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2020 (10) TMI 855 - AAAR - GSTClassification of supply - Pure Supply of goods or a Pure Supply of Services - Composite Supply of goods and services being a works contract or not - street lighting activity under the Energy Performance Contract dated 05.12.2016 - rate of tax - benefit of exemption under entry 3 or 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended - time of supply of services - Whether KEONICS is liable to tax only once the energy saved is certified by the energy auditor? Whether amount credited in joint ESCROW account can be termed as 'receipt' especially because the said amount is not under control of KEONICS until the conditions are met? - challenge to AAR decision. Whether the activity undertaken by the Appellant for the Thane Municipal Corporation amounts to a supply of goods or a supply or service or is it a composite supply involving both goods and service? - HELD THAT:- A supply of goods does take place as part of the contractual terms although it is not during the during the course of the contract. The supply of goods takes place when the contract come to an end and therefore forms part and parcel of the contract. Thus, the supply under the ESCO contract is a composite supply involving both a supply of service as well as a supply of goods. The principal supply however is a supply of service as it is the operation, management and maintenance of the street lighting system which is the essence of the ESCO contract. The LED lights and other equipment like smart feeder panels are goods used for the rendering the service. Therefore, we disagree with the lower Authority's ruling that the principal supply is a supply of goods. Rate of tax applicable on the supply of service by the Appellant - HELD THAT:- In this case, there is no doubt on the fact that the supply is made to a local authority (Thane Municipal Corporation) and the service supplied i.e the operation and maintenance of street lighting is in relation to a function entrusted to the Municipality under Article 243W of the Constitution. However, the ESCO contract involves the supply of goods albeit at the time of termination of the contract. Therefore, the first condition of it being a pure service is not fulfilled. A pure service must necessarily not involve a supply of goods - the Appellant is not eligible for the benefit of exemption as a pure service under entry No 3 of Notification No 12/2017 CT (R). Benefit of exemption under entry No 3A to the exemption Notf No 12/2017 CT (R) - HELD THAT:- The entry 3A of the exemption Notification is unambiguous in laying down the condition that the value of the supply of goods should not exceed 25% of the total value of the supply. The burden of proving the eligibility to the exemption is on the Appellant to show that his case comes within the parameters of the exemption notification - this onus has not been adequately discharged by the Appellant. Therefore, the Appellants are not eligible for the benefit of exemption under entry 3A of the Notf No 12/2017 CT (R) as amended by Notf No 02/2018 CT (R). Applicable rate of tax in respect of the supply of service to TMC - HELD THAT:- The scope of the work under the ESCO contract is undertaken in three phases. Phase I involves the preparatory work for installation of Smart Feeder Panels and LED light fixtures. Phase II involves the implementation of energy efficient lighting fixtures, brackets and junction box, underground cables and flexible cables. In Phase III the operation and maintenance of the street lighting system will be monitored upto the end of the contract period. As observed earlier, there is a significant usage of goods and materials for the provision of the service as per the contract - the service of street lighting is classifiable under Heading 999112. This heading is chargeable to tax at the rate of 9% CGST and 9% SGST which is specified under entry Sl.No 29 of Notification No 11/2017 CT (R) dated 28-06-2017. Time of supply - HELD THAT:- The supply in this case is a composite supply involving the supply of both goods and services with the supply of service being the predominant supply, the provisions of Section 13 of the CGST Act relating to time of supply of services will apply. Thye decision of AAR set aside.
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