TMI Blog2018 (12) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... on of goods by road & is claiming to be discharging GST liability under Reverse Charge Mechanism and in such a situation he is a recipient of such service and is not a supplier thereof. The first contract referred to above includes ex-works supply of all equipments and materials which includes testing and supply of cable package required for successful commissioning - the second contract consists of all other activities required to be performed for commissioning of the project which also includes transportation, insurance, etc. Thus, it is concluded that as per the first and second contracts referred above there is no doubt that both these contracts consisting of cross fall breach provisions are in the nature of ‘Composite supply of Works Contract’ which is a service & would be taxable@ 18% in terms of Sr. No. 3(11) of Notification No. 11/2017-Central tax (Rate) dated 28.06.2017 & artificial bifurcation of contracts & scope of work as claimed by the applicant to go out of the scope of correct tax liability is not legal and proper. Ruling:- The supply of transportation services, rendered by the Applicant, will not be exempt from the levy of GST in terms of Sl. no. 18 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of goods and services envisaged, which are as follows - a) A supply of goods contract regarding the engineering, manufacturing, supply and type testing of Cable Package-C ( Goods ); b) A Services Contract for Cable Package-C (which includes Detailed Route Survey, Planning, Transportation, Insurance, Delivery at site, Unloading, Handling, Store, laying, installation (including civil works), Jointing, Termination, testing, Demonstration for acceptance, Commissioning, Documentation required for complete execution f Cable Package-C) ( Services ) Copies of the contracts regarding the supply of goods and services are being annexed herewith as Ex - A1 and Ex.-A2. 5. Each of the contracts consist of a cross fall breach clause deeming any breach in either of the contracts to be a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages. The various supplies envisaged under both the contracts are distinct and independent. Every such distinct supply of goods or services have separate considerations prescribed also. One of such supplies that the Applicant is required to provide is that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iff) Description of Services Rate (per cent.) Condition 18 Heading 9965 Services by way of transportation of goods (a) by road except the services of- (i) a goods transportation agency; (ii) a courier agency; (b) inland waterways Nil Nil C.2 In other words, the Applicant shall be eligible to claim exemption from the levy of GST in relation to such transportation services supplied by it under the contract for services, vide the above discussed Notification, provided it is neither GTA nor a courier agency. C3. Now, GTA has been defined in the Explanation to Sl. no 9 and 11 of Notification No. 11/2017 dated 28th June, 2017 as follows: goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. C.4 In the instant case, Applicant is engaging a GTA to undertake the activity of transportation of goods by road for the Applicant. The GTA service provider is issuing consignment note the Applicant is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a principal supply; C.9 Thus, composite supply means a supply of two or more taxable supplies of goods or services or both which are: d. naturally bundled; and e. supplied in conjunction with each other in the ordinary course of business; and f. one of which is a principal supply C.10 Section 2(90) of the CGST Act defines principal supply as under: 2(90) principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; C.11 Thus, a combined reading of the definition of composite supply and principal supply indicates that a composite supply has only one principal supply. If a particular contract has more than one principal supplies, the supply under the said contract will cease to be composite supply. C.12 Further, there is no strait-jacket formula to determine as to what constitutes a composite supply . The determination as to whether a supply constitutes a composite supply or separate supplies is very subjective and is required to be determined on the basis of the facts and circumstances of each case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate considerations for each of them which indicates the intention of the parties to treat them independently. c. Each of the services contemplated constitute an aim in itself for a consumer and no way can one service be considered ancillary for the better enjoyment of any other of the services contemplated. d. While the installation and testing services are provided by the Applicant itself, the transportation services are being sub-contracted by the Applicant e. The fact that a single contract provides for all the supply of services, cannot be a conclusive indicator of the supplies constituting a composite supply C.16 The observations of the court maybe squarely made applicable to the facts of the instant scenario. The services contract provides for supply of transportation services, installation services and testing services along with separate considerations for each of them. Further, each of services are independent of each other and cannot be said to be intrinsically linked with each other. Also, while the installation and testing services are provided by the Applicant itself, the transportation services are being sub-contracted by the Applicant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 12/2017 dated 27.06.2017. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Please refer to letter No. NSK-II Div/29/T-II/2-17-18 dated 25.09.2018 the above subject wherein Application for Advance Ruling filed by M/s. Cable Corporation of India Ltd. (M/s CCL) before the Member (CGST SGST) of the Advance Ruling Authority, Maharashtra, Mumbai was forwarded. 2. M/s Cable Corporation of India Lt (M/s CCL) has requested for ruling whether the supply of transportation services, rendered by them under the contract for services, will be exempt from the levy of GST in terms of S). No. 18 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. 3. (i) Exemption from the Central Tax leviable under sub-section (1) of Section 9 of the GST Act is provided under Notification 12/2017- Central Tax (Rate) dated 2806.2017 to intra-State supply of services specified therein Serial No. 18 of the Notification exempts Services by way of transportation of goods (a) by road except the services of a Goods Transport Agency; (ii) a courier agency. (ii) In their written submission, M/s. CCA admits that he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notwithstanding the break up of the Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Applicant shall remain responsible to ensure execution of both the contracts to achieve successful completion. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vice versa. The two contracts are, therefore, linked by a cross fall breach clause deeming that any breach in either of the contracts to be a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages. The cross fall breach clause , settles unambiguously that supply of goods, their transportation to the contractee s site delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as defined under Section 2(119) of the GST Act, with single source responsibility. Composite nature of the contract is clear from the facts that first Contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee s site. The two contracts for supply of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods, shall be treated to taxation under Section 8(a) of the GST Act, and the consideration receivable on that account be taxed accordingly. 04. HEARING The case was taken up for Preliminary hearing on dt. 04.09.2018 when Sh. Chaitanya Bhatt, Advocate along With Ms. Meghna Mohpatra, Advocate appeared and made oral and written submissions for admission of application . Jurisdictional Officer was not present during the hearing. The application was admitted and called for final hearing on 19.09.2018, Sh. Chaitanya Bhatt, Advocate along with Ms. Meghna Mohpatra, Advocate appeared and made detailed oral and written contentions. Jurisdictional Officer, Sh. Pradip Zode, Supdt., Division - II, Nashik CGST Central Excise Commissionerate appeared and stated that they have received the documents and application very late and therefore be granted 20 days time to make their submissions and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, oral written submissions made by the applicant as well as the jurisdictional officer the applicable provisions of the GST laws in this regard. We find that the applicant is a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sportation, insurance, etc. We fully agree with the contentions of the jurisdictional officer with regard to interdependence of two contracts which are reproduced as under:- The First Contract includes ex works supply of all equipments materials. The scope of the works includes testing and supply of Cable Package required for Successful commissioning. The second contract includes all other activities required to be performed for complete execution of the Cable package. The scope of the work includes transportation, insurance and other incidental services. It is apparent that the First Contract cannot be executed independent of the Second Contract. There cannot be any supply of goods without a place of supply. As the goods to be supplied under the First Contract involves movement and/or installation at the site, the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to the recipient or moved to the site for assembly or installation refer to Section 10(1)(a) (d) of the IGST Act, 2017). The First Contract however does not include the provision and cost of such transportation and delivery. It, therefore, does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties but in nutshell it was only one contract for the simple reason that N.T.P.C. kept a right with it with regard to cross-fall breach clause meaning thereby that default in one contract would tantamount to default in another and whole contract was liable to be cancelled. Thus from the detailed facts of the case as put before us, as per the first and second contracts referred above there is no doubt that both these contracts consisting of cross fall breach provisions are in the nature of Composite supply of Works Contract which is a service would be taxable@ 18% in terms of Sr. No. 3(11) of Notification No. 11/2017-Central tax (Rate) dated 28.06.2017 artificial bifurcation of contracts scope of work as claimed by the applicant to go out of the scope of correct tax liability is not legal and proper. We find that we have already decided a similar issue vide Order No. GST-ARA-36/2017-18/B-43 dated 04.06.2018 = 2018 (7) TMI 1691 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA in case of Shri Dinesh Kumar Agarwal and the relevant reasoning and decision as arrived in that case would be applicable in respect of the present case as well. 05. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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