AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 632
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....Nagar Kondivita, Andheri East, Mumbai - 400059. ("hereinafter referred to as "Appellant") against the Advance Ruling No GST-ARA-27/2020-21/B-38 dated 31.03.2022., pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as "MAAR"). BRIEF FACTS OF THE CASE 3.1 The Appellant is a company registered under the Indian Companies Act, 1956. The Appellant is part of Worley Parsons Limited, which is a global engineering company providing project delivery and consulting services to the resources and energy sectors and other complex process industries. 3.2 The Appellant is inter alia engaged in the provision of project management consultancy (hereinafter referred as 'PMC') services. The Appellant is registered under the Maharashtra Goods and Service Tax Act, 2017 ('MGST Act') having registration number 27AAKCS1815L1Z2. 3.3 The Appellant is one of the world's largest engineering, procurement and construction management (hereinafter referred as 'EPCM') service providers engaged in the oil and gas, chemicals, metals and minerals sector. The Appellant has a strength of more than 4,500 professionally qualified people in India, who are providing PMC se....
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....ded by the Appellant are classified under SI No. 21(ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21 (ia) of Rate Notification. (iii) Further, if the subject services are not classifiable under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be imposable? 3.8 Thereafter, the MAAR passed the order No. GST-ARA-27/2020-21/B-38 dated 31.03.2022('Impugned Order') and held that the services provided by the Appellant are neither covered under S.I. No. 24(ii) nor under SI. No.21 (ia) of Rate Notification on the following grounds: * The service code 998621 includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case, it is actually the EPC contractor who is giving support services to VL by being responsible for all the engineering, procurement, and construction activities to deliver the completed Projects. In view of this the impugned services are not covered....
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...., it has outsourced the same to the Appellant vide separate agreements covering the scope of PMC services. As per the agreements, all such operational, consulting and management services, related to the Project development at RDG as well as the All Development/Production - Debottlenecking Project, are carried out by the Appellant. 4.4 The Appellant have submitted that the pertinent Projects are essentially for development/augmentation of existing oil and gas fields. Accordingly, the services provided by the Appellant are integrally connected with the mining operations, such that the wholistic objective of augmentation of oil and gas facilities are fulfilled as per the prescribed schedules. 4.5 On the basis of the above, the Appellant have argued that the MAAR has failed to understand the true commercial nature of services provided by the Appellant to VL and has merely passed the Impugned Order on frivolous grounds inasmuch as it has not analyzed the nature of activities carried out by the Appellant. SUPPLY OF SERVICES BY THE APPELLANT SHOULD BE CLASSIFIED AS 'SUPPORT SERVICES TO EXPLORATION, MINING, OR DRILLING OF PETROLEUM CRUDE OR NATURAL GAS OR BOTH UNDER SI. No. 24(ii) OF HE....
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....R 1958 SC 650 and Association of Leasing and Financial Service Companies v. Union of India ('UOIP), 2010 (20) S.T.R. 417 (SC). 10 In this regard, the term 'support services' had been defined under Section 65(49) under the erstwhile Finance Act, 1994 (inserted w.e.f. 1.6.2012), which is as follows: '(49) 'support services' means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis; ' 4.11 The Appellant have submitted that since they have been outsourced the activity of management of the entire Projects, the said activities carried out by the Appellant squarely falls within the ambit of support services. 4.12 Referring to the description of the Heading 9986, the Appellant have submitted that the said heading includes all kinds of support services which are co-related inter alia to the activity of mining or....
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....39;mining' 4.16 As submitted above, it is evident that the services provided by the Appellant are in the nature of support services. In order to classify the said activity within the ambit of the heading 9986 of the SAC, it is imperative that such services are required to be provided inter alia in support to mining. It is pertinent to note that the term 'mining' has not been defined under the CGST Act and the Rate Notification. Hence, in order to the understand the scope and ambit of the said term, the following definitions of mining/mining operations/mines have been extracted for ease of reference: Source Meaning The Law Lexicon Dictionary, 3rd Edition Mining: the process or business of making or working of mines; the process of extracting from the Earth the rough ore, would seem to be the first step in the process; milling or reducing, the second step, to writ, the further separation of the materials found together, the one from other, and extracting from the mass the particular natural product desired. Mines and Minerals (Development and Regulation) Act, 1957 (d) 'mining operations' means any operations undertaken for the purpose of winning any mineral....
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.... the activity of mining and therefore, the supply of services provided by the Appellant is squarely covered within the ambit of SI. No. 24(ii) of heading 9986 of the Rate Notification under SAC 998621. As a result, it is submitted that the said services would attract GST @ 12% in light of SI. No. 24 (ii) of the Rate Notification as 'support services to exploration, mining or drilling of petroleum crude or natural gas or both'. Circular clarifies scope of support services The Appellant have relied upon the Circular No. 114/33/2019-GST dated October 11, 2019 ('Circular') wherein clarification on the scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both have been provided. The said Circular makes reference to the Explanatory Notes to the Scheme of Classification of Services which inter alia explanations with respect to service codes 998621 and 998622 (Support services to other mining n.e.c). 4.22 The relevant extract of SAC 998621 as provided in the Explanatory Notes to the scheme of classification of services is being reproduced hereinunder: '998621 Support services to oil and gas extraction This service code inc....
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....83 of the SAC. The relevant portion of the said entry is reproduced hereinbelow: SI.No. Heading Description of services Rate 21 Heading 9983 (Other professional, technical and business services) (ia) Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both 12 The relevant portion of Heading 9983 of SAC as prescribed under the Scheme of Classification is as follows: Annexure: Scheme of Classification of Services SI No. Chapter, Section Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 296 Heading 9983 Other professional, technical and business services 5.2 Relying upon the aforesaid entries, they have submitted that on a bare reading of the aforesaid heading and corresponding service description, it is seen that the said entry is broad in its entirety, as it includes business services. They relied upon the definition of the term 'business' provided under Section 2(17) of the CGST Act, the relevant portion relied upon by the Appellant is being reproduced hereinbelow : '(17) 'business' includes- (a) any trade, commerce, manufactu....
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.... which can be provided by any service provider, as the said services are customized and tailor made to suit the requirements of the customers and further require extensive technical and sound expertise in the field of oil and gas, built over many years. Hence, in the present case, is submitted that the supply of services by the Appellant to VL in relation to the mining activities under the Projects, which are technical in nature, merits classification under heading 9983 of the SAC. Accordingly, by virtue of SI. No. 21(ia) of the Rate Notification, it is submitted that the said activity gets squarely covered within the broad ambit of 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and consequently attracts GST @12%. RESPONDENT'S/DEPARTMENT'S SUBMISSIONS 6. The Jurisdictional Officer vide their letter dated 23.06.2022 have made the following submissions: (i) The service code 998621 "includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case, it appears that it is actually the EPC contractor who i....
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.... as amended (hereinafter referred to as the "Rate Notification"), on the following grounds: (i) The service code 998621 includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case, it is actually the EPC contractor who is giving support services to VL by being responsible for all the engineering, procurement, and construction activities to deliver the completed Projects, and therefore, the impugned services are not covered under SI. No. 24(ii) of the Rate Notification; (ii) The Explanatory Notes to service code 998341 is restricted to geological and geophysical consulting services and the Notes to service code 998343 is restricted to mineral exploration and evaluation and the impugned services cannot be considered as being connected to either geological and geophysical consulting services or mineral exploration and evaluation services, and therefore, the impugned services are not covered under SI. No. 21(ia) of the Rate Notification; (iii) Further, the said professional, technical and business services supplied by the Appellant to VL are clearly covered under the residual entry No. 21(ii) of the Ra....
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....Appellant's client, Vedanta Limited (hereinafter referred to as "VL"), but the same have been outsourced to them in terms of the agreement entered between them, therefore, they are providing support services to their client. They further argued that since the impugned services provided by them are pertaining to the projects which would support in increasing the mining activities of their client, therefore, their services would aptly be construed as support services to exploration, mining or drilling of petroleum crude or natural gas or both" as enumerated under the entry at SI. No. 24(ii) of the Rate Notification. They have also stressed upon the amendment carried out in the Notification No. 8/2017-I.T. dated 28.06.2017 vide Notification No. 19/2019-I.T. dated 30.09.2019 wherein 'support services 'of exploration, mining or drilling of petroleum crude or natural gas or both' was substituted to read as 'support services 'to' exploration, mining or drilling of petroleum crude or natural gas or both.' In this regard, the Appellant have contended that the aforesaid amendment had widened the scope of services, in as much as, such services would cover all a....
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.... not in restrictive sense, and thereby. assigning a very connotation to the word "include". We have carefully considered the above contentions put forth by the Appellant. In this regard, first we would like to examine the relevant entry. i.e., entry at SI. No. 24(ii) of the Rate Notification. which is being reproduced herein under: SI.No. Heading Description of Service Rate (per cent) 24 Heading 9986(Support services to agriculture, hunting, forestry, fishing, mining and utilities) (ii) Support services to exploration, milling or drilling of petroleum crude or natural gas or both. 12 13. On perusal of the aforesaid entry, it is seen that the aforesaid entry inter alia contains the phrase "support services". In this regard, we are inclined to agree with the interpretation drawn by the Appellant wherein they have relied upon the definition of the support services as provided under the Finance Act, 1994 as the same has not been defined under the CGST Act. 2017. and thereby, the Appellant's activities related to the project management, which were otherwise the responsibilities and functions of the Appellant's client, VL. can be construed as support services attribut....
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....code. In the context of the case, the relevant service code under the Chapter Heading 9986, having description as "Support services to agriculture, hunting, forestry, fishing, mining and utilities", is 998621 which bears the description "Support services to oil and gas extraction", under which the Appellant intends to classify their services. The relevant extracts of the said explanatory note is being reproduced hereinunder: '998621 Support services to oil and gas extraction This service code includes derrick erection, repair and dismantling services; well casing, cementing, pumping, plugging and abandoning of wells; test drilling and exploration services in connection with petroleum and gas extraction; specialized fire extinguishing services; operation of oil or gas extraction unit on a fee or contract basis ... ... ...' 16. On perusal of the above provisions made in the said explanatory note to the scheme of classification of services, it is adequately evident that the activities, which merit classification under SAC 998621, are in the nature of physical performance or activities ....
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.... tenable. 19. The Appellant have further contended that in the event services by the Appellant do not merit classification under Heading 9986 of the SAC, the said services would merit classification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' under SI. No. 21(ia) of heading 9983 of the Rate Notification. It is submitted by the Appellant that Entry (ia) of SI No. 21 of Rate Notification uses the phrase 'other professional, technical and business services', which has a broad connotation to inter alia include PMC services rendered by professionals of their company. They further contended that since the term 'mining' is wide enough to include within its ambit, 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. Accordingly, the term 'mining' would also include development of existing oil and gas facilities to strengthen the mining activities carried out at the block. In this regard, it is submi....
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....der the pertinent entry at SI. No. 21(ia) of the Rate Notification. 22. In this regard, we agree with the Appellant's contention in as much as the impugned services provided by them through their professionals are in the nature of professional and technical services as the said impugned services provided by them in deed require technically qualified and trained professionals and staffs. However, the impugned services provided by them are not related to exploration, mining or drilling of petroleum crude or natural gas or both'. This observation is also supported by the explanatory note to SAC 998341 which is being reproduced hereinunder: 99834 Scientific and other technical services 998341 Geological and geophysical consulting services This service code includes provision of advice, guidance and operational assistance concerning the location of mineral deposits, oil and gas fields and groundwater by studying the properties of the earth and rock formations and structures; provision of advice with regard to exploration and development of mineral, oil and natural gas properties, including pre feasibility and feasibility studies; project evaluation Page 62 of 130 services....