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TMI Blog2018 (5) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Goods and Services Tax Act, 2017 * If yes, whether the Principal Supply in such case can be said to be 'solar power generating system' which is taxable at 5% GST. * Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- [A] AS SUBMITTED ALONGWITH APPLICATION Statement of the relevant facts having a bearing on the aforesaid clarification(s)/ transaction(s) 1. "The Applicant is an EPC contractor and enters into contract with various Developers wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; c) Solar power generating system d) Wind mills and wind operated electricity generator e) Waste to energy plants/devices f) Solar lantem/solar lamp g) Ocean waves/tidal waves energy devices/plants h) Photo voltaic cells, whether or not assembled in modules or made up into panels Per the above, concessional rate of 5% has been provided to the following (when covered under heading 84, 85 or 94): * PV modules * Solar power generating system - This term has not been defined * Parts for manufacture of solar power generating system and PV modules - There is no restriction provided on what would qualify as parts and in such case all goods which qualify as 'parts' of solar power generating system should be eligible for concessional rate of tax 1.2 Concept of composite supply and mixed supply Section 2(30) Of CGST Act defines composite Supply to mean 'a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in Section 2(90) of the CGST Act as 'principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary' Thus, principal supply refers to the supply which is the predominant element in a composite supply. Illustration as provided in GST law is that In case goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. Further, in terms of Section 8 of the CGST Act, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply will be treated as supply of such principal supply. The relevant para of Section 8 of the CGST Act provides as follows: '8. Tax liability on composite and mixed supplies. - The tax liability on a composite or a mixed supply, shall be determined in the following manner, namely:- (a)a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply' Per the above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erally are the systems which absorb sunlight and convert it into electricity which can be put to further use. Solar power system has been defined under Solar Power -Grid Connected Ground Mounted and Solar Rooftop and metering Regulation -2014 issued by State of Goa. Solar power system as per the regulation means 'a grid-connected solar generating station including the evacuation system up to the Grid inter-connection point' Typically the term system has a wide ambit. As per the Oxford Dictionary, the definition of the term 'system' is "a complex whole, a set of things working together as a mechanism or interconnecting network". Similarly, the system is defined in Chambers 20th Century Dictionary as "anything formed of parts placed together or adjusted into a regular and connected whole". Hence, system typically includes various components/ parts which are manufactured/ assembled together for performing a function. In the present case, the term system should include all goods provided under the contract which help in end to end generation as well as transmission of electricity. Further, under erstwhile law also, solar power generating systems have not been defined. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Guide issued under service tax regime It is to be noted that the concept of composite supply under GST is identical to the concept of naturally bundled services prevailing in the erstwhile Service Tax regime. Section 66F (3) of the Finance Act, 1994 ('the Finance Act') two rules have been prescribed for determining the taxability of such services. The rules prescribed are explained as under: I. If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character' 2. If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax. The concept of naturally bundled services was explained in the Education Guide issued by the CBEC in the year 2012 ('the Education Guide'). The relevant extract of the Education Guide is reproduced as under for ease of reference: Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackage would be treated as services naturally bundled in the ordinary course of business. * Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are: * There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use * The elements are normally advertised as a package * The different elements are not available separately. * The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. Per the above, the following conclusions can be drawn: * In case more than two supplies are supplied together wherein one of the supply is principal supply would qualify as composite supply. * Further, goods supplied under the composite supply are supplied in conjunction with each other. Also, such composite supply is supplied in the ordinary course of business. * The composite supply would qualify as supply of the principal supply. Taxes would be applicable as on such principal supply. Drawing reference to the above, it is submitted that the customer perceives the entire contract is for supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncierge) were incidental and ancillary to the accommodation part of the supply.' Per the above, composite supply is taxed as supply of the dominant activity to which others are merely ancillary. In the present case also, the dominant supply is those of goods (which constitutes solar power generating system' and services is merely incidental to provision of such goods. 2.4.2. European Union Per the European Union Directive, a composite supply is a transaction where supplies with different VAT treatments are sold together as one. The supplies with a composite supply may consist Of parts that, if assessed separately, have different tax rates. Some have standard rates, reduced rates or are exempt from VAT. The European Court of Justice ECJ') has delivered several judgements on the aspect of composite supply under European Union Value Added Tax laws ('EU-VAT'). In the case of Card Protection Plan Ltd. Vs. C& E Commrs [1994] BVC 20 , the ECJ held that 'a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied' . Per the above principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system and services such as erection, commissioning etc are only a means to provide the main supply of goods. 4. Contract does not constitute works contract It is submitted additionally that works contract is also defined as a composite contract and includes 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 our case that the intent of the contract executed by the Applicant are not in the nature of erection, commissioning or fitting out, etc. Instead the contract is entered for provisioning of solar power generating system and the main intent of parties is to procure a solar power generating system to which the activity/ services of erection/ commissioning etc are only incidental. In the present case, even if the contract qualifies as composite contract, the principal supply would be that of provision of solar power generating system and not provision Of works contract services. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (including all goods as well as services) should qualify as solar power generating system taxable at 5%. * Concessional rate of 5% for supply of solar power generating system or its parts should also be available to sub-contractors." [Bl AS SUBMITTED DURING HEARING "1.5. Without prejudice and in addition to the submissions already made, the Applicant hereby make the following additional submissions. The Proposed transactions/ Contract is one for supply of 'Solar Power Generating System' as a whole and hence the rate of GST should be 5%. 1.6. It is submitted that the intent of the parties is always for supply of Solar Power Generating system as a whole 1.7. Reference is made to the draft contract (annexed herewith as Annexure A), which is a Contract for Supply of 60Mw Solar Power Plant. Further, Clause B of the draft Agreement provides as following: "B. Owner has appointed the Contractor for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning of the Plant as per scope defined in relevant schedule of this Contract, as per Applicable Law and Technical Specifications" 1.8. Additionally, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , testing and commissioning of the solar power plant. The intention of the parties is not to undertake any activity on an immovable property, but to supply Solar power plant. 1.13. Solar power plant is not an immovable property 1.13.1 It is submitted that it has been highlighted in various pronouncements by the judicial authorities that in cases where an object is installed/fastened to the land for better running of the said object, and not for the benefit of land, such object will not be considered as immovable property. Further, it has been held that if fixing of a plant to a foundation is only meant to give stability to the plant and where there is no intention to make such plant permanent, the foundation would not change the nature of the plant and make it an immovable property. 1.13.2 Reliance is placed on a judgment by the Hon'ble Supreme Court in the matter of Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998 1 SCC 400) = 1997 (12) TMI 109 - SUPREME COURT OF INDIA , wherein in case of a paper making machine, it was held that merely because the machinery was attached to the earth for operational efficiency, it does not automatically become an immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer Of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed.' 1.13.4. In furtherance to the aforesaid judgment, the Madras High Court in the case of Board of Revenue, Chepauk, Madras v. K. Venkataswami Naidu (AIR 1955 Mad 620, 1955 CriLJ 1369), held that if something is temporarily embedded in the earth, it cannot be termed as immovable property. The relevant extract of the judgement is reproduced as under: '2. The answer to the question depends upon whether the equipment of the touring cinema would fall within the category of immoveable 'Property. We have no hesitation in holding that it does not. In the question referred to us, the properties are described as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land and as immovable property.' A copy of all the judgements is collectively marked and attached as Annexure - B. 1.13.7. In view of the aforesaid judgments, it is submitted that in the instant case, the solar power plants supplied by the Applicant is commissioned and installed only for the purpose of better functioning of the plant and are capable of being removed and transferred from one place to another. Hence, the fact that the plant is firmly but not permanently attached to the land means that the same is not an immovable property. 1.13.8. Reference can be made to Clause 4.1(xiii) of the draft agreement, which contemplates possibility of transferring the Plant: (xiii) Any costs incurred by the Contractor for any changes made in the land/premises of the Owner, while development of Plant, due to the requirement of transferring the Plant to another location, would be borne by the Owner. Such costs incurred would be charged by the Contractor from Owner separately and does not form part of the Contract price highlighted in Schedule 3 of the Contract. The amount to be charged due to the changes will be mutually decided between the parties. 1.13.9. Reliance is also placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply'. 1.15. Section 2(90) defines principal supply as "principal supply" means 'the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary'. 1.16. Further, in terms of Section 8 of the CGST Act, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply will be treated as supply of such principal supply. The relevant para of Section 8 of the CGST Act provides as follows: '8. Tax liability on composite and mixed supplies, - The tax liability on a composite or a mixed supply, shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply' 1.17. Per the above, the essential conditions fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al supplies, the most critical part of the Plant are the supply of the mounted PV Module which constitute 60%- 70% of the total contract value. Further, it is also agreed that the Contractor is responsible for the whole of the contract that is for getting-up/ supply of the Plant. For the purpose of undertaking compliances under Laws constituted in India, the parties may agree to define prices of the equipment to be supplied as part of the contract. The same shall not in any manner exceed the lump sum price agreed between the Parties and also does not in any manner dilute the responsibility of the Contractor." 1.23. Further, there is a definition in the draft agreement, "Major Equipment" [1.1.67] which clearly identifies PV Modules as the Major Equipment "Major Equipment(s) " means PV solar modules which is an assembly of solar cells that helps in converting solar power into electricity and all other Equipments specified in Schedule 3 (Contract Price and Payment Milestones) for facilitation of Payment under this Contract; 1.24. Reference in this regard is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics & Instruments Ltd. vs. Commr. Of C. Ex., Jaipur w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer generating system should not qualify as immovable property 3.3. Alternatively, even if the agreement is construed as a composite supply, the principal supply would be the supply of PV Modules which again are liable to tax @5%. 3.4. Hence, the Applicant submits that the proposed agreement with its customers should be taxable @5% GST, and the same should be applicable to sub-contractors as well. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- "In support to their claim that EPC contract for construction of solar power plant is purely a Composite Supply and it should not be treated as works contract, they have submitted draft agreement, various case laws. In this connection, I am submitting by submission as under: * M/s Giriraj Renewables Pvt Ltd is engaged in the work of construction of a solar power plant. This work is taken on Engineering, Procurement and Construction (EPC) basis. The dictionary meaning of ECP contract is "Engineering, Procurement, and Construction" (EPC) is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of photovoltaic module at around 60 to 70% of entire solar power plant. However submission given by the dealer is not supported by documents, such as estimate, etc. Therefore this artificial bifurcation arrived by the dealer is not acceptable. So it is submitted that as per Section 2(119) of GST Act, the EPC contract for solar power plant comes under the purview of works contract. It is also submitted that since it is works contract, question of principal supply does not arises and so GST tax rate of Solar Power Generating system is not applicable to EPC contract. As the principal contract is treated as works contract, applicability of concessional rate of tax to the subcontractor does not arise." 04. HEARING The case was taken up for hearing on dt.17.01.2018 and on dt.12.02.2018 when Sh. Prashant Agarwal (Partner, PricewaterhouseCoopers Pvt. Ltd.) attended and reiterated the contention as made in the written submission. During the hearing on dt.12.02.2018, a sample copy of the agreements in such types of contracts was submitted and our attention was invited to various clauses therein. Sh. Pravin Chavan, the concerned officer holding the post of State Tax Officer was also pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. We have known a 'works contract' in the Sales Tax regime to be activities as building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. Thus, activities in relation to movable and immovable property were covered earlier whereas the GST regime requires it to be restricted to immovable property only. It is with this distinctive difference that the applicant puts before us the contention that the transaction of supply of the Solar Power Plant ("SPP" as would be henceforth referred to) does not result into transfer of an 'immovable property' as the SPP is a 'movable property'. With this background, we proceed to see the clauses of the agreement: "WHEREAS: * Owner intends to develop a 60 MWAC/ 81 MWDC solar power plant ("Plant"/ "Plant") in------------ Karnataka ( "Plant Site "), for onward sale of power to its consumers. * Owner has appointed the Contractor for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning (as defined later) of the Plant as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equipment; 1.1.43. "Execution Schedule" means the schedule of Supply of Equipment, construction, installation and Commissioning of the SPP as elaborated under the Schedule 4 (Execution Schedule); 1.1.67. "Major Equipment(s) " means P V solar modules which is an assembly of solar cells that helps in converting solar power into electricity and all other Equipments specified in Schedule 3 (Contract Price and Payment Milestones) for facilitation of Payment under this Contract; 1.1.77. "Plant" shall have its meaning under Recital B; 1.1.78. "Plant Site" shall have its meaning under Recital B; 1.1.80. "punch List" shall have its meaning under Clause 15.6; 1.1.81. "Punch List Completion " shall have its meaning under Clause 15.6; 1.1.87. "SPP" shall mean 60MWAC/ 81MWDC Solar Power Plant to be Supplied, installed and commissioned at the plant site by the Contractor, which is forming part of the solar power generating system; 1.1.89. "Supply " means supplying of Equipment to the Plant Site in accordance with the Technical Specification and the terms of this Contract, for the purposes of installation, testing and Commissioning as part of the Works; and the term "Supplied" shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formance of the Scope of the Contract and all obligations as set out under this Contract. 6.5. Effect of Payment No payment of the Contract Price or part thereof made by the Owner, shall be deemed to constitute acceptance by the Owner of the performance of (any part or whole) of the Scope of Contract by the Contractor, and shall not relieve the Contractor of any of its obligations under this Contract, solely on the basis of such aforesaid payments being made by the Owner. 6.6. Final Payment The Contractor expressly agrees that the final payment shall be released by the Owner only upon completion of the necessary obligations as set out in the final Payment Milestone as set out under Schedule 3 (Contract Price and Payment Milestones). 7.4. Performance Bank Guarantee Upon Commissioning of the Plant, the Contractor shall provide an unconditional and irrevocable performance bank guarantee to the Owner for 5% (five percent) of the Contract Price from a nationalized or scheduled commercial bank ("PBG") with respect to the Contractor's Defects Liability obligations under this Contract, which shall be valid for a period of 1 (one) year from the date of Commissioning of the Plant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chievement of Commissioning: (a) successful installation, testing and Commissioning including generation of electrical energy and charging of 100% DC capacity of Relevant MW size of the Plant; (b) the Plant is mechanically and electrically completed meeting minimum functional, technical and safety requirements; (c) the data acquisition system has been commissioned and able to log data as required by the utility; (d) that the Plant has been continuously running for a minimum period of 3 days except for minor faults and Grid non- availability. (ii) Upon receipt of the Notice of Commissioning, the Owner or Owner's Representative shall remain available for witnessing Commissioning. Upon inspection of the Commissioning, the Owner shall either: * endorse the commissioning certificate ("Commissioning Certificate") certifying that the Works (or the Works in respect of any particular unit of the Plant) is Commissioned, as per the format in Schedule 9; or * notify the Contractor in writing, detailing the shortfall or Defect and/or deficiencies within 5 (five) days thereof. (iii) In the event that if the Owner discovers any Defect during the Commissioning of the Plant and furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss Days of receipt of notice under Clause 15.6 (i) from the Contractor, inspect and verify that all items in the Punch List have been duly completed by the Contractor as per Technical Specifications and terms of this Contract. In the event that the Owner notifies any Defect or any failure in implementing any Punch List item, then the Contractor shall promptly rectify such Defect or carry out the item so that it confirms to Technical Specification and terms of this Contract. If that the Punch List items have been rectified and/or completed, the Owner shall within 7 (seven) Business Days thereafter endorse the punch list completion certificate ("Punch List Completion Certificate"), as per the format in Schedule 10. The date of endorsement of the Punch List Completion Certificate shall be the date when the SPP is finally accepted by the owner ("Final Acceptance Date "). However, if the Punch List items have not been completed within the aforesaid time period, the Contractor shall be required to complete the same within 15 (fifteen) Business Days of a notice to this effect issued by the Owner detailing the deficiencies in completion of the Punch List items by the Contractor. (iii) If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is duly issued. 22.1. Risk, Custody and Care All risk of the Contractor in the Equipment's, Work and SPP shall stand transferred to the Owner from and upon Commissioning of the Relevant MW size of the Plant. However, Contractor shall be responsible for any damage in Equipment (excluding Free issue Material), Work and Plant due to any act by the Contractor or its representatives till Punch List Completion. 22.2. Title Transfer All the risk and title of the Contractor in the Equipment and the Plant forming part of the Supply), including every proprietary interest in the Equipment, shall be transferred to the Owner upon Commissioning of the Plant. SCHEDULE 1 SCOPE OF WORK The Contractor would be responsible for Supply of Equipment and undertake all necessary activities ancillary to such supplies (such as erection, civil work etc) to ensure complete supply of Solar Power Plant. Both parties agree that of the total supplies, the most critical part of the Plant are the supply of the mounted PV Module which constitute 60%-70% of the total contract value. Further, it is also agreed that the Contractor is responsible for the whole of the contract that is for setting-up/ supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow-cause, the respondents explained the processes involved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719-cubic-metre capacity and the size of its outer diameter is 10.6 metres, and the height 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at various levels to melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one-metre thickness. Thus, the drilling machine has to drill a hole through one-metre thickness of the refract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the equipments have to be assembled/erected on the base frame projection of the furnace. She also accepted the submission urged on behalf of the appellant that if the machines are to be removed from the blast furnace, they have to be first dismantled into parts and brought down to the ground only by using cranes and trolley ways considering the size, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole-drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers (P) Ltd. [(1989) 1 SCC 172 : 1989 SCC (Tax) 64 : (1988) 38 ELT 566 : 1988 Supp (3) SCR 1] and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CCE [(1993) 65 ELT 121 (cegat) = 1992 (10) TMI 188 - CEGAT, NEW DELHI ] which held that the issue of immovable property was never raised before the Supreme Court in Narne Tulaman Manufacturers (P) Ltd. [(1989) 1 SCC 172 : 1989 SCC (Tax) 64: (1988) 38 ELT 566 : 1988 Supp ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freely on the asphalt layer. There were no bolts and nuts for holding the tanks on to the foundation. The tanks remained in position by their own weight, each tank being about 30 feet in height, 50 feet in diameter, weighing about 40 tons. The tanks were connected with pump house with pipes for pumping petroleum products into the tank and sending them back to the pump house. The question arose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allowing the appeal this Court observed: (SCC p. 33, para 32)"32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the latter place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it must be a goods mentioned either in the Schedule or under Item 68 and must be marketable. The word "goods" applied to those which can be brought to market for being bought and sold and therefore, it implied that it applied to such goods as are movable. It noticed the decisions of this Court laying down the marketability tests. Thereafter this Court observed: (SCC p. 376, para 5) "The basic test, therefore, of levying duty under the Act is twofold. One, that any article must be goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immovable and do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth ceased to be goods within meaning of Section 3 of the Act." 25. In Mittal Engg. Works (P) Ltd. v. CCE [(1997) 1 SCC 203 : (1996) 88 ELT 622 = 1996 (11) TMI 66 - SUPREME COURT OF INDIA ] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmovable property, as such it cannot be an excisable goods falling within the meaning of Heading 85.02. In reaching this conclusion this Court considered the earlier judgments of this Court in Municipal Corpn. of Greater Bombay [1991 supp (2) SCC 18 = 1990 (11) TMI 407 - SUPREME COURT ] , Quality steel Tubes [(1995) 2 SCC 372 : (1995) 75 ELT 17] = 1994 (12) TMI 75 - SUPREME COURT OF INDIA and Mittral Engg. Works (P) Ltd. [(1997) 1 SCC 203 : (1996) 88 ELT 622 = 1996 (11) TMI 66 - SUPREME COURT OF INDIA ] as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. CCE [(1998) 1 SCC 400 : (1998) 97 ELT 3 = 1997 (12) TMI 109 - SUPREME COURT OF INDIA ] . This Court observed: (SCC pp. 35-36, para 14) "14. There can be no doubt that if an article is an immovable property, it cannot be termed as 'excisable goods 'for purposes of the Act, From a combined reading of the definition of 'immovable property ' in Section 3 of the Transfer of Property Act, Section 3(26) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the excise law. Whether an article is permanently fastened to anything a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate. It is not necessary for us to express any opinion as to whether the mudguns and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of "goods " within the meaning of the term in the Excise Act. Thus, it can be seen that the Hon. Supreme Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it at another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of 'immovable property' as something attached to the earth. We would also look at the decision of the Hon. Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing parts and components of the plants had availed benefit of exemption wrongly and in breach of the provisions of Rules 9(1) and 173-F and other rules regulating the grant of such benefit. 6. Insofar as Solidmec marketing company was concerned, the show-cause notice alleged that Solidmec was engaged in the manufacturing of asphalt batch mix and drum mix/hot mix plants by assembling and installing the parts and components manufactured by the manufacturing units of the group. According to the notice the process of assembly of the parts and components at the site provided by the purchasers of such plants was tantamount to manufacture of such plants as a distinct product with a new name, quality, usage and character emerged out of the said process. Resultantly, the end product, namely, asphalt drum/hot mix plants became exigible to Central excise duty, which duty Solidmec had successfully avoided. The notice also proposed to levy penalties upon all the five concerns under appropriate provisions of the Central Excise Act." The Hon. Court has very elaborately dealt with the issue and it would be useful to go through the observations - "22. Section 3 of the Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition, Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. It is no body's case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of tee either the foundation or the land in which the same is imbedded. 26. In English law the general rule is that what is annexed to the freehold becomes part of the realty under the maxim quidequid plantatur solo, solo cedit. This maxim, however, has no application in India. Even so, the question whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures. 31. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine Can be sold in the market, The Tribunal has found as a fact that it can be sold In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the Company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property." 38. Reliance was placed by Mr Bagaria upon the decision of this Court in Quality Steel Tubes (P) Ltd. v. CCE [(1995) 2 SCC 372 : (1995) 75 ELT 17] and Mittal Engg. Works (P) Ltd. v. CCE [(1997) 1 SCC 203 : (1996) 88 ELT 622] In Quality Steel Tubes (P) Ltd. case [(1995) 2 SCC 372 : (1995) 75 ELT 17] this Court was examining whether "the tube mill and welding head" erected and installed by the assessee for manufacture of tubes and pipes out of duty paid raw material was assessable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiable under the Excise Act. This court observed that: [Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622] , SCC p. 208, para 10] "10... The Tribunal ought to have remembered... that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were." This decision also, in our opinion, does not lend any support to the case of the assessee in these appeals as we are not dealing with the case of a machine like mono vertical crystallisers which is permanently embedded in the structure of a sugar factory as was the position in Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622]. The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts in order to provide stability from vibrations during the operation. 42. So also in T. T. G. Industries Ltd. v. CCE [(2004) 4 SCC 751 : (2004) 167 ELT 501], the machinery was erected at the site by the assessee on a specially made concrete platform at a level of25 ft height. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate the decision in the correct sense. Though not issued for the purposes of the GST Act, we may as well mention herein the reference by the Hon. Bombay High Court in M/s. Bharti Airtel Ltd. (Earlier known as Bharti Tele-Ventures Ltd.) v. The Commissioner of Central Excise (2014 SCC OnLine Bom 907 : (2015) 77 VST 434) with regard to a Circular being issued by the Central Board of Excise & Customs in a decision of the same Hon. Bombay High Court - "(i) In the decision of the Division Bench of this Court in the case of "Commissioner of C.Ex, Mumbai-IV v. Hutchison Max Telecom P. Ltd., (2008 (224) E.L.T 191 (Bom.) ", the issue which fell for consideration of the Division Bench inter alia was pertaining to transmission tower set up by the assessee and whether the setting up of the towers amounted to manufacture as the towers being a new product with a distinct name, characteristics and use and is distinct from the components used in the manufacture as contended on behalf of the Revenue. The Division Bench after making the following observations in paragraphs 7 to 9 held that the towers being not moveable, saleable and marketable, they would not be subject to excise duty. Paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS & BSCs) Which are networked With the operation support subsystem (constitued MSCs) which networked with the Public network. The entire sub systems of BTSs and BSCs or MSCs and the number of constituents would depend on the Geographical area covered by the Cellular Network and there is no fixed designation numbers to constitute a component of transmission apparatus. It is not necessary to set out the other facts in detail considering the the Tribunal has in extenso set out the facts. The Tribunal relying on para 20 in the case of Triveni Engineering & India Ltd (supra) on the test of marketability, held that the so called BTS/BSC site erected, installed and commissioned by the contractors of the company cannot be construed as marketable goods manufactured by the appellant since they cannot go to the market as such BTS/BSC site are not marketable. It also held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different. Further, from the statement of Narayan as set out in the order of the Commissioner, it may be noted that he had stated that regarding installation of BTS the designing team after survey identified the location as per the requirements of the local coverage needs, determining the shelter location, fabrication of I-beam and pole location. It may be possible for us to agree that by installing or erecting, a new product comes into being with a different name in the market from its components. However, as discussed the test of marketability is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement brings out the enormity of the scale of operations and how the transaction would fall in the scope of an immovable property - * The agreement clauses also refer to a definition of "GO" - means government order issued by Karnataka Renewable Energy Development Limited for development of the Plant. Such a renewable energy project would invariably have an essential element of permanency. There is also involvement of other agencies, as well [Karnataka Renewable Energy Development Limited and Karnataka Power Transmission Company Limited]. This means that the Project would be established under Governmental Rules and Regulations. It is most unlikely that a project would be moved from place to place ONCE it has been put into place after obtaining the essential permits and licenses. The upshot of being a renewable energy project to generate electricity for consumers would be a connection to the Grid. And we find the definitions in the agreement clauses thus - * Thus, it can be seen that the Plant would be connected to the Grid Substation for the purposes of the commercial operations. After having established and commissioned such a Project which is connected to a Grid Substation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d supra), the Hon. Court has held the product as 'movable property' for the reason that the plant was not intended to be permanent at a given place and the plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. Such are not the facts of the instant case as has been explained above. We see that the applicant has not come up with any decision which overrules the laws laid down by the decisions of the Hon. Courts that we have discussed. Nor have we come across any adverse case laws. Having seen that the impugned transaction is a "works contract" in terms of clause (119) of section 2 of the GST Act., we find that para 6, as reproduced below, of SCHEDULE II [ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES] treats "works contracts" u/ s 2(119) as supply of 'services'- "6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2;" In view of "works contracts" u/ s 2(119) being deemed to be a supply of services, the impugned transaction would be a supply of "services". The impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of solar power generation system and parts thereof would also be available to sub-contractors? We find that the applicant has informed that in certain cases, the contractor engages various sub-contractors (manufacturers/ supplies/ sub-contractors) who further supply the goods to such contractor or engage in provisioning of certain portion of the contract. It is also informed that there may be cases wherein the Developer divides the contract between two separate contracts of construction of solar power generation system, In this regard, the applicant argues that since the concessional rate of 5% [as clarified to be under Notification no. 1/ 2017-lntegrated Tax (Rate)] is provided to renewable energy products and parts thereof, the same should be applicable to all suppliers providing such products as long as it can be established (through certification or otherwise) that these are to be used in solar power generation system. The applicant has laid claim to sr. no.234 of Schedule I of Notification No.1/2017-Central/State tax (Rate) which states thus - 234 84, 85 or 95 Following renewable energy devices & parts for their manufacture * Bio-gas plant * Solar power based devices ..... X X X X Extracts X X X X X X X X Extracts X X X X
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