TaxTMI 
TaxTMI 
2022 (2) TMI 1099
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....r, D-236 & 237, SDC Monarch Building, Amrapali Marg, Vaishali Nagar, Jaipur-302021, 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 08AABCL5967DIZE 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 L & T Hydrocarbon Engineering Ltd. ("the Applicant") is a company registered Linder the Indian Companies Act, 1956. It is a subsidiary of L&T Limited, an Indian technology, engineering, construction, manufacturing and financial services conglomerate. The Applicant is engaged in the business of engineering, procurement fabrication, construction and project management providing integrated solutions to the Hydrocarbon Industry. The Applicant carries out construction of refinery, petrochemical, chemical project, g....
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....la wells ("Subject services"). 1.6 The Mangala field has 18 well pads out of which 15 were under 'polymer flood' and 3 were under 'water flood'. The well pads are distributed in different clusters depending upon their physical location in the field and stage of development There are separate networks for evacuation of production fluid as well as for supply of injection water and power fluid. 1.7 The production fluid received from well pads are processed in three oil trains consisting of slug catchers, production heaters, production separators and settling tanks. The oil from the settling tanks is further sent to Dehydrators and export tanks (complying with the acceptable technical requirements]. 1.8 The Produced water separated from different vessels and tanks in oil trains is gathered and treated in the produced water treatment facilities, whereas the power fluid requirement of Mangala is met by the power fluid pumps. The Injection Water (IW) system consists of IW tanks, IW booster pumps, IW heaters, IW filters & IW pumps which are common to both injection water & power fluid systems. SCOPE OF WORK - AUGMENTATION OF FACILITIES & INFRASTRUCTURE UNDER MUP....
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.... electrical instrumentation etc. are in Applicant's scope. Augmenting existing Injection Water System capacity 1.14 The customized Injection water (IW) system consists of IW tanks, booster pumps, heaters, filters, IW pumps & Power fluid (PF) pumps. The overall injection water, requirement is -780 KBWTD & Power Fluid requirement is -400 KBWPD. Thus, the combined requirement of IW & PF is 1180 KBWPD. This increased IW & PF requirement necessitates augmentation of existing Injection Water & Power Fluid systems. 1.15 The Power Fluid stream is currently not filtered at MPT. Hence, new customized filter beds are envisaged for filtering the power fluid. The major facilities envisaged includes, new Injection Water Booster Pumps, water Heaters, water Filters, power fluid filters, injection & power fluid pumps, all customized as per the contract. New Back Wash System 1.16 The existing filters in the plant are presently being backwashed by filtered injection water, which has been found ineffective. Hence, Vedanta has decided to use heated fresh (Thumbli) water for filter backwashing purpose. The scheme is to be implemented for 2 nos. existing & 2 nos. new customized filter ....
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....itrogen. Based on all new user requirements, apart from those listed above, the capacity of Nitrogen generation skid including its compressor, air dryer, etc. is to be finalized. Therefore, the scope of work for this system includes New customized instrument Air package, nitrogen generation package and new instrument air receiver. Augmentation of other facilities New Facility Features New Chemical injection skid at MPT Scope of work for this system includes: • Augmentation of chemicals injection as per adequacy reports of FEED done by EC. • > The first fill of chemicals for equipment supplied by the Applicant is to be in Applicant's scope. This includes chemicals required for commissioning, pre-commissioning & PGTR. Flare System the hydrocarbon gas release from the MUP-2 facilities is to be integrated with existing HP flare & LP flare headers by connecting HP & LP flare headers from MUP-2 facility to existing headers. No augmentation in LP & HP flare system in envisaged as part of the MUP-2, AU dead ends of flare header is to be provided with Fuel gas as purge gas. Any I hydrocarbon liquid that is contaminated by oil or chemical or....
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....cable tie-in with the existing & proposed facilities, site acceptance testing (SAT), pre-commissioning & commissioning, RFSU, performance guarantee test run (PGTR) as per Contract , training of Vedanta's commissioning & operations personnel as per SOW, Project Management, Construction Management, Logistic Management, Site Management, Stakeholder Management, Regulatory Compliance, Site Restoration as applicable & satisfactory handover to Vedanta of the facilities, all customized as per the contract and forming an internal part of MUPS2-EPC2 Project. 1.23 All the works is to be carried out by the Applicant in accordance with the Vedanta's approved specifications, drawings, procedures, method statements, applicable codes & standards, scope of work, schedule of rates & other requirements of contract. The Applicant is required to deploy resources (including manpower, tools & tackles, equipment, etc.) for execution of the scope of work. The Applicant is also responsible for arranging any external assistance/ support, if required, at its own cost & risk. 1.24 The Applicant's obligation is to cover the provision of all plant & equipment & performance of all installation s....
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....itions/ stipulations laid downs by concerned authorities, etc as per Contract SOW (e) Obtaining all necessary approvals & work permits from concerned authorities for performing the work like shifting/ relocation of existing facilities & other utilities, etc. (f) Coordinating with vendors, suppliers, fabricators & to perform all activities including expediting, inspection & testing, transportation, loading/ unloading, storing, shifting & liaison with the authorities, etc. (g) Identifying & planning access to sites as may be required for construction of project facilities. Design & Engineering 1.27 The Applicant's scope of work for Design & Engineering for the facilities forming part of this project includes engineering for facilities, procurement, construction/ installation/ commissioning & Test run. The Applicant is responsible to meet the design requirements and to install a safe and efficiently operable facility and not to be relieved or absolved in any manner whatsoever of any of its obligations under the contract. Further, the Applicant is required to perform the following activities at each engineering stage: (a) Pre-bid engineerin....
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....ite, performing preconstruction surveys, delineating existing facilities & suggesting re-routes, if required. (c) Arranging the materials at site: Coordinating with vendors to ensure timely delivery of materials at site and perform necessary inspection with regard to quality, quantity, damaged material, etc. (d) Construction of facilities : Construction of proposed facilities in the vicinity of existing operating pipelines, utilities as approved by Vedanta. Testing & Pre-Commissioning 1.31 The Applicant has to ensure safe and acceptable testing and pre-commissioning of all the facilities constructed under this contract, more specifically, the testing and pre-commissioning of the specified facilities, viz., piping, equipment & vessels, electrical, instrumentation & other miscellaneous facilities shall be performed as per acceptable specification and technical standards including hydrotest pressure and duration standards. In case of unsuccessful results, the Applicant is required to ensure re-testing till specified results are achieved. Commissioning 1.32 The Applicant submits that facilities forming permanent part of the system is required to be commiss....
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....osition, since the newly introduced entries seem to be more appropriate and accurate to cover the Subject services. (h) Upon analysis of the various Headings of Classification of services under the Rate Notification, the Applicant is of the considered view that the Subject services are appropriately classifiable under the Heading 9986 [Sr. No. 24(ii)] (viz.. "Support services to exploration, mining or drilling of petroleum crude or natural gas or both") or alternatively under the Heading 9983 [Sr. No. 21 (ia)] (viz.. "Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both ") and are liable to 12% rate of GST under the CGST Act. By filing the present application under Section 97(2)(a) of the RGST Act, the Applicant seeks to confirm this classification. (a) STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED APPLICANT'S ELIGIBILITY FOR ADVANCE RULING 1.38. Section 97 of the Central Goods and Service Tax Act, 2017 ('CGST Act'), entails that advance ruling may be file....
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....rolling all aspects of the execution of the MUPS2-EPC2 Project on behalf of Vedanta. Since such services are in the nature of operational or administrative assistance provided by the Applicant to Vedanta, it aptly merits classification as 'support services to mining' as per Heading 9986 of the Rate Notification. 1.42 The Applicant submits that the Rate Notification prescribes the principles of classification which are to be adopted while interpreting the entries provided therein. Given that classification of services is based on the HSN system of classification of services, Rate Notifications under Central Goods and Services Tax ('CGST'), prescribe the adoption of the scheme of classification of services annexed to the respective Rate Notifications. In this regard, the Explanation to the Rate Notification prescribes as under: "Explanation - For the purposes this notification,- (ii) Reference to "Chapter", "Section" or "Heading", wherever they occur, unless the context otherwise requires, shall mean respectively as "Chapter ", "Section" and "Heading" in the Scheme of classification of services annexed to notification No. 11/2017-Central Tax (Rate....
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....ash system, LP Steam & condensate system (c) Augmentation of Instrument Air & Nitrogen capacity (d) Augmenting other aspects of liquid handling capacity (e) Installation of new chemical injection skid, flare system and drainage and potable water system (f) Modification of well pads 1.47 From the above, it is evident that the construction and installation of these customized facilities will help Vedanta in enhancing its overall liquid handling capacity and hence directly result in the increased production from its mining activities. It is also evident from the above that without upgrading its infrastructure facilities, it would not be possible for Vedanta to enhance its production capacity. Therefore, the installation of aforesaid facilities forms an inextricable link to the petroleum operations and hence are sine quo none. 1.48 Further, for the purpose of carrying out the above customized enhancements in the facilities and infrastructure, the scope of work for the Applicant including the following:- a. Supervising, reviewing and monitoring the designs, drawings and other relevant documents for the effective completion of the projec....
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....rvices to agriculture, hunting, forestry, fishing, mining and utilities. Sr.No. Chapter, Section Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 454 Heading 9986 Support services to agriculture, hunting, forestry', fishing, mining and utilities. 462 Group 99862 Support Services to Mining 463 998621 Support services to oil and natural gas extraction 998622 Support services to other mining nowhere else classified 1.52 The Applicant submits that a reading of the aforesaid entry suggests that it covers 'Support Services to Mining'. Therefore, it is relevant to understand the meaning of the terms "support services", "to" and "mining" used in that expression. Term "support services' has a wide meaning 1.53 Heading 9986 relates to support services and inter alia covers mining. The term "support services' has not been defined under the Central Goods and Services Tax Act, 2017 ('CGST Act'). The principle of nomen juris suggests that where definition of a term is not provided in a particular Act, the definition of the same....
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....nything which helps in sustenance, keeps something going, enables something to exist or continue. Further, as per the definition of 'support services' as prescribed under the erstwhile Finance Act, it is evident that the said activity would include all such operational, administrative, consulting and management services, or any other such support services, which the entities or recipients would carry out themselves, hut have outsourced the same to the supplier of such services. Meaning of the term 'to' • While (here is no specific definition of the term 'to' in the Rate Notification, however, it has been most acceptable position in law-that in absence of any specific legal definition, the term used in common trade parlance may be resorted to. The term "to" is generally understood as below: Dictionary Meaning Words & Phrases Legally defined, Lexis Nexis, Fourth Edition I think we ought to construe the word 'to ' us meaning towards That is the sense in which the ward is always used in all instruments connected with or relating to marine assurance. It has that meaning in a bill of lading, and I dan t know why we should adapt ....
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....hin its ambit the ancillary and incidental activities such as extraction, purification, development of existing mining facilities, all of which is in relation to the activity of mining of minerals/petroleum/natural gas from the earth. Thus, it is submitted that not only, the activity of extraction would qualify as mining, but also, it would include development of existing mining facilities, in order to bolster the quantum of mined goods or increase in production or efficiency of the oil mine. 1.61 The Applicant submits that the customized services provided under the EPC contract would be of no material significance / relevance, if there is per se no activity of mining operations. Further, the Subject services would be insignificant when performed in isolation without mining operations being undertaken. It is submitted that until and unless the services provided by the Applicant are integrally connected with that of mining operations undertaken by the Applicant on behalf of Vedanta, the objective of achieving the desired augmentation/development of the oil and gas facilities would not be fulfilled 1.62 Further, the innate nature of the Subject services as outlined in the agree....
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....e vide Notification No. 20/2019-Central Tax (Rate) dated 20.09.2019, wherein 'support services of exploration, mining or drilling of petroleum crude or natural gas or both1 was substituted to read as 'support services to exploration, mining or drilling of petroleum crude or natural gas or both In this regard, it is submitted that the aforesaid amendment had widened the scope of services, in as much as, such services would cover all ancillary or incidental activities to the main activity of mining or exploration of natural gases, and not only those support services which directly involves mining or exploration of gas. 1.67 In the present case, as mentioned above, the Applicant provides support services to Vedanta. In light of above, it is submitted that the support services provided by the Applicant are integrally connected to the activity of mining and therefore, the supply of services provided by the Applicant is squarely covered within the ambit Sr. No. 24(ii) of Heading 9986 of the Rate Notification. As a result, it is submitted that the said services would attract GST @ 12% in light of Sr. No. 24 (ii) of the Rate Notification as 'support services to exploration, ....
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....which forms the very basis of exploration and mining activities and are therefore explicitly provided under the Explanatory Notes to the Heading 998621. 1.71 The occurrence of the expression "includes" in the above Explanatory Notes suggests that it is not an exhaustive list but is merely indicative. In this regard, it is submitted that the said phrase has a very wide connotation, thereby giving the Chapter Heading an extensive scope. The said phrase used in the Explanatory Note clearly shows that the Chapter Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard is made to Tetragon Chemie Private Limited and Ors Vs CCE and Ors [2001 (138) ELT 0414 Tri-LB], wherein in the context of interpretation of an inclusive Chapter Note, the Delhi Tribunal inter alia held that the Chapter Heading is to be given a wide connotation and is not to be restricted to the illustrations provided in the Chapter Note. 1.72 Reference is also made to the decision of Stove Kraft Pvt. Ltd. Vs State of Karnataka [2006(2) TMI 603] wherein on the aspect of classification of goods, Karnataka High Court inter alia held that the word 'includes&....
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....danta under Heading 9954 - "General construction services' and is paying GST @ 18% under Sr. No. 3 of the Rate Notification. Given the scope of work involved in the project and further by virtue of the amendment made in the Rate Notification effective October 1, 2019 wherein a specific amendment was made in Sr No. 24 (ii) of the Rate Notification which attracts GST @ 12%, the Applicant is of the firm belief that the Subject services would merit classification under Sr. No. 24 (ii) as 'support services to exploration, mining or drilling of petroleum crude or natural gas or both '. 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 QR BOTH' UNDER HEADING 9983 OF Sr. No. 21 (ia) OJ THE RATE NOTIFICATION 1.78 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 Notificatio....
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....tate Government or any local authority in which they are engaged as public authorities.' 1.82 The aforesaid definition 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. 3 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. 1.83 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 classify particular services such as management and consultancy services relating inter alia mining, and which do not merit classification as support services to mining under Heading 9986. 1.84 It is pertinent to note that Entry at Sr. No. 21 (ia) of the Rate N....
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....fied 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 the Circular is reproduced hereinbelow:- '2 The matter has been examined. Most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas Jail under heading 9986. A few services particularly technical and consulting services relating to exploration also fall under heading 9983 Therefore following entry has been inserted under heading 9983 with effect from 1st October 2019 vide Notification No. 20/20/9- Central Tax(Rate) dated 30.09.2019, - '(ia) Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' 1.87 The aforesaid Circular clearly states that technical and consulting services relating to exploration also fall under Heading 9983 and would also classified under Sr. No. 21(ia) of Rate Notification as other professional, technical and business services relating to inter alia mining. It is pertinent to note that since the wordings use....
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....sions already made in the application. He further requested that the case may be decided at the earliest D. COMMENTS OF THE JURISDICTIONAL OFFICER Comments received from the Deputy Commissioner. SGST, Circle-N, Jaipur vide letter dated 17.09.2020 are as under:- • The applicant L&T HYDROCARBON ENGINEERING ltd is a subsidiary of L&T Ltd. and is engaged in activities such as construction of refineries petrochemicals, chemical projects, gas gathering station, crude oil and gas terminals etc. • The applicant has entered into an engineering procurement and construction contract (EPC contract) with Vedanta ltd for augmenting facilities and infrastructure for enhancing the liquid handling capacity to 1300 KBLPD at MPT based on the projected production scenario. • The applicant has sought the clarification regarding heading 9986 of notification no 11/2017 dated 28-06-2017 as support services to exploration, mining, or drilling of petroleum of petroleum products attract GST at 12% and whether the services provided by applicants are classified under other professional, technical, and business services relating to exploration, mining or drilling of ....
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....nt and construction (EPC) services in relation to the upgradation of certain facilities of the Mangla oil field which is operated by Vedanta for carrying out petroleum operations. Since services are in the nature of operational or administrative assistance provided by the applicant to Vedanta, it aptly merit classification as "Support-services to mining" as per heading 9986 of the Sr. No. 24 (ii) Rate notification No. 11/2017 central tax (Rate) dated 28/06/2017 (as amended). The applicant further contended that alternatively the supply of services by them 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 No. 11/2017 Central tax (Rate) dated 28/06/2017 (as amended). 3. Now the issue to be decided 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. S....
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....r "Support services to exploration mining or drilling of Petroleum crude or natural gas or other professional, Technical and business services relating to exploration, mining or drilling of Petroleum crude or natural gas or Both. 6. As per EPC contract the applicant has to complete the task, of setting up of MUPS2-EPC-2 project broadly ranging from designing, engineering, procurement, fabrication, manufacturing, assembly, erection and installation, facilities construction, Testing, Pre commissioning & Commissioning, Training etc & satisfactory hand over of complete various infrastructure facilities, all customised as per contract. The applicant has to start from the scratch and bring into existence a fully operational various infrastructure facilities at MUPS-2-EPC-2 project. The execution of the project would also involve the transfer of property in goods. 7. In light of 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, ....
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....abrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc. are involved along with transfer or property in goods. b. Under GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property, then it will be classified as works contract. Further, we observe that the activity proposed to be undertaken is a composite supply of works contract, the rate of tax in given service shall he determined in accordance with the Notification No 11/2017-Cf (Rate) dated 28.06.2017, as amended from time to time. The relevant portion of the S. No. 3(Heading 9954) (ii) of the Notification No. 1 1/201 7-CT (Rate) dated 28/06/2017 (as amended) is as under:- Heading 9954 (Construction services) CGST Rate % SGST Rate % IGST Rate % Remarks (ii) Composite supply of works contract as defined in clause 119 of Section 2 of Central Goods and Service Tax Act, 2017 9 9 18 - In view....