TaxTMI 
TaxTMI 
2024 (3) TMI 45
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....st 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 the operator of Onshore RN-ON-90/1 block which i....
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...., 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 integrated EPC contract for all the above elements. The Scope of work includes the technical compliance format, ....
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....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 would be the appropriate classification for the same and what rate GST would be imposable? Answer - The activities of supply of survey, desi....
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....ns 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 operations. For this purpose, the Appellant have entered into contract with Vedanta to undertake the execution of the SRP. 11.5 The Appellant set out the relevant text of the Heading 9986 as figures in the Rate Notification: "Support services to explor....
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....ned 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 provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent manifest intention of the legislature from being carried out" 11.13 They submitted that this view was also supporte....
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.... "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 Sulphate Removal Plant to reduce sulphate ions present in the saline water so it can be used for injection during petroleum operations. 11.20 The Appellant submitted that since in terms of the phases of oil extraction, the exploration has already been completed and the well pads have now been built to extract and mine the oil and natural gas, it is clear that all the per....
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....f 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 activities involved designing, engineering and construction, those are in the form related to the creation of infrastructure facility, and hence cannot be treated as support services to petroleum extraction. 11.30 The Appellant submitted that the services rendered by them are linked to, and in connection with, the petroleum operations. This fact has never been disputed by the AAR, Rajasthan. They add....
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....rvices 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 occurs last in numerical order among those that equally merit consideration" 11.36 The Appellant submitted that in the light of the above, it can be seen that the subject services are customized in nature and considering the above, it is reiterated that the services supplied by them merit classification under SAC Heading 9986 which is a specific entry for services which support the petroleum operations. 11.37 The Appellant submitted ....
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.... 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 amendment made in the Notification effective from October 1, 2019 wherein a specific amendment was made in Sr. No. 24 (ii) of the Rate Notification which attracts GST @ 12%, the Appellant stated that the subject services should merit classification under Sr. No. 24 (ii) as 'support services to exploration, mining or drilling of petroleum crude or natural gas or both' 11.44 The Appellant submitted that in view of the above, the activities performed by the Appellant under the EPC Contract are more directly related to the petroleum operations c....
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....n. 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 was not even existent at the relevant time. 11.52 As per the Appellant it is an established principle of law that the provision of law, on the basis of which any action has been taken by an Authority or a decision or Ruling has been pronounced, must be in force at the time of the applicable case. In this regard, reliance has been placed on the following judgments: (a) Carrier Point v. Commissioner of Central Excise, Jaipur, 2018 (10) G.S.T.L. 213 (Raj.) (b) Pillar Inductions (I) Ltd. v. Commissioner of Central Excise, Chennai, 2004 (166) E.L.T. 43 (Tri.- Chenna....
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....nd 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 interpretation of an inclusive Chapter Note, the Delhi Tribunal, inter alia, held that the Chapter Heading is to be given a wide connotation and is not to be restricted to the illustrations provided in the Chapter Note. 11.60 The Appellant also referred to the decision of Stove Kraft Pvt. Ltd. Vs State of Karnataka [2006 (2) TMI 603] wherein on the aspect of classification of goods, Karnataka High Court, inter alia, held that the word 'includes' is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. According to them, when it is so used, these words and ....
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....tion, 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 under the EPC contract and the activities of Vedanta at the Rajasthan Block. 11.68 The Appellant also submitted that it is noteworthy that the explanatory notes referred by the AAR, Rajasthan are an inclusive definition and hence the scope is not exhaustive (but merely indicative) or limited to only the above specified services. An inclusive definition is expansive in nature and would cover all transactions possessing similar features. 11.69 The Appellant are of the view that the above submission finds support from the interpretative rules for the explanatory notes under the UNCPC which explains the non-exhaustive nature of the list of services mentioned....
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....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: "(119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, 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;" The Appellant submitted that a look at the aforesaid definition would reveal that works contract includes within its ambit, inter alia, services relating to construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of....
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....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 merit in the argument that the Heading 9986 does not cover activities which are in the nature of works contract. 11.85 Therefore, according to the Appellant, on this ground alone, the impugned Ruling is liable to be set aside. Submission VII: Alternatively, the subject services should be classified as 'other professional, technical and business services under heading 9983 11.86 The Appellant submitted that the impugned Ruling, at Para 5 states that, "...Other professional, technical & business services are classified under Heading 9983. The heading covers other professional, technical and business services relating to exploration, mining or drilling of petroleum crude of natural gas or both. This heading covers "pure services" of other Professional, technical & bus....
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....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 facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) activities of a race club including by way of total is at or a license to book maker or activities of a licensed book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;' 11.91 The Appellant submitted that the aforesaid definition of 'business' is an inclusive definition. That it is a settled law that the term 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. The said wor....
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....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 associated with exploration, mining or drilling of petroleum crude or natural gas fall under Heading 9986 of the Rate Notification. Further, they add that it has clarified that certain services such as technical and consulting services in relation to exploration would merit classification under Heading 9983 of the Rate Notification. The relevant extract of the Circular is reproduced herein below: '2. The matter has been examined. Most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986. A Jew services particularly technical and consulting services relating to exploration also fall under heading 9983. Therefore, following entry has been inserted under heading 9983 with effect from 1st October 2019 vide Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019; - '(ia) Other professional, technical and business services relating to explo....
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..... (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 Tax Act, 2017". According to them the Entry (ii) stands omitted vide Notification No. 3/2019-CT (R), dated 29.03.2019, effective from 01.04.2019 as under: "(b) against serial number 3, - a. item (ii) and the entries relating thereto in columns (3), (4) and (5) shall be omitted;" 12.2 It is settled principle of law that the basis of a Ruling or a decision must be in accordance with the provisions of law as it stood at the relevant time. See Carrier Point v. CCE [2018 (10) G.S.T.L. 213 (Raj.)], Pillar Inductions (I) Ltd. v. CCE [2004 (166) E.L.T. 43 (Tri.-Chennai)], CC v. Madras Aluminium Co. Ltd. [2016 (339) E.L.T. 295 (Tri.-Chennai). Given that Entry (ii) under SAC Heading No. 9954 did not exist in statute book during the relevant period for which the Ruling is sought, the Ruling is bad in law and hence is liable to be set aside on this ground alone. 12.3 The Appellant submitted that the only contention raised in the impugned ....
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....tion 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 creation of the infrastructure for production, suffers from fallacy and complete non-consideration of facts. Without prejudice and even assuming this contention to be valid, the Order has utterly failed to appreciate the fact that 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. Being one of the largest onshore oil discoveries in India, the information is readily available in the public domain. 12.8 The Appellant submitted that in terms of the Explanatory Notes, several support services including well casing, test drilling and exploration services, cementing etc. which are undertaken before commencement of production, also fall under the scope of the Heading 998621. Therefore, the findings in the Order that SAC Heading No. 998621 would only cover services which are provided after creation of infrastructure and facility of exploration is without any basis in law and ought to be out rig....
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....ied 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, the services are classifiable under Heading 9986. Reliance has been placed on Biomax Lift Sciences Ltd. v. CC. [2021 (375) E.L.T. 263 (Tri.-Hyd.)], CC (Port) v. Praman International [2019 (365) E.L.T. 846 (Tri.-Kolkata)1, Paswara Impex Ltd. v. CC [2013 (292) E.L.T. 562 (Tri.-Ahmd)], Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tri.-Mumbai]. 12.12 The Appellant submitted that by concluding that the services performed by the Appellant are outside the purview of Heading 9986 merely because it is a 'works contract' service, the impugned Order seems to have misread the law and tried to read something which does not exist. 12.13 The Appellant submitted that a plain reading of the Explanatory Notes to SAC Heading No. 998621 shows that it includes services such as well casing, cementing, pumping and abandoning of wells, derrick erection, etc. which requires labor services as well as supply of goods for providing the same. They added that these services involve civil work as well as supply of goods as....
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....tire 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 & 19.09.2023 made on behalf of the Appellant and oral submissions made by the authorized representatives of the Appellant at the time of personal hearing held on 11.01.2022 as well as on 13.09.2023. 17. Before proceeding to decide the appeal, we need to first decide as to whether the appeal has been filed within stipulated period (i.e. thirty days from the date on which the Ruling sought to be appealed against is communicated to the Appellant) prescribed under Section 100 (2) of CGST Act, 2017 or not. We find that the date of communication of the Order of AAR, Rajasthan to the Appellant was 21.09.2021 and the appeal was filed on the portal on 19.10.2021. Thus, we find that the Appellant have filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. Therefore, we may proceed to decide the appeal. 18. We find that the Appellant have sought Advance Ruling in respect of the activities undertaken by them for M/s Vedanta Limited which as per their version involved provisi....
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....the correct classification E. Analysis of classification and rate of tax suggested by AAR F. Appellant's arguments against Ruling of AAR F.1. Non-existing entry suggested by AAR F.2. Nature of activity undertaken not appreciated F.3. Rules of classification not referred F.4. Alternates suggested G. Questions for determination G.1. Classification under Heading 998621 G.2. Classification under Heading 9983 G.3. Classification under Heading 9954 G.4. AAR's ruling- classification vis-a-vis rate of tax H. Examination of submissions and analysis of evidence H.1. Nature of activities as per EPC contract H.2. Ingredients of services classifiable under Heading 998621 H.3. Ingredients of services classifiable under Heading 9983 H.4. Construction services under Heading 9954 I. Some specific arguments J. Reliance on Ruling of Maharashtra, AAR Order No. MAH/AAAR/DS-RM/14/2022-23 dated 03.01.2023 K. Conclusion and findings A. Activity in brief as narrated by the Appellant: As can be seen ....
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....ccordance with their contract with M/s Vedanta Limited deserve to be classified under SAC Heading No. 998621 as most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under Heading 9986 as per Circular No. 114. B.2. In the alternate it has been contended that the subject services can also be classified as 'other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both under Heading 9983. C. Appellant's analysis of the activity for classification: The Appellant have analysed the activities proposed to be carried out by them in pursuance of the EPC Contract and found that based on the ingredients of the activities as discussed in detail in the contract, the same merit classification under SAC Heading No. 998621 or in the alternate under Heading 9983. C.1. Classification under support service of business- Heading 9986 The Appellant have submitted that under the terms of the EPC Contract, the scope of work assigned to the Appellant involves construction of Sulphate Removal Plant which helps reduce sulphate ions present in the saline water to acceptable ....
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.... the activities of supply of survey, designing, installation, commissioning of project under EPC contract by the Appellant shall attract GST @18% under Sl. No. 3 SAC Heading No. 9954 (ii) of Notification No. 11/2017-CT(R), dated 28.06.2017. E. Analysis of classification and rate of tax pronounced by AAR: We note that the Ruling as pronounced by the AAR classified the supplies involved in survey, designing, installation and commissioning of project under EPC contract by the Appellant under SAC Heading No. 9954 which relates to construction services. Second part of the Ruling concerns the rate of tax applicable on the said supplies by the Appellant and it has been ruled that the supplies, which are in the nature of works contract, will attract GST @ 18% in terms of SI. No. 3 (ii) of Notification No. 11/2017-CT(R), dated 28.06.2017. F. Appellant' arguments against Ruling of AAR: The Appellant have challenged the Ruling pronounced by AAR mainly on three counts, one of them being classification under a non-existing entry in the rate notification while the other grounds concern nature of activity undertaken by the Appellant not appreciated and also the rules of classification not ref....
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.... to them includes services such as well casing, cementing, pumping and abandoning of wells, derrick erection etc. which require labor services as well as supply of goods for providing the same. It has been submitted by the Appellant, that these services, involve civil work as well as supply of goods as part of performance of such activities and can very well take the shape of works contract and bringing such works contract services out of the purview of Heading 9986 is clearly a result of misreading of the law and lack of understanding of the oil and gas industry. Alternatively it has been suggested that the services supplied by the Appellant would also merit classification as "other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both" under Entry No. 21(ia) of Heading 9983 of the Rate Notification. G. Questions for determination: In view of the submissions made by the Appellant in the appeal and the Rulings pronounced by the AAR, we observe that the issues for determination before us are as follows:- G.1. Classification under Heading 998621: Whether the supplies proposed by the Appellant in pursuan....
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....iated loading/unloading and shifting of material. (e) Construction, erection and installation of facilities including construction management and Local Contractor Management. (f) Mechanical Completion, Tie-ins with existing facilities, SAT, site testing, pre-commissioning. (g) Commissioning, RFSU, Performance Guarantee Test Run including site restoration works and waste management (h) Training and handover of facilities including associated QHSE management. (ii) We further observe that at Appendix-11 of the appeal is a document titled "Vedanta Limited-Cairn Oil & Gas -Sulphate Removal Project- Overall Project Scope of Work- EPC Execution". The said document submitted by the Appellant contains 33 pages. Since we have to decide the question of classification of the supplies proposed to be made by the Appellant in terms of the said EPC Contract, we are mainly concerned with the provisions of the said document governing the scope of work assigned to the Appellant. (iii) With a view to deciding the classification of supplies proposed to be made by the Appellant in the context of their claim of classification under Heading 998621 as 'support services to exploration, mining or d....
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....n the site premises without any damage to existing facilities in and around the site. g. Contractor shall be responsible for progressively achieving Mechanical completion, testing of the facilities installed by them and thereafter, shall perform Pre- commissioning, Commissioning, RFSU, plant operation stabilization for specified duration, and Performance Guarantee Test Run of the equipment / plant installed and shall demonstrate the operability of the plant installed by them. h. CONTRACTOR shall be responsible for insurance of the facilities until the Ready for Start-Up, Performance Test Run and handover to Company, as required in the ITT package. CONTRACTOR shall also be responsible for insurance of his personnel working at the Site. i. CONTRACTOR shall carry out all testing and certification activities in conjunction with approved procedures, up to the date of the FINAL ACCEPTANCE. CONTRACTOR shall provide and arrange for training of COMPANY's personnel for the correct and safe operation and maintenance of the facility j. Contractor shall obtain all necessary Regulatory and Statutory approvals for the execution of WORKS. k. CONTRACTOR shall consider the life span of all....
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....nce, port handling and transportation from sea or air ports / suppliers' works for all equipment and materials including handling of consignments at site. Contractor shall monitor and report to COMPANY the movement of all consignments dispatched to SITE from various points of dispatch until receipt. Contractor shall also be responsible for safety & storage of material to be supplied by him q. CONTRACTOR shall maintain all areas required for temporary storage, construction facilities, buildings, medical facilities, toilets with proper hygiene and other construction infrastructures for their use. r. CONTRACTOR shall verify available information on topographic survey for the Sulphate Removal Plant and Reject well pads including the pipelines site included in the ITT package by carrying out a fresh topographic survey. s. CONTRACTOR shall verify the soil investigation results included in the ITT package by carrying out fresh soil investigation and make its own interpretations and conclusions to determine the basis of its own design and construction methods and procedures as stated in the package. t. As per Para 9 of the contract, COMPANY shall not supply any material of what-so-....
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....re which is already in place. It, therefore, follows that there are three distinct successive stages in the entire gamut of oil and gas extraction which contribute to completion of the work of oil and gas extraction. For the services to be eligible to classification under the instant SAC Heading No. 998621, it is required that the service should support the main activity of oil and gas extraction by the infrastructure put in place for the purpose. Before we proceed further to examine the scope of services to be supplied by the Appellant, we may make it clear that the narration under the said SAC Heading No. 998621 seeks to enlarge the scope of the service by declaring that some of the activities shall also be included in the scope of the support services. Inclusion clause, therefore, expands the scope of the service which has to be understood by the words employed to describe it. Hence, it is evident that any service that supports the activity of oil and gas extraction comes within the purview of the instant SAC Heading No. 998621 and the activities specified in the inclusion clause will also form part of the support service, whether they seem to be, or not, strictly in the nature....
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....as mode of construction. The boundary wall shall have fencing on top of the along with Gates for movements. SRP shall be adequately protected by providing gabion Wall & mattress around the plot 2) ISBL Package- pre- treatment System consisting of Multi-Media filters & Cartridge filters alongwith related Pre and Post Dosing systems. Sulphate removal facility consist Nano Filtration + Reverse Osmosis System. On skid Piping, Interconnecting piping, all E&I equipment and accessories required for sulphate removal package. Clean in Place Systems as required for NF and RO membranes. Electrical, Instrumentation & Control system. 3) OSBL- EPC works for Balance of plant for Sulphate Removal Project. Following facility among other facility shall be constructed by the contractor. a) Feed water tank and pumping facility. Permeate water tank and pumping facility. Reject water tank and pumping facility, associated piping network for transportation of Feed and permeate Piping & Reject pipeline Network including manifolds for Reject Wellpads, Integration with Existing MPT Facility. b) All civil and structural facility like, road network, building, pipe racks, sleepers etc. as applicable with....
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....e Appellant are obliged by the contract for satisfactory handover of complete Sulphate Removal Plant including Non-Process Buildings, road network and drains, racks sleepers Intra-field Pipeline, water pipeline, toilet along with overhead tank, transformer, earthing to the Company M/s Vedanta Limited, complete with applicable hook-up & tie-in with the existing & proposed facilities. This provision of the contract makes it amply clear that the Appellant have been assigned the work of establishment of new facilities for oil extraction and other infrastructure alongside the already existing facilities at MPT (vii) Coming to the proposed classification under Heading 998621 we observe that the said heading covers 'support services to oil and gas extraction' which is self explanatory in as much as the services proposed to be classified under this heading provide support to the main activity of oil and gas extraction and such activity of extraction eventually requires the infrastructure facilities established. These three parts of the entire gamut of oil and gas extraction are clearly distinguished from each other. Support service has to be essentially distinct from the main activity of ....
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....s their contention that the said entry uses the phrase 'relating to' which signifies that any professional, technical and/or business services provided relating to mining, would merit classification under the said entry and the said entry includes a broad range of services which pertain to or concern with the activity of mining. To buttress their argument, the Appellant have further claimed that they provide services by way of proper management of the project right from the detailed design and planning of the project till its final test run, commission and hand over in fully functional form and it is also inter alia required to review, monitor, manage and control all aspects of the execution of the project along with the day-to-day administration and logistics, such as, procurement, performance, HSE, quality and schedule management, among others, on behalf of M/s Vedanta. The Appellant have also referred to and relied upon the CBIC Circular to claim that the wordings used under the Heading 9983 of the Rate Notification is broad in nature, various services which are provided in relation to exploration, mining or drilling would fall within its ambit and attract GST @ 12%. (ii) On g....
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....ate Removal Plant) which are quite different and distinct from the advice concerning location of gas fields. Further, the provision of advice with regard to exploration and development of oil and natural gas properties or feasibility studies is also not the activity that the Appellant are obliged to undertake in pursuance of the EPC Contract. Strictly speaking, as observed earlier, the scope of the current contract for the Appellant covers execution of Sulphate Removal Plant. These aspects of the contract of the Appellant cover such activities which do not answer the description of geological or geophysical consulting services or mineral exploration and evaluation services. This will be more clearly analyzed in the latter part of our analysis when the issue will be examined with reference to construction services. H.4: Construction Services under Heading 9954: (i) We observe that in response to the query by the Appellant as to what would be the correct classification of the supplies proposed to be undertaken by them in pursuance of the EPC Contract, the AAR has pronounced the Rulings dated 15.09.2021 declaring that the activities of supply, survey, designing, installation and co....
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....ttedly, entry at SI. No. 3(ii) did not exist in the rate notification when the application seeking Advance Ruling was filed or when the Ruling was pronounced. Hence, the rate as prescribed vide the said entry was not available to the Appellant at the relevant point of time. However, we observe that the omission of the given entry from the rate notification in question by itself does not make the instant supply eligible to lower rate of tax until other aspects of the Ruling concerning the description of the supply based on its nature and classification under the given heading are examined to determine the appropriate rate of tax. Hence, we observe that it is important to examine the other aspects of the Ruling with reference to the true nature of the supplies as given in the EPC Contract. (iv) We observe that the AAR has pronounced classification of the supply under the SAC Heading No. 9954 relating to construction services with the observation that the supply being composite in nature and covered under the description of work contract as defined under clause (119) of Section 2 of the CGST Act, 2017. The Appellant have opposed the Ruling mainly on the ground that the said category ....
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....ACTOR shall be responsible for insurance of the facilities until the Ready for Start-Up, Performance Test Run and handover to Company, as required in the ITT package. CONTRACTOR shall also be responsible for insurance of his personnel working at the Site. (F) CONTRACTOR shall carry out all testing and certification activities in conjunction with approved procedures, up to the date of the FINAL ACCEPTANCE. CONTRACTOR shall provide and arrange for training of COMPANY's personnel for the correct and safe operation and maintenance of the facility. (G) Contractor shall obtain all necessary Regulatory and Statutory approvals for the execution of WORKS. (H) CONTRACTOR shall consider the life span of all equipment and materials from the date of first commissioning as minimum 25 years or as specified in Technical Specifications; whichever is more. CONTRACTOR shall interface with other sub-contractors / vendors/ suppliers for the supply, installation, testing, commissioning of those systems which have been defined in the ITT package. (I) CONTRACTOR shall provide all required construction equipment, tools, tackles, instruments duly calibrated, and consumables inclusive of erection and....
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....cilities, buildings, medical facilities, toilets with proper hygiene and other construction infrastructures for their use. (O) CONTRACTOR shall verify available information on topographic survey for the Sulphate Removal Plant and Reject well pads including the pipelines site included in the ITT package by carrying out a fresh topographic survey. (P) CONTRACTOR shall verify the soil investigation results included in the ITT package by carrying out fresh soil investigation and make its own interpretations and conclusions to - determine the basis of its own design and construction methods and procedures as stated in the package. (Q) COMPANY shall not supply any material of what-so-ever nature. All material required for the execution of the project (temporary as well as permanent) shall be procured and supplied by the contractor as part of firm scope of work. The procurement activities shall be carried out in accordance with agreed Procurement Procedure covered under Tender Package. From perusal of the provisions of the EPC Contract which have been summarized above, we observe that the Appellant have been assigned the task of construction of various facilities. Sulphate Removal ....
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....r in hand does not simply involve supply of services only, rather as mentioned in the EPC contract and as also admitted by the Appellant in the appeals, supply of goods is also involved in the contract and such goods have been used in the execution of the EPC contract as the Appellant are required to undertake the execution of Sulphate Removal Plant and its handover along with buildings, road, pipelines etc. We are, therefore, in agreement with the AAR in holding that the composite supply of construction services and goods involved in the execution of the contract amount to supply of works contract service. Hence, we may refer to clause (119) of Section 2 of the CGST Act, 2017 which reads thus:- "(119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, 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;" (x) We observe that the supplies involving both services and goods as proposed to be undertaken by the Appellant are, th....
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....ied under this entry." (xiii) We observe that the said item (xii) of entry at Sl. No. 3 of Notification No. 11/2017-CT(R), dated 28.06.2017, as amended up to Notification No. 3/2019-CT (R), dated 29.03.2019 prescribes Central Tax @ 9% on the supplies proposed to be undertaken in terms of the EPC Contract and therefore, the supplies proposed to be undertaken by the Appellant attract tax at the rate of 18%. The Ruling pronounced by the AAR, therefore, needs to be modified up to that extent. I. Some specific arguments In view of what has been discussed above, we observe that the issues involved stand addressed in the light of legal position which applies to the supplies proposed to be undertaken by the Appellant under the EPC Contract. However, before concluding the matter, we deem it appropriate to discuss some points which have specifically been raised by the Appellant. These points are discussed as follows:- (i) The Appellant have argued in their written submission dated 18.01.2022 that the instant EPC Contract was awarded during the year 2018-19 whereas the original production of oil and gas in the oil field had started in the year 2010. Thus, the Ruling by the AAR suffers fr....
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....e support services under Heading 998621 by way of inclusion clause has to be viewed with reference to support services and cannot be so interpreted to relate it to construction services. In that view of the matter, whether it be derrick erection or repair and dismantling services, well casing, cementing pumping, plugging and abandoning of well, all these activities have to be understood in the nature of support services only and none of them relates to creation of infrastructure or facilities for oil and gas extraction by way of construction, erection and commissioning of the new facility. The Appellant have not been assigned activity of type mentioned in Heading 998621 rather the contract is for creation of new facility and infrastructure for extraction of oil from well pads. Hence, we do not find force in the arguments advanced by the Appellant. The Appellant have also placed reliance upon various case laws pronounced by the Hon'ble Courts. We observe that each case has different facts. When Appellant's case has already been discussed in detail as above, in our opinion, there is no need to discuss the cases relied upon by the Appellant separately. J. Ruling of the Maharashtra A....
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....s mining sector by way of actual participation in the mining activity and in the subject case, it is actually the EPC contractor who is giving support services to VEDANTA LIMITED by being responsible for all the engineering, procurement and construction activities to deliver the completed Projects. In view of this the impugned services are not covered under S. No. 24(ii) of the Rate Notification * The Explanatory Notes to service code 998341 is restricted to geological and geophysical consulting services and the Notes to service code 998343 is restricted to mineral exploration and evaluation and the impugned services cannot be considered as being connected to either geological and geophysical consulting services or mineral exploration and evaluation services. In view of this the impugned services are not covered under SI. No. 21(ia) of the Rate Notification The said professional, technical and business services supplied by the Appellant to Vedanta Limited are clearly covered under the residual entry No. 21(ia) of the Rate Notification, attracting tax at the rate of 18%. (iii) When Worley Services preferred an appeal against the above Order, the MAAAR upheld the MAAR Order No. GS....