TaxTMI 
TaxTMI 
2024 (3) TMI 45
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....pellant on the portal on 19.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/20 dated 15.09.2021. As per the Appellant, the Order of AAR, Rajasthan was communicated to them on 21.09.2021 BRIEF FACTS ON THE CASE 1. M/s ION Exchange (India) Limited, Plot No. 186, 22 Godam, Jaipur (Rajasthan)-302006 (herein after referred as Appellant) submitted that they are engaged in the business of water treatment, waste-water treatment and its recycling. They are registered under the Central Goods & Service tax Act 2017 having registration no. 08AAACI1726L1ZK. The Appellant reportedly offers wide range of customized treatment plants for water, waste liquids and waste-water which are installed in thermal and nuclear power plants, fertilizer factories, refineries, and the petrochemical and other industries. As a part of their business operations, the Appellant enters into Engineering, Procurement and Construction contracts ("EPC Contract") with their customers. 2. The Appellant have entered into an EPC contract with M/s. Vedanta Limited ("Vedanta") vide Contract No. 4600008952 dt. 14.08.2018. The Appellant have informed that Cairn (Vedanta's upstream Oil & Gas vertical) is t....
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....manufacturing, fabrication and construction. Project Management & surveys Planning, scheduling, monitoring, progress reporting, quality assurance, quality control and overall project management functions. Procurement & Supply Vendor management, Procurement and Logistics management; Manufacturing, Fabrication, Inspection and Testing, FAT, packing, shipping, shipment insurance, transportation and delivery to site complete with associated, Loading/Unloading & Shifting of Material; Construction, erection and installation Execution of the complete construction activity and management of local contractors Commissioning, RESU, Performance Guarantee Test Site Restoration works & waste management for ready for Start-up activities and performance guarantee testing Training and facility Handover Associated Quality, health and safety environment management training SPECIALIZED & CUSTOMIZED SERVICES The development of Sulphate Removal Plant covers three major elements, viz., Early Civil works, Inside Battery Limit primarily covering the technology part and Outside Battery Limit-primarily covering the rest of the plant. The Appellant have been given an integra....
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....upport services to exploration, mining or drilling of petroleum crude or natural gas or both") or alternatively under the SAC Heading 9983 [Sr. No. 21(ia)] (viz., "Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both") and are liable to attract 12% GST under the CGST Act. By filing the application under Section 97(1) of the RGST Act/ CGST Act before the AAR, Rajasthan, the Appellant had sought to confirm this classification. The AAR, Rajasthan have answered the questions of the Appellant, vide their Ruling dated 15.09.2021 as under: Question 1 - With the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, whether the services with respect to EPC contract entered for execution of Sulphate Removal Plant supplied to M/s Vedanta Limited vide contract No. 4600008952 dated 14.08.2018 is covered under Sr. No. 24 (ii) (Support Services to Mining) or Sr. No. 21(ia) (Professional, Technical or Business Service to Mining) of the Rate Notification. Answer: - No Question 2 - If the subject services are not classified under any of the aforesaid entry, what wou....
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....rite law that decisions based on presumption and surmises have no place in the eyes of law. In this regard, reliance has been placed upon by the appellant on the following decisions wherein it has been held that an order based on presumption, surmises and conjectures is liable to be quashed: • Commissioner v. Sree Ganesar Textile Mills Ltd, 2015 (321) E.L.T A270 (S. C.); • Commissioner v. Bihariji Manufacture Co. Pvt. Ltd., 2015 (323) E.L.T. A23 (S. C.); • Commissioner v. Modern Denim Ltd., 2006 (199) E.L.T. A181 (S.C.); • Kirloskar Oil Engines Ltd. v. Commissioner of Central Excise, Nashik, 2017 (349) E.L.T. 299 (Tri. - Mumbai); • Wolters Kluwer India Ltd v. Commissioner of Service Tax, 2014 (36) S.T.R 396 (Tri.-Del.); • Industrial Filter & Fabrics Pvt. Ltd. v. Commr. of C. Ex., Indore, 2014 (307) E.L.T. 131 (Tri. - Del.) 11.4 That the Appellant submitted that Vedanta has decided to construct a Sulphate Removal Plant (SRP) with associated facilities adjacent to the Mangala Processing Terminal (MPT) in Banner district of Rajasthan to tackle with the high amount of H2S produced during petroleum operatio....
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....red within the scope of Heading 9986 as per the Scheme would reveal that it covers diverse nature of activities ranging from test drilling and exploration, to casing and cementing of wells and derrick erection for the purpose of moving heavy material on the oil fields. 11.10 The Appellant submitted that the impugned Ruling, while denying the benefit of SAC Heading No. 9986 to the Appellant, stated that SAC Heading No. 9986 covers only those activities which are provided once the infrastructure/ facility for exploration is built & complete in all respect and ready to start exploration. 11.12 The Appellant denied such interpretation of the classification entry at SAC Heading No. 9986 adopted by the AAR, Rajasthan, for it not only appears absurd and lacks any credible basis in law, it is also directly in the teeth of the established principle of law that classification entries should be derived from literal meaning and no addition of words or expressions should be made into it. In the case of Oswal Agro Mills Ltd. &Ors. v. Collector of Central Excise & Ors., 1993 (66) E.L.T. 37 (S. C.), the Hon'ble Apex Court held as follows: "The ordinary rule of construction is the pr....
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....) 4 SCC 635 c) Bansal Wire Industries Ltd. v. State of Uttar Pradesh, (2011) 6 SCC 545 d) CIT v. Calcutta Knitwears, 2014 (6) SCC 444 11.17 In the light of the above, the Appellant submitted that the AAR, Rajasthan has adopted a narrow view while deciding the purview of Heading 9986, in respect of which, even Circular 114 itself states that, "Most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 11.18 Without prejudice, the Appellant submitted that if at all the contention of the AAR, Rajasthan, that Heading 9986 shall include the services to be provided for exploration, once the infrastructure/ facility for exploration is built & complete in all respect and ready to start exploration, is to be accepted, still the finding held by the AAR, Rajasthan will not hold good. 11.19 Appellant reiterated that Vedanta wanted to tackle the high amount of H2S produced during petroleum operations therefore they entered into a contract with the Appellant to undertake an execution of a Sulphate Removal Plant. The Appellant have to perform activities which are required for execution of the Sulpha....
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....cility for exploration is built & complete in all respect and ready to start exploration. But it doesn't include the services to be provided before creating the infrastructure/ facility. Under the EPC contact, the Appellant have to undertake activities from designing, engineering, procurement, construction of customized facility, commissioning of permanent facility, Test run and hand over of complete facility so designed, constructed, tested and commissioned. Thus, it cannot be treated as support services to oil & gas extraction." 11.28 In this regard, the Appellant submitted that one of the reasons contended by the AAR, Rajasthan for rejecting the classification Heading 9986 for the subject services is that Heading 9986 does not include services provided before creating the infrastructure/ facility for exploration. 11.29 The Appellant submitted that the AAR, Rajasthan further stated that the Appellant are carrying out EPC contract wherein it is required to undertake designing, engineering, procurement, construction of customized facility, commissioning of permanent facility, Test run and hand over of complete facility so designed. They further stated that since these activit....
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....anatory Notes to the Scheme itself is based on the same. 11.35 The relevant extract of the interpretative rules enshrined under the UNCPC provides thus: "56. In the CPC, the classification of products other than transportable goods, mainly services, shall be determined according to the terms of the categories as described in the divisions, groups, classes or subclasses in Sections 5 to 9 of CPC. When services are, prima facie, classifiable under two or more categories, classification shall be effected as follows, on the understanding that only categories at the same level (Sections, divisions, groups, classes or subclasses) are com parable.. (a) The category that provides the most specific description shall be preferred to categories providing a more general description; (b) Composite services consisting of a combination of different services which cannot be classified by reference to (a) shall be classified as if they consisted of the service which gives them their essential character, in so far as this criterion is applicable; (c) When services cannot be classified by reference to (a) or (b), they shall be classified under the category that ....
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....ng 9986. 11.41 The Appellant submitted that as per the said rule, when services are classifiable prima facie under two headings, the same should be classified under the heading which occurs last in the numerical order. The Appellant therefore are of the view that as heading 9986 appears later to the SAC Heading No. 9954 in the numerical order, the services are classifiable under heading 9986. 11.42 In this regard, the Appellant have placed reliance on the following decisions: • Biomax Life Sciences Ltd. v. Commissioner of Customs, C.Ex. & S.T. [2021 (375) E.L.T. 263 (Tri.-Hyd.)] • Commissioner of Customs (Port) v. Praman International [2019 (365) E.L.T. 846 (Tri.-Kolkata)] • Paswara Impex Ltd. v. Commissioner of Customs [2013 (292) E.L.T. 562 (Tri.-Ahmd)] • Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tri.-Mumbai)] 11.43 The Appellant submitted that they have been classifying the subject services provided to Vedanta under SAC Heading No. 9954 - 'General construction services' and are paying GST @ 18% under Sr. No. 3 of the Rate Notification. Given the scope of work involved in the project and further by virtue of the amend....
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....fication entry which was not even in force during the period for which the Ruling was sought. 11.49 The Appellant set out the relevant provisions of the SAC Heading No. 9954 (ii) as follows: "(ii) Composite supply of works contract as defined in clause 119 of Section 2 of Central Goods and Services Tax Act, 2017." 11.50 The Appellant submitted that the aforesaid provision existed in the statue books since 28.06.2017. Thereafter, vide Notification No. 3/2019-CT (R), dated 29.03.2019 w.e.f. 01-04-2019, the said clause was omitted from the Rate Notification. Therefore, the said provision existed in the statute books during the period from 28.06.2017 to 31.03.2019 and post that date, it was omitted. 11.51 The Appellant submitted that the relevant period for classification of the subject services before the AAR, Rajasthan was 01.10.2019 onwards. Given that the Heading 9954(ii) was non-existent for the relevant period for which the Ruling was sought, there is no basis of law to Rule that the subject services rendered by the Appellant to Vedanta under the EPC contract merits classification under Heading 9954(ii) of the Rate Notification, evidently when such provision of law wa....
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....bandoning of wells, test drilling and exploration services in connection with petroleum and gas extraction." According to the Appellant, a look at the nature of services covered in the aforesaid entry reveals that it includes services relating to oil wells which include its cementing, pumping, casing, plugging and abandonment. Further, the entry also includes, inter alia, test drilling in connection with the petroleum and gas. 11.58 The Appellant further stated that the relevant Explanatory Note uses the expression "includes" which means that the activities which are provided in Heading 9986 are merely indicative in nature and it can include more such services which are of similar nature or ilk. In this regard, the Appellant added that the said phrase has a very wide connotation, thereby giving the Chapter Heading an extensive scope. 11.59 The Appellant also submitted that the said phrase used in the Explanatory Note clearly shows that the Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard is made to Tetragon Chemie Private Limited and Ors Vs CCE and Ors [2001 (138) ELT 0414 Tri-LB], wherein in the context of int....
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...., the Appellant find it evident that they are providing support services to Vedanta by carrying out the execution of the Sulphate Removal Plant for purifying injection water used in the oil fields. 11.64 Therefore, according to the Appellant, construction of such facilities forms an indispensable part of the support activities for mining and petroleum operations and the inclusive list provided in the Explanatory Note must be seen in that context. 11.65 The Appellant also reiterated the following from the Circular 114 issued by CBIC wherein it has been specifically stated as follows: "Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 11.66 According to the Appellant it is beyond doubt that their responsibility under the EPC Contract involves a wide range of activities which are clearly associated with the exploration, mining and drilling of petroleum crude. 11.67 The Appellant also submitted that a perusal of various terms of the contract would make it evident that there is a clear nexus between the functions and activities that are required to be performed by the Appellant unde....
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....rocurement and commissioning of 'Sulphate Removal Plant.' What would be transferred is the plant including the civil work and land involved in plant. Various civil structure would be created and various equipment would be installed. In case of this contract the said project cannot be shifted anywhere; it is essentially of the nature of immovable property. The project after completion at the time of transfer will be immobile property. It is thus we are of the considered view that the work specified in the EPC contract qualifies as "work contract" and will be taxed accordingly." 11.75 The Appellant submitted that the impugned Ruling incorrectly rejects their arguments on the ground that the services supplied by the Appellant under the aegis of an EPC contract, are in the nature of a works contract falling under the SAC Heading No. 9954 of the Rate Notification and therefore taxable at the rate of 18%. As per the Appellant, in coming to this conclusion, the AAR, Rajasthan has failed to apply the settled principles on classification to the present facts of the matter. 11.76 The Appellant submitted that Section 2(119) of the CGST Act, 2017 defines "Works contract" as follows: ....
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.... wells; (c) test drilling and exploration services in connection with petroleum and gas extraction; (d) specialized fire extinguishing services; (e) operation of oil or gas extraction unit on a fee or contract basis 11.82 According to the Appellant, a reading of the aforesaid list of indicative services would reveal that many of the aforesaid services are in the nature of works contract. Services like well casing, cementing, pumping and abandoning of wells, derrick erection, etc. are such services which requires labor services as well as supply of relevant material for providing the same. These services involve civil work as well as supply of material as part of performance of such activities and can very well take the shape of works contract. 11.83 The Appellant submitted that to bring such services as above, out of the purview of Heading 9986 is clearly a result of misreading of the law and lack of understanding of the industry in which petroleum operations are carried out. 11.84 As per the Appellant, many of the services which can be considered as work contract are clearly covered within the scope of the Heading 9986, therefore, there is no me....
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....scription (1) (2) (3) (4) 296 Heading 9983 Other professional, technical and business services 11.90 The Appellant 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. The term 'business' has been defined under Section 2(17) of the CGST Act, which is reproduced herein below for ease of reference: '(17) 'business' Includes (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the f....
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....as well as an indirect significance depending on the context. They add that term 'relating to' has been held to be equivalent to or synonymous with 'concerning with' and 'pertaining to'. Therefore, they submitted that entry (ia) of Sr. No. 21 includes a broad range of services which pertain or concern with the activity of mining. 11.94 The Appellant submitted that the services provided by them are in relation to the mining activity of Vedanta, as stated above in detail. Hence, in the present case, they submitted that the supply of services by the Appellant to Vedanta in relation to the mining activities under the project merits classification under Heading 9983. According to the Appellant, by virtue of Sr. No. 21(ia) of the Rate Notification, it is submitted that the said activity may alternatively get 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 attract GST @12%. 11.95 The Appellant submitted that in addition to the above, it is also relevant to note that the Para 2 of the Circular 114 specifies that most of the activities associat....
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....8 The Appellant submitted that without prejudice to the submissions made above the supply of services made by them to Vedanta, in relation to the mining, would merit classification under Heading 9983 and attract GST @ 12% in terms of Sr. No. 21(ia) of Rate Notification. Therefore, according to the Appellant, on these grounds as well, the impugned Ruling pronounced by the AAR, Rajasthan is liable to be dismissed. PERSONAL HEARING 12. A virtual hearing in the matter was held on 11.01.2022. Sh. Rohit Jain, Advocate and Sh. Rahul Khurana, Advocate, Authorized Representatives of the Appellant attended the hearing. They reiterated the submissions already made under grounds of appeal. Further vide letter dated 18.01.2022, the Appellant also submitted following additional grounds in support of their appeal: 12.1 The Appellant submitted that the impugned Order seeks to classify the services provided by the Appellant under Entry no. (ii) of SAC Heading No. 9954 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 ("Rate Notification") which provided a rate of tax for "composite supply of works contract as defined in clause 119 of Section 2 of Central Goods and Services Ta....
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....logical, geophysical and related prospecting and consulting services, cf 99834." As per the Appellant the use of the term "includes" implies an expansion in scope of the term and should be given a wide connotation. See Tetragon Chemie Private Limited and Ors v. CCE and Ors [2001 (138) ELT 0414 Tri-LB], Stove Kraft Pvt. Ltd. v. State of Karnataka [2006 (2) TMI 603], Bharat Coop. Bank (Mumbai) Ltd v. Coop Bank Employees Union [2007(4) SCC 685], Regional Director Employee's State Insurance Corporation v. High Land Coffee Works of Pfx. Saldanha & Sons [1991(7) TMI 367] 12.6 The Appellant submitted that the expansive scope of entry 998621 is re-iterated in the CBIC Circular No. 114/33/2019-GST dated 11.10.2019 which specifically states that "Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 12.7 The Appellant submitted that the findings in the impugned Order at Para 5 are that the classification of support services to oil and gas extraction under Heading 9986 is only applicable when the exploration/production had started and the support services do not include services supplied before the creat....
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....rvices. They added that even if it is to be assumed that the supply of services under the EPC contract is a composite supply in the nature of a works contract, the service will still merit classification under SAC Heading No. 998621 which is a specific entry for services that support the activity of oil and gas extraction. They have placed reliance upon Ascent Meditech Ltd. v. CCE, Vapi [2014 (309) E.L.T. 712 (Tri. - Ahmd.)] [Affirmed in 2015 (320) ELT A281 (Supreme Court)], Pepsico India Holdings Pvt. Ltd v. Dy. Commercial (A) IV, Commercial Taxes, Jaipur [2018 (16) G.S.T.L. 249 (Raj.)], Dabur India Ltd. v. CCGST [2020 (34) G.S.T.L. 9 (A11.)], Sanwar Agarwal v. Commissioner of Customs (Pont, [2016 (336) E.L.T. 42 (Cal.)]. 12.11 The Appellant submitted that even in case where the headings merit equal consideration, resort must be taken to clause (c) of the general interpretative rules which states that when services are classifiable prima facie under two headings, the same should be classified under the heading which occurs last in the numerical order. The Appellant are of the considered view that as Heading 9986 appears later to the SAC Heading No. 9954 in the numerical order, ....
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....ave also submitted additional submission which is brief of ground already submitted during appeal and additional submissions already submitted by them on 18.01.2022. Nothing extra has been added. 14. Due to change of Members of AAAR, another personal hearing was held on 13.09.2023, in which Sh. Rohit Jain, Advocate and Sh. Rahul Khurana, Advocate, authorized Representatives of the Appellant appeared & attended the hearing. They reiterated the submissions already made under grounds of appeal and the submissions made by them vide letters dated 18.01.22 & 16.03.2022. During the hearing, Counsels provided executive summary of the submissions dated 13.09.2023, which is a brief of grounds already submitted during appeal and additional submissions already made by them. 15. The Counsel vide letter dated 19.09.2023 (received on mail on 20.09.2023) made additional submissions which are already submitted by them and nothing extra has been added. DISCUSSION AND FINDINGS 16. We have carefully gone through the entire material available on record, appeal papers filed by the Appellant, Ruling pronounced by the AAR, Rajasthan, additional written submissions dated 18.01.2022, 16.03.2022 ....
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....h based on the documents submitted by the Appellant in order to arrive at a finding in accordance with the legal provisions governing the subject. To facilitate analysis, the detailed examination and findings based thereon have been divided into the following Sections:- Section Sub-Section Description A. Activity in brief as narrated by the Appellant B. Appellant's understanding of law on the subject B.1. Main Contention as to classification of supply B.2. Alternate classification suggested C. Appellant's analysis of the activity for classification C.1. Classification under support service of business- Heading 9986 C.2. Classification under other professional, technical & business services- Heading 9983 D. Ruling pronounced by the AAR D.1. Classification suggested under SAC Heading No. 998621 rejected D.2. Classification suggested under Heading 9983, in the alternate, also rejected D.3. What is the correct classification E. Analysis of classificatio....
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....lopment & production of hydrocarbons. (v) The oil & gas produced from these fields are collected and transported to a central processing facility at Mangala through a network of existing in-field pipelines. The central processing facility is also termed as Mangala Processing Terminal (MPT). The existing pipeline corridor at Mangala Field, between MPT and various well pads, has various exiting pipelines running through it. M/s Vedanta Limited have awarded EPC contract to the Appellant to have their services rendered at their oil and gas fields in the block. The Appellant entered into an EPC contract with M/s Vedanta Limited in which they have to undertake the construction of 'Sulphate Removal Plant' or SRP with respect to the petroleum operations at Mangala wells as per the specification & customization laid down in the EPC contract. B. Appellant's understanding of law on the subject: The Appellant have referred to the rules of interpretation of the United Nations Central Product Classification as also CBIC's Circular No. 114/33/2019-GST dated 11.10.2019. and argued that the services they supply can be defined as support services to oil and gas extraction deserving....
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....ellant under SAC Heading No. 998621 or under Heading 9983 and held that the supplies proposed to be undertaken by them are classifiable under Heading 9954. D.1. Classification sought under SAC Heading No. 998621 was rejected : The first part of the first question of the Appellant that with the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, whether the services with respect to EPC contract entered for execution of Sulphate Removal Plant supplied to M/s Vedanta Limited vide contract No. 4600008952 dated 14.08.2018 are covered under Sr. No. 24 (ii) (Support Services to Mining) of the Rate Notification has been answered by the AAR in negative D.2. Classification sought under heading 9983, in the alternate was also rejected: The second part of the first question of the Appellant that with the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, whether the services with respect to EPC contract entered for execution of Sulphate Removal Plant supplied to M/s Vedanta Limited vide contract No. 4600008952 dated 14.08.2018 are covered under Sr. No. 21(ia) (Professional, Technical or Business Service to Mining) of the Rate Not....
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....frastructure for production, suffers from fallacy and complete non-consideration of facts in as much as the contract was awarded during the year 2018/2019 and the original production of oil and gas in the oil field had in fact started in the year 2010 itself. F.3. Rules of classification not referred: We also observe that the Appellant have contended that the rules of classification as per the explanatory notes require that if at all the services performed by the Appellant appear to be falling under SAC Heading No. 9954 as against Heading 9986, still, in terms of the cardinal rule of interpretation for purposes of classification of goods and services, the classification entry giving a more specific description to the activities performed by the Appellant shall apply over the entry providing a more general description. It is their contention that SAC Heading No. 9954 is a general entry which is applicable for works contract services while even if the services supplied under the EPC contract are considered to be a composite supply in the nature of a works contract, the service will still merit classification under SAC Heading No. 998621 which is a specific entry for services th....
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....In view of the questions framed by us for determination in these proceedings, we find that the nature of activities carried out by the Appellant in terms of the EPC Contract with M/s Vedanta Limited is required to be analysed and the submissions of the Appellant need to be examined in the light of the EPC Contract in question as the determination of the questions depend upon the true nature of the activities proposed to be carried out by the Appellant. H.1 Nature of activities as per the EPC Contract: (i) We observe that in the appeal dated 19.10.2021 praying for setting aside of the Ruling dated 15.09.2021 pronounced by the AAR, the Appellant have stated that with a view to construct a Sulphate Removal Plant with associated facilities adjacent to the Mangala Processing Terminal, Vedanta awarded the Engineering, Procurement and Construction Contract ("EPC Contract") to the Appellant. It has been stated in the appeal in Para- 1.5 that Appellant will have to undertake the following activities: (a) Design and Engineering: Project Management. (b) Surveys (pre-engineering, pre-construction/ pre-installation and post installation (c) Procurement and suppl....
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....e-engineering, pre-construction pre-installation and post-installation), Procurement, Manufacturing, Fabrication, Inspection and Testing, packing, shipping, shipment insurance, transportation and delivery to site, Loading/ Unloading & Shifting of material, Construction, Fabrication, Dismantling, removal and disposal of existing facilities, restoration, Construction, Complete erection and installation, Mechanical Completion, Tie-ins with existing facilities, SAT, Site Testing, Pre-commissioning, Commissioning, Stability performance, PGTR ( Performance Test Run), Training and Hand over of facilities for SRP project. b. CONTRACTOR shall provide efficient and adequate Project Management from start of works till completion of all facilities c. CONTRACTOR shall provide full assistance to COMPANY and PMC's personnel at all stages of work and at all places during the course of the 'WORKS, including arranging travel permissions, visas, etc. as applicable. d. CONTRACTOR shall provide engineering designs in accordance with ITT package, current worldwide best practices, governing codes and in compliance with the Indian statutory regulations in force. e. Engi....
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..../ PMC. As regards to left over useable material including bulk material, CONTRACTOR shall duly codify the same as per the COMPANY'S guidelines and return to the COMPANY without any extra cost to COMPANY n. CONTRACTOR shall procure and supply all equipment and materials required to construct the facilities. The procurement functions shall include the securing of proposals from approved suppliers, issuing of purchase orders, expediting deliveries, performing the necessary inspections including arranging third party inspections and tests to ensure quality and quantity, handling the shipping, receiving, unloading, customs clearance, transporting to the SITE and warehousing of equipment and materials. All equipment and materials shall be newly manufactured for the project. In the event to expedite the project and meet the schedule, if any off the shelf material is proposed, then prior approval shall be obtained from the company, subject contractor successfully demonstrating the suitability of item along with complete documentary evidence manufacturing & testing reports. o. CONTRACTOR shall supply all special tools & tackles required for operation and maintenance. CONTR....
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....ve classification under SAC Heading No. 998621 as support services to exploration, mining or drilling of petroleum crude or natural gas or both. It has been stated that the contention is based on the Rules of Interpretation falling under Chapter-III of the United Nations Central Product Classification (UNCPC) as the Explanatory Note to the Scheme of Classification of Services is itself based on the UNCPC as stated by CBIC in Circular No. 114/33/2019-GST dated 11.10.2019. (ii) In this regard, we observe that the broad Heading 9986 in the Explanatory Notes is titled as 'support services to agriculture, hunting, forestry, fishing, mining and utilities' and the sub-heading 99862 is titled as 'support services to mining'. SAC Heading No. 998621 has been described as follows:- "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 ....
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....86. Para-4 of the circular relevant to the instant issue reads as follows:- "4. It is hereby clarified that the scope of the entry at Sr. 24 (ii) under heading 9986 of Notification No. 11/2017-CT(R), dated 28.06.2017 shall be governed by the explanatory notes to service codes 998621 and 998622 of the Scheme of Classification of Services." We, therefore, observe that the scope of services provided by the Appellant needs to be examined in terms of the description of services given in the Explanatory Notes which have already been discussed above. H.2.1 Details of EPC contract w.r.t classification under Heading 998621 (i) We observe that the EPC Contract which has been submitted by the Appellant describes the nature of activities undertaken by the Appellant in detail. Explaining the scope of the said document (EPC Contract), it has been mentioned in the introductory part that cairn is planning to develop the Sulphate Removal Plant which is primarily focused its largest field, Mangla. An area of 184m x 230m has been allocated for proposed plant (including green belt, flood Protection measures etc.). Indicative plan is also developed by Company and included in the tende....
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....d instant EPC Contract to the Appellant with mandate to establish Sulphate Removal Plant along with other required infrastructure. (iii) After analyzing the broad outlines of the contract awarded to the Appellant, we find it appropriate to examine the nature of work assigned to the Appellant under the EPC Contract in question. We observe that the Appellant have not denied the fact that supply of service under the EPC Contract in question also involves transfer of property in goods. The only contention by the Appellant in this regard is that the scope of Heading 9986 does not exclude Works Contract Service. As can be seen from the appeal as also from the EPC Contract submitted by the Appellant, the Appellant have been assigned the work related to establishment of infrastructure for the proposed Sulphate removal plant as well as other facility. (iv) One of the important aspects of the EPC Contract is that Appellant are responsible for doing civil or structural work which includes jungle clearance, Gabion Wall & mattress around the plot, foundation, structures, buildings like control building, sub-stations, switchyard, fire stations and sheds, roads, paving and drains etc. and t....
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....e considered in the nature of support to the main activity of oil and gas extraction. Analysis of the said activities, included in the service code, would reveal that these activities are such as can help the main activity of oil and gas extraction. These activities of repair and dismantling services, well casing, cementing, pumping, plugging and abandoning of wells or fire extinguishing services are, in one way or the other connected to the main activity of oil and gas extraction. But none of these activities can be said to be related to establishment of the infrastructure facilities for oil and gas extraction. Since, the Appellant have been tasked with establishment of Sulphate Removal Plant, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot, by any stretch of imagination, be said to be support services to oil and gas extraction. The distinction between the activities undertaken by the Appellant in terms of the EPC contract and the activities included in the definition of SAC Heading No. 998621 is strikingly clear. Therefore, we hold that the activities undertaken by the Appellant in pursuance of the EPC Contract cannot be classified under SAC ....
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....of mineral, oil and natural gas properties, including pre feasibility and feasibility studies; project evaluation services; evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying; providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magneto metric methods & other subsurface surveying methods. This service code does not include- test drilling and boring work, cf 995432." "998343: Mineral exploration and evaluation: This service code includes mineral exploration and evaluation information, obtained on own account basis. Note: This intellectual property product may be produced with the intent to sell or license the information to others." (iii) On analysis of the contents of the explanatory notes above, we observe that so far as SAC Heading No. 998343 is concerned, the same has a very narrow scope/limited coverage of mineral exploration and evaluation information which is certainly not the activity proposed to be undertaken by the Appellant in pursuance of the instant EPC Contract as already discussed at length above. Thus, we find it difficult to ag....
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....contended that the Ruling has been issued based upon non-existent provision of law in as much as entry at Si. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 stood deleted with effect from 01.04.2019. The Appellant have also claimed that for deciding classification of a supply, the category that provides the most specific description shall be preferred to categories providing a more general description and therefore, even if it is assumed that the supply of services provided under the EPC Contract is a composite supply in the nature of a Works Contract, the service will still merit classification under Heading 9986 which is a specific entry for services that support the activity of mining of natural gas. (ii) The Ruling pronounced by the AAR has been contested by the Appellant that it is based on a non-existent provision of law. We deem it appropriate to first examine the Ruling vis-a-vis the contention accordingly. On examination of the Ruling, we observe that the Ruling consists of three different parts. Fist part of the Ruling declares that the supplies proposed to be undertaken by the Appellant answer to the description of works contract service. Second part of....
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....elevant portion of the EPC Contract which has been submitted with the appeal, we observe that the following activities have been assigned to the Appellant which form the core of the entire supply under the contract:- (A) Construction Management, Vendor Management, Procurement and Logistics Management, Waste Management, Local contractor Management, Surveys (pre-engineering, pre-construction preinstallation and post-installation), Procurement, Manufacturing, Fabrication, Inspection and Testing, packing, shipping, shipment insurance, transportation and delivery to site, Loading/ Unloading & Shifting of material, Construction, Fabrication, Dismantling, removal and disposal of existing facilities, restoration, Construction, Complete erection and installation, Mechanical Completion, Tie-ins with existing facilities, SAT, Site Testing, Pre- commissioning, Commissioning, Stability performance, PGTR (Performance Test Run), Training and Hand over of facilities for SRP project. (B) Engineering, Procurement and construction of fire-fighting system related to SRP is under the purview of this project and included in the scope of the Contractor along with applicable interfacing,....
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.... cost to COMPANY. (K) CONTRACTOR shall procure and supply all equipment and materials required to construct the facilities. The procurement functions shall include the securing of proposals from approved suppliers, issuing of purchase orders, expediting deliveries, performing the necessary inspections including arranging third party inspections and tests to ensure quality and quantity, handling the shipping, receiving, unloading, customs clearance, transporting to the SITE and warehousing of equipment and materials. All equipment and materials shall be newly manufactured for the project. In the event to expedite the project and meet the schedule, if any off the shelf material is proposed, then prior approval shall be obtained from the company, subject contractor successfully demonstrating the suitability of item along with complete documentary evidence manufacturing & testing reports. (L) CONTRACTOR shall supply all special tools & tackles required for operation and maintenance. CONTRACTOR shall provide the requirements for all the consumables for operation and maintenance of Sulphate Removal Plant on daily/ weekly/ monthly/yearly basis giving details of suppliers....
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....ed for controlling the H2S. The Appellant are required to hand over the facility complete in all respects after the design, construction, commissioning etc. are completed. (vii) In view of what has been observed by us in the preceding paragraphs, it is necessary to examine the issue with reference to the relevant explanatory notes of the scheme of classification of services independent of the issue of composite supply which can be addressed later on. We observe that SAC Heading No. 9954 of the Scheme of Classification covers the overall construction services with SAC Heading No. 995425 the general construction services of mines and industrial plants. The explanatory notes clarify that the said service code includes construction services for mining and related facilities associated with mining operations. Since, oil and gas exploration is also a form of mining; therefore, the construction services proposed to be supplied by the Appellant for execution of Sulphate Removal Plant are appropriately classifiable under the SAC Heading No. 9954. (viii) We further observe that based on the stipulations of the EPC Contract under consideration, the AAR had also classified the supplies p....
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....proposed to be undertaken by the Appellant are concerned, the composite supply in the instant cases shall be treated as supply of service defined as works contract and the pronouncement of the AAR, therefore, needs no interference up to that extent. (xii) As already observed by us, entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 was omitted with effect from 01.04.2019 and, therefore, the supplies proposed to be undertaken by the Appellant could not have been eligible for the rate prescribed therein. However, we observe that up to Notification No. 3/2019-CT (R), dated 29.03.2019, major changes have been made in the said entry under Sl. No. 3 of the basic Notification No. 11/2017-CT(R), dated 28.06.2017 to provide for different rates of tax for supplies under the categories of supply of construction services or supply of works contract services. On examination of the various items covered by the said entry at SI. No. 3, we observe that different rates of tax have been provided in respect of different types of supplies of construction services or works contract services under items (i), (ia), (ib), (ic), (id), (ie) and (if) or items (iii), (iv), (v), (va)....
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.... assigned the work of construction and installation of Sulphate Removal Plant along with other facility to establish new infrastructure. The contract obliges the Appellant to handover the complete SRF' including Non Process Buildings, receiving end substation at MPT, Intra-field Pipeline, irrigation water pipeline and approach roads after completing the construction, erection, installation and commissioning work. Thus, we observe that the supplies proposed to be undertaken by the Appellant relate to the new facilities being awarded by M/s Vedanta Limited. (ii) The Appellant have also argued that Ruling to the effect that Heading 9986 covers only those activities which are provided once the infrastructure/ facility for exploration is built and complete in all respect and ready to start exploration, is an interpretation which lacks credible basis in law. It has been argued that classification entries should be derived literal meaning without addition or deletion of words. The Appellant have impressed upon the fact that test drilling and exploration services and derrick erection are some of the activities that are also part of Heading 998621 and these activities are carried o....
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....d entered into separate agreements dated 29.05.2018 and 10.01.2019 with Worley Services in relation to two projects for supply of PMC services. The PMC services were customized and tailor made to suit the requirements of Vedanta Limited and further require extensive technical and sound expertise. As per the agreements, Worley Services India Pvt Ltd was required to continuously review, monitor manage and control all aspects of the execution of the Projects on behalf of Vedanta Limited to complete it with quality, on time and within the approved cost. Worley Services was appointed to manage the projects right from details to designing to commissioning and close out of Projects with Vedanta Limited. Worley Services India Pvt Ltd approached the MAAR seeking Advance Ruling on the following questions: (1) Whether the services provided by the Appellant are classified under SI No. 24(ii) of heading 9986 of the Rate Notification as Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 and attracts GST @ 12% in terms of SI. No. 24(ii) of Rate Notification. (2) Alternatively, whether the services provided by the Ap....