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2025 (4) TMI 230 - AAR - GSTEligibility for exemption under serial No. 3A of N/N. 9/2017-IT (Rate) dated 28.6.2017 as amended by N/N. 2/2018-IT (Rate) dated 25.1.2018 - supply of services of Dredging Activity undertaken by the applicant given to Government - HELD THAT - The Gujarat Maritime Board is a body corporate. The term government entity stands omitted from the exemption notification. Even otherwise in terms of Section 103 of the CGST Act 2017 the advance ruling pronounced by the Authority is binding only on the applicant. The applicant is not eligible for the benefit of the exemption notification.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered by the Authority for Advance Ruling (AAR) was whether the supply of dredging services undertaken by the applicant, provided to the Gujarat Maritime Board (GMB) through a contract awarded by the Fisheries Department (a government entity), qualifies for exemption under serial No. 3A of Notification No. 9/2017-IT (Rate) dated 28.6.2017, as amended by Notification No. 2/2018-IT (Rate) dated 25.1.2018. Specifically, the issues involved were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Composite Supply and Value of Goods Relevant legal framework and precedents: Serial No. 3A of Notification No. 9/2017-IT (Rate) requires that the supply be a composite supply of goods and services where the value of goods does not exceed 25% of the composite supply. The applicant submitted a certificate from the Chief Engineer of Fisheries certifying that the dredging work does not constitute more than 25% of the value of goods supplied. Court's interpretation and reasoning: The tender documents describe the dredging work as involving soil dredging using excavators and machinery, mobilization and demobilization, loading and unloading onto barges, and transportation of dredged material. This confirmed the composite nature of the supply. However, during the hearing, the applicant's representative conceded that the certificate's wording was ambiguous and possibly a drafting error. Application of law to facts: Despite the ambiguity, the applicant accepted the condition was met. Therefore, the first two conditions under serial No. 3A-composite supply and goods value not exceeding 25%-were deemed satisfied. Issue 2: Recipient Qualification as Government or Local Authority Relevant legal framework and precedents: Serial No. 3A requires the supply to be made to the Central Government, State Government, Union Territory, or local authority. The term "government entity" was introduced in Notification No. 33/2017 but was subsequently omitted from serial No. 3A by Notification No. 16/2021. Court's interpretation and reasoning: The applicant claimed the Fisheries Department is a government entity and thus eligible. However, the Authority noted that the term "government entity" no longer appears in serial No. 3A, thus the applicant's argument based on this term fails. Further, the dredging services were actually received by the Gujarat Maritime Board (GMB), which owns the port. Key evidence and findings: The Port Policy of December 1995 and GMB's website confirmed that Porbandar port is owned by GMB, a body corporate established under the Gujarat Maritime Board Act, 1981. The Act states that GMB is a corporate body with perpetual succession and power to contract. Application of law to facts: GMB does not fall within the definition of Central Government, State Government, Union Territory, or local authority under Section 2(69) of the CGST Act, 2017. Therefore, the third condition of serial No. 3A is not satisfied. Treatment of competing arguments: The applicant's reliance on the Fisheries Department being a government entity was rejected as the actual recipient of the service is GMB, which does not qualify under the exemption notification. Issue 3: Relation of the Activity to Panchayat or Municipality Functions Relevant legal framework: The exemption applies only to supplies related to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution. The XIth Schedule lists fisheries as a function under Panchayats. Court's reasoning: Since the third condition was not satisfied, the Authority did not examine whether the dredging activity relates to a Panchayat function. This was considered an academic exercise and thus not necessary to decide. Issue 4: Applicability of Precedent Advance Rulings Applicant's submissions: The applicant cited three advance rulings where dredging services rendered to government entities were held exempt under similar notifications. Court's analysis: The Authority distinguished the present case on facts. The cited rulings involved recipients clearly defined as government entities under the exemption notification, whereas the term "government entity" is omitted in the current notification. Further, advance rulings are binding only on the applicant and do not establish binding precedent. Conclusion: The prior rulings did not support the applicant's claim in the present factual and legal context. 3. SIGNIFICANT HOLDINGS The Authority held that the supply of dredging services undertaken by the applicant, provided to the Gujarat Maritime Board, is not covered under serial No. 3A of Notification No. 9/2017-IT (Rate) dated 28.6.2017 as amended. The crucial legal reasoning includes the following verbatim excerpts:
Core principles established:
Final determination: The supply of dredging services by the applicant to the Gujarat Maritime Board is not exempt under serial No. 3A of Notification No. 9/2017-IT (Rate) dated 28.6.2017 as amended, and therefore, the applicant is not entitled to the benefit of exemption under GST for the said supply.
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