TMI Blog2022 (7) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... act for construction of Electric Loco Shed. A Joint Venture Company, which is formed by two or more entities, has a separate existence than that of the said entities. The applicant has himself submitted that they are providing sub-contract services in relation to supply and commissioning of machinery and plants, mechanical engineering, electrical works etc. to `JV'. The supply of goods/services by the applicant can't be bundled with the JV which is separate entity, both having their separate GSTINs. As such, the goods/services supplied by the applicant to JV are to be examined for the purpose of their coverage in works contract. In the case of M/S. VIRGO INDUSTRIES (ENGINEERS) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE CHENNAI II COMMISSIONERATE, CHENNAI [ 2015 (4) TMI 247 - MADRAS HIGH COURT] the Madras High Court observed that an item fixed to the earth can continue to be movable if the same is capable of being shifted to another place without having to dismantle the same into constituent components and without causing substantial damaging to such individual components. For the goods/services supplied by the applicant to be covered in the works contract, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venture with M/s. Indwell Constructions Private Limited and constituted M/s. INDWELL - HYT (JV) (hereinafter referred as JV ). (2) Rail Vikas Nigam Limited (hereinafter referred as RVNL ) has invited a tender Tender no. RVNL/BSB/SYH/1 dated 25.05.2018 for the Construction of PEB shed, structure, building, water supply arrangement, drainage, sewerage, road works, track works, power supply and general electrical works, OHE works, signal telecommunication works and supply, installation and commissioning of machinery and plant in connection with setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh (India). (3) The JV had made a bid for the tender and the said tender was allotted to the JV, and the Letter of acceptance (hereinafter referred to as LOA) bearing No. RVNL/BSB/SYH/1/1416 dated 24.09.2018 was issued to the JV. The JV has duly accepted the same and signed. (4) JV had awarded the contract to the JV partners on a back to back basis vide the JV agreement dated 10.10.2018 with the specific execution of the works contract between the partners. Applicant was allocated with the work of supply, installation and commissioning of the plant and machinery, mec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant in Form GST ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant. 5. The applicant have submitted their interpretation of law as under- (1) When it is works contract, it has to be construed as supply of services in terms of Section 7 of CGST Act, 2017 read with Schedule II to the said Act. Accordingly, the rate of tax is to be determined in terms of Notification No. 11/2017-CT(R) as amended. (2) As per the entry 3(v) in the notification No. 11/2017-CT(R), following conditions has to be fulfilled: a. The works should be a composite supply; b. It should be falling within the definition of works contract as defined in Section 2(119) of the Central Goods and Services Tax Act, 2017; c. Such works should be original works; d. Such original work supply should be by way of construction, erection, commissioning, or installation; e. Such original works should be pertaining to railways including monorail and metro (3) The term Composite Supply is defined in Section 2(10) as composite supply means a supply made by a taxable person to a recipient cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The contract must be for building, construction, fabrication, completion, erection etc., b) Such construction, fabrication etc. must be of any immovable property, c) Transfer of property in goods must be involved in the execution of such contract. (8) In the present case, the contract received by JV from RVNL is to set up the entire electric loco shed for them, which is an immovable property, completion of which requires construction, installation, commissioning of machinery, plants, civil work, electric work, mechanical work etc. Therefore, it can be very well said to be the contract covering various elements of works as stated within the meaning of the term works contract as per the definition given in section 2(119) of the GST act (9) JV has been allocated with the project by RVNL and further parts of the project are being divided between the partners of the JV in order to execute the complete project. Therefore, the main contract is allocated to the JV only responsibilities got divided between the partners. Merely dividing the responsibilities or work between the partners does not change the colour of the original contract which is the setting up of the electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth . (15) Hon'ble Supreme Court in the case of Quality Steel Tubes (P) Ltd vs Collector of Central Excise, U.P 1995 (75) E.L.T. 17 (S.C) held that Goods which are attached to the earth and thus become immovable do not satisfy the test of being goods within the meaning of the act nor it would be said to be capable of being brought to the market for being bought and sold. Both the tests were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth, they ceased to be goods within the meaning of Section 3 of the Act. Erection and installation of a plant cannot be held to be excisable goods (16) The above case has been distinguished in Commr. Of C. Ex., Ahmedabad Vs. Solid Correct Engineering Works civil appeal nos.960-966 of 2003 where the assessee has attached the plant with nuts and bolts intended to provide stability and prevent vibration not covered as attached to earth. The Hon'ble Supreme Court in this case has held that all that has been said by assessee is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to draw the attention to the Order No. 58/1/2002-CX dated 15.01.2002 wherein the excisability was clarified in respect of specific instances. (23) Applicant places reliance in the case of VOLTAS LTD. Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-VII 2011 (270) E.L.T. 541 (Tri. - Mumbai), wherein it is stated that it is not in dispute that the chiller plant erected and commissioned at site is an immovable property. (24) The definition of 'Original Works' is given in Notification No. 12/2017-CT(R) dated 28th June 2017 is relevant since there is no specific definition given under notification No. 11/2017-CT(R) dated 28th June 2017. The definition read as follows: original works means- all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; In the instant case as per the contract, it clearly involves erection, commissioning or installation of plant, machinery, equipment and structures as well. Thereby it can be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson who is hired by the general contractor to perform a specific task as part of the overall project or the total project. (32) Further, when the principal contractor hired the sub-contractor contract remains same and the identity of the original contract doesn't change. Further the work performed by the original contractor as well as sub-contractor remains same and identical to what is specified in the original contract awarded by the employer. (33) In this regard appellant places reliance in the case of M/s Lanco infratech Ltd Vs. Commissioner of Customs, Central Excise and Service Tax 2015-TIOL-768- CESTAT-BANG-LB, wherein it was stated that we conclude, on the basis of the judgment in Larsen and Toubro Ltd. (SC-2008) that where under an agreement (whether termed as a works contract, turnkey or EN.' project contract), the principal contractor, in terms of the agreement with the employer/ contractee assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such contract passes from the sub contractor by accretion to or incorporation into the works, the principal contractor cannot be considered as having provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng given by the Karnataka Authority in the case of Quatra Rail Tech Solutions Ltd 2019 (31) G.S.T.L 620 (A.A.R-GST) vide order number KAR ADRG 93/2019 dated 27.09.2019 , wherein it was held that the contract work of the applicant to the main contractor, who is executing the works contract to M/s. DFCCIL, is liable to tax at 6% under CGST Act and at 6% under KGST Act or 12% under IGST Act, 2017 6. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter. The Deputy Commissioner, CGST Central Excise Division-II, Allahabad vide C.No. VI(30)16/Advance Ruling/Audit/Lko/2021/84 dated 12.01.2022 submitted his report wherein following comments were made- (i) the applicant is providing sub contract services to a JV who has been allotted work by RVNL for entire loco shed. (ii) construction of electric loco shed seems to be akin to an immovable property and with transfer of this property after works of building construction, fabrication, it may be considered as a work contract service. (iii) from available documents, the exact nature of works to be given by applicant to JV can not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installation and commissioning of machinery and plant in connection with setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh . The summary of the schedule was detailed as under- Bill No. Description of schedule Civil Engineering Works 1 Earthwork in formation 2A Civil Works (Other than steel items) 2B Civil Work (steel items involving fabrication and erection) 2C Supply of steel items 3 Ballast supply 4A P. Way supply (other than steel items) 4B P. Way supply (steel items) 5A P. Way Linking (installation works) 5B P. Way Linking (supply and installation works) 6 Buildings 7A Miscellaneous works (other than steel items) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnal telecommunication works and supply, installation and commissioning of machinery and plant in connection with setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh. 14.1 The applicant has sought ruling as to whether the works awarded to the applicant is a composite supply of the works contract service. We shall now discuss the provisions relating to Works Contract and Composite Supply. We refer to the definition of 'Composite Supply' as mentioned in sub-section (30) of Section 2 of CGST Act, 2017 which is as under:- 'Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply'. 14.2 We find that as per the Joint Venture Agreement, the applicant has been entrusted the work of Supply and commissioning of Machinery and Plant by the JV which consists of following- Bill No. Description of schedule 13A Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached. 4.6 The applicant has made following submission in support of their claim that the works performed by them are covered in works contract- (a) the project covers mechanical engineering and electrical engineering for installation of plant and machinery in the railway sites on lumpsum basis. (b) The breakup of the contract (of Electric Loco shed) in various schedules is more for the logical division of the work in various baskets for ease in determination of pricing and release of milestone payments to the applicant, however this itself cannot be said to be an individual contracts in themselves and the ultimate objective of the contract does not changes due to such bifurcation. (c) the entire contract could be construed as complete only if the entire installation of plant and machinery is completed at site. (d) the work undertaken results into an immovable property consisting of various elements being machineries plants, mechanical work and electrical works and once all the elements are accretion and built-up into the unit, then later its removal is not simple and is not possible without causing substantial damage therefore the work undertaken by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia in the case of Commissioner of Central Excise, Ahmedabad Vs. Solid and Engineering Works, (2010) 5 SCC 122 has explained in detail the law relating to Immovable property. In that case the asphalt drum/ hot mix plants were Claimed to be immovable property. The observations of the Court in that case as regards immovable property are reproduced below - Para 24-Section 3 (26) of the General Clauses Act includes within the definition of the term immovable property things attached to the earth or permanently fastened to anything attached to the earth. The term attached to the earth has not been defined in the General Clauses Act; 1897. Section 3 of the Transfer of Property Act, however gives the following meaning to the expression attached to the earth (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or building; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. Para 25-it is evident from the above that the expression 'attached to the earth' has three distinct dimensions Attachment of the plant in question with the help of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect works. We find that sl. No. 3 (v) of the Notification No. 11/2017-Cetral Tax (Rate) dated 28.06.2017, as amended prescribed CGST rate @ 6% for composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, (other than that covered by item (i), (ia), (ib), (ic), (id), (ie) and (if) above) supplied by way of construction, erection, commissioning, or installation, of original works pertaining to railways, including monorail and metro. 18. The rate prescribed vide sl. No. 3 (v) of the Notification No. 11/2017-Cetral Tax (Rate) dated 28.06.2017, as amended is applicable to composite supply of works contract and as the supply entrusted to the applicant vide JV Agreement is not a works contract, the applicant is not entitled for the benefit of the said notification. 19. In view of the above discussions, we pass an order as follows: ORDER Question 1. Whether the works awarded to the applicant is a composite supply of the works contract services? Answer 1- Replied in negative. Question 2- Whether the benefit of Si. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended vide notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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