commissioner of Income Tax, Amritsar vs. Straw Board Manufacturing Co. Ltd., 1989 Supp (2) SCC 523 = AIR 1989 SC 1490]. c. Hansraj Gordhandas vs. H.H. Dave, Assistant Collector of Central Excise Customs Surat and Others, (1969) 2 SCR 253 = AIR 1970 SC 755. d. Collector of Customs Vs. Bharat Heavy Electricals Ltd., 1992 (61) ELT 332 (SC). e. Commissioner of Customs, Import (Mumbai) Vs. Tullow India Operations Ltd., 2005 (189) ELT 401 (SC). 5) Discussion: The appellant has not disputed the Ruling to the extent that the transaction of import and subsequent supply to ONGC are two distinct transactions i.e. distinct supplies as prescribed under the Customs / GST Acts. Thus the decision of the impugned order with regard to the import of drill bits for supply to ONGC at its location in India on consumption basis involves two supplies namely, Import into India of drill bits; and Indigenous movement from the port of import to ONGC's location is upheld.. The main contention on behalf of the appellant is that the case fell within the language of the two notifications, one for import of drill bits into India under serial no. 404 of Notification No. 50/2017-Customs, date....