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2015 (7) TMI 825 - Advance Ruling Authority

2015 (7) TMI 825 - Advance Ruling Authority - 2015 (40) S.T.R. 393 (A. A. R.) , [2015] 83 VST 120 (AAR) - Denial of CENVAT Credit - input services - installation and commissioning related services on the input side for bringing into existence a pipeline - Revenue has contended that the services used for erection and commissioning of such plant, do not take part directly in providing output taxable service of transportation of gas and also same cannot be considered to be integrally connected in p .....

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no doubt that the subject goods i.e. pipes and valves, are capital goods but the input service to be rendered by the applicant is not for support of pipes and valves i.e. "capital goods" but for laying of pipeline for transport of gas. As input service received by the applicant from EPC contractors and others is not for laying of foundation or making of structure for support of capital goods, same does not fail under the exclusion clause.

Applicant is eligible to avail Cenvat Credit .....

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- Dated:- 3-7-2015 - V S Sirpurkar And S S Rana, JJ For The Appellant : Shri Sujit Ghosh, Adv For The Department : Shri Amresh Jain (AR) RULING M/s GSPL India Transco Limited (F.No. AAR/44/ST/03/13) and M/s GSPL India Gasnet Limited (F.No. AAR/44/ST/05/13) (hereinafter referred to as applicant) are a subsidiary of Gujarat State Petronet Limited (GSPL), which is a Government Company under the Companies Act, 1956. As the facts and question, on which Advance Ruling sought, is same in respect of ab .....

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y to hear the applicant on merits. In the interim, Service Tax laws in India were replaced by a comprehensive Service Tax regime with effect from 01.07.2012. Due to these changes, the applicants filed corrigendum to the original applications on 12.11.2012. However, on the instructions of this Authority, fresh applications dated 01.03.2013 were filed, i.e. present applications. This Authority vide Order dated 16.01.2015 restored the applications, which were dismissed earlier for non-prosecution o .....

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he route involves a feasibility analysis to ensure that an acceptable route for the pipeline exists that provides the least impact to the environment and public infrastructure already in place. Once the route for the pipeline is identified, the next step is to acquire Right of Use and Right of Way on the said route. In this regard the applicant would obtain the Right of Use (ROU) in respect of the land along the identified route either under the Gujarat Water & Gas Pipelines (Acquisition of .....

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oned along the identified routes so as to connect the source to the destination. In this regard, the applicant would either grant various turnkey contracts (EPC Contracts) involving supply of pipes as well as installation and commissioning of the said pipes to bring into existence a pipeline connecting the source to the destination or would procure the pipes themselves and separately obtain the services of construction contractors for installation and commissioning of the said pipes to bring int .....

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inspection and testing, consulting engineering etc which would be required to bring into existence a pipeline. 6. The scope of work of the EPC Contractors would relate to construction of the complete pipelines by carrying out inter alia the following specific work scopes: a) Supply of Plant and Equipment (including pipes and valves) b) installation and construction services, and other services c) Supply of mandatory spares within and outside India d) A civil works package for constructing the s .....

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would charge separately for the supply of goods like pipes from the applicant and separately for provision of services. Thus the EPC Contract between the applicant and the EPC Contractors would be divisible contract, which can be divided into provision of service and supply of equipment/material i.e. pipes. Separate invoices would be raised by the EPC Contractors for the sale of pipes and provision of construction / erection, installation and commissioning services for laying of the pipeline Un .....

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for provision of the services of installation and commissioning for putting together the pipes and bringing into existence a pipeline along the identified route. 8. Applicant submits that the service by the EPC Contractors/construction service providers would essentially consist of putting together the individual pipes issued free of cost by the applicant by welding / using nuts and bolts / other means and bringing into existence a pipeline along the identified route. Such pipes, once connected .....

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her, in the light of the fact that such services by EPC Contractors would be composite supplies involving both goods and services, the EPC Contractors would discharge Service Tax on the basis of one of the options given under Rule 2A of Service Tax (Determination of Value) Rules, 2006. 9. Applicant submits that other construction contractors and other service providers who would be providing pure services would raise service invoices and pay service tax thereon at the applicable rates. The gas t .....

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other service providers (except for service tax paid vis a vis construction services for the civil works package for building the pipeline substations) against the Applicant's output service tax liability under the taxable output service in the nature of transport of gas through pipelines." 10. First point urged by the Revenue is that the question raised by the applicant in present applications, are same as already decided by the Appellate Tribunal in the case of Gujarat State Petronet .....

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lings to decide the questions raised in the petitioners' applications, under Section 96 C, on merits, under Section 96 D of the Finance Act, 1994. Hon'ble High Court concluded that if AAR pronounces advance ruling on the question raised by the petitioners, even then it will not result in conflicting or incompatible decision as order of AAR would be binding only on the applicants and tax authorities. In view of the above decision of the Hon'ble High Court in the present case, the matt .....

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hat case, Tribunal examined the expression "used for providing a output service" as appearing in Rule 2 (k) (ii) of Cenvat Credit Rules, 2004 under the definition of "input", as it existed then. It is observed by the Tribunal that said definition has restrictive meaning and cannot be given wide import. Tribunal held that cement and steel used in construction of jetty, cannot be said to provide port service. On the same analogy, Revenue has contended that the services used for .....

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y can render service of transport of gas through pipeline; that input service from EPC contractors and others to bring into existence the pipeline will be "used for providing output service" for transport of gas through pipeline. It is observed that the applicant proposes to provide output service of transportation of gas through pipeline, on the basis of input services of construction/ erection, installation and commissioning received from the EPC Contractors/ third party and these se .....

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hat without the pipes and valves or the pipeline system, it is not possible to render the service of transport of gas through pipeline; that said service can-not be provided without using the said input services, which are intrinsically required for the provision of taxable services; that the proposition is also clear, given that the description of taxable services per se i.e. "transport of goods through pipeline or other conduit service", as it was under Section 65 (105) (zzz) of the .....

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t Cenvat credit is not available on inputs used for manufacture of immovable goods and same are not relevant to issue before us. Present issue relates to input service used for providing output service. We also agree with the applicant that factum of pipeline system being immoveable property is irrelevant in the back-drop of Rule 2 (l) ibid. 12. Revenue has also urged an issue regarding exclusion clause A (b) of input service under Rule 2 (l) of Cenvat Credit Rules, 2004, pleading that laying of .....

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ion or execution of works contract of a building or a civil structure or a part thereof; or (b) Laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or x x x x x 13. Rule 3 (1) of Cenvat Credit Rules, 2004 inter-alia envisages that a provider of output service shall be allowed to take credit of Service Tax leviable under Section 66 B of the Finance Act, 1994, paid on any input service by the provider of outp .....

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f works contract and construction services. It has been correctly pointed out by the applicant that service of laying of pipeline is different from construction of building or a civil structure, as under erstwhile Section 65(25b) of the Finance Act, 1944, 'commercial and industrial service" meant (a) construction of a new building or a civil structure or a part thereof, or industrial construction service meant construction of a new building or civil structure or a port thereof or (b) co .....

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