TaxTMI 
TaxTMI 
2024 (1) TMI 702
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....pplicant to IOCL on High Seas Sale [HSS] basis by endorsing bill of lading in favour of IOCL who will be filing the bill of entry for warehousing and subsequently for home consumption by paying the applicable customs duty and IGST. The applicant, further states that the contract value is fixed on a lump sum price of Rs. 18,72,00,48,047.50 comprising of- [synopsis para 1.5] (i) Rs. 14,70,30.56.131/- for domestically sourced material and supply of service; (ii) foreign Exchange Euros of EUR 4.55.18,322 (ie converted @ 1 EURO = INR 88.25 as on the date of opening of price bid Rs. 401,69,91,916.5) based on the terms and conditions of the Contract No. 44AC9100-EPCC-1 towards goods imported outside India; (iii) Rs. 32.89,75,280.89 towards custom Duty & SWS on Foreign Component imported which is reimbursable according to contractual terms. 5. As per the applicant, during the course of importation, before the goods reach the Customs frontier in India, they enter into a HSS agreement with IOCL, transferring the ownership of the goods to IOCL at the price agreed in the contract. The applicant raises a custom invoice with respect to goods sold to IOCL under HSS without charging GST. I....
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....ion has also been clarified by CBIC vide its circular No. 33/2017-Cus., dated 01-08-2017; * that they also rely on the AAR. ruling in the case of M/s. AIE Fiber Resource and Trading (India) Private Limited [2021 (12) TMI 1265]. 11. The next submission is that contract is divisible in nature; that the intent was always to treat supply of imported goods and the remaining EPC services, separately. To substantiate this submission, the applicant has further stated as follows: * that the contract no. 44AC9100-EPCC-1 is divisible in nature wherein the goods imported and sold on HSS basis can be separately identified from the rest of the EPC contract; * the minutes of meeting dated 16.6.2022 amends the contract and carves out import of goods as a separate supply; * the contract evidences separation of supply of imported materials from the rest of the EPC contract in view of the foregoing viz: * the bifurcation of the contract value with respect to supply of imported goods into India and sold under HSS basis to IOCL; * special conditions of contract with respect to milestone payment of the consideration; * the HSS agreement with IOCL; * that only the value of goods componen....
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....either a supply of goods nor a supply of service, cannot be construed as a taxable supply & hence it cannot form part of a composite supply as well; * that sale of imported materials in terms of contract cannot be considered as part of a composite supply and hence cannot be part of the overall works contract; * that if tax is levied on the transaction of sale of goods on HSS basis under works contract service, it would amount to double taxation which is impermissible. * that value of imported goods supplied on HSS basis cannot form part of the works contract since IOCL, being the last buyer of goods under HSS would be liable to file a bill of entry and pay customs duty along with GST: * that since IOCL would be discharging its IGST liability while importing goods, charging GST again on the same transaction as work contract service would lead to double taxation; * that the applicant relies on the judgement in the case of Mohit Minerals [2022 (61) GSTL 257 (SC)]. 14. In view of the above, the applicant has sought advance ruling on the below mentioned questions viz 1. Whether the transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (I....
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.... facility. Further these contracts are usually 'fixed price' contracts. 19. Before setting out the contentions and our findings, it would be prudent to reproduce the relevant portion of the contract viz > Contract No: 44AC9100-EPCC-1. [relevant extracts] THIS CONTRACT made at New Delhi this 19th day of January 2021; BETWEEN INDIAN OIL CORPORATION LIMITED, a Government of India Undertaking registered in India under the Indian Companies Act, 1956. having its registered office at G-9, AU Yavar Jung Marg, Bandra (East), Mumbai-400 051 and the Headquarters of its Refineries division at Scope Complex, Core-2, 4th Floor, 7, Institutional Area. Lodhi Road. New Delhi - 110 003 (hereinafter referred to as the "OWNER which expression shall include its successors and assigns) of the ONE. M/s TECNIMONT PRIVATE LIMITED, a Company registered in India under the Indian Companies Act. 1956. its registered office at Tecnimont House, Chincholi Bunder. 504. Link Road. Malad (W). Mumbai-400 064 India (hereinafter referred to as collectively referred to as the "CONTRACTOR", which expression shall include his/their/its executors, administrators, representatives and permitted assigns/success....
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....ery including civil, Structural. Mechanical, Piping, Electrical and Instrumentation including tie-ins, spares tall type) handed over to IOCL store duly codified, as per IOCL requirement, Testing, Insulation. Painting, First fill of chemicals and lubricants, Obtaining all Statutory Approvals (except for Environment Clearance which will be obtained by M/s IOCL). pre-commissioning Mechanical Completion of Plant, Preparation of plant specific operating manuals, Start-up. Commissioning and Performance Guarantee Test Runs (PGTR). Training of Owner's OLM personnel, consumables (Chemicals cfc Lubricants) for 6 (six) months operation. Contract closure activities Final invoice/ billing & document hand over and handing over of the facilities with Final and "As Built documentation for EPCC-1 package, of Acrylic/Oxo-Alcohol Project at IOCL Dumad Complex (near Gujarat refinery! comprising of following two units namely: 1. AA UNIT (90KTA) 2. BA UNIT (150 KT A) 1.0 LUMPSUM PRICE 1.1 The Contract value (also termed as 'Contract Price' or 'Lumpsum Price) is fixed Lumpsum price of INR 1872,00,48,047.50 INR Eighteen Hundred Seventy-Two Crore Forty-Eight Thousand Forty-Seven and Pai....
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....t and the cost thereof has been covered suitably and appropriately assigned to various available heads and categories in the Schedule of Prices. Non-identification of any works in the description of items included in Schedule of Prices and the Schedule of Break-up of Lumpsum prices shall not be considered a reason either for extra claims or not carrying out the work in strict conformity with drawings, specifications and instructions of Engineer-in-Charge. 3.4 The breakup of Lumpsum prices shall be used for preparation and submission of detailed Billing Schedule (Schedule of Activities and Bill of Material for release of progressive payments. Notwithstanding the amounts shown in the Billing Schedule (Schedule of Activities and Bill of Material) under various heads, the total payment to the Contractor for performance of this Contract shall be limited to Lumpsum Price mentioned at para 1.1 above. 4.0 TAXES & DUTIES 4.1 Goods & Service Tax (GST): Goods & Service Tax (GST) levied on and paid by the Contractor/ Supplier on any Indigenous material sold and supplied by the Contractor to Owner under the Contract shall be reimbursed by Owner subject to the extent of Input lax Credit ....
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....ndian port of CONTRACTOR'S choice in respect of imported materials and delivered ex-factory in respect of other materials, at the price of materials specified in the Price Schedule. It is hereby clarified that the said contract shall include a contract for the sale and supply within the price of materials (and any recoveries in respect thereof under any policy of insurance) of all materials required for the replacement of any defective materials and any materials lost, damaged or destroyed during transit, storage, fabrication, erection or otherwise prior to the issue of the Completion Certificate. 30.2.2(a) Supplier's invoices in respect of materials covered within the scope of supply under Clause 3.0.2.1 shall be made out by the Supplier in favour of the OWNER and the materials shall be consigned to the OWNER. Where the CONTRACTOR is the supplier, the invoices shall be drawn by the CONTRACTOR as the Supplier. (b) The Supplier's invoices for imported materials shall include the cost of all predelivery tests and third party inspections, but shall not include the CONTRACTOR'S procurement charges. (c) The Supplier's invoices for indigenously supplied material....
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....actor will execute imports under MOOWR/EPCG under the responsibility of IOCL. After detailed deliberation, it was decided to clear all the imported consignment in the name of IOCL based on the high sea sale agreement to be executed between M/s IOCL and M/s Tecnimont Private Limited. M/s Tecnimont Private Limited informed to share the list of items to he Imported through email latest by 15th Feb' 2022 specifying the details such as tentative value, port of discharge like Mundra/ Kandla /Nhava Sheva / Mumbai Seaport and/or Ahmedabad / Mumbai International Airport, expected date of goods reaching Indian port etc. CONTRACTOR has provided the list of items to be imported with requested details vide email dated 16.02.2022. The price to be indicated in the list of imported items will be as per the value of the imported material to he sold by M/s Tecnimont to IOCL on High Sea Sales agreement. However, at the bidding stage M/s Tecnimont had envisaged imports & clearance in their own name and accordingly the detailed billing break up for imported supplies will now undergo change owing to adoption of MOOWR scheme but the total Value of Imported items will remain same as per SP-1 and....
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....ved billing schedule will be effective, and payment shall be governed by existing approved billing schedules till the lime imported and remaining billing breakup is not approved and shall not result in delay in payment on account of pending approval of billing schedule. M/s Tecnimont also requested IOCL to share the list of people signing the High Sea Sale agreement in advance and preferably the person to be based out of Mumbai. Further, IOCL also clarified that GST TDS will not be applicable on imported supply value as the same is exempt from GST at first place and hence there is no question of deducting GST TDS on it. This MOM shall be part of amendment to DLOA/Contract. [emphasis supplied] 20. The applicant's contention primarily is that the contract entered into with IOCL, identifies two separate set of supplies under the turnkey EPC contract, viz [i] supply of imported materials for the project; and [ii] works contract for EPC work pertaining to EPCC-1 project. Coupled with the above contention is the next submission that in respect of [i] supra, the transaction is exempt under Schedule-III of CGST Act, 2017 and in respect of [ii], supra, the applicant will ch....
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....labour and service and it was not within the domain of the assessing officer to dissect an indivisible contract to distinguish the sale of goods constituent and the labour and service component. The aforesaid being the legal position, the Parliament brought in the Forty-sixth Amendment by incorporating Clause (29A) in Article 366 of the Constitution to undo the base of the Constitution Bench decision in Gannon Dunkerley's-I case. 42. At this juncture, it is condign to state that four concepts have clearly emerged. They are (i) the works contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale of goods, and the other for supply of labour and services; (ii) the concept of "dominant nature test " or, for that matter, the "degree of intention lest " or "overwhelming component test" for treating a contract as a works contract is not applicable; (iii) the term "works contract " as used in Clause (29A) of Article 366 of the Constitution takes in its sweep all genre of works contract and is not to be narrowly construed to cover one species of contract to provide for labour and service alone; and (iv) once the characteristics of wor....
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....ace order, regard being had to the building, and also make certain preparatory work. But it is not in dispute that the preparatory work has to be done taking into consideration as to how the lift is going to be attached to the building. The nature of the contracts clearly exposit that they are contracts for supply and installation of the lift where labour and service element is involved. Individually manufactured goods such as lift car. motors, ropes, rails, etc. are the components of the lift which are eventually installed at the site for the lift to operate in the building. In constitutional terms, it is transfer either in goods or some other form. In fact, after the goods are assembled and installed with skill and labour at the site, it becomes a permanent fixture of the building. Involvement of the skill has been elaborately dealt with by the High Court of Bombay in Otis Elevator (supra) and the factual position is undisputable and irrespective of whether installation is regulated by statutory law or not, the result would be the same. We may hasten to add that this position is stated in respect of a composite contract which requires the contractor to install a lift in a buildin....
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....lly dividing an otherwise single turnkey contract into [a] supply of goods and [b] supply of services. 24. Now, we move on to the first question on which the applicant has sought ruling viz whether the transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on HSS basis in terms of Contract No. 44AC9100-EPCC-1 would be covered under Entry No. 8(b) of Schedule III of the CGST Act and shall be excluded from the value of work contract service for charging GST? 25. Entry No. 8(b) of Schedule III to the CGS T Act, 2017, and section 7, ibid, states as follows: * SCHEDULE III [ See section 7] Activities or transactions which shall be treated neither as a supply of goods nor a supply of services 8. (a) Supply of warehoused goods to any person before clearance for home consumption; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.] Explanation 1.-For the purposes of paragraph 2, the term "court" includes District Court. High Court and Supreme Court. Expla....
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....rvices or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the Slate Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act. if charged separately by the supplier: (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both: (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of or before delivery of goods or supply of services: (d) interest or late fee or penalty for delayed payment of any conside....
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....ed below viz 1. (a) This instant petition is filed to challenge the order dated 28-2-2022 (Annexure - P/5) passed by the Appellate Authority for Advance Ruling, Chhattisgarh (for brevity 'the AAAR') as no decision was rendered in terms of Section 101 (3) of the Central Goods and Service Tax Act, 2017 (for brevity 'the CGST') and the Chhattisgarh Goods and Service Tax Act, 2017 (for brevity 'the CHGST') and the order dated 4-1-2021 (Annexure - P/6) passed by the Authority for Advance Ruling, Chhattisgarh (for brevity 'the AAR') to be illegal wherein it was held that Goods and Services Tax (for brevity 'the GST') would be leviable on the value of diesel provided by the service recipient Free of Cost (for brevity 'FOC'). (c) The petitioner is a Goods Transport Agency (for brevity 'the GTA') service provider,................. As per the proposed terms of agreement, it was agreed that the petitioner would provide trucks/trailers along with driver for transportation of goods belonging to the service recipient on a day-to-day and non-exclusive basis and further as per Clause 2 of the draft agreement, the service recipient will be responsible for providing fuel in the trucks/trailers s....
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.... as per the proposed agreement/contract, the fuel (diesel) is not in the scope of the service of the petitioner. The agreement purports that the fuel would be free of cost basis for transportation of the goods and fuel would be filled by the service recipient for transportation. 21. The very definition and existence of the petitioner who is to provide transportation service, by plain and simple interpretation would point out the entire business and survival is premised and interdependent on the vehicles for transportation of goods. The obvious factor would be the vehicle cannot run without fuel. Therefore, the design of the entire activity of GTA is based on supply of fuel to the respective vehicles. In absence of fuel, the the entire business activity would stand arrested to provide service. Therefore, the need of fuel is glued for survival of a GTA. If the GTA has stitched up to provide service by obtaining fuel on FOC basis by contract with recipient Company, this phenomenon would transcend the activity which reflects a broader shift in name of contract, therefore, the revenue has power to remove the lid to find out the object and purpose. 22. In the instant case, the scope ....
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....ually paid. This section imposes statutory obligation. The very existence of petitioner as GTA is for goods transport. Naturally, it would be the obligation for the GTA to run the vehicles and this factor needs a merited attention. The provision of Section 15(2)(b) has been tried to be by-passed by the agreement wherein the diesel was agreed to be supplied FOC by service recipient to the GTA. If we look into the facts by other angle, the expenses to fill the diesel in vehicle in furtherance of supply of service in normal condition was to be incurred by the GTA and it was his liability to fulfill such supply. However, in this issue, the expense of fuel has been agreed to be incurred by the recipient by agreement and value of diesel is excluded to evaluate the value of supply. The statutory provision of Section 15(2)(b) takes within its sweep to value, which is incurred by recipient. Therefore even by agreement in between the GTA and service recipient, this statutory liability cannot be sidelined and the merited attention of the statute sets a red line. Therefore, in the instant case, the value of service agreed to be provided necessarily will depend on the nature of service and the ....
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....his stage while interpreting the provisions of Section 15(2)(b) of the GST Act, 2017 with the proposed GST Law specially taking into consideration the nature of business by GTA, the service provider. 30. Again when we examine the nature of business of the petitioner, who is a GTA, the nucleus of survival of business shows that the business of petitioner entirely survives on transportation. Since the transportation inter-alia is an inter- dependent on supply of fuel, it would be a crucial component to run the business of GTA. If such integral part of survival of reins are held by service recipient, in such a case, it would be actually doing the substance addition of GTA survival. Therefore, the Circular dated 8th June 2018 on which the petitioner tried to rely upon would not be of any help especially considering the nature of business and the provisions of Section 7(1)(a) and 15(2)(b) of CGST Act. 31 ..................... In view of the observations made in foregoing paragraphs the initial order passed by the AAR on 04.01.2021 shall revive and it is observed that though the diesel was provided free of cost by the service recipient, it would nevertheless be added to the value for....
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....anent works as determined by the applicant. Thus, the argument that it is a divisible contract entailing [a] supply of imported goods and [b] supply of services is not borne out from the reading of the contract and the relevant documents thereof. 30. On going through the minutes of the meeting, it is further observed that the applicant has to undertake and perform all services and formalities necessary for clearance of the imported goods/materials from under bond from Customs. Needless to add, that it is the applicant who is contractually obliged to procure the imported goods in terms of the contract for the said turnkey EPC project. 31. The submission of the applicant as listed in para 11 supra, to substantiate that the contract is divisible & further stress about the intent of the parties to the said contract, is viz * the bifurcation of the contract value with respect to supply of imported goods into India and sold under HSS basis to IOCL; * special conditions of contract with respect to milestone payment of the consideration; * the HSS agreement with IOCL; * that only the value of goods component is included in the custom invoice; * the applicant then issues an Inv....
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.... is legally incorrect owing to the fact that in terms of Sr. No. 6 of Schedule II to the CGST Act, 2017, viz 6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. As is already stated the contract entered into by the applicant with IOCL, is a turnkey EPC contract, to commission an Acrylic Acid & Butyl Acrylate Unit of Acrylic/Oxo-Alcohol Project, which is a composite works contract in terms of section 2(119), ibid. In terms of Sr. No. 6 of Schedule II, such composite works contracts, involving transfer of property in goods (whether as goods or in some other form) involved in the execution of the said project is a composite supply & in terms of Schedule II, would be treated as supply of service and leviable to GST accordingly. 34. The next argument that the appl....
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....ly issued under Sections 5(3) and 5(4) of the IGST Act, it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation. As noted earlier, under Section 7(3) of the CGST Act, the Central Government has the power to notify an import of goods as an import of services and vice-versa: "7. Scope of supply- [...] (3) Subject to the provisions of [sub-sections (1), (1A) and (2)] 16, the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods." No such power can be noticed with respect to interpreting a composite supply of goods and services as two segregable supply of goods and supply of services. 147. We are in agreement with the High Court to the extent that a tax on the supply of a service, which has already been included by the legislation as a tax on the composite supply of goods, cannot be allowed. As is evident, the facts in Mohit Minerals, supra is at complete variance from the facts relating to the applicants case. The reliance therefore is not legally....