TaxTMI 
TaxTMI 
2022 (2) TMI 1047
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....ded by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central/State Government, Union territory, a local authority, a Governmental Authority or a Government Entity taxable at the rate of 5%? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions of M/s Kapil Sons Explosives LLP, the applicant, are as under:- 2.1 The applicant, a GST registered firm, is engaged in drilling and blasting works at various sites using Industrial explosives and other materials. 2.2 The development of balance land in Sector-26 & Sector-26(A) at Vahal Ulwe, Navi Mumbai in the State of Maharashtra ("the QUARRY") is in the effective control and possession of the owner, M/s City ....
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....issue is reproduced as under: 2.9 The work awarded by CIDCO to the main contractor i.e. Balajee, is development of balance land in Sector 26 & 26A at Vahal, Navi Mumbai under NMIA Project. For such contract, the main contractor has engaged the applicant as a sub-contractor for drilling and blasting work. 2.10 As per the work order issued by CIDCO to Balajee, development of balance land includes series of activities such as providing rock fill for reclamation of land up to level specified in drawings as per specifications with material queried by control blasting or wedging and chiseling or line drilling from area in the Quarry, extraction of rock by controlled blasting/chiseling, loose dressing of land, filing of voids with quarry spalls and compacting with pneumatic vibratory roller, levelling of land. 2.11 The term "earthwork" has not been defined in Act or rules made there under and hence reference is required to be made to the dictionary meaning of the same. 1. As per - Merriam Dictionary "earth work" means:- 1. an embankment or other construction made of earth especially: one used as a field fortification 2. the operations connected with exc....
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....O as given in the annexure to the work order (a) By controlled blasting or wedging and chiselling or line drilling 456164.87 167.00 Cum. 7,61,79,533.79 2.13 On going through the work order, it is understood that various goods including explosives, tools and other material have to be used during the process of blasting and hence there is an element of goods involved in the transaction. Further, undoubtedly there is a service element in carrying out the whole process starting from drilling till the end by removing the rubble. Hence, the activity involves both goods and services. 2.14 The elements of the definition of a works contract are as under:- • 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; 2.15 In respect of above conditions, the applicability of facts of case is as under:- • It is clear from the work order....
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....ods, this factor does not prevent them from being goods. Hence there is a transfer of property in goods, in some other form involved in the execution of construction project. Further, in this regard, the judgment of Hon'ble Supreme Court in the case of State of Gujarat Vs. Bharat Pest Control [Civil Appeal No. 1335 of 2018] = 2018-TIOL-310-SC-VAT is relevant, wherein it has been held as follows "5. A Constitution Bench of this Court in Kone Elevator India Private Limited vs. State of Tamil Nadu, while considering the correctness of its earlier view with regard to dominant nature of the contract test, had apart from holding that the dominant nature test would no longer be determinative, considered paragraph 56 of the report in Larsen & Toubro Limited 2 (2014) 7 SCC 1 (supra) and has accepted the same to be the correct position in law. 6. In view of the above position of law enunciated in Larsen & Toubro Limited (supra) and Kone Elevator India Private Limited (supra) the view taken by the High Court that there is no deemed sale of the goods used in the contract executed by the respondent - contractor cannot have our approval. We, therefore, set aside the order o....
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....f work to be done by applicant for Balajee was same and was on the basis of the main contract between CIDCO and Balajee only. In the instant case, the material i.e. blasting material along with other tools and consumables were bought and employed by applicant only the same site. Thus the services supplied by the applicant are duly classifiable under following HSN: Site formation and clearance services including preparation services to make sites ready for subsequent construction work, test drilling and boring and core extraction, digging of trenches- 995432. 2.23 On the basis of above the billing has been done by the applicant at 5% GST Rate to Balajee only. The copy of invoice raised by applicant upon Balajee is enclosed and marked as Annexure-9. Hence it is clear that since the service supplied by main contractor is classifiable under entry S.No 3(vii) of N.N. 11/2017-CT Rate 2017 and back to back sub-contract of the same agreement has happened hence the service supplied by the applicant merits classification under entry S.No. 3(x) of N.N. 11/2017-CT (Rate) dated 28.06.2017 which is read as: [(x) Composite supply of works contract as defined in clause (119) o....
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...., In Hindustan Zinc Ltd. v Commercial Taxes Officer, on 29 February, 2008, the Hon. Rajasthan High Court while dealing with the issue whether the explosives are goods liable to be taxed and whether the activity of blasting carried out by Hindustan Zinc is a works contract observed that; "27.... since the explosives is a consumable item and in fact consumed in mining operation, therefore, as per Clause (e), ((e) cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract; and) the entire cost of explosives is required to be deducted from the value of the goods involved in execution of works contract, which in other words, mean that no tax can be levied on the value of the consumable item which is explosive in this case. The argument appears to be quite attractive but is devoid of any force because of the reason that deduction from the value of goods involved in the execution of a works contract can be claimed only of "charges towards labour" and "services" obviously provided by principle. The explosive is not falling in either "labour charges" ....
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....aid contract and also from the clause regarding the scope of work to be done by the Applicant for M/s Balajee shows that, the Applicant is entrusted only with the work of drilling and blasting operation with explosives at the designated site of CIDCO. The Applicant is only supposed to drill at the quarry site and thereafter perform the work of blasting of rocks etc., with the help of explosives. As per contract terms, the Applicant is not supposed to remove the boulders, rocks or mud, etc. after completion of blasting operation. The said work may be done by M/s Balajee or any of his agents but definitely not by the Applicant. The Applicant, thereby, does not have to and does not perform any earthwork activities as canvassed. Further, the nature of the work performed the applicant reveals that the cost of labour (service) component is very less as compared to the cost of explosives that are to be employed and utilized by the Applicant in the said contract. 3.6 Entry 3(vii) of Notification No.11/2017-CT (Rate) dated 28/6/2017 provides for the tax rate of 5% on "Composite supply of works contract as defined in clause (119) of section 3 of the CGST Act, 2017 involving predominantly ....
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....oints have been agreed by the jurisdictional officer.- 1. The activity undertaken by the applicant for M/s Balaji Infratech & Construction Pvt Ltd is a works contract service (page no 3 of the "argument note") 2. The HSN Code of the services supplied by the applicant is classifiable under HSN Code 9954 under "Construction Services" 3. The activity undertake by the applicant will not will not fit in the activity defined under entry 3(x) as applicant is not entrusted with the activity of performing any earth work and is definitely not doing any and thus Applicants' construction service by virtue of been categorized under entry 3(xii) of Notification No.11/2017-CT (Rate) dated 28/6/2017 has to be taxed at 18 per cent. 4.2 The point wise reply to the said "argument notes" is submitted as under,- A. Applicant concurs with the view of the jurisdictional officer that its activity is classifiable as works contract service in accordance with notification no 11/2017-CT Rate dated 28.06.2017. B. The applicant concurs with the view of the jurisdictional officer that HSN Code of the services supplied by it is classifiable under HSN Code 9954 u....
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....from CIDCO for Drilling, Blasting, Mucking and allied job and reclamation works for the land Development respectively pertaining to Ulwe NMIA at the said QUARRY. On perusal of same it is evident that it has been asked to undertake series of Activities such as,- 1. providing rock fill for reclamation of land up to level specified in drawings as per specifications with material queried by control blasting or wedging and 2. chiseling or line drilling from area in the Quarry, 3. extraction of rock by controlled blasting/chiseling, 4. loose dressing of land, 5. filing of voids with quarry spalls and 6. compacting with pneumatic vibratory roller, 7. levelling of land. C.3. Thus the activity to be done by Balajee Infratech & Construction Pvt Ltd predominately (in fact only) involves earth work i.e. extraction, site clearance and land levelling only. C.4. It is evident from the work awarded to M/s Balajee that, it has to get the blasting done and also has to prepare the land. The debris removal plus dressing of land and its levelling is within the scope of its work. C.5. work to be done by M/s Balajee....
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....med by the applicant should be predominantly earth work. The said condition is only applicable on the main contractor which has been established above. C.13. That thus once HSN Code under which the services supplied by the applicant as sub-contractor is 9954 i.e. works contract services, the applicant's activity duly gets covered under entry 3(x) of the notification no 11/2017-CT (Rate) dated 28.06.2017. C.14. That further classification of service i.e. 6 digit classification is irrelevant in given case since the main contractor is covered under HSN Code 995432 and involves earth work. 05 HEARING 5.1 Preliminary e-hearing in the matter was held on 30.11.2021. The Authorized representative of the applicant, Shri. Yash Ladda, learned CA and Smt. Shuchi Sethi, learned CA were present. The Jurisdictional officer was absent. The Applicant was directed to produce details of works completed. The Applicant was also directed to produce relevant bills, invoices issued (copies) and details thereof and what tax treatment is being adopted at present by the applicant. 5.2 The Application was admitted and was fixed for final e-hearing on 14.12.2021. Shri. Yash Ladda....
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....ntracted to the applicant, is a composite supply as defined under the GST Laws. We also take reference from the decision given by the Advance Ruling Authority of Gujarat in case of M/s KHEDUT HAT [2018-TIOL-173-AAR-GST] which has held that blasting work with use of explosives is a composite supply. The ruling pronounced is as under: "There is deemed supply of explosives in this case in view of the judgement of Hon'ble Supreme Court in the case of Bharat Pest Control - 2018-TIOL-310-SC-VAT as well as the supply of service in the form of the blasting work - Therefore, the situation as narrated by the applicant is a 'composite supply' of goods and services and shall be covered by Section 2(30) and Section 8(a) of the CGST Act, 2017 and the GGST Act, 2017: AAR. 6.7 The jurisdictional officer has referred to the decision in the case of M/s Hindustan Zinc Ltd. v Commercial Taxes Officer, dated 29 February, 2008 and has submitted that, from the said decision, it can be inferred that the activity of the Applicant of drilling and blasting of explosives can be termed as a 'works contract'. We also find that, since the Applicant is rendering a composite supply ....
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....CT(R) dated 18.11.2021 (with effect from 01.01.2022) and in Sr. No 3 (vii) of the amended Notification No. 15/2021-CTR dated 18.11.2021, the words "Governmental Authority" and "Government Entity" have been deleted. Therefore, in view of the above discussions, with effect from 01.01.2022, the impugned services supplied by the applicant will not be covered under Sr. No. 3 (x) of Notification No. 11/2017-CT (Rate) dated 28/6/2017, as amended. 06. In view of the above discussions, we pass an order as follows: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus - Question 1: Whether the activity to be carried by the applicant shall be classified as supply of goods or services or a composite supply of 'works' contract'? Answer: The activity to be carried by the applicant shall be classified as a composite supply of 'works' contract'. Question 2: Whether the activity should be classified as Composite Supply of works contract under Entry 3(x) of Notification No. 11/2017-CT (Rate) dated 28.06....