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In Re : M/s GSPL INDIA TRANSCO LTD AND M/s GSPL INDIA GASNET LTD

2015 (7) TMI 825 - Advance Ruling Authority

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 providing output service in view of restrictive definition of "input service"

Held that:- Applic .....

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ered 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 of the Service Tax that would be paid by the EPC Contractor/other construction contractors and other servi .....

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artment : 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 above referred applicants, both applications are taken up for common ruling. 2. Both these cases had a check .....

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ive 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 on 21.04.2014. 3. The applicant proposes to avail the benefit of Cenvat credit in respect of Service Tax th .....

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rovides 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 Right of User in Land) Act, 2000 or the Petroleum and Minerals Pipeline (Acquisition of Right of User Inla .....

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cant 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 into existence a pipeline. EPC Contractors, under no circumstances, have the complete responsibility of bring .....

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line. 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 stations along the pipeline route 7. Though the EPC Contracts awarded by the applicant to the various EPC C .....

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n 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 Under the EPC Contracts, the applicant will procure the pipes from the EPC Contractors, under a "Bill t .....

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g 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 to each other, are referred to as 'pipelines' in trade parlance, as well as in dictionaries. Such .....

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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 transmission pipeline that would be brought into existence through the services rendered by the EPC Contrac .....

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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 Ltd, Vs. CCE, Ahmedabad reported in 2013 (32) STR 510 (Tri. Ahmed). Therefore, as per provisions to Secti .....

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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 matter was taken up by this Authority. Therefore, contention of Revenue is not correct. 11. Revenue relied upo .....

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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 erection and commissioning of such plant, do not take part directly in providing output taxable service o .....

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ers 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 services are output services from EPC contractors and others. Therefore, in case of Mundra Port & SEZ Lt .....

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port 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 Finance Act, 1994, prior to 01.07,2012, which indicates that the services are to be rendered via use of pi .....

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nt 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 pipeline would not come under the definition of "input service", which, inter-alia states as un .....

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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 output services. There is no doubt that the applicant is provider of output service i.e. transport of gas thro .....

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e 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) construction of pipeline or conduit; or........It is clear from above that construction of a building or a c .....

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