TaxTMI 
TaxTMI 
2022 (3) TMI 1090
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....es the following scenarios: i. Contract involving supply of cattle feed plant including equipment & machinery as well as erection & installation service thereof without civil work. ii. Contract involving supply of cattle feed plant including equipment & machinery as well as erection & installation services thereof with civil work. Part A - Supply of cattle feed plant involving supply of installation, testing and commissioning services without civil work 4. IDMC has submitted that one of the purchase order placed by Barauni Dairy vide reference # DRMU/PUR/CFP-Khag/18-19/278 dated January 16, 2019 for design, supply, installation, testing & commissioning of cattle feed plant & allied equipment at Maheshkhunt, Khagaria. The copy of purchase order is enclosed herewith as Exhibit B. 5. The applicant has received the order for design, installation, testing and commissioning of cattle feed plant ('plant'). They have quoted and agreed separate prices for supply of equipment and installation & commissioning of equipment. The bill of material / bill of quantity specify number of equipment required for cattle feed plant including accessories thereof and all th....
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....nclude land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth;" 6.5 As the expression 'attached to the earth' has not been defined in the General Clause Act, reference can be drawn from Section 3 of Transfer Property Act which gives the following meaning to the expression "attached to the earth": "(a) rooted in the earth, as in the case of trees and shrubs, (b) embedded in the earth, as in the case of walls or buildings, and (c) attached to what is so embedded for permanent beneficial enjoyment of that to which it is attached." 6.6 From above, IDMC submits that immovable property would mean anything that is permanently fastened to the earth. Considering this, it would be important to discuss whether the supplies in present case result into 'immovable property'. 7. IDMC submit that in their own case having similar facts, Gujarat Advance Ruling Authority vide reference order #GUJ/GAAR/REFERENCE/2017-18/1 has upheld that same would not be contemplated as works contract. The copy of ruling is enclosed herewith as Exhibit C. Relevant extract of the ruling is reproduced hereunder....
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....ed. 10.3 IDMC has referred an e-flyer issued by the CBIC on 'Composite supply and mixed supply'. IDMC submits that the above flyer has relied upon the Service Tax - Education Guide issued in erstwhile regime of Service Tax wherein the clarification was provided with respect to services bundled in the ordinary course of business. 10.4 IDMC submits that this bundle of various machinery and equipment and services are essential for each other and are naturally bundled for operation of cattle feed plant even though there is separate value allocated. It is important to note that need of customer would not be satisfied if IDMC does not supply all the goods and services required for functioning of the cattle feed plant and the obligation of IDMC would not be completed. Moreover, it is worthy to note that IDMC provides the entire bundle service as per the requirements of the customer and IDMC does not have an option to pick and choose the supplies. IDMC is required to provide all the necessary machinery and services required for a functioning cattle feed plant and hence, IDMC submits that the separate line items with separate consideration does not mean they are separate supplies but ....
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.... * In the case of Levob Verzekeringen BV, OV Bank NV v. Staatssecretaris van Financiën, [2005] EUECJ C-41/04, the ECJ held that where two or more elements or acts supplied by a taxable person to a customer are so closely linked that they form objectively, from an economic point of view, a whole transaction, which it would be artificial to split, all those elements or acts constitute a single supply for the purposes of application of VAT. 14. IDMC submits that in order to qualify various supplies as naturally bundled, it is essential to have following ingredients in any transaction and same are present in the arrangement at hand. Ingredients Whether present in this case The perception of customer is to obtain all equipment and machinery and services as a package Yes Whether trade & industry has similar practice to supply cattle feed plant including all goods and services Yes The nature of bundle should be such that they are bundled in ordinary course of business Yes There is single price for package and advertised in the same manner The price is agreed for entire work with relevant bifurcation of goods and services. Different products / g....
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.... (Vishakhapatnam). Without these goods, the services cannot be supplied by the applicant and, therefore, we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus, we find that there is a composite supply with supply of goods being the principal supply i.e. 'Chilled Water Plant'/ 'Chiller' in the subject case." 19. IDMC has place reliance on the Advance Ruling of NEC Technologies India Pvt. Ltd. vide Advance Ruling No. GUJ/GAAR/R/ 2020/07 dated May 19, 2020. The Gujarat Advance Ruling Authority had occasion to analyze whether design, development and supply of automatic fare collection (AFC) system would be considered as works contract or composite supply. In this case, after analyzing the facts, it was upheld that the contract for supply of the AFC system to the local authority does not qualify as a 'Works contract' under Section 2(119) of the CGST Act, 2017, since the installed AFC system cannot be said to result in the emergence of an immovable property. The relevant extract of the decision is reproduced hereunder, for your ready reference. ....
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....ite supply. The relevant extract of the ruling is as below: "10.8 In the instant case, the Applicant's supply involves goods i.e. submersible pump sets and the installation etc, of the same as service. Therefore, the Applicant supplies goods as well as services which are taxable supplies, The contractual agreement between the applicant and the said Corporation requires the applicant to supply the pumps and also install and energise the same. The applicant is, therefore, engaged in two taxable supplies, that of goods and also the service of installation. The service of installation is possible only when the goods (submersible pump sets) are supplied and hence the pre-dominant supply is that of "Submersible Pump Sets" and hence the principal supply in this case is supply of goods i.e. under the definition of Composite Supply. 22. IDMC submits that all conditions for composite supply is fulfilled in present case. IDMC submits that this is the practice followed by trade wherein as per requirement of customer, the supplier would provide cattle feed plant along with installation services. Therefore, IDMC believe that the present case would qualify to be composite supply w....
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....eadings of Chapter 84 or 85." 26. IDMC submits that all machinery / equipment and services contribute towards principal functions that work as cattle feed plant. Hence, entire plant should merit classification under Chapter Heading 8436. 27. IDMC has referred to Schedule II of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 12% for product falling under Chapter Heading 8436. The relevant extract has been provided hereunder for your easy reference: S.No. Chapter /Heading /Sub-heading / Tariff item Description of goods 199 8436 Other agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators and brooders 28. IDMC submits that as the Chapter Heading is included in the CGST Notification, the sub-heading falling under the Heading would also be covered within such line item. On conjoint reading of above, IDMC believes that the supply of cattle feed plant involving supply of various machines and equipment merit classification under Heading 8436 10 00 and be taxed at GST at the rate of 12%. Part B - Discussion on Classif....
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....ing civil work would result into an immovable property and hence, the present case would be treated as composite supply of works contract service. 34. Question on which Advance Ruling sought. 1. Whether contract involving supply of equipment / machinery & erection, installation& commissioning services without civil work thereof would be contemplated as composite supply of cattle feed plant under GST regime? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No. 01/2017 - CT (Rate) dated June 28, 2017 (as amended). 2. Whether contract involving supply of equipment / machinery & erection, installation& commissioning services with civil work thereof would be contemplated as works contract service or not. If the supplies would qualify as composite supply of works contract, what would be the classification and applicable tax rate thereon in accordance with Notification No. 11/2017 - CT (Rate) dated June 28, 2017 (as amended). Personal Hearing 35. Personal hearing granted on 18-2-22 was attended by Shri Hardik Shah, CA and Shri Kumar Parikh, CAand the....
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....nk, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the later part is in the positive then it would be treated as permanently attached to the earth. 41. On careful reading of the submissions before us, we find the following facts emerging: i. All the machines, apparatus, equipment are vital and requisite for the Cattle Feed Plants Operation and the Plant cannot function in their absence. ii. The Plant includes equipment receiving raw materials till packaging of finished goods. iii. The supply includes Installation and Erection at Customers premises. This involves equipment drawings and their layout for main feed plant, storage silo plant and steam generation plant. iv. The supply involves cable trench layout; electrical drawings, ETP drawings including civil cons....
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....lving transfer of property. We find that the Plant installation comprises cabling and fastening to earth/ foundation and all the equipment/parts are interlinked to constitute a functioning Plant that it cannot be moved as such without dismantling/ dismembering. We find no force in IDMC's submission that supply of Operational Plant without civil work is different in its essence from supply of Operation Plant with civil works for reasons of test of permanency, laid down by H'ble Apex Court, answered positive and for the associated civil works and fastening of Plant to earth, irrespective of terminology of contract. We find that though IDMC categorises a supply without civil work, is these cases also all equipment, ancillary equipment, MS Structurals, MS chequered plates, conveyors, electrical boards, cabling is involved and Plant is invariably fitted on foundation/ structures prior to its commissioning. The supply hinges on providing a functional and operational cattle feed plant which has passed the test of permanency and thereby an immovable property. The supply interalia involves transfer of property to the customer and the subject supply merits consideration under works contract ....
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....bserves that the specific machine in question can be moved and has indeed been moved after the road construction and repair project, for which it was installed, is completed. However, if a machine is intended to be fixed permanently to a structure embedded in the earth, the moveable character of the machine, according to the Supreme Court, becomes extinct. 45. We rest on the foundation laid down by the Supreme Court with respect to test of permanency and bound by the law of the land, as per Article 141 of our Constitution. We refer to Article 141 of our Constitution, "141. Law declared by Supreme Court to be binding on all courts: The law declared by the Supreme Court shall be binding on all courts within the territory of India". Further, We find that our views is in compliance to the Hon'ble Apex Court decision in case of M/s. Kone Elevator India Pvt. Ltd. Vs State of Tamil Nadu and others [2014 (5) TMI 265-Supreme Court] wherein the issue before the Larger Bench of the Hon'ble Apex Court was to decide correctness of the Judgement in case of State of Andhra Pradesh vs. Kone Elevators [2005 (2) TMI 519- Supreme Court] wherein a three judges bench held that contract of manufactur....
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....l part of the immovable property. The relevant extract of the said judgment is as under: "9. Having heard the rival contentions and having examined all the citations referred to hereinabove, we are clearly of the opinion that the same shall apply to the facts of this case in full force and item in question being immovable property cannot be subjected to excise under the tariff heading claimed by the Revenue. The case sought to be made out by the petitioner is also covered by the decision of the Government of India in reference, OTIS Elevator Company (India) Ltd. - 1981 (8) E.L.T. 720 (G.O.I.), wherein, it was clearly held that if an article does not come into existence until it is fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation of such article when it becomes part of immovable property, it cannot be described as goods attracting levy of any excise duty. Thus, applying the ratio of all the above judgments including the order of the Government of India referred to hereinabove, the case sought to be made out by the petitioner has to be upheld. The contention sought to be advanced by the petitioner has a lo....