TaxTMI 
TaxTMI 
2023 (1) TMI 632
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....gy House. Ramkrishna Mandir Road, J B 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 quali....
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....Si. No. 24(ii) of Rate Notification. (ii) Alternatively, whether the services provided 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 ....
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....activities of such EPC contractor for the development Project at RDG as well as the All Development/Production - Debottlenecking Project, however, 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 APPEL....
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....an be borrowed from any other Act or statute. The said principle has been recognized and used by Courts in order to determine the true nature of the term or phrase, in State of Madras v. Ganon Dunkerley & Co. (Madras) Ltd., AIR 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 ....
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....osely related to, or in close proximity with the activities of exploration and mining. 4.15 The PMC services provided by the Appellant are evidently related to the activity of mining and hence would find place under the said entry. Ambit of the term '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....
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....ting mining facilities. Accordingly, it is submitted that the activities carried out by VL under both the Projects come within the ambit of the term 'mining' in light of the definitions extracted above. 4.20 In light of above, the support services provided by the Appellant are integrally connected to 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 resp....
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....d 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.SI. No. 21 of Rate Notification provides the rate of tax leviable on the services meriting classification under the Heading 9983 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 afores....
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....#39;relating to' has been held to be equivalent to or synonymous with 'concerning with' and 'pertaining to'. Therefore, it is submitted that entry (ia) of SI. No. 21 includes a broad range of services which pertain or concern with the activity of mining. 5.6 It is further submitted that PMC services provided by the Appellant in relation to the Projects are not in the nature of generic management services 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 natura....
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....ave gone through the Appeal memorandum encapsulating facts of the case and the grounds of appeal. We have also gone through the impugned MAAR Order bearing No. GST-ARA-27/2020-21/B-38 dated 31.03.2022 ('hereinafter referred to as the "Impugned Order") wherein it has been held that the services provided by the Appellant are neither covered under SI. No. 24(11) nor under SI. No. 21(ia) of the Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 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 exp....
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.... 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; ' 11. Relying upon the aforesaid definition of support services, the Appellant have contended that since they are carrying out the functions pertaining to the management and supervision of the Project which should otherwise have been carried out by the 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 Notific....
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....e Appellant have argued that the concerned Explanatory Note for 998621 uses the phrase 'includes', which has got a very wide connotation, thereby giving the Chapter Heading an extensive scope, which would squarely cover their activities related to the management of projects, under the above service code, i.e., 998621. In order to strengthen their contention, they have relied upon various court rulings wherein the scope and interpretation of the word "include" has been derived by the court in the extensive sense and 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 t....
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....covers only such activities or services which are used directly in the mining operations as understood by the aforesaid dictionary meaning of the term "mining" which essentially entails the excavation of the land or sea to extract the valuable substances therefrom. In this regard, we would also like to refer to the explanatory note to the scheme of classification of services which inter alia indicates the scope and coverage of the pertinent entry by illustrating certain activities which are to be included under the specific Chapter Heading, group or service 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....
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....r natural gas or both', thereby, widening the scope of the pertinent entry to such an extent that the said entry would aptly include the impugned services, it is opined that the said substitution appears to be more in the grammatical nature rather than the intention of widening the scope of the pertinent entry as the preposition "to" substituted in place of the preposition "of' removes the ambiguities, if any, and add more relevance and meaning to the clause of the pertinent entry. Thus, the Appellant's contention put forth in this regard is fictitious, and hence, not 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 int....
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....have further contended that Entry (ia) to SI. No. 21 of the Rate Notification is very wide and that the Circular cannot per se restrict the scope of the Rate Notification to cover only few services, and hence the impugned services provided by them would aptly be covered under entry at SI. No. 21(ia) of the Rate Notification. Further, they have also relied upon the definition of the business as provided under section 2(17) of the CGST Act, 2017 to contend that their services are in the nature of business services being provided to augment the business of their Client, and hence merit classification under 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 explana....