TaxTMI 
TaxTMI 
2024 (3) TMI 891
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....0 of the Rajasthan Goods & Services Tax Act, 2017 (hereinafter also referred to as 'the RGST Act') by the Appellant on the portal on 29.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/21 dated 15.09.2021. As per the Appellant, the Order of the AAR was communicated to them on 21.09.2021. The Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of Hon'b1e Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020. BRIEF FACTS OF THE CASE 1. M/s Kalpataru Projects International Limited (earlier known as M/s Kalpataru Power Transmission Limited) ("the Appellant") registered under the Central Goods and Service Tax Act, 2017 (CGST Act) vide registration number 08AAACK8387R2ZI. They are engaged in developing infrastructure facilities mainly in power transmission projects, developing infrastructure facilities for laying of the cross country pipelines for Crude Oil, Refinery products and Natural Gas (along with all associated facilities. The Appellant executes Engineering, Procurement and Construction ("EPC") projects in Power Transmission One Towers, Oil and Gas and Railways ....
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...., Procurement, supply, Construction and commissioning works for MIPA project as described in the Scope of Work of the Contract ("subject services"). 6. SCOPE OF WORK - AUGMENTATION OF PIPELINE INFRASTRUCTURE AT MANGALA OIL FIELD 6.1 As stated by the Appellant, eighteen well-pads are operation in the Mangala Field. Further, the Appellant submitted that Vedanta planned to augment its pipeline network, to cater to the increased production capacity of these Well Pads. For this, Vedanta planned to lay down a network of new customized pipelines between the existing well pads and MPT. Three types of Pipelines which are required to be constructed, as part of MIPA project as described below: a. Production Fluid Pipelines b. 'Injection water' Pipelines c. 'Power Fluid' Pipelines 6.2 Station Facilities -The Appellant submitted that they are required to construct customized piping associated station facilities, for terminating the pipelines, as per PIDs and Tender specifications. 6.3 Additional Requirements - The Appellant are also required to install the additional equipment and customized as per EPC contract such as Anchor Flanges, Valve Chambers, Provi....
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....ng structures like rain harvesting tanks and pole mounted transformers falling inside the corridor. 7.6 The Appellant are also required to deploy all resources for execution of the scope of work and is also to be responsible for arranging any external assistance/support (in the form of specialized or customized task required for completion of the works), if required, at its own cost and risk. 8. RESPONSIBILITIES OF APPELLANT UNDER THE SCOPE OF WORK 8.1 General Responsibilities Under the EPC contract, the Appellant have the following general responsibilities in relation to the design, construction and installation of customized infrastructure facilities: a) Providing & mobilizing all project management resources for performance of works. b) Providing and mobilizing all engineering & procurement resources for execution of project. c) Providing and mobilizing all construction resources for execution of project. The construction team is primarily responsible for performing pre-construction activities, review of all the construction/ fabrication drawings prior to start of site construction and updating same as per actual site conditions etc. ....
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....g specialised tasks including Seismic, HAZID, HAZOP, SIL, QRA, SIMOPS reviews, etc. However, the consultant would be engaged with prior approval from Vedanta. 8.7 PROCUREMENT & SUPPLY - The Appellant submitted that they are required to estimate, procure and supply all the materials (temporary and permanent) of all types/sizes/rating/quantity required for execution of the complete works in the contract as part of their firm scope of work with sole responsibility of the materials. 8.8 The scope of supply by the Appellant broadly includes but not be limited to Mobilization/ Demobilization, Construction of facilities, Commissioning, Testing and Clean-up & Restoration. 8.9 The Appellant submitted that they are required to arrange "No Objection Certificate" from the Local/statutory authorities, as applicable, and is to settle all the applicable compensations, dues, fees etc. 9. The Appellant have been providing the subject services in the State of Rajasthan and classifying such services under SAC Heading 9954. However, vide Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, Entry No. 24(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 has been am....
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....me and what rate GST would be imposable? Answer - The activities of supply survey, designing, installation, Commission of Infrafield Pipelines under MIPA Project under EPC contract by the Appellant shall attract GST @18% under S. No. 3 Heading 9954 (ii) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. 10. Being aggrieved with the Ruling pronounced by the AAR, Rajasthan, the Appellant have filed appeal before this authority and their grounds of appeal are as under. GROUNDS OF APPEAL Submission I: The Impugned Ruling has been issued based upon erroneous presumptions as to the facts and law 11.1 The Appellant submitted that the impugned Ruling, at Para 5 states that, "From the explanatory note, it reveals that Support services 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. But it does not include the services to be provided before creating the infrastructures facility. Under the EPC contract, the Appellant have to undertake activities from designing, engineering, procurement, construction of customized facility, commis....
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....ines of varying sizes for transportation of Production Fluid, Power Fluid and Injection Water between the well pads and the Mangala Processing Terminal by Vedanta. 11.5 The Appellant set out the relevant text of the Heading 9986 as figures in the Rate Notification: "Support services to exploration, mining or drilling of petroleum crude or natural gas or both." As per the appellant, a look at the aforesaid provision would reveal that it includes support services which are related to exploration, mining or drilling of petroleum crude or natural gas or both. 11.6 The Appellant also referred to the Rules of Interpretation falling under Chapter III of the United Nations Central Product Classification ("UNCPC"). The UNCPC gains significance for the purpose of classification under the GST law because the Explanatory Notes to the Scheme of Classification of Services ("Scheme") is itself based on the UNCPC - as stated by the CBIC in Circular No. 114/33/2019-GST dated 11.10.2019. The interpretative rules for classification of services under the UNCPC are aligned with the above-mentioned settled principle of classification. 11.7 The Appellant further submitted that the Ci....
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....ich states, "Support services to oil and gas extraction", would reveal that the scope of the SAC Heading No. 998621 is not limited to exploration, but includes a wider term "extraction". In fact, test drilling and exploration is just one of the activities covered therein and the heading includes a host of other activities which form part of the oil and gas extraction. 11.13 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". 11.14 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. 11.15 Appellant reiterated that as part of augmentation of its production at the Mangala oilfield,....
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....nstruction 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 & was extraction." 11.22 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. 11.23 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. 11.24 The Appellant submitted that the services rendered by them are linked to, and in connec....
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...., classes or sub-classes 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 comparable: (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" 11.30 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 ....
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....ces are classifiable under heading 9986. 11.36 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] 11.37 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....
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....at the aforesaid provision existed in the statue books since 28.06.2017. Thereafter, vide Notification No. 03/2019-Central Tax (Rate) 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. 11.44 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. 11.45 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 th....
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....cludes, inter a/in, test drilling in connection with the petroleum and gas. 11.51 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. 11.52 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. 11.53 The Appellant also referred to the decision of Stove Kraft Pvt. Ltd. Vs State of Karnataka [2006 (2) TMI 603] wherein on the aspe....
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....ve list provided in the Explanatory Note must be seen in that context. 11.58 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". 11.59 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. 11.60 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. 11.61 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....
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....as "work contract" and will be taxed accordingly. " 11.67 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. 11.68 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 relatin....
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....ence to Oil & Gas sector wherein the Ministry clarified on the nature of activities that would be treated as services required for petroleum operations. The relevant extract of the FAQs is as under: S. No. Questions Answer 2 What is the meaning of Supply of Services required for Petroleum Operations? The activities involved under petroleum operations are defined under Petroleum Tax Guide, 1999. The services required in connection with such activities would be treated as services required „for petroleum operations. Such services include, survey, data acquisition, data-interpretation, drilling, well-logging, mud services, cementing services, construction of offshore well platform, construction of process platform, pipe-laving onshore processing facilities, hiring of rigs, hiring of offshore supply Vessels/ multipurpose supply vessel, hiring of survey vessel etc. 11.76 Appellant submitted that above answer to the FAQ provided by the MoPNG expressly provides that the services required in connection with the petroleum operations include pipe-laying services. The Appellant reiterated that the EPC contract with Vedanta involves design, installation and laying do....
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....materials used in developing Petroleum accumulations, the drilling, completion and testing of development wells, the drilling and completion of wells for gas or water injection, the laying of gathering lines, the installation of offshore platform sand installations, the installation of separators, tankage, pumps, artificial lift and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or gas processing facilities ,either onshore or offshore, including the laying of pipelines within or out side the Contract Area, storage and delivery point or points, the installation of said storage or gas processing facilities, the installation of export and loading facilities and other facilities required for the development and production of the said Petroleum accumulations and for the delivery of Petroleum at the delivery point and also including incidental operations not specifically referred to herein but required for the most efficient and economic development and production of the said Petroleum accumulations in accordance with good international petroleum industry practices." They submit that the term "Development opera....
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....ng 9983 11.83 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 & business related and not the services provided under the EPC contract which include engineering, procurement & construction. As discussed in Para 5 above, the Appellant have to undertake designing, engineering, procurement, construction of customized facility, commissioning of permanent facility, test run & hand over of complete facility so designed, constructed, tested & commissioned. Thus, it cannot be classified as other professional, technical & business services relating to exploration, mining or drilling of petroleum crude or natural gas or both." 11.84 Without prejudice to the above submissions, the Appellant submitted that the subject services may merit classification as 'Other professional, technical and business services relating to exploration, mining or drilling of p....
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....ker 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; 11.88 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 word is succeeded by the phrase 'any trade, commerce, manufacture, profession, ... ... whether or not it is for a pecuniary benefit'. The definition of the word 'business' under the CGST Act makes it amply evident that it covers within its ambit, a wide range of activities. The Appellant add that the said definition would also include operational administrative, consulting and management services. 11.89 The Appellant further submitted that Entry at Sr. No. 21 (ia) was inserted vide Rate Notification with effect from October 1, 2019. The aforesaid entry was introduced by the Government in order classify particular services such as management and consultancy....
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.... 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 few 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 exploration, mining or drilling of petroleum crude or natural gas or both 11.93 The Appellant submitted that the aforesaid Circular clearly states that technical and consulting services relating to exploration also fall under Heading 9983 and would also get classified under Sr. No. 21(ia) of Rate Notification as other professional, technical and business services relating to inter alia mining. The Appellant find it pertinent to note that since 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 it....
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....ing 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 Id Ltd. v. CCE 2004(166) E.L.T. 43 (Tri-Chennai)J, CC v. Madras Aluminum 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 Order is that SAC Heading 9986 does not cover creation of infrastructure/facilities which are in nature of works contract. They added that the Appellant are providing services such as laying down customized network pipelines at the Mangala oil field. 12.4 The Appellant submitted that Order has glossed over the fact that such EPC services are ultimately used to increase/aid in the extraction and production of oil and hence should be classified under heading 9986. It is undisputed that the services supplied by the Appellant are linked to or in connection with the petroleum operations. 12.5 The....
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....omain. 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 rejected outright. Thus, the Order which is based on presumption, surmises and conjectures is liable to be quashed. 12.9 The Appellant submitted that without prejudice to any of the other submissions that if at all the services performed by the Appellant appear to fall 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. In this regard, the Appellant submitted that, the Preface to the Explanatory Notes to the Sc....
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....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 part of performance of such activities and can very well take the shape of works contract. In view of the Appellant, to bring 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. 12.14 The Appellant submitted that alternatively, the services supplied by them 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. The use of the term "business services" and a plain reading of the d....
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.... 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 29.10.2021. 18 We find that the Appellant have not filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. However, the Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of the Hon'ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020. The Hon'ble Supreme Court in its Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020 in Para (iii) has held that "In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply". 19. Thus, the appellant were required to file the appeal within 30 days from 21.09.2021 in light of the aforesaid judgment of Ho....
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.... 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 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 ....
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....h Vedanta Limited in March-2018 for constructing additional network of customized Intra-field pipelines under the 'MANGLA INTRA-FIELD PIPELINES AUGMENTATION PROJECT' ("MIPA Project" or "the Project") at Mangala wells. 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 classification under Heading 998621. B.1. Main contention of the Appellant is that the activities performed by them in accordance 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 un....
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....ding No. 998621 was rejected: The first question of the Appellant as to whether the services provided by the applicant merit classification under the heading 9986 [(Sr. No. 24 (ii))] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to Support service to mining and is leviable to 12% GST rate under the CGST Act, 2017 has been answered by the AAR in negative D.2 Classification sought under heading 9983, in the alternate was also rejected: The question of the Appellant as to whether the services provided by the applicant merit classification under Heading 9983 [(Sr. No. 21(ia)] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to Professional, Technical or Business Service to mining and is leviable to 12% GST rate under the CGST Act, 2017? has also been answered by the AAR in negative. D.3 What is the correct classification: The AAR, Rajasthan pronounced in their Ruling that 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-Central Tax (Rat....
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....ct 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 that support the activity of oil and gas extraction. F.4. Alternates suggested The Appellant have primarily sou....
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....ities 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: (a) We observe that in the appeal dated 29.10.2021 praying for setting aside of the Ruling dated 15.09.2021 pronounced by the AAR, the Appellant have stated that with a view to further to augment the production from existing well pads at Mangala, the Appellant have entered into and an Engineering, Procurement and Construction Contract ("EPC contract") with Vedanta Limited in March, 2018 for constructing additional network of customized intra-field pipelines under Mangala intra-filed pipelines augmentation project ("MIPA project" at Mangala wells. It has been stated in the appeal in Para- 1.6 that for outlining the scope of work, relevant extract of the EPC contract has been provided Appendix-II. (ii) We further observe that at Appendix-II of the appeal is a document titled as MANGALA....
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....uments proposed to be prepared and submitted by the contractor during Design & detailed engineering shall broadly include process, Piping, civil & structural, electrical, Mechanical equipment, Instrumentation & controls, HSE, Operation & Control. (E) Cairn Oil & Gas has an existing Pipeline corridor at Stretching along the length of field. The contractor shall have to install the proposed Pipelines in existing corridors adjacent to the existing pipelines (F) Contractor shall carry out pre-construction surveys and verification of the proposed routes and Station location. (G) Contractor shall be responsible for performing engineering for procurement. (H) Contractor shall be responsible for performing construction & installation engineering including reports, operation and maintenance manual, waste management plan etc. H.2 Ingredients of services classifiable under Heading 998621: (i) The Appellant have mainly contended that the supplies proposed to be made by them deserve 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 t....
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....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 of such service. (iv) We further observe that as claimed by the Appellant, the CBIC has also issued a clarification on the scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both through a Circular No. 114/33/2019-GST, dated 11.10.2019 with reference to the entry at SI. No. 24(ii) of Heading 9986 in Notification No. 11/2017-CT(R) dated 28.06.2017. It has been specifically mentioned in the Circular that Explanatory Notes to the Scheme of Classification of Services adopted for the purposes of GST, which is based on the United Nations Central Product Classification describe succinctly the activities associated with exploration, mining or drilling of petroleum crude or natural gas under heading 9983 and 9986. 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. ....
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.... and also ensure that necessary precautions/safety measures in line with MSDS are provided. 5. Safe potable water to be included and addressed in HSE plan. 6. Concreting procedure to address concreting under high ambient temperature. 7. Flash flood zones to be identified and higher elevation accommodation blocks etc. to be ensured. 8. Proper cylinder, chemical storage, colour coding, nomenculture and other requirements to be insured Page-417. 8.8 Quality management: Contractor and their vendors shall work within a formally documented quality Management system that is at least to the requirement of ISO 9001:2008/2015 quality Management systems Requirements. Page-427 Annexure 1-ELECTRICAL SCOPE OF WORK The scope of work under this package covers basic design and engineering, detailed engineering, preparation of drawing and documents, sizing, procurement, inspection, transportation to site, supply of all materials/equipments took and tackles, storing, testing and handing over of all electrical work complete in all respects . Page-431 Annexure 2- INSTRUMENTATION SCOPE OF WORK. ....
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....s/ sub-stations, roads, electrical appliances, instrumentation etc. (iv) From the provisions of the EPC Contract as discussed above we find that the Appellant have been tasked with installation and construction of the proposed facilities concerning the Mangala intrafield pipelines and various infrastructures which is aimed at capacity expansion of MPT. (v) From perusal of the said scope of work we observe that the Appellant are obliged by the contract for satisfactory handover of complete intrafield pipelines along with other facilities to 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 and natural gas extraction alongside the already existing facilities at the MPT. (vi) 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 e....
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....nce, 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 going through the explanatory notes, and as also clarified vide the CBIC Circular dated 11.10.2019 referred to above, we observe that the services relating to exploration, mining or drilling of petroleum crude or natural gas are described under Heading 9983, which are reproduced below:- "998341: Geological and geophysical consulting services. This service code includes provision of advice, guidance and operational assistance concerning the location of mineral deposits, oil and gas fields and groundwater by studying the properties of the earth and rock formations and structures; provision of advice with regard to exploration and development of mineral, oil and natural gas properties, including pre-feasibility and feasibility studies; project evaluation services; evalua....
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....xploration 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 Reading 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 commissioning of project under the EPC contract to be undertaken by the Appellant shall attract GST @ 18% under SI. No. 3(ii), Heading No. 9954, of Notification No. 11/2017-CT(R), dated 28.06.2017. However, the Appellant have challenged the said classification mainly on the ground that the supplies proposed to be undertaken merit classification under SAC Heading No. 998621 as support services to oil or gas exploration or in the alternate, under Heading 9983 as other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both. It has also been contended ....
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....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 of service i.e. construction service provides only a general description of the supply while support service to exploration, mining or drilling of petroleum crude or natural gas or both is a specific description of the supplies proposed to be undertaken by them. Though there is no denying the fact that transfer of property in goods is involved in the execution of the instant EPC Contract, some of the main provisions of the EPC Contract need to be reproduced, even at the cost of repetition, to examine as to whether the proposed supplies invoke provision of construction services. (v) On goi....
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....elates to construction of all the facilities which have been proposed to be created for enhancement of production and processing capacity at the MPT and 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 constructing facilities for handling the increased production capacity are appropriately classifiable under the....
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....d as a supply of services, namely:- (a) works contract as defined in clause (119) ofsection 2; and" (xi) Thus, we observe that so far as classification of the supplies 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 SI. No. 3(ii) of Notification No. 00/2017-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 Sl. No. 3, we observe that different rates of ta....
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....ploration, once the infrastructure/ facility for exploration is built and complete in all respect and ready to start exploration. In this regard, we observe that according to the EPC Contract, the Appellant have been assigned the work of construction and installation of the entire facility and the proposed infrastructure being installed is aimed at capacity expansion as has been mentioned by the Appellant in the appeal that the with a view to augment the production from existing well pads at Mangala, the Appellant have entered into EPC contract with Vedanta Limited in March 2018 for constructing additional network of customized Intra-field pipelines MIPA project. The contract obliges the Appellant to handover the complete system including Non Process Buildings, road, drains, Pipeline, 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 for enhancement of capacity and production. Therefore, the existing production from the existing facilities cannot be taken to be related to the expansion being undertaken under ....
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....rce 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 Appellate Authority for Advance Ruling Order No. MAH/AAAR/DS-RM/14/2022-23 dated 03-01-2023 is squarely applicable in the instant matter:'* (i) The Maharashtra Appellate Authority for Advance Ruling in respect of appeal filed by M/s Worley Services India Pvt Ltd, New energy House Ramkrishna Mandir Road, J B Nagar Kondivita, Andheri East Mumbai on the same issue has held similar view. Vedanta Limited had 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,....
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....ineral 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. GST-ARA-27/2020-21/B-38 dated 31.03.2022 wherein it was held that the services provided by Worley Services India Pvt Limited are neither covered under Sl. No. 24(ii) nor under SI. No. 21(ia) of the Rate Notification. As regards the classification of the impugned services, it is held that the impugned services of project management consultancy services provided the Appellant would merit classification under the SAC 998349 bearing description "Other technical and scientific services nowhere else classified, attracting GST at the rate of 18% (CGST @9%+SGST @9%). K. Conclusion and findings: In view of these observations we hold that:- (i) Based on the analysis of activities, the Appellant....