TaxTMI 
TaxTMI 
2022 (5) TMI 531
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....egal Name Sapna Gupta) Gurjar Ki Thadi, Jaipur (hereinafter also referred to as 'the appellant') against the Advance Ruling No. RAJ/AAR/2021-22/10 dated 03.09.2021. BRIEF FACTS OF THE CASE 3. M/s Utsav Corporation (legal name Sapna Gupta) Gurjar Ki Thadi, Jaipur (herein after referred as appellant) have filed appeal against Ruling issued by Authority for Advance Ruling Rajasthan vide order No. RAJ/AAR/2001-22/10 dated 03.09.2021. The Appellant has submitted appeal on online portal on 06.10.2021 and in hard copy on 18.10.2021. Fee of CGST Rs. 10000/- and SGST Rs. 10000/- have been paid vide Challan dated 23.09.2021. Brief facts of the case are as under: - 3.1 M/s Utsav Corporation, Gurjar Ki Thadi, Jaipur (hereinafter referred to as "appellant") is a proprietorship concern engaged in providing products and services in energy conservation, renewable energy sources, water infrastructure and water treatment project management. The appellant is engaged in supply of solar energy-based products under various contracts and on the basis of purchase orders from customers with or without installation service. Appellant is registered under GST as per the provisions of the GST laws bea....
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....ocurement, development, testing, commissioning etc hence, it is a mixed supply for goods and services and highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.7 Solar panel + Solar Controller + Solar Pump, Solar Pump + Solar Panel, Solar Pump + Controller, Solar Panel + Controller: -Since the above composition is the mixed supply of goods, as already discussed in above para, hence the highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.8 Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water application: - It is a works contracts Service and attracts 18%rate if GST S. NO. 3 of Heading 9954 (ii) of Notification No. 11/2017 dated 28.06.2017. 4. Aggrieved by the ruling, appellant has filed appeal before this forum on following grounds: - 4.1 Appellant submitted that technical details and use of the products 'Solar Controllers' and 'Structure' in the relevant context has been ignored in determination of classification of the product which have been briefed out by the....
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....t aids in maximum use of power generated by the solar panel array. In the sunlight, the MPPT algorithm of solar drive extracts maximum power and also operates the motor at a variable speed based on the power input to drive. When the sunshine varies during the day, the power input to the drive also varies and the solar drive generates variable ratio to control the speed of the motor. The above drive with MPPT is assembled in an enclosure to form a solar converter. MPPT technology is not used in conventional electric pumps and it has no use there because the technology functions to maximize the use of DC power generated by solar panel array by the solar pumping systems only. It is a distinguishing factor of solar controllers. MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems specifically provide that Maximum Power Point Tracker (MPPT) shall be included to optimally use the power available from the SPV array and maximize the water discharge. Since in the case of appellant the controllers comprise of Variable Frequency Drive (VFDs) with MPPT, it is apparent that these controllers are designed only for use in sola....
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....ion: Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, lock-gates, towers, lattice masts, roofs, roofing frame-works, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel However, in the case of appellant, the product in question is not general iron structures but 'Water Pumping System Mounting Structure'. They are parts of specific machines. Hence it is important to refer the Section Note according to which parts of machines are to be classified. Note 2 of Section XVI of Customs Tariff being relevant in the given case states as under: 2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules: (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487,....
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.... PV modules for solar water pumping system are essentially parts of Solar water pumping system. In the case of Elecon Engineering Co. Ltd. 1998 (103) ELT 395 (Tribunal), it was agreed that power cables cut to specific size and used as a protection to the wind mill from short circuit should be treated as an essential part of the Wind Turbine Controller. Hence above facts and judgment strengthen the facts that structures are parts solely for use in Solar water pumping system. Applying the above Section Note 2 to structures in the given case, these are parts not included in Chapter 84 or 85, so they out of (a) above. Thus structures are other parts and as per Note 2(b), since these structures are suitable for use only with Solar Water Pumping System having specific technical design and parameters for specified number of panels and weight etc., these structures are to be classified with the solar water pumping system only under Chapter 84. Hence the structures are classifiable under Chapter 84 of Customs Tariff by applicability of Section Note 2(b) to Section XVI of Customs Import tariff. Now for determining the GST rate on iron structures for solar pumping system sold o....
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....le will be made by the appellant on separate prices clearly bifurcated for all the parts of Solar Water Pumping System. Copy of sample Purchase Order by a customer of the appellant for previous periods has been attached. 4.2.2 Appellant submitted that it is abundantly clear from the above definition that a mixed supply is a combination which does not constitute a composite supply. Hence without applying and refuting the applicability of composite supply, conclusion regarding mixed cannot be reached. Now in the given facts, it was explained to AAR and substantiated by commercial practices and guidelines issued by the concerned Ministry of Central Government itself that the goods supplied together by the appellant are essential parts of a Solar Water Pumping System. The submissions are re-submitted as under: MNRE Guidelines for Specification of Solar Water Pumping System 2019-20 clearly state as under: A solar photovoltaic (SPV) water pumping system is a system powered by solar energy which consists of SPV panels and when sunlight falls on the solar panels it produces current which then feeds the motor to pump out the water. So the system is a solar power generat....
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....ssential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled. Rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or compone....
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....r pumping and pumps for handling water are classifiable under Heading 8413.Hence according to the Section Note 4, Solar Water Pumping System is classifiable under Chapter 8413. 4.2.13 It is further submitted that the Solar pumping system sold by the appellant consisting of the individual components in unassembled form will still be included in Heading 8413 only as per Rule 2(a) which clearly provides that a reference to a heading should be taken to include a reference to that article presented in unassembled or disassembled form. 4.2.14 Now as it is understood while classification of solar pumping system under Customs tariff that Solar Water Pumping system is in itself a product and being composite goods or machine consisting of individual components, it is classified as the essential character component i.e. pumps, the classification of the product in question i.e. 'Solar Water Pumping System' under GST tariff for determining tax rate needs to be looked upon. 4.2.15 That the AAR has ruled as under in relation to this question: Since, Solar Water Pumping System is not the whole device it is made of Solar panel, Controller, Solar Pump, Structure etc. includes procu....
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....unal held as under: The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. 4.2.18 The Authority for Advance Rulings of Uttarakhand in case of Eapro Global Limited has confirmed the taxability for supply of same goods in similar combinations where the appellant in exactly similar background asked the following questions: (a) Applicability of GST rate on supply of solar inverter, controller, battery and panels under "Solar Power Generating System" as a whole& whether such supply be called as 'composite or mixed supply' (b) Supply of solar inverter & solar panels together will fall under the definition of "Solar Power Generating System" or it will be a 'mixed supply' and the applicability of GST rate on supply of solar inverter & solar panels together. The Authority concluded as under: i) Supply of solar inverter, controller, battery and panels would be covered under "Solar Power Generating Syste....
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....unbundling/vivisecting the package into individual components to determine their classification"; Relying upon the technical opinion provided by IIT, concludes that the assessee clears nothing but "Solar Power Generating System" or "Solar Photovoltaic Lantern" and the exemption claimed by the assessee in respect of same under SI No 237 of Not No 6/2002-CE....is admissible to the whole package" : Mumbai CESTAT. 4.2.20 That in the view of appellant based on explanations given below, all the items supplied in the transaction of sale are classifiable under Entry 201A of the Notification No. 1/2017-CT (Rate) dated 28.06.2017 amended as on date under respective HSN codes as above and hence the applicable tax rate on supply of all items is 5% and thus the tax rate applicable on supply in question shall also be 5% only. 4.3 Other Combinations: 1. Solar Controller + Solar Pump + Solar panel 2. Solar Pump + Solar Panel 3. Solar Pump + Controller 4. Solar Panel + Controller 4.3.1 The components sold by the appellant are all designed specifically and solely for use in a solar water pumping system. When these parts are sold in any combination as ment....
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....n by AAR is reproduced below: - In the present case, the applicant is proposed to supply the functional solar water pumping system as a whole. which include supply. installation, commissioning & maintenance. The proposed supply including installation, commissioning & maintenance would fall under the ambit of works contract service as per Section 2(119) of CGST Act,2017 and attracts 18% GST. 2.Further, we observe that the supply. supplied by the applicant i.e comprising of goods (Solar Panel Solar Controller + Solar Pump + Structure) along with the installation is a composite supply of works contract, and the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (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. 11/2017-CT (Rate) dated 28.06.2017 (as amended) is as under. - S.No. Chapter, Section or Heeding Description of Service CGST Rate % SGST Rate % 3 Heading 9954 (Construction services) (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act....
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....for the present issue is reproduced as under: SI.No. Chapter Description 201A 84, 85 or 94 Following renewable energy devices & parts for their manufacture: a) Bio-gas plant b) Solar power based devices c) Solar power generator d) Wind mills, Wind Operated Electricity Generator (WOEG) e) Waste to energy plants/devices f) Solar lantern/solar lamp g) Ocean waves/tidal waves energy devices/plants h) Photo voltaic cells, whether or not assembled in modules or made up into panels "Explanation: If the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 [G.S.R. 690(E)], the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service." 4.4.5 Appellant submitted that on a conjunctive reading and analysis of abov....
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....water pumping system comprises SPV panels, Structures, Storage tank Controller, Pipe and Cables. The Appellant is also adding De-fluoridation unit (DFU) and also accomplishing the task of installation, commissioning, operation and maintenance of the System including DFU. DFU qualifies for other goods while Installation and Commissioning of the System are the Services which are not only taxable but are also being provided in relation to setting up of the System, a requirement of the 'Explanation' to entry No. 234 ibid and entry No. 38 ibid. Thus, we find that the condition precedent to availment of the benefit of these entries i.e. "supply of other goods and Services also, one of which should be a taxable service specified in the entry No. 38", stands fulfilled. 4.4.7 Appellant further submitted that, in case of Premier Solar System Pvt. Ltd. reported in 2019-TIOL-79-AAR-GST, a ruling was sought "(b) Whether the supply of solar irrigation water pumping systems along with design, erection, commissioning & installation is a 'composite supply' and the applicability of GST rate?" The Authority pronounced a Ruling that (i) Supply in question would covered un....
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.... products such as Solar Water Pumping System as a whole or sale of one of the specified products on standalone basis or sale of the products under different combinations to be undertaken by them and also supply of parts of the system along with supply of installation service relating to such system. 6.3 As can be seen from the order dated 03.09.2021 of the Authority for Advance Ruling, it has been held therein that- (i) Solar Panel has a specific entry in the schedule and the same is taxable at the rate of 5% GST; (ii) Solar Pump is a solar power based device which is covered under Sl. No. 234 of Notification No. 01/2017-CT (Rate), dated 28.06.2017 and, therefore, taxable at the rate of 5% GST; (iii) Controller is neither a solar power based device nor a part of solar power based devices and, therefore, the same would fall under chapter heading 85 of GST Tariff which has a specific entry for Electrical Transformers, Static Converters and Inductors attracting 18% rate of GST; (iv) Structures are neither solar power based devices nor part of solar power based devices and, therefore, the same would fall under Chapter Heading 7308 attracting 18% r....
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....sed on these guidelines, it is their claim that an SPV Controller converts DC voltage of the SPV array into suitable DC or AC, single or multi phase power and may also include equipment for MPPT (Maximum Power Point Tracker) and remote monitoring and protection devices. The appellant has further claimed that the Solar controller converts the DC power produced by the solar array to match the voltage and current operating requirements of the system's solar pump and it ensures that the pump operates at its maximum performance levels and the pump will operate in less-than-perfect sun conditions, when sun rays are not available at required frequency such as on night time or cloudy days. We find that the controller as claimed by the appellant is an electrical device that can coordinate in a predetermined manner the performance of an electric motor. A controller performs variety of functions and is used with both direct current and alternating current motors. A controller includes means to connect the motor to the electrical power supply, and may also include overload protection for the motor, and over-current protection for the motor and wiring. A motor controller may also supervise t....
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....of certain conditions. For better appreciation of the provisions of the notification, the relevant portion is reproduced below:- "--- the Central Government on being satisfied that it is necessary in the public interest so to do, hereby exempts all items of machinery, including prime movers, instruments, apparatus and appliances, control gear and transmission equipment and auxiliary equipment (including those required for testing and quality control) and components, required for initial setting up of a solar power generation project or facility, from the whole of the duty of excise leviable there on which is specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), subject to the following conditions, namely- (1) before the clearance of the goods from the factory, the manufacturer produces to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, a certificate, from an officer not below the rank of a Deputy Secretary to the Government of India in the Ministry of New and Renewable Energy recommending the grant of this exemption and the said officer certifies that the goods are require....
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.... of iron and steel etc. would be called a part of the item to which it is attached or the item which it supports. In such a situation, none of structures would fall under the Chapter Heading 7308. We further observe that the matter of classification of structures and the rate of GST applicable thereon has also been clarified by the Tax Research Unit of the Department of Revenue in December 2017 in response to Frequently Asked Questions. Reply to the relevant question number 75 applicable to the instant case is reproduced as under:- 75. What is the HS code for Solar Panel Mounting Structure and its GST rate? 1. Structures of iron or steel fall under heading 7308 and structures of aluminium fall under heading 7610 and attract 18% GST. 2. Solar Panel Mounting Structure, depending on the metal they are made of, fall under 7308 or 7610 and attract 18% GST. In view of the above position which is also supported by the clarification referred to above, it is clear that a metal structure including Solar Panel Mounting Structure is correctly classifiable under Chapter Heading 7308 (if made of iron or steel) or 7610 (if made of aluminium) and the same will attract GST at the ....
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....urse of business, one of which is a principal supply. An illustration provided under the said definition provides that "where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. In the above illustration, it is obvious that the supply of packing material, supply of service of insurance or transport is not independent of the supply of goods. Hence, the transportation of goods, supply of packing material and insurance are covered by the definition of "composite supply" with the supply of goods which is a principal supply in the illustration. Accordingly, from the above definition and illustration, we are of the view that a "composite supply" can be determined on the basis of the following criteria:- (i) Supply of two or more goods or services or combination of both; (ii) The supply should be made in a natural bundle, i.e. the goods and/or services are provided as a combination in the ordinary course of business; (iii) The individual items (goods and/or services) cannot be supplied separately; and (iv) One of the supplies ....
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....weighs against the definition of composite supply. We, therefore, hold that the supply of different type of items such as Solar Panel, Controller, Solar Pump or Structure in different possible combinations, if any, without anyone of the goods being supplied as principal supply would be covered by the definition of "mixed supply" of different type of goods. In arriving at the conclusion drawn above we may gainfully refer to the ruling given by West Bengal Authority for Advance Ruling in the case of Sari Educational Centre reported at 2019 (22) G.S.T.L. 315 (A.A.R.-GST)], wherein it was held in the case of the applicant, who was engaged in supplying food and other services, that they are not naturally bundled with the lodging services as all these components are independent of each other. The said ruling has been upheld by the Appellate Authority for Advance Ruling of West Bengal as reported at 2019 (27) G.S.T.L.13.1 (App. AAR - GST). Once the question of the nature of supply, whether composite or mixed, is decided, the question that remains.to be addressed is the rate of GST applicable to such supplies. The different type of goods that are proposed to be supplied by the app....
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....x rate of goods portion from 5% to 12% resulting in the effective tax of tax increasing to 13.8% on such supply. In this regard, the appellant has also referred to the ruling given by the Rajasthan Appellate Authority for Advance Ruling vide Order No. RAJ/AAAR/2019-20 dated 15.05.2019 in the case of Kailash Chandra (Proprietor of Mali Construction) involving similar situation and also relied upon the advance ruling given by the Authority for Advance Ruling for the State of Uttarakhand in the case of M/s Premier Solar Systems Pvt. Limited as reported at 2019-TIOL-79-AAR-GST wherein it was held that the supply of solar irrigation water pumping system along with design, erection, commissioning and installation would constitute a composite supply attracting GST @ 5% on goods portion which would be 70% percent portion of the aggregate value and GST @ 18% on services portion comprising of the remaining 30% portion of the aggregate value. We find that the Appellant has submitted copy of a sample proposal for scope of work for sub-contracting arrangement which requires the appellant to supply, to the main contractor, Solar Pumping Systems comprising of solar panels, sola pumps, solar....
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.... If the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at Sl. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate.), dated 28^th June, 2017 the value of supply of goods for the purposes of this entry shall be deemed as seventy percent of the gross consideration charged for all such supplies, and the remaining thirty percent of the gross consideration charged shall be deemed as value of the said. taxable service."; On careful consideration of the above-mentioned entries of the said notifications and the proposed contract submitted by the appellant we find that the benefit of the said entries is available only when the Solar Power based devices is supplied alongwith other goods and Services, one of which being a taxable. service specified in the entry at S. No. 38 ibid. We find that the Appellant in the instant case is supplying solar energy based bore well water pumping system and also carrying out the activity of provision of installation and commissioning of such systems. Hence; the appellant is supplying solar energy based devices....