TMI Blog2018 (7) TMI 1691X X X X Extracts X X X X X X X X Extracts X X X X ..... what is imbedded for the permanent beneficial enjoyment of that to which it is attached], for the reason that an attachment to fall in the third category it must be for permanent beneficial enjoyment of that to which the plant is attached. The intent of the person at the time of erecting and operationalizing a structure/plant is to be seen and if the intent is to establish it as an immovable property at the time of setting it up, then it is to be treated as an immovable property even if later on due some exigency it is required to be dismantled or removed. Ruling:- The question is answered in the affirmative and same is liable to tax as a works contract as per provisions of section 2(119) of the GST Act. - GST-ARA-36/2017-18/B-43 - - - Dated:- 4-6-2018 - Shri B.V. Borhade and Shri Pankaj Kumar, Member No. GST-ARA-36/2017-18/B-43 Mumbai, dt. 04/06/2018 PROCEEDINGS ( under section 98 of the Central Goods and Service Tax Act, 2017 and the Maharashtra Goods and Service Tax Act, 2017) 1. The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. Description of the Applicant The Applicant, an individual, is proposing to undertake certain project related service contracts. Generally, parties enter into three different kinds of understanding as stated below: EPC Contract: Generally, composite EPC contracts are entered for supply of (i) basic and detailed engineering of the project and equipment, (ii) procurement of equipment and inspection thereof at the vendors site, (iii) transportation of equipment from vendors site to the project site including transit insurance, (iv) loading, unloading and storage of equipment, (v) assembly and erection of equipment including civil works required for such erection, (vi) test and commissioning of the project. Each line item is classified under appropriate HSN heading and priced separately and billed to the customer as per supply schedule (itemized billing). In case an item is not supplied, same is not billed to the customer. Split Contract: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was not proposed draft contract. Shri. Dinesh Kumar Agarwal agreed to submit copies of draft contract at the earliest. When the matter was called for Final hearing Shri. Dinesh Kumar Agarwal submitted draft contract which is the nature of EPC contract. Applicant was also informed to submit written say within a week else the final plant as proposed in the EPC contract should not be treated as immovable property. Accordingly additional written submission given by the applicant on 08/05/2018 is as follow- Additional Written submissions given by the applicant on 08.05.2018 A Containing applicants interpretation of Law and Facts is as follows. The Applicant is a prospective contractor undertaking different works for supply of goods and services. Scope of works usually include procurement and supply of goods, transportation of goods from vendor, assembly and erection and commissioning. The question before the authority is as to whether transportation charges received by the applicant are liable to tax under GST, specially when the applicant is not a goods transport agency (GTA). A. Documentation - The Applicant has submitted two documents: (i) Bid docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreed detailed PERT network of the Contractor setting forth his starting and completion dates for the various key phases of Works prepared as per condition in Clause 12.0 of this Section GCC of Volume-I. Any payment under the Contract shall be made only after the Contractor's price break-up is approved by the Engineer. The aggregate sum of the Contractor's price break-up shall be equal to the lump-sum Contract Price. A Price Breakup over valuing those items of supply which will be shipped first will not be accepted. 34.7.3 of GCC - Inland transportation Insurance - Inland transportation (including port handing) and inland insurance shall be paid to the Contractor on pro-rata to the value of the equipment received at site and on production of the invoices by the Contractor. However, wherever equipment wise inland transportation charges have been called for in the Bid Proposal Sheets and have been furnished by the Contractor, the payment of inland transportation charges shall be made after receipt of equipment at site based on the charges thus identified by the Contractor in his proposal and incorporated in the Contract. The aggregate of all such pro-rata payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g structures can be drilled in roof and building columns. Sometime where the customer doesn't want drilling, heavy concrete blocks are used to hold mounting structures. These concrete blocks can be brought out or can be cast at site. The size of the block depends on the design. Each rectangular block of 400x200x200 weigh around 40 kgs. These heavy blocks prevent hobbling of mounting structures against winds, rains and storms. Step 3: Module Mounting Structure Installation: In the third step, the execution team mounts the module mounting structures on the civil foundations. The mounting structure is made of galvanized steel which interwove various blocks horizontally and also provide vertical support to the panels. Step 4: Module Installation: Once the module mounting structures are in place, solar modules (panels) are bolted onto the structures. Step 5: Cabling: Solar modules are connected in series with DC cables to the inverter, and with AC cables from the inverter to the evacuation point (customer's LT panel). Step 6: Inverter Connection and Grid Synchronization: Once the installation is ready, the inverter is charged, and begins synchronizing the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le property. As per Section 2(119) of the Act, 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. The concept of immovable property is not defined in the GST Acts, even though it is used. The General Clauses Act, 1897 states that ' Immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.' However, the definition in General Clauses Act 1897 is at variance with Scheduled III, Entry 5, which excludes 'land' and 'building' from being taxed. However, this exemption is not extended 'plant and machinery' which was under the current regime at par with 'land' and 'building' and all together constituting 'immovable property'. The specific listing under the Schedules, reflects on a plausible legislative intent to make a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, it would be considered as composite supply and tax will be payable at the rate applicable to principal supply. However, there is ambiguity on taxability when the Applicant charges separate price for transport and insurance. The customer is at liberty to take delivery of goods and transport the same in his own carriage or in a hired one. And therefore, such arrangement should not fall within the mischief of section 2(30) of the Act. F. Taxability If such transporter is considered as GTA, tax would be payable by the customer and if such transporter is not a GTA, no tax would be payable as same is exempt under entry 18 of Notification No. 12/2017-CentraI Tax (Rate), The Applicant understand that separate price for the goods and transportation signifies two distinct contract, first part for supply of goods and the second part for transportation of goods. There is no prohibition in entering into multiple contracts in a single form. Although a single form is used, in substance, each part is a separate contract making it a divisible contract. In this regards, the Applicant has placed its reliance on Builders Association of India vs Union of India [1989 SCALE (2) 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her it was requested to applicant to give a written up within one week of today, as to why the final plant of proposed in EPC contracts should not be treated as immovable property. Jurisdictional Officer, Sh. R.T. Nikam, Sales Tax Officer appeared and made written submission also which is considered for the fair decision. 05. OBSERVATIONS We have heard Shri. Dinesh Kumar Agarwal on the issue and have carefully gone through the written submission, and the proposed activity represented by draft agreement for Engineering, procurement and Solar Power Plant i.e. roof top photovoltaic (PV). In short, applicants submission is that he is not a goods transport agency (GTA) as he is not issuing any consignment note or the like and hence no tax is payable by virtue of Sr. No. 18 of Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017. Applicant submits that as per clause 10 - which read as follow- The Contractor shall at its own risk and expense, be fully responsible for loading, transportation, delivery to the Project Site and unloading of the Equipment. The cost of transit insurance, if any, should be borne by the contractor. On the basis of this term of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in accordance with these instructions. We find that the aforesaid clauses of the proposed draft agreement, cannot be read in isolation or out of context. It is necessary to read the contract as a whole to ascertain the true/correct nature of transaction. From the co-joint reading of the clauses of the agreement as mentioned above especially clause No.10 it can be safely concluded that the contract is a single contract. As such this agreement for Engineering Procurement and construction of Solar Power plant constitute composite supply in the nature of Works Contract. Thus impugned Supplies constitute Works Contract. The next issue to be decided is whether this composite supplies constitute Works Contract as defined U/s 2(119) of the GST Act. On this issue applicant submits that the contract is for supply of roof top Solar Plant which involves solar panels which are mounted on steel structures fixed on the roof of building. The steps involved in this regard are already mentioned above in the written submission dated 08/05/2018. He lastly submits that every item can be dismantled and disassembled without any damage and relocated to another site and as such supply of Roof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over which it had put up, apart from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Koch lank rested on a foundation of sand having a height of 2 feet 6 inches with four inches thick asphalt layers to retain the sand. The steel plates were spread on the asphalt layer and the tank was put on the steel plates which acted as bottom of the tanks which rested 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 perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling them to form a part of the tube mill and purchasing certain components from the market and assembling and installing them on the site to form a part of the tube mill which was also covered in the process of welding facility. After noticing several decisions of this Court, the Court observed that the twin tests of exigibilily of an article to duly under the Excise Act are that 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: (SCCp. 376. para 5) The basic test, therefore, of levying duly 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 lest of being goods within the meaning of the Act nor u can be said to be capable of being brought to the market for being bought and sold. Therefore, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se specially constructed on the land cannot be treated as a common base and, therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable 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]. Quality Steel Tubes 1(1995) 2 SCC 372: (1995) 75 ELT 17] and Mittal Engg. Works (P) Ltd [(1997) 1 SCC 203 (1996) 88 ELT 622] as also the earlier judgment of this Court in Sirpur Paper Mills Ltd v. CCE [(1998) 1 SCC 400: (1998) 97 ELT 3]. 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 properly there is neither mobility nor marketability as understood in the excise law. Whether an article is permanently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the appellant submitted before 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the material point of time. The notice also pointed out that the units 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 hatch 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable 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 nobody's case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -plating which was attached by bolls to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath 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 nor 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix on cement base for operational efficiency and also fur sec win Thai 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 lest is whether the paper-making machine can be sold m 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consumers in the market as it is without anything more. 41. Relying upon the decision of this Court in Quality Steel Tubes (P) Ltd. Case [(1995) 2 SCC 372 : (1995) 75 ELT 17] . the erection and installation of mono vertical crystallisers was held not dutiable 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 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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