TMI Blog2018 (10) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... r power generating system along with its installation at the site - In case, if the clarification is sought for "Applicable GST Rate on supply of Solar Power Generating System." then the goods should be supplied under a single "Supply Contract" subject to condition of eligibility of them being "devices and parts" of solar generating system and only then it would be covered under Entry 234 under notification No 01/2017-CT (Rate) dated 28.06.2017 and would attract 5% rate of tax . The scope of work in instant case is of supply of solar power generating system and its installation at the site which involves simultaneous supply of goods and services under a single contract where Applicant has to inter alia, design, engineer, procure, transport, deliver, develop, erect, install, test , commission and at times maintain & service the project after installation. Hence Applicant intends to undertake an " EPC contract" and not a "Supply Contract". The installation of the Solar Power generating system has a permanent location as it is meant for onward sale of power to the consumer. Contract between an EPC contractor and the counter-party is entered into on the premise that the plant wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct Services" (SAC 9954) of Notification no. 11/2017 Central Tax (Rate) dated 28 June, 2017 and shall attract 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts, aggregating to 18%. - ADVANCE RULING NO. RAJ/AAR/2018-19/19 - - - Dated:- 24-9-2018 - Nitin Wapa Member And Sudhir Sharma Member ORDER Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGSTAct 2017, within a period of 30 days from the date of service of this order. The Issue raised by the applicant is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a) (e) which is as given under: (a) Classification of any goods or services or both (e) Determination of the liability to pay tax on any goods or services or both Further, the applicant being a registered person, GSTIN is 08AABCF2533P1ZF as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is 'admitted' to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submits that they are supplying 'solar power generating system' which is specific entry under notification no. 01/2017 Central Tax (Rate) dated 28.06.2017. The applicant submits that the specific entry always prevail over the general description. The applicant submits that the entry no. 3(ii) of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 is very general entry prescribing GST rate of 'composite supply of works contract as defined in section 2(119) of the CGST Act, 2017.' 7. The applicant further submits that they have made composite supply involving supply of solar power generating system and its installation thereof and so the specific provisions contained in section 8 of the CGST Act, 2017 regarding tax liability on composite supplies would be applicable. It is provided in section 8(a) of the CGST Act, 2017 that 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. In the present case, since the supply of solar power generating system is principal and its installation is ancillary, the GST rate applicable on solar power generating system being 5% i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end to end generation as well as transmission of electricity. Consequently, the concessional GST rate of 5% specified for solar power generating system is applicable and the installation of the plant should not be treated as works contract service. The Applicant further stated the installation is ancillary to the principal supply of solar power generating system. Consequently, the GST rate applicable to the solar power generating system being 5% should be considered and not the GST rate applicable for works contract services. On point of solar power generating system being a movable property the Applicant has placed reliance on following judicial pronouncements: 1. SIRPUR PAPER MILLS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, HYDERABAD [1998(97) E.L.T. 3 (S.C.)] 2. COMMR. OF C. EX., AHMEDABAD VERSUS SOLID CORRECT ENGINEERING WORKS [2010 (252) E.L.T. 481 (S.C.)] Applicant argued that solar power generating system is usually accompanied with its installation and so in each and every case if the supply of solar power generating system is considered as works contract service attracting GST rate of 18% then it would lead to the entry no. 234 as redundant. They reiterated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In a composite EPC contract the contractor has to, inter alia, design, engineer, procure, transport, deliver, develop, erect, install, test commission and at times maintain service the project after installation. c) In contract of these kind applicant has to undertake following activities during execution of Composite Turnkey EPC Contract : i. Planning for the project as per requirements and technical specifications of owner. ii. Procurement of materials i.e. equipments /component needed for installation of the plant . iii. Under take Civil works at the site such as development of site, structure foundation, install structure for transmission , build cable trenches, complete civil work relating to invertors and control buildings, store rooms , canopies and such other civil structure and related activities - as needed iv. Erection, commissioning and installation of the solar panels as per technical specification. v. Project management services such as Engineering services of layout and foundation, Erection of the structure, Installation services of all components, Precommissioning, Commissioning, Performance tests, Defect rectification. vi. Generation of ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renewable energy' devices parts for their manufacture . If the transaction is only of supply of goods i.e. of renewable energy devices parts then the applicable Schedules would have to be seen but the intent of parties is always for supply of Solar Power Generating System as a whole which includes supply, installation, testing and commissioning and it is not chattel sold as chattel. It is not a contract which is restricted to supply of devices parts of solar power generating system but is a contract where the contractor has to, inter alia, design, engineer, procure, transport, deliver, develop, erect, install, test and commission the project. Under composite EPC turnkey contracts the intention of the owner and the contractor is not to procure devices parts of solar power generating system but to procure a completely functional solar power plant as a whole. Hence to classify a Composite turnkey EPC contract as supply of goods of Solar Power Generating System is not rational. j) Applicant has submitted that under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In GST, as per definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not intended to be permanent and was to be shifted after completion of road repair and construction work hence it was regarded as moveable. But in the instant case the solar power generating system has an element of permanency. 3. In decision of M/S. T.T.G. Industries Ltd., vs Collector of Central Excise, 2004 (167) ELT 501 (SC) on 7 May, 2004. The facts of the case are as follows: The facts of the case are not in dispute. The appellant- Company pursuant to the acceptance of its tender, entered into an agreement with M/S SAIL, Bhilai Steel Plant for design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace Nos.4 and 6 of the Bhilai Steel Plant. For this purpose, it imported several components and also manufactured some of the components at their factory in Marai Malai Nagar, Chennai. These components were transported to the site at Bhilai where the manufacture and commissioning of the aforesaid machines took place. It is undisputed that duty was paid in respect of the components manufactured at its workshop in Chennai, but no duty was paid on manufacture of the aforesaid Mudguns an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed position. The various components of the mudgun and drilling machine are mounted piece by piece on a metalframe, which is welded to the base plate. The components are stored in a store-house away from the blast furnace and are brought to site and physically lifted by a crane and landed on the cast house floor 25 feet high near the concrete platform where drilling machine and mudgun has to be erected. The weight of the mudgun is approximately 19 tons and the weight of the drilling machine approximately 11 tons. The volume of the mudgun is 1.5 x 4.5 x 1 metre and that of the drilling machine 1 x 6.5 x 1 metre. Having regard to the volume and weight of these machines there is nothing like assembling them at ground level and then lifting them to a height of 25 feet for taking to the cast house floor and then to the platform over which it is mounted and erected. These machines cannot be lifted in an assembled condition. The judicial member noticing these facts observed that it is a physical and engineering impossibility to assemble mudguns or the drill tap hole machines elsewhere in a fully assembled condition and thereafter erect or install the same at a height of25 feet on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble thereon . The core question that still survives for consideration is whether the processes undertaken by the appellant at Bhilai for the erection of mudguns and drilling machines resulted in the emergence of goods leviable to excise duty or whether it resulted in erection of immovable property and not goods . The appellant has placed considerable reliance on the principles enunciated and the test laid down by this Court in Municipal Corporation of Greater Bombay (supra) to determine what is immovable property. In that case the facts were that the respondent had taken on lease land over which it had put up, apart from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Each tank 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 its own weight, each tank being about 30 feet in height 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result was not merely a machine but something which is in the nature of being immovable, and if required to be moved, cannot be moved without first dismantling it, and then re-erecting it at some other place. Some of the other decisions which we shall hereafter notice clarify the position further. In Quality steel Tubes (P) Ltd. vs. Collector ofCentra1 Excise, UP 1995 (75) ELT 17 (SC); the facts were that a tube mill and welding head were erected and installed by the appellant, a manufacturer of steel pipes and tubes by purchasing certain items of plant and machinery in market and embedding them to earth and installing 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 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 exgibility of an article to duty 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofthe sugar factory. It is not capable of being sold as it is, without anything more. This Court, therefore, concluded that mono vertical crystallisers are not goods within the meaning of the Act and, therefore, not exigible to excise duty. In Triveni Engineering Indus Ltd. Vs. CCE 2000 (120) ELT 273; a question arose regarding excisability of turbo alternator. In the facts of that case, it was held that installation or erection of turbo alternator on a concrete base 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 Corporation of Greater Bombay, Quality Steel Tubes and Mittal Engineering Works Pvt. Ltd. (supra) as also the earlier judgment of this Court in Sirpur Paper MiIls Ltd. V. Collector of Central Excise, Hyderabad 1998 (97) EL T 3 (SC). This Court observed . - There can be no doubt that if an article is an immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor it is practicable to shift them frequently. Counsel 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 mudgun 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmanent location as it is meant for onward sale of power to the consumer. Contract between an EPC contractor and the counter-party is entered into on the premise that the plant would continue to be situated at the place of construction. Such plant would therefore have an inherent element of permanency. 2) The output of the project i.e. Electricity would be available to an identifiable segment of consumer. Thus this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals. 3) The Solar generating system cannot be shifted to any other place without dismantling the same. Further it is a tailor made system as per technical specification which cannot be sold as it is to the other person. 4) Installation of solar power generating system necessarily includes civil work such as development of site, structure foundation, building cable trenches, civil work relating to invertors and control buildings, store rooms , canopies and such other civil structure and related activities as set out in Scope of work and the Technical Specifications. Civil structure cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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