TaxTMI 
TaxTMI 
2022 (6) TMI 1203
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....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 FACTS: 2.1 M/s Cummins India Ltd, the Applicant, manufactures diesel/natural gas engines, & power generation systems (gensets). Applicant's business, broadly comprises of three segments, namely, a) Engine business: b) Power System business: and c) Distribution business. Applicant provides products, packages, services & solutions for ensuring uptime of equipment supplied, provides parts, new & rebuilt engines, batteries, varied services & customer support solutions. 2.2 Under segment 'C' above, Applicant undertakes activity of overhaul & repair of engines which involves the customer sending engines/equipment to the Applicant who is required to render various services and supply different parts/sub-assemblies to its customers. The arrangement is....
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....e. The arrangement will also have exclusion aspects i.e. parts that are not covered by such arrangement or services that are not envisaged to be rendered. 2.6 Services rendered as a part of overhaul and repair activity, are independently taxable at the rate of 18% in terms of Notification No. 11/2017-C.T.(R), dt 28.06.2017, amended from time to time. 2.7 Goods (parts/ sub-assemblies) to be supplied as part of overhaul & repair arrangement are covered under different rate brackets as specified in Notification No. 1/2017-C.T.(R) dated 28.06.2017, amended from time to time & GST rates applicable to list of parts (goods) that will be under such overhaul and repair arrangement varies from 18% on hose flexible, gasket connection, bushing, insert valve seal oil to 28% on block cylinder, engine piston kit, crosshead valve, cylinder kit, set main bearing. Consideration for the described activity will be 'engine model-wise rates' (fixed single price). Separate consideration has not been earmarked for the supply of services and for supply of goods. Applicant would charge agreed rates to ONGC, irrespective of the actual value of goods used and services supplied during overhaul and re....
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.... (inputs or capital goods) job work is performed is called "Principal" for the purpose of section 143 of the Act. Thus, job work' covers processes/ treatment which result in conversion of inputs into semi-finished/finished goods whereas repair & overhaul activity, as in the instant case, would entail carrying out treatment/process on engines belonging to ONGC. In the light of above, such arrangement would not be considered as 'job work'. Similar view was taken by West Bengal Advance Ruling Authorities in case of Alok Bhanuka [2019-TIOL-93-AAR-GST] while dealing with taxability of repair and servicing of transformers. 2.12 As per Section 2 (30) of the CGST Act, a composite supply should consist of: two or more goods or services together; such supply should consist of taxable supplies; Goods/ services supplied are provided together in normal course of business i.e. supplies are naturally bundled and One of such supplies is 'principal supply'. 2.13 The impugned supply is a combination of taxable services as well as goods. The supply of service and parts/sub-assemblies are naturally bundled and further, one of supplies can be considered as 'principal supply....
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....ncy & eliminate unexpected system failure. Hence, the main intention of underlying transaction is to overhaul/ repair engines belonging to ONGC and not the transfer of property in goods (i.e. parts/ sub-assemblies) to ONGC. Applicant refers the clauses of the tender document dated 15.11.2018 issued by ONGC (enclosed as Exhibit A) which reveals that the purpose of proposed transaction / predominant intention of ONGC is to receive services rendered by the Applicant. The proposed contract is not intended to be framed as a part sale agreement with identified items (to be supplied) and rates for the same. Rather, the skills and resources of the Applicant are intended to be used on ongoing basis to enable continued use/ efficiency of engines. It emerges that the predominant intention of the transaction is repair and overhaul services of engines to keep the same in un-impaired and operating condition & supply of parts/sub-assemblies, is not the focal element of the proposed transaction. Also, it is not possible to identify parts/ sub-assemblies that will be supplied during overhaul and repair activity. The principal object of subject activity is to provide services and in other words, the....
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.... proposed tender clarifies that the work centres of ONGC Limited will provide the spares required for in frame overhauling. This limb of the proposed tender thus comprises only of services to be supplied by the Applicant. It is noticeable that (Ann III of proposed tender document), this arrangement will be performed "in-situ", i.e., at the site. C. Major overhaul (also referred to as "Engine Overhauling") Covered in the scope of Applicant Covered and part of the scope of supply to be made by the Applicant. No restrictive clause as to supply of goods, i.e., there is no prescription that the goods (spares, parts, etc.) will be supplied by ONGC Limited. Composite supply (offering) by the Applicant, wherein the principal requirement is rendition of services D. Overhaul / repair of sub-assemblies Covered in the scope of Applicant Covered and part of the scope of supply to be made by the Applicant - refer Annexure III (clause C) of the proposed tender. No restrictive clause as to supply of goods, i.e., there is no prescription that the goods (spares, parts, etc.) will be supplied by ONGC Limited. Composite supply (offering) by the Applicant, wherein the principal requiremen....
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....s satisfied by the Applicant. Applicant relies on the judgement of the Hon'ble Kerala High Court in Abbott healthcare P. Ltd. vs. CCT (2020 (34) G.S.T.L. 579 (Ker.)], wherein it was held that the practice holding the field / custom must be given due regard and importance. * The dominant intention (objective) of Applicant is to overhaul & repair engines or sub-assemblies, belonging to customers & in course, supply goods as a part of & parcel of providing the repair & overhaul activity i.e. the object of the contract is to remove defects, maintain the engines & sub-assemblies, upkeep of engines & sub-assemblies, ensure uptime (functioning) of these engines & sub-assemblies. Repairing of engine or sub-assemblies & keeping them in working condition is the dominant intention of the impugned activity & thus supply of service is the 'principal supply'. * The actual composition of goods supplied vis-à-vis services provided varies from case to case. Yet, separate consideration has not been earmarked for supply of services and for supply of goods. More importantly, Applicant will charge agreed rates to its customer, irrespective of the actual value of goods used & servic....
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....character of the service.' 3.3 Applicant's contention that the impugned supply is classifiable under Composite Supply, is not tenable. From reading the entire contract between the applicant & ONGC Ltd. as well as from the definition of composite supply, it can be clearly said that the proposed supply is far from being described as a composite supply as the applicant had before this agreement use to only provide the Engines of different specifications to ONGC without any other specific contract for repair and overhaul of their engines. Hence, it can be said that the two elements of subject supply i.e. the supply of the parts while undertaking the repair or overhaul and the supply of service of repair and overhaul of the engine both can have an independent characteristic of their own in the supply i.e there can be an agreement for only supply of parts as and when needed by ONGC for repair of their engine by other third party too. Hence, this means the agreement for overhaul & repair of the engines does not constitute the "Composite supply". 3.4 Hon'ble AAR, Kerala in M/s Vista Marine & Hydraulics in Advance Ruling No. KER/58/2019 decided on September 16, 2019 has held t....
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....piston & rings 1 Manifold, air intake 2 Liner, cylinder 2 Crankshaft (Chargeable if non serviceable) 3 Elbow, male adapter 3 Camshaft RB 4 Elbow, plain street pipe 4 Camshaft LB 5 Element, tub oil filter 5 Cylinder head 6 Gasket, adapter 6 tub oil pump 7 Set main bearing std. 7 Water pump 8 Valve, shutdown 8 Injector 9 Kit, STC white smoke 9 PT pump 10 Filter, lubricating 10 Connecting rod 11 Elbow, male union 11 Core, after-cooler 12 Screw, hexagon head cap 12 Kit, turbocharger 13 Gasket sets (upper & lower) 14 Hoses & belts 15 Rod, push 16 Damper, vibration 17 Thermostats 18 Bushings and bearings 19 Repair/recon of sub-assemblies: 20.1 Water pump 20.2 tube pump 20.3 Turbo charger 20.4 Injectors 20.5 Fuel pumps 20.6 Connecting rods 20.7 Cylinder heads 20.8 Accessory drives 20.9 Cam followers 20.10 Rocker levers 3.7 Hence, ....
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.... repair of engines and sub-assemblies and has submitted that the subject application is made in respect of the proposed transaction to be undertaken as per the Tender issued by ONGC on the basis of which the applicant will be entering into an Agreement with ONGC. 5.3 The applicant has contended that: i) Arrangement for overhaul and repair for ONGC is "composite supply"; ii) The "principal Supply" is that of 'service' and iii) Consequently, the rate of tax (GST) for all supplies (consisting of parts/sub-assemblies and repair services) is 18%. 5.4 From the submissions made by the applicant and the Tender Document it is clearly seen that the Tender conditions visualize a supply of goods as well as supply of services. The applicant feels that the impugned supply is a 'composite supply' where the principal supply is 'supply of service' and therefore according to the applicant GST will be leviable on the impugned supply at 18% being the rate of tax on the principal supply. According to the submissions the consideration for the described activity will be fixed single price and separate consideration has not been earmarked for the supply of services and for ....