TaxTMI 
TaxTMI 
2023 (4) TMI 421
X X X X Extracts X X X X
X X X X Extracts X X X X
....nounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling; (b) On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. * * * * * Subject: GST - Appeal filed by M/s Transmission Corporation of Telangana Limited (TS Transco), Hyderabad, under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.09/2021 dated 14.09.2021 passed by the Tel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provided to GHMC, I&CAD and SCR. In respect of Advance ruling at S.No.(3) and (6) pertaining to eligibility to exemption from tax on supply of works contract services provided by the appellant to I&CAD Department to the extent of grants received by the appellant and Tax liability for procuring works contract services by the appellant from a 3rd party in order to supply the same to South Central Railway, has been accepted and not disputed by the appellant. Whether the appeal is filed in time: 4. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 24.06.2020 was received by the appellant on 11.10.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 10.11.2021, which is within the prescribed time-limit. Brief Facts: 5. M/s Transmission Corporation of Telangana Limited (hereinafter referred to as "TS TRANSCO"/ "the Appellant") are a state-owned utility responsible for transmission of electricity in the state of Telangana having its corporate office (head office) located i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ders. The contractors are registered under GST and charge GST at the applicable rates to the Appellant, the incidence of tax falls on the Appellant. 8. The appellant filed an application in which the following clarifications were sought.: 1. Eligibility to exemption from tax on the supply of works contract services by the applicant to Greater Hyderabad Municipal Corporation (GHMC). 2. Tax liability with respect to works contract services procured by the applicant from a 3rd party for supplying same services to GHMC 3. Eligibility to exemption from tax on supply of works contract services by the applicant to I & CAD department. 4. Tax liability with respect to works contract services procured by the applicant from a 3rd party for supplying same services to I & CAD department. 5. Tax liability for supply of works contract service by the applicant to south central railway. 6. Tax liability for procuring works contract services by the applicant from a 3rd party in order to supply the same to south central railway. 9. The Authority for Advance Ruling, heard the appellants and their averments submitted and ruled that the service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng line, structure and equipment's shall be borne by GHMC or in other words the party at whose request such alteration of the structure, equipment is undertaken. b. The impugned order held that the works performed for GHMC, from the estimate of contract submitted by the appellant involves significant portion of material and therefore is not a pure service and is a works contract service which shall be taxable @ 18%. c. The Appellant wishes to submit that the Authority on Advance Ruling (in short AAR) has arrived at this conclusion without examining the issue that there is no transfer of property by TS TRANSCO to GHMC despite the appellant repeatedly explaining this fact and vehemently reiterating the same even in the course of personal hearing. d. It would be pertinent to examine whether the services undertaken for GHMC qualify to be called "Works contract Service". The definition of the term "Works Contract Service" is contained in clause (119) of section 2 of CGST act, 2017 which is as under: "(119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modificati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i. The Appellant makes reference to Entry 3 of Notification 12/2017 CT(R) dated June 28, 2017 which is as follows: "3. Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution." j. Implies following conditions must be satisfied in order to avail the exemption from the GST, ● It is a pure service excluding works contract service or other composite supplies involving supplies of goods ● is provided to a Central Government/State Government/ Governmental Authority/Local authority; ● "In relation to" any function enumerated under Article 243G/ 243W of the Constitution; ● Then such a service is exempt from the levy of GST. k. In the instant case for consideration, TS TRANSCO is providing pure serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be transfer of property in goods. Below is the extract of the same: "...Thus, the foremost conditions of WCS are that it leads to creation of an immovable property and then transfer of the said property in goods..." 11. In view of the aforesaid submissions, on facts and unambiguous position in terms of law, the exemption under Notification 12/2017 - CT (R) is squarely applicable for services provided by TS TRANSCO to GHMC and therefore qualifies to be an exempt service. II. In respect of supplies received by TS TRANSCO from its sub-contractors is taxable at the lower rate of 12% in terms of Notification no. 11/2017-CT(R) dated June 28, 2017 as per Entry No. 3(vi) of the said notification. a. Once more the AAR has arrived at a conclusion without scrutinizing the transaction in its entirety. The authority has stated that Entry 3(vi) of Notification 11/2017 dated 28th June, 2017 exempts specifically only following works of construction, erection, commissioning, etc., are covered for claiming lower rate of tax: i. Civil structures or any other any original works meant predominantly for use other than for Commerce, industry, or any other....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... concession to services rendered to Government Entity pursuant to work entrusted by Central Government or State Government or Local authority. The genesis of extending the concession to the Government Entity can be traced to the law committee recommendations vetted by Tax Research Unit (TRU)apropos the issues raised State Governments of Gujarat and Telangana. This having culminated into the amendments to Sl. No. 3(vi) of Notification 11/2017-CT (Rate) dated June 28, 2017 vide Notification No. 31/2017-CT (Rate) dated October 13, 2017 is a clear pointer to the contemporaneous understanding. In this connection we also place reliance of Supreme Court judgement in the case of K.P. Varghese Vs. Income Tax Officer & ANR (1981) 131 ITR 597 (SC) with regard to the weightage to be given to the contemporaneous understanding in construing an entry in the statute. It is a settled position in law that construction of the statute or the delegated legislation ought to be such as to effectuate to the fullest extent the intention leading to the legislation - ITAT Hyderabad bench in UCO Bank. Similar is the ratio of the judgement in District Mining officer Vs TISCO. d. Following the legal ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate Government, Union Territory or Local Authority. III. In respect of services supplied by the contractor to the appellant towards supply of services to I & CAD, fall under Entry 3(vi) of Notification 11/2017 CT(R) dated June 28, 2017. This supply of works contract services to the appellant is taxable at the rate of 6% under GST Act. a. The authority has here concluded that the concessional rate of tax of 12% is not applicable for the services received by the appellant from turnkey vendors to provide the same services to I&CAD once again without examining the transaction in its entirety as mentioned point II above. b. The appellant has made the submissions as mentioned in point II above which shall apply in the present case also. c. The Appellant submits on practical considerations the unintended consequence of a rigid interpretation of the entry without a cogent reading with the Proviso and Explanation as intended renders the Appellant's projects unviable, considered at a micro level and at a macro level leading to the additional cost to the State's Exchequer resulting in loss. A representative sample analysis of 3 projects delineating the unin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Personal Hearing: 15. In terms of Section 101(1) of the Act, the appellant was given personal hearing, in virtual mode on 02.12.2021. Smt. Radhika Verma, Chartered Accountant and Authorised Representative appeared for the Appellants. The appellants were requested to submit copies of MOU/Contract entered with GHMC, I&CAD and SCR in the subject issue. They requested to set aside the advance ruling in respect of said issues that are being contested and consider their appeal favourably. Discussions and Findings: 16. We have gone through the application for Advance Ruling filed by the appellants before the Authority for Advance Rulings and TSAAR Order No. 09/2021 dated 14.09.2021. The Authority for Advance Ruling passed its order by classifying the services provided by appellant as 'Works Contract Service' leviable to tax @ 18%. Further denied the appellant's claim for classifying the service as 'Pure Service' and allow exemption under Notification No.12/2017 CT (Rate) dated 26.06.2017 as amended. With regard to services procured by the appellant, the Authority denied the concessional rate of tax @12% in terms of Notification No.11/2017 CT(Rate) dated 28.06.2017 as amended. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; 22. The Authority for advance ruling has stated that since a significant portion of material is involved in the contract, the contract between the applicant and GHMC is a works contract. A careful reading of the communication made between M/s GHMC and M/s TRANSCO reveals the contract is for shifting of the 132 KV towers (which are owned by the appellant) which are an obstruction for construction work taken up by M/s GHMC. For the said purpose (shifting), valuation was provided by M/s TRANSCO. It can be understood that, the material value mentioned in the contract is only for arriving at the cost of replacement and there is no transfer of property in such goods from the applicant to GHMC. Therefore, the contract cannot be termed as a works contract. 23. The applicant, as per the request of GHMC has agreed to replace or shift its own electric equipment and cables etc to other place, for the purpose of replacing or shifting such electric equipment the expenditure that is expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icle 243W of the Constitution, making the supply exempt from levy of tax as it falls under Entry 3 of notification no 12/2017 CT(R) date June 28, 2017. Opinion of the Appellate Authority (Central Member) 29. The applicant has undertaken replacement of overhead cables and underground cables in Road No. 45 Jubilee hills, Hyderabad as Greater Hyderabad Municipal Corporation ('GHMC' in short) was constructing an elevated corridor. For this purpose, the applicant collected the cost of such shifting/replacement from GHMC. 30. As seen from the contract submitted by the applicant in their written submissions, the work was w.r.t. shifting of 132 KV tower on Road No. 45 near 132/33 KV Jubilee Hills substation and to replace the overhead line across the road by laying UG cable, so as to take up the work of elevated corridor from Road No. 45 to Durgam Cheruvu. As per the abstract of estimate of the work order, major portion of value was towards material viz. Cables, OH line and SS. 31. On the above activity, the applicant claimed exemption from payment of tax in terms of Sl.No. 3 of Notfn No. 12/2017-CT(R), dt. 28.6.2017. The said serial number is reproduced below: "3. Pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cabling. It needs to be appreciated that replacing of cables underground cannot be done without having a support to such cables either in the form of concrete bedding / cc foundation fastening with nuts and bolts or in any other form which allows such cables to remain undisturbed. Such an arrangement would make the whole replacement of cables embedded to earth making them immovable in turn becoming immovable property. As such, their contract for electrical cable supply and laying work can be classified as contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. Hence there is no hesitation in holding that the applicant is supplying Works Contract Services. 37. Section 3(26) of General Clauses Act, 1897 defines 'Immovable Property' as "Immovable Property' shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth;" 38. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case laws relied by the applicant are not applicable to the case on hand and consequently, the applicant is not eligible for exemption available against Sl.No. 3 of the Notification ibid and the services are liable to classified as works contract services and therefore is subject to payment of tax as applicable. II. Rate of Tax applicable to services procured by the appellant from 3rd party contractor in providing services to GHMC and I& CAD. 42. In this context, at the first instance, it is observed from the contracts that the appellant has entered into contract with GHMC, I&CAD for providing certain services. However, for providing these services, the appellant has engaged various private contractors who will execute the works. During, the course of execution and completion, the services along with goods are handed over to the appellant and there is transfer of property in goods, as discussed in paras 39 and 40 above. Therefore, the services provided by 3rd party i.e., private contractors are classifiable as 'Works Contract Service'. 43. The contention is only with regard to rate of tax and the appellant requests for concessional rate as provided under serial no. 3(v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce, the structure being constructed for the appellant is neither a residential complex nor a structure meant predominantly for use as an educational, clinical, or an art or cultural establishment, For the services procured by the appellant to fall under the said entry, the service should be: i. a Composite supply of works contract ii. Should be provided to a Government Entity .... iii. Should be a civil structure or any other original works iv. The said works should be meant predominantly for use other than for commerce, industry, or any other business or profession 45. There is no dispute regarding the fact that in this case works contract service is being provided to a government entity. Even, if the work is classified as construction of a civil structure or any other original works, the point of dispute that still remains is the classification of works as being meant predominantly for use other than for commerce, industry, or any other business or profession. The appellant has contested that they are liable to pay tax @ 6% only, as per serial No. 3(vi)(a) read with the explanation provided therein. The appellants emphasized that the expres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wager or any other similar activity, whether or not it is for a pecuniary benefit is a business. It is evident from the above facts that TRANSCO is in the business of transmission of electricity and collecting charges for the said activity. The Profit & Loss Account of TRANSCO specifies income generated as "Income from Sale of power". Thus, it is seen that TRANSCO has been established on commercial principles in as much as Section 61 of the Electricity Act, 2003 stipulates the guiding principles for determination of tariff by the STATE Regulatory Commission and mandates that the Tariff should progressively reflect cost of supply of electricity, reduce cross subsidy and recover the cost of electricity in a reasonable manner. 49. The legal maxim noscitur a sociis is not applicable to the present case as there is no ambiguity in relation to the word 'business' having been clearly defined in the Act itself. The word 'business' encompasses within itself activities undertaken whether or not for a pecuniary benefit, which removes any scope for exclusion of the activities undertaken by the appellant from the ambit of 'business'. It is immaterial, if the Government entity (Appellant) is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons, such as rope way for tourism development shall not be covered by said entry 3(vi) not being a structure that is meant predominantly for purposes other than business. While road, bridge, terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification, structures like ropeway are not covered by these entries too. Therefore, works contract service provided by way of construction such as of rope way shall fall under entry at sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%" 51. The applicant's argument that, since GHMC has entrusted this work in the capacity of public authority, the character of the work will remain so, even if provided through the Government entity doesn't appear to be valid for the reason that the applicant themselves have stated it is not of relevance to GHMC as to what material and/or goods are used to replace the overhead cables with underground cables, the concern of GHMC is that the cables should not hinder the construction of the elevated corridor. Therefore, it is of no interest to GHMC if the work of re-construction is taken up or not, hence, it is of the applicant's interest to get re-constructed the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other than (i), (ia), (ib), (ic), (id),(ie), (if), (iii), (iv), (v), (va), (vi), (vii), (viii),(ix), (x), and (xi) above. Explanation: For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id),(ie) and (if),in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column(5) and shall not be levied at the rate as specified under this entry. 9 - 56. From the above reading, the services provided by 3rd party are works contract services covered under residual entry 3(xii) of the notification as amended. As such, the appellants claim that the services procured by them from private contractors are eligible for concessional rate of tax is not sustainable. Hence, the decision of the Lower Authority is upheld on the issue. III. Tax liability for supply of works contract service by the applicant to South Central Railway. (Hereinafter referred to as 'SCR') 57. At the outset, the appellant has claimed the services provided by the appellant to South Central Railway to be 'Pure Services'. 58. The phrase 'Pure Service' has not been defined ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Works Contact". 62. The appellant in his submissions has stated that, as a State Utility, they are responsible for transmission of electricity and generally, any works that are being taken up by them involves use of materials or goods that are essential for transmission of electricity. However, these works are taken up as deposit contribution works (DC Works) wherein the cost of execution of works involving various factors like, earth work, civil works, Engineering works, procurement of materials/goods are estimated and is collected from their customers. Even though, the amounts are collected from the customers, the value of materials/goods are shown as Deferred consumer contributions towards property, plant and equipment under Non-Current Liabilities in their balance sheet, which implies that the ownership of the goods lie with the appellant in their books of accounts and are amortized after relevant periods. Therefore, the appellant contended that the essential factor of 'transfer of property in goods' has not been satisfied so as to classify the service as 'works contract service'. 63. The applicant was issued with contracts of installation and erection of electric equipme....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., (ib), (ic), (id),(ie) and (if) above, provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation , or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017. Explanation. - For the purposes of this item, the term 'business' shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. 6 Provided that where the services are supplied to a Government Entity, they should have been procured by the said ent....