TaxTMI 
TaxTMI 
2022 (2) TMI 1045
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....es, 358/2, Near Axis Bank Limited, Rajapark, Jaipur- 302004, Rajasthan - (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: - a. Classification of goods and /or services or both Further, the applicant being a registered person (GSTIN is 08AAAC11726L1ZK as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT; 1.1 M/S. ION Exchange India Limited ("Applicant") is engaged in the business of water treatment, waste-water treatment and its recycling. The Applicant offers wide range of customized treatment plants for water, waste liquids and wastewater which are installed in thermal and nuclear power plants, fertilizer factories, refineries, and the petrochemical and other industries. As a part of its business operations, the Applicant enters into Engineering, Procurement and Construction ("EPC") contracts with its customers. 1.2 As a part of it....
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....esigning of this plant n their New Delhi office and uses various Engineering software to design the customized plant as per specifications provided by Vedanta Various disciplines like Civil, Mechanical, Piping, Pipeline, Electrical, Instrumentation and Telecom engineers work together and issue drawings which are used for construction of the customized plant after approval from Vedanta. b) Procurement: The Applicant is the manufacturer of the key components of this plant. These components are manufactured specifically suiting and customized to the requirements of Vedanta. Applicant procures other auxiliary components from various reputed manufactures and supplies them to the customized plant location for construction. c) Construction: Applicant has engaged various construction teams at plant location who construct the customized plant as per the approved design drawings. This construction team installs the component manufactured by Applicant and those supplied by various manufacturers. All these components are then assembled with the interconnecting process piping and pipeline as per approved design drawings. Respective electrical, instrumentation and telecom compo....
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....017 ('CGST Act'), entails that advance ruling may be filed by an Applicant for a transaction of supply of goods or services being undertaken or proposed to be undertaken on following questions:- a) Classification of any goods or services or both; b) Applicability of a notification issued under the provisions of this Act; c) Determination of time and value of supply of goods or services or both; d) Admissibility of input tax credit of tax paid or deemed to have been paid; e) Determination of the liability to pay tax on any goods or services or both; f) Whether applicant is required to be registered; g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 1.9 The Applicant submits that the issue on which advance ruling is sought in the instant matter post release of Notification No. 20/2019-Central Tax(Rate) dated 30.09.2019, is whether the services supplied by the Applicant to Vedanta qualify as Support Services to Mining (Sr. No. 24) or Professional, Technical or Busines....
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.... services being undertaken by the Applicant is discussed hereunder. Nature of Subject services 1.13 The Applicant reiterates that it is engaged in the business of treatment of water, waste-water and its recycling, the activities required to be carried out by the Applicant under the scope of work of the EPC Contract involves the construction of customized Sulphate Removal plant based upon Nanofiltration & Reverse Osmosis technology to remove sulphate from water which is named as Sulphate Removal Plant. 1.14 Sulphate Removal Plant reduces the sulphate ions present in the Saline water to the acceptable levels for water injection. Sulphate removal is a technology utilized by the oil industry to produce low sulfate water for injection. 1.15 The Applicant further submits that there are innumerable benefits of the Sulfate Removal Plant in the overall mining operations. Few of them are listed below: BENEFITS OF SULPHATE REMOVAL PLANT Control sulfate in discharge water SRP helps control the concentration of sulphate in the water used in concentrators, mines, and process effluents Reduce scaling to improve plant availability Removal of sulfate and calcium prevents ....
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....r Heading 9986. Thus, it falls under Sr. No. 24(ii) of Notification No. 11/2017-CT, as amended. For the sake of ready reference, the relevant extract Sr. No. 24(ii)] is reproduced below: S.No Heading Description of Goods Rate 24 Heading 9986 (Support services to agriculture, hunting, forestry, fishing, mining and utilities) (i) ..................... 6% (ii) Support services to exploration, mining ot drilling of petroleum crude or natural gas or both. (iii) .................... 1.19 The Applicant submits that a reading of the aforesaid entry suggests that it covers support services to, inter alia, exploration, mining or drilling of petroleum crude oil. It is relevant to understand the meaning of the terms "support services" and "to" used in the "support services to exploration, mining....". Meaning of 'support services ' 1.20 The term 'support services' used in Heading 9986 has not been defined in the Rate Notification. Therefore, it is relevant to refer to the dictionary meaning of the term "support". Meanings from few legal dictionaries are set out below for ready reference: Dictionary Meaning Black's Law Dictiona....
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....n be seen that the term "to" indicates contact or proximity to the subject or, more specifically. means "towards". 1.24 Applying this to the present case, the Applicant submits that the "support services to exploration, mining..." would essentially mean support services which are "towards" or are most closely related to or in close proximity of the activities of exploration and mining. Scope of work of the EPC Contract is qua SRP 1.25 It is a settled principal of law that a contract is required to be read on the basis that it reflects the true intention of the parties thereto as regards the consideration agreed to be paid in return for the parties carried out under the contract. 1.26 In the instant case, the contract between the Applicant and M/s. Vedanta is for the customized/ specialized construction of SRP (Water treatment plant) wherein Applicant has to follow technical specifications and end to end responsibility of construction lies with the Applicant. 1.27 It is submitted that in the instant case, the Applicant will be constructing water treatment plant in accordance with the specifications provided by M/s. Vedanta. On the basis of the said specifications, the....
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....t list of activities includes:- a) derrick erection, repair and dismantling services; b) well casing, cementing, pumping, plugging and abandoning of wells; c) test drilling and exploration services in connection with petroleum and gas extraction; d) specialized fire extinguishing services; e) operation of oil or gas extraction unit on a fee or contract basis 1.33 A reference to the above list reveals that these are primarily those activities which are inextricably linked to the petroleum operations and are indispensable to it. Activities like derrick erection, well casing, cementing and pumping, abandoning wells, test drilling and exploration services are some of the significant activities which forms the very basis of exploration and mining activities and are therefore explicitly provided under the Explanatory Notes to the Heading 998621. Copy of the relevant Circular is attached. 1.34 The occurrence of the expression "includes'" in the above Explanatory Notes suggests that it is not an exhaustive list but is merely indicative. In a catena of judgments, it has been held that the presence of the expression 'includes' su....
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....nger term to commence and produce results, the benefits accrue to the larger public and the nation's development. Therefore, while determining classification of activities or services which related to mining and petroleum operations, a purposive interpretation should be adopted. 1.40 In the light of the aforesaid, since the Subject services satisfies the specific description of the Heading 9986 under Sr. No. 24(ii) of Notification No. 11/2017-CT, as amended. B. ALTERNATIVELY, THE SUPPLY OF SERVICES BY THE APPLICANT SHOULD BE CLASSIFIED AS 'OTHER PROFESSIONAL, TECHNICAL AND BUSINESS SERVICES RELATING TO EXPLORATION, MINING OR DRILLING OF PETROLEUM CRUDE OR NATURAL GAS OR BOTH' UNDER HEADING 9983 OF SR. No.21(ia) OF THE RATE NOTIFICATION 1.41 Without prejudice to the above submissions, the Subject services may merit classification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both ' under Sr. No. 21(ia) of Heading 9983 of the Rate Notification. 1.42 Sr. No. 21 of Rate Notification provides the rate of tax leviable on the services that merits classification under ....
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....of 'business' is an inclusive definition. It is settled law that the term 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. The said word is succeeded by the phrase 'any trade, commerce, manufacture, profession........whether or not it is for a pecuniary benefit. The definition of the word 'business' under the CGST Act makes it amply evident that it covers within its ambit, a wide range of activities. The said definition would also include operational administrative, consulting and management services. 1.46 Entry at Sr. No. 21 (ia) was inserted vide Rate Notification with effect from October 1, 2019. The aforesaid entry was introduced by the Government in order to classify particular services such as management and consultancy services relating inter alia to mining, and which do not merit classification as support services to mining under Heading 9986. 1.47 It is pertinent to note that Entry at Sr. No. 21 (ia) of the Rate Notification uses the phrase 'relating to which signify that any professional, technical and/or business services provided rela....
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....ity and schedule management, among others, as per contract awarded by Vedanta. The said services are in relation to the mining activity of Vedanta, as stated above in detail. Hence, in the present case, it is submitted that the supply of services by the Applicant to Vedanta in Ration to the mining activities under the project merits classification der Heading 9983. Accordingly, by virtue of Sr. No. 21(ia) of the Rate Notification, it is submitted that the said activity may alternatively get covered within the broad ambit of 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both ' and consequently attract GST @12%. 1.50 In addition to the above, it is also relevant to note that the Para 2 of the Circular 114 specifies that most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under Heading 9986 of the Rate Notification. Further, it has clarified that certain services such as technical and consulting services in relation to exploration, would merit classification under the Heading 9983 of the Rate Notification. The relevant extract of ....
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....t classification under Heading 9983 and attract GST @ 12% in terms of Sr. No. 21 (ia) of Rate Notification. B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT 1. With the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, the applicant intends to ascertain whether the services with respect to EPC contract entered for execution of Sulphate Removal plant supplied to M/s Vedanta Ltd vide Contract no 4600008952 dated 14.08.2018 is covered under Sr. No. 24(ii) (Support Services to Mining) or Sr. No. 21(ia) (Professional, Technical or Business Service to Mining) of the Rate Notification. 2. Further, if the subject services are not classifiable under any of the aforesaid entries, what would be the appropriate classification for the same and at what rate GST would be imposable? C. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 07.09.2021. Shri Rohit Jain (Advocate) authorized person of applicant appeared for personal hearing. During the personal hearing, he reiterated the submissions already made in the application. He further requested that the case may be decided at the earliest. D. COMMENTS OF THE JURISDICTION....
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....ided whether the supply to be made by the applicant under the EPC contract awarded to them would be classified as "Support services to mining or other Professional, Technical & Business services relating to exploration, mining or drilling of Petroleum Crude or Natural Gas or Both or otherwise in any other service". 4. Support services to exploration, mining or drilling of Petroleum crude or natural gas are classified under heading 9986. The explanatory Note to service code 998621 provides the scope of the said entry i.e. Support Services to Oil & gas extraction, which is reproduced below "This service code includes derrick erection, repair and dismantling services, well casing, cementing, pumping, plugging and abandoning of wells, test drilling and exploration service in connection with petroleum and gas extraction, specialized fire extinguishing services, operation oil or gas extraction unit on a fee or contract basis. This service code does not include geological, geophysical and related prospecting and consulting services". 5. From the explanatory note it reveals that Support Services shall include the services to be provided for exploration, once the infrastructu....
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....f these fact, we examine the definition of "work contract" as provided under Section 2(119) of the CGST Act 2017, which reads as under:- (119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; The contract is for the engineering, procurement and commissioning of 'Sulphate Removal Plant.' What would be transferred is the plant including the civil work and land involved in plant. Various civil structure would be created and various equipment would be installed. The said plant cannot be shifted anywhere; it is essentially of the nature of immovable property. The plant after completion at the time of transfer will be an immobile property. It is thus, we are of the considered view that the work specified in the EPC contract qualifies as "work contract" and will be taxed accordingly. 8. According to Section 8 of Central Goods and Services Tax Act, 2017, ....