TaxTMI 
TaxTMI 
2022 (3) TMI 1090
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....nvolving 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 the goods are offered to customers at their respective rate even if th....
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...." 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. "8.2... We observed that if the equipments or components assembled or installed at site and attached by foundation to earth can be dismantled without substa....
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....ax 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 are a part of a single supply i.e. cattle feed plant. 10.5 In this regard, IDMC relied upon the case of M.O.H. Uduman And Ors Vs. M.O.H. Aslum dated November 13, 1990 [1991 AIR 1020] wherein it has been observed that the con....
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....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 / goods and services are integral part of overall system Yes 15. IDMC submits that the supply of cattle feed plant involving various machineries, equipment and services is naturally bundled and in conjunction with each other and therefore, third condition is also sat....
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.... 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. "25. As per the applicant, apart from the flap gates and manual swing gates, which can arguable to be said to be fixed/ annexed to immovable property, rest all hardware to be supplied under said contracts are movable property. The flap gates, POS machines and manual swing gates are attached with screws ....
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....tween 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 wherein the supply of cattle feed plant is the principal supply which provides essential character to the entire bundle of supply of goods as well as installation service. 23. IDMC submits that Heading 8436 of Customs Tariff Act, specifically covers machinery for preparing animal feeding stuffs. The relevant extract of the Customs ....
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....ct 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 Classification of supply of cattle feed plant involving supply of installation, testing and commissioning services with civil work. 29. IDMC submits that in this case they receives order for design, installation, testing and commissioning of cattle feed plant ('plant'). They quote and agree separate prices for supply of equipment and installation & commissioning of equipment. The Applicant fur....
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....egime? 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 they reiterated the submission. Additional Submission: 36. IDMC vide letter dated 4-3-22 has submitted as follows: 'During the course of hearing, your good office has sought Photographs of cattle feed plant in order to determine ruling on questions asked in the application. In this regard, we are enclosing herewith sample photographs showing various parts & equipment of cattle feed plant in respect of question raised for P....
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.... 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 construction work, including drawings of civil structure. v. The mechanical installation comprises supply and installation of structural platforms and tables. vi. The supply comprises final adjustment of the foundations including alignment and dressing of foundation surface, embedding and grouting of anchor bolts and bedplates. vii. IDMC shall only after the alignment has been checked by it and witnessed by the Purchaser, then afterwards only, permanently bolt down the equipment ....
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....ks 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 service. 43. In this regard, we find it apt to refer to CBEC Order No. 58/1/2002-Cx dated 15-1-2002 issued for the purpose of uniformity in connection with classification of goods erected and installed at site. We find this CBEC order's rationale applies to our subject matter. This said CBEC order was issued in wake of plethora of judgments appear to have created some confusion with the assessing officers, the matter was examined by the Board (CBEC) in consultation with the Solicitor General of India and the matter was clarified vide sai....
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....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 manufacture, supply and installation of lifts is to be treated as sale of goods, as opposed to a works contract. However, the Larger Bench of the Hon'ble Supreme Court overruled the said decision of three judges bench and held that the said contract in question is not merely a sale of goods since the same does not involve chattel (lift) sold for chattel. The Larger Bench of the Supreme Court upheld that the contract in question as a works contract since the same did not involve sale of chattel simpliciter but involved installation of chattel at site amounting to chattel being attac....
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..... 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 lot of merits in their submission and the issue is squarely covered against the Revenue that once the item has been held to be an immovable property, then, for the purpose of valuation the cost of construction and proportionate escalation charges cannot be added in the assessable value, as such, the impugned communication dated 20th August, 1987 of the respondent No. 1 is quashed and set aside and it is declared that the erection of lift is not excisable under Tariff Item No. 68 of the First Schedule to the said Act." 46.1 We note our views in compliance to ratio decidenci laid down vide ....