TaxTMI 
TaxTMI 
2024 (3) TMI 1262
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....ereinafter also referred to as 'the RGST Act') by the Appellant on the portal on 19.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/18 dated 13.09.2021. As per the Appellant, the Order of the AAR was communicated to them on 21.09.2021. BRIEF FACTS OF THE CASE I. M/s L&T Hydrocarbon Engineering Limited, Flat No. 236 and 237, SDC Monark Building, Amrapali Marg, Vaishali Nagar, Jaipur - 302021 (herein after referred as Appellant) is a company registered under the Indian Companies Act, 1956. It is a subsidiary of L&T Limited, an Indian technology, engineering, construction, manufacturing and financial services conglomerate. The Appellant are engaged in the business of engineering, procurement fabrication, construction and project management providing integrated solutions to the Hydrocarbon Industry. The Appellant carries out construction of refinery, petrochemical, chemical project, gas gathering stations, crude oil & gas terminals, etc. on turnkey basis. The Appellant are registered under the Rajasthan Goods and Service Tax Act, 2017 ('RGST Act') having registration number 08AABCL5967DIZE. 2. The Appellant have informed that Cairn (Vedanta'....
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....proposed facilities, testing, pre-commissioning & commissioning, RFSU, test runs, training of Vedanta personnel, Project Management, Construction, Logistical, Site & Stakeholder Management, Regulatory Compliance, Site Restoration handover to Vedanta. 5.1 The Appellant are required to deploy resources (including manpower, tools & tackles, equipment, etc.) for execution of the scope of work. The Appellant are also responsible for arranging any external assistance/ support, if required, at its own cost & risk. 5.2 The Appellant's obligation is to cover at their expense the works mentioned in the above two Para. In addition to the supply of mandatory spare parts included in the contract, the Appellant would also supply spare parts required for the operation and maintenance of the facilities for the period specified as per specifications. 6. RESPONSIBILITIES OF APPELLANT UNDER THE SCOPE OF WORK 6.1 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 f....
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.... 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 amended to include within its ambit, support services to, inter alia, mining activities, and Entry No. 21(ia) thereof has been newly inserted to cover within its ambit professional, technical and business services relating to petroleum operations, both taxable at 12% GST rate. Post the introduction of these more specific entries, the Appellant decided to re-evaluate their current position to cover the subject services. 8. The Appellant submitted that they are of the considered view that the subject services are appropriately classifiable under the Heading 9986 [Sr. No. 24(ii)] (viz., "Support services to exploration, mining or drilling of petroleum crude or natural gas or both") or alternatively under the SAC Heading 9983 [Sr. No. 21 (ia)] (viz., "Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both") and are liable to attract 12% GST under....
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...., engineering, procurement, construction of customized facility, commissioning of permanent facility, test run and hand over of' complete facility so designed, constructed, tested and commissioned. Thus, it cannot be treated as support services to oil & gas extraction." 11.2 In view of the Appellant, a perusal of the aforesaid basis given by the Authority for Advance Ruling would reveal that the AAR, Rajasthan has made an incorrect presumption of the support services envisaged under SAC Heading No. 9986 in the following manner: (a) That support services do not include the services provided for creating the infrastructure/ facility for exploration; and (b) it includes services which are provided once the infrastructure/facility for exploration is built & complete in all respect and ready to start exploration. 11.3 That the Appellant submitted that the above presumptions by the AAR, Rajasthan are outrightly incorrect, bad in law and without any basis. The findings recorded by the AAR Rajasthan with respect to the classification of the subject services are wholly misconceived and shows lack of understanding of the activities required to be performed by the ....
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.... Circular clarified the scope of the aforesaid entry as follows: "This service. code includes derrick erection, repair and dismantling services; well casing, cementing, pumping plugging and abandoning of wells; test drilling and exploration services in connection with petroleum and gas extraction; specialized fire extinguishing services; operation of oil or gas extraction unit on a fee or contract basis. This service code does not include geological, geophysical and related prospecting and consulting services, cf 998341" 11.8 As per the appellant, a reference to the aforesaid Explanatory Note would show that it provides certain support services which are classifiable under the SAC Heading No. 998621. The explicit list of activities includes: (a) derrick erection, repair and dismantling services; (b) well casing, cementing, pumping, plugging and abandoning of wells; (c) test drilling and exploration services in connection with petroleum and gas extraction; (d) specialized fire extinguishing services; (e) operation of oil or gas extraction unit on a fee or contract basis 11.9 The Appellant submitted few of the servi....
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.... 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 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 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 supported by the Hon'ble in ITC Ltd. v. Commissioner of Central Excise, New Delhi, 2004 (171) E.L.T. 433 (S.C.). 11.14 The Appellant submitted that derrick erections help move heavy materials across the oil field, whereas well casing an....
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....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 the Appellant have been contracted by Vedanta to augment the infrastructure/facility at the MPT and well pads to cater to the increased liquid handling capacity. The Appellant have to perform activities to augment the facility and infrastructure to manage the increased liquid handling capacity. 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 performance of its responsibilities by the Appellant under the contract would be having relation to the production and extraction of oil/natural gas and not exploration. 11.21 The Appellant submitted that even if AAR, Rajasthan's contention, that Heading 9986 covers only post exploration related activities on the ....
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....sted and commissioned. Thus, it cannot be treated 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 added that the only contention raised by the AAR ....
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....hat only categories at The same level (Sections, divisions, groups, classes or subclasses) are comparable: (a) The category that provides the most specific description shall he 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 shaft 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 that it is the cardinal rule to be applied for classification of any goods or services that in case of two compet....
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....021(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 l, 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 carried out by Vedanta ....
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....tification. Therefore, the said provision existed in the statute books during the period from 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....
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....d in Heading 9986 are merely indicative in nature and it can include more such services which are of similar nature or ilk. In this regard, the Appellant added that the said phrase has a very wide connotation, thereby giving the Chapter Heading an extensive scope 11.59 The Appellant also submitted that the said phrase used in the Explanatory Note clearly shows that the Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard is made to Tetragon Chemie Private Limited and Ors Vs CCE and Ors [2001 (138) ELT 0414 Tri- LB], wherein in the context of 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 st....
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....le part of the support activities for mining and petroleum operations and the inclusive list provided in the Explanatory Note must be seen in that context. 11.65 The Appellant also reiterated the following from the Circular 114 issued by CBIC wherein it has been specifically stated as follows: "Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986" 11.66 According to the Appellant it is beyond doubt that their responsibility under the EPC Contract involves a wide range of activities which are clearly associated with the exploration, mining and drilling of petroleum crude. 11.67 The Appellant also submitted (hat 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....
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.... In case of this contract the said project cannot be shifted anywhere; it is essentially of the nature of immovable property. The project after completion at the time of transfer will be immobile property. It is thus we are of the considered view that the work specified in the EPC contract qualifies as "work contract " and will be taxed accordingly." 11.75 The Appellant submitted that the impugned Ruling incorrectly rejects their arguments on the ground that the services supplied by the Appellant under the aegis of an EPC contract, are in the nature of a works contract falling under the SAC Heading No. 9954 of the Rate Notification and therefore taxable at the rate of 18%. As per the Appellant, in coming to this conclusion, the AAR, Rajasthan has failed to apply the settled principles on classification to the present facts of the matter. 11.76 The Appellant submitted that Section 2(119) of the CGST Act, 2017 defines "Works contract" as follows: "(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 ....
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.... or contract basis 11.80 According to the Appellant, a reading of the aforesaid list of indicative services would reveal that many of the aforesaid services are in the nature of works contract. Services like well casing, cementing, pumping and abandoning of wells, derrick erection, etc. are such services which requires labor services as well as supply of relevant material for providing the same. These services involve civil work as well as supply of material as part of performance of such activities and can very well take the shape of works contract. 11.81 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. 11.82 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. 11.83 Therefore, according to the Appellant, on this ground alone, the impugned Ruling is liable to be set asi....
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....orresponding service description, it is seen that the said entry is broad in its entirety, as it includes business services. The term 'business' has been defined under Section 2(17) of the CGST Act, which is reproduced herein below for ease of reference: (17) 'business' Includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefit 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 ac....
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....s with 'concerning with' and 'pertaining to'. Therefore, they submitted that entry (ia) of Sr. No. 21 includes a broad range of services which pertain or concern with the activity of mining. 11.92 The Appellant submitted that the services provided by them are in relation to the mining activity of Vedanta, as stated above in detail. Hence, in the present case, they submitted that the supply of services by the Appellant to Vedanta in relation to the mining activities under the project merits classification under Heading 9983. According to the Appellant, by virtue of Sr. No. 21 (ia) of the Rate Notification, it is submitted that the said activity may alternatively get covered within the broad ambit of 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and consequently attract GST @12%. 11.93 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 Notifi....
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....by them to Vedanta, in relation to the mining, would merit classification under Heading 9983 and attract GST @ 12% in terms of Sr. No. 21(ia) of Rate Notification. Therefore, according to the Appellant, on these grounds as well, the impugned Ruling pronounced by the AAR, Rajasthan is liable to be dismissed. PERSONAL HEARING 12. A virtual hearing in the matter was held on 11.01.2022. Sh. Rohit Jain, Advocate and Sh. Rahul Khurana, Advocate, Authorized Representatives of the Appellant attended the hearing. They reiterated the submissions already made under grounds of appeal. Further vide letter dated 18.01.2022, the Appellant also submitted following additional] grounds in support of their appeal: 12.1 The Appellant submitted that the impugned Order seeks to classify the services provided by the Appellant under Entry no. (ii) of SAC Heading No. 9954 of Central Tax (Rate) dated 28.06.2017 ("Rate Notification No. 11/2017 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. 03/2019 Central Tax (Rate) dated 29.03.2019....
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....ie Private Limited and Ors v. CCE and Ors [2001 (138) ELT 0414 Tri-LB], Stove Kraft Pvt. Ltd. v. State of Karnataka [2006(2) TMI 603], Bharat Coop. Bank (Mumbai) Ltd v. Coop Bank Employees Union [2007(4) SCC 685], Regional Director Employees's State Insurance Corporation v. High Land Coffee Works of Pfx. Saldanha & Sons [1991(7) TMI 367] 12.6 The Appellant submitted that the expansive scope of entry 998621 is re-iterated in the CBIC Circular No. 114/33/2019-GST dated 11.10.2019 which specifically states that "Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 12.7 The Appellant submitted that the findings in the impugned Order at Para 5 are that the classification of support services to oil and gas extraction under Heading 9986 is only applicable when the exploration/production had started and the support services do not include services supplied before the 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....
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....8621 which is a specific entry for services that support the activity of oil and gas extraction, They have placed reliance upon Ascent Meditech Ltd. v. CCE, Vapi [2014 (309) E.L.T. 712 (Tri. -Ahmd.)] [Affirmed in 2015 (320) ELT A281 (Supreme Court)], Pepsico India Holdings Pvt. Ltd. v. Dy. Commercial (A) IV, Commercial Taxes, Jaipur [2018(16) G.S.T.L. 249 (Raj.)], Dabur India Ltd. v. CCGST [2020(34) G.S.T.L. 9(All.)], Sanwar Agarwal v. Commissioner of Customs (Port) [2016 (336) E.L.T. 42 (Cal.)]. 12.11 The Appellant submitted that even in case where the headings merit equal consideration, resort must be taken to clause (c) of the general interpretative rules which states that when services are classifiable prima facie under two headings, the same should be classified under the heading which occurs last in the numerical order. The Appellant are of the considered view that as Heading 9986 appears later to the SAC Heading No. 9954 m the numerical order, the services are classifiable under Heading 9986. Reliance has been placed on Biomax Life 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)], Paswara Impe....
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....other personal hearing was held on 13.09.2023, in which Sh. Rohit Jain, Advocate and Sh. Rahul Khurana, Advocate, authorized Representatives of the Appellant appeared & attended the hearing. They reiterated the submissions already made under grounds of appeal and the submissions made by them vide letters dated 18.01.2022 & 16.03.2022. During the hearing, Counsels provided executive summary of the submissions dated 13.092023, which is a brief of grounds already submitted during appeal and additional submissions already made by them. 15, The Counsel vide letter dated 19.09.2023 (received on mail on 20.09.2023) made additional submissions which are already submitted by them and nothing extra has been added. DISCUSSION AND FINDINGS 16. We have carefully gone through the entire material available on record, appeal papers filed by the Appellant, Ruling pronounced by the AAR Rajasthan, additional written submissions dated 18.01.2022, 16.03.2022 & 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 a....
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....n have been divided into the following Sections:- Section Sub- Section Description A. Activity in brief as narrated by the Appellant B. Appellant's understanding of law on the subject B.1. Main Contention as to classification of supply B.2. Alternate classification suggested C. Appellant's analysis of the activity for classification C.1. Classification under support service of business- Heading 9986 C.2. Classification under other professional, technical & business services- Heading 9983 D. Ruling pronounced by the AAR D.1. Classification suggested under SAC Heading No. 998621 rejected D.2. Classification suggested under Heading 9983, in the alternate, also rejected D.3. What is the correct classification E. Analysis of 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. R....
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....ala Processing Terminal (MPT). The existing pipeline corridor at Mangala Field, between MPT and various well pads, has various exiting pipelines running through it. With a view to further augment facilities and infrastructure for enhancing the liquid handling capacity from 800 KBLPD to 1300 KBLPD at MPT based on the projected production scenarios & expected increase in total liquid, the Appellant have entered into an Engineering, Procurement and Construction Contract ("EPC contract") with Vedanta Limited in January, 2019 for construction of customized additional infrastructure facilities under Vedanta's Mangala Up-gradation Project Stage 2 EPC - 2 or "MUPS2-EPC2" 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 11l.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 co....
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....ty and schedule management, among others, on behalf of M/s Vedanta Limited. D. Ruling pronounced by AAR: The AAR for Rajasthan has pronounced Rulings vide order dated rejecting the classification as sought by the Appellant under SAC Heading No. 998621 or under Heading 9983 and held that the supplies proposed to be undertaken by them are classifiable under Heading 9954. D.1. Classification sought under SAC Heading No. 998621 was rejected: The first question of the Appellant as to whether the services provided by the appellant are classifiable under Sr. No. 24 (ii) of heading 9986 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12%. 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 are classified under 'Professional, Technical or Business Service relating to exploration. mining, or drilling of petroleum crude or natural gas or both' under Sr. No. 21 (ia) (Professio....
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....f AAR to the effect that the classification of support services to oil and gas extraction under Heading 9986 is only applicable when the exploration/production had started and the support services do not include services supplied before the creation of the infrastructure for production, suffers from fallacy and complete non-consideration of facts in as much as the contract was awarded during the year 8/2019 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 ....
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....uling- Classification vis-a-vis rate of tax: What is the correct classification of the supplies proposed to be made by the Appellant in pursuance of the EPC Contract entered with M/S Vedanta Limited? H. Examination or submissions and analysis of evidence: In view of the questions framed by us for determination in these proceedings, we find that the nature of activities carried out by the Appellant in terms of the EPC Contract with M/S Vedanta Limited is required to be analysed and the submissions of the Appellant need to be examined in the light of the EPC Contract in question as the determination of the questions depend upon the true nature of the activities proposed to be carried out by the Appellant. H.1 Nature or activities as per the EPC Contract: (i) We observe that in the appeal dated 19.10.2021 praying for setting aside of the Ruling dated 13.09.2021 pronounced by the AAR, the Appellant have stated that with a view to further augment facilities and infrastructure for enhancing the liquid handling capacity to 1300 KBLPD at MP T based on the projected production scenarios & expected increase in total liquid, the Appellant have entered into an Engineering, Procu....
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....tallation, Insulation , Painting, Facilities Construction, Insulation, Painting, Dismantling, removal and disposal of existing facilities, Hooks-ups, Site Acceptance Testing, Pre Commissioning & Commissioning, RFSU, Performance Guarantee Test Run(s) (PGTR), Training of Company's Commissioning and Operations personnel, Project and Construction Management, Interface Management (Internal & External) by Interface Management Team(IMT) and satisfactory handover to company of the facilities forming an integral part of Mangla upgradation with applicable hook-up & tie-in with the existing & proposed facilities. (B) Contractor's scope also include providing & mobilizing all project management resources and all construction resources, as required, (C) Contractor shall deploy all resources (including manpower, tools & tackles, equipments etc.) for execution of the work. Contractor shall supply labour, materials, equipments, spare parts and accessories, construction equipment, construction utilities and supplies, temporary materials, structures and facilities. (D) Contractor shall deploy requisite resources for design & engineering, procurement & supply, fabri....
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.... connection with petroleum and gas extraction; specialized fire extinguishing services; operation of oil or gas extraction unit on a fee or contract basis This service code does not include:- geological, geophysical and related prospecting and consulting services, cf 998341" (iii) As can be seen from the language of the heading of the service, the service in question has to be in the nature of support to the main activity which is that of oil and gas extraction. There is no denying the fact that the activity of oil and gas extraction can be undertaken by using the infrastructure 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....
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....ase liquid handling at MPT, Mangla Upgradation Projects to be implemented in stages. MUP Stage-2 EPCO related to augmentation of facilities & infrastructure at MP T & well pads executed through this ITT, As further described, company plans to Increase the liquid handling capacity at PMT to 1300 KBLPD based on the projected production scenarios & expected increase in total liquid. We may usefully refer to some of the provisions as contained at different pages are as follows:- (A) Page-408. 4.1 Augmentation of Liquid Handling capacity: The production fluid from cluster 'D" shall be routed to a new slug catcher V-240 to handle 420 KBLPD & 17 MMSCFD of liquids and gas respectively form the wells, The separated oil is pumped by new oil slug catcher shall be operating at 3.5 barg. A Piping bypass across the existing HIP PS systems shall also be installed to reduce the pressure drop in the existing system. A new HIPPS Z-204 shall be installed before the new slug catcher. (B) Page-409. 4.2 Augmentation of Produced Water Treatment facility: The total water handling capacity of existing produced water treatment system is - 1200 KBWPD ....
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....ity, augmentation of produced water treatment facility, augmenting existing injection water system facility are indicative of the fact that new facilities, in addition to the existing facilities, are being created by M/s Vedanta Limited for enhancement of oil and gas production and sales. (iii) After analyzing the broad outlines of the contract awarded to the Appellant, we find it appropriate to examine the nature of work assigned to the Appellant under the EPC Contract in question. We observe that the Appellant have not denied the fact that supply of service under the EPC Contract in question also involves transfer of property in goods. The only contention by the Appellant in this regard is that the scope of Heading 9986 does not exclude Works Contract Service. As can be seen from the appeal as also from the EPC Contract submitted by the Appellant, the Appellant have been assigned the work related to establishment of infrastructure for the proposed expansion in the production and processing capacity. As mentioned in Pam-9.5 titled Construction of process Facilities at MPT/Well pads- construction of the new facilities shall be performed after proper survey, designing, ground sca....
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....n defined to include some activities specifically which are also to be considered m the nature of support to the main activity of oil and gas extraction. Analysis of the said activities, included in the service code, would reveal that these activities are such as can help the main activity of oil and gas extraction. These activities of repair and dismantling services, well casing, cementing, pumping, plugging and abandoning of wells or fire extinguishing services are, in one way or the other connected to the main activity of oil and gas extraction. But none of these activities can be said to be related to establishment of the infrastructure facilities for oil and gas extraction. Since, the Appellant have been tasked with establishment of infrastructure facilities for oil and gas extraction, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot, by any stretch of imagination, be said to be support services to oil and gas extraction. The distinction between the activities undertaken by the Appellant in terms of the EPC contract and the activities included in the definition of SAC Heading No. 998621 is strikingly clear. Therefore, we hold that the activ....
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....ties 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,' evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying: providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magnetometric methods & other subsurface surveying methods. This service code does not include-test drilling and boring work, cf.' 995432 " "998343: Mineral exploration and evaluation: This service code includes mineral exploration and evaluation information, obtained on own account basis. Note: This intellectual property product may be produced with the intent to sell or license the information io others. (iii) On analysis of the contents of the explanatory notes above, we observe that so far as SAC Heading No. 998343 is concerned, the same has a very narrow scope/limited coverage of mineral exploration and evaluation information which is certainly not the activity proposed to be unde....
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....r 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 that the Ruling has been issued based upon non-existent provision of law in as much as entry at Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 stood deleted with effect from 01.04.2019. The Appellant have also claimed that for deciding classification of a supply, the category that provides the most specific description shall be preferred to categories providing a more general description and therefore, even if it is assumed that the supply of services provided under the EPC Contract is a composite supply in the nature of a Works Contract, the service will still merit classification under Heading 9986 which is a specific entry for services that support the activity of mining of natural gas. (ii) The Ruling pronounced by the AAR has been contested by the Appellant that it is based on a non-existent provision of law. We deem it appropriate to first examine the Ruling vis-a-vis the contention accordingly. On examination of the Ruling, we observe that the Ru....
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.... EPC Contract need to be reproduced, even at the cost of repetition, to examine as to whether the proposed supplies invoke pro vision of construction services. (v) On going through the relevant portion of the EPC Contract which has been submitted with the appeal, we observe that the following activities have been assigned to the Appellant which form the core of the entire supply under the contract:- (A) Complete Erection and Installation, Facilities Construction, Pipeline laying, Pre-Commissioning & Commissioning, Project and Construction Management; (B) Satisfactory handover of complete Liquid handling capacity, produced water treatment facility, new customized filters beds for filtering the power fluid etc along with Pipelines, roads, building and infrastructure. (C) Providing & mobilizing all project management resources for performance of works. The project management team is to be fully equipped with planning/ scheduling software and analysis tools & manned with competent and experienced manpower complete with sound project management, reporting, and project control system. (D) Performing construction activities, review of all the constru....
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....vices 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 SAC Heading No. 9954. (vii) We further observe that based on the stipulations of the FPC Contract under consideration, the AAR had also classified the supplies proposed to be undertaken by the Appellant under SAC Heading No. 9954 and therefore, Ruling of the AAR to that extent is legally valid and omission of a specific entry in the rate notification does not have a bearing on such Ruling in so far as classification under SAC Heading No. 9954 is concerned. Since, the nature of supply justifies its classification as construction services of mining, we observe that there is no conflict suggesting preference to specific description under SAC Heading No. 998621 to general description under SAC Heading No. 9954 because the nature of activities clearly indicates that the supply is classifiable under SAC Heading No. 9954. (viii) We further observe that the instan....
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.... 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 tax have been provided in respect of different types of supplies of construction services or works contract services under items (i), (ia), (ib) (ic), (id), Cie) and (if) or items (iii), (iv), (v), (va), (vi), (vii), (viii), (ix), (x), (xi) and (xii) of the said entry at Sl. No. 3. The supplies proposed to be undertaken by the Appellant are not covered by any item other than item at Sl. No. (xii) of the said entry at Sl. No. 3 which provides as under:- (xii) Construction services other than (i), (ia), (ib), (ic). (id), (ie), (if), (iii), (iv), (va). (vi), (vii), (viii), (ax), (x) and (xi) above. Explanation. - For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic). (id). (ie) and in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in col....
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....hat 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 capacity or production from the existing facilities cannot be taken to be related to the expansion being undertaken under the instant EPC Contract. (ii) The Appellant have also argued that Ruling to the effect that Heading 9986 covers only those activities which are provided once the infrastructure/ facility for exploration is built and complete in all respect and ready to start exploration, is an interpretation which lacks credible basis in law. It has been argued that classification entries should be derived literal meaning without addition or deletion of words. The Appellant have impressed upon the fact that test drilling and exploration services and derrick erection are some of the activities that are also part of Heading 998621 and these activities are carried out before installation of the infrastructure and facility for exploration. In this regard, we observe that classification of the supplies depends upon the scope of the work assigned to the Appellant which has already bee....
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....9 with Worley Services in relation to two projects for supply of PMC services. The PMC services were customized and tailor made to suit the requirements of Vedanta Limited and further require extensive technical and sound expertise. As per the agreements, Worley Services India Pvt Ltd was required to continuously review, monitor manage and control all aspects of the execution of the Projects on behalf of Vedanta Limited to complete it with quality, on time and within the approved cost. Worley Services was appointed to manage the projects right from details to designing to commissioning and close out of Projects with Vedanta Limited. Worley Services India Pvt Ltd approached the MAAR seeking Advance Ruling on the following questions: (1) Whether the services provided by the Appellant arc classified under SI No. 24(ii) Of heading 9986 of the Rate Notification as Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 and attracts GST @ 12% in terms Of SL No. 24(ii) of Rate Notification, (2) Alternatively, whether the services provided by the Appellant are classified under S. No. 21 (ia) of heading 9983 of....