2023 (4) TMI 421 - AAAR - GST

Classification of supplies - rate of tax - pure services - supply of works contract services - services procured by the appellant from 3rd party contractor in providing services to GHMC and I& CAD - eligibility to obtain services at reduced rate of 12% as per entry 3(iv) of Notification 11/2017 CTR dated 28 June 2017 - HELD THAT:- Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term “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.” - It is evident from the abstract of estimate that they are supplying and erecting cables, OH line and Stainless Steel (SS) during the course of the work. Therefore, the implication is that the cables are enclosed in such RCC pipes which are kept under the ground at a certain depth and then the entire pipes with the enclosed cables are covered back with filling to make the road as it is. This clearly satisfies the condition of being attached to earth.

The work schedule submitted by the applicant also indicates that their work involves shifting of HT & LT Overhead line & cable through underground. The contract for shifting of cables and replacing with underground cables can be classified as contract for building, construction, fabrication, completion, erection, fitting out, improvement, modification, etc., of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. Hence, there is no hesitation in holding that the applicant is supplying Works Contract Services. It is also apparent that the nature of the works undertaken by the applicant are not in the nature of ‘Original Works’ and is to be classified as works contract service.

The applicant is not eligible for exemption available against Sl.No. 3 of the Notification ibid and the services are liable to classified as works contract services and therefore is subject to payment of tax as applicable.

Rate of Tax applicable to services procured by the appellant from 3rd party contractor in providing services to GHMC and I& CAD - HELD THAT:- As per definition of business in section 2(17) of the CGST Act,2017 any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit is a business. It is evident from the above facts that TRANSCO is in the business of transmission of electricity and collecting charges for the said activity - it is seen that TRANSCO has been established on commercial principles in as much as Section 61 of the Electricity Act, 2003 stipulates the guiding principles for determination of tariff by the STATE Regulatory Commission and mandates that the Tariff should progressively reflect cost of supply of electricity, reduce cross subsidy and recover the cost of electricity in a reasonable manner.

The legal maxim noscitur a sociis is not applicable to the present case as there is no ambiguity in relation to the word ‘business’ having been clearly defined in the Act itself. The word ‘business’ encompasses within itself activities undertaken whether or not for a pecuniary benefit, which removes any scope for exclusion of the activities undertaken by the appellant from the ambit of ‘business’. It is immaterial, if the Government entity (Appellant) is running with or without generating any surplus as long as the activity undertaken has commercial implication - the services provided by 3rd party are works contract services covered under residual entry 3(xii) of the notification as amended. As such, the appellants claim that the services procured by them from private contractors are eligible for concessional rate of tax is not sustainable.

Tax liability for supply of works contract service by the applicant to South Central Railway - HELD THAT:- The work contract executed by the applicant is meant for the purpose of business. Thus, the facts of the case are analogous to the circular issued by CBIC vide No.152/08/2021-GST dated 17-06-2021. Hence, works contract service provided by M/s TRANSCO by way of construction of the said civil structure meant predominantly for the purpose of business is not covered under Entry 3(vi) of Notification No. 11/2017-CT(R) - The documents furnished indicate the service rendered to SCR where the service rendered was for construction of certain transformers for the purpose of extending the power supply including certain telecommunication work.

The Services provided by TS Transco (Appellant) to SCR are classifiable as ‘Works Contract Service’ falling under Chapter 99, Group 99542 as per the Scheme of Classification of Services provided under Annexure to Notification No. 11/2017- CT(Rate) dated 28.06.2017 as amended and are taxable @ 18% in terms of Serial No. 3(xii) of Notification No. 11/2017- CT(Rate) dated 28.06.2017 as amended.

Appeal disposed off.