TMI Blog2018 (12) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore constitutes the predominant element in the instant case; the other activities of excavation (or extraction as also mentioned in Agreement), loading, unloading and reloading as also formation / maintenance of ramps/roads, are the incidental or ancillary activities, preceding, coinciding or following the said main activity of transportation from one place to another - the principal supply involved in this case is transportation of goods as held by the State Member and not excavation of sand as held by the Central Member. What is the classification of the principal supply which would thereby be the classification of the composite supply as held by the lower Authority? - Held that:- The principal supply in the instant case is that of transportation of goods i.e., sand. It is an urn-disputed fact and also explicitly recorded in the Agreement and tender documents that the said transport is by road only. The Scheme of Classification of services is laid down in the Annexure to the Notification No. 1 1/201 7-Central Tax (Rate) dated 28-6-201 7 which contains the entries pertaining to Land transport services - The classification of the services rendered by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng under Section 101 (1) of the Telangana Goods and Services Tax Act, 2017) Preamble 1. In terms of Section 102 of the Telangana Goods Services Tax Act, 2017 ( the Act , in short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard. 2. Under Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling; (b) On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STIN No. 36AAGFR6627L12Q) is being referred to the Appellate Authority for Advance Ruling for the state of Telangana in terms of Section 98 (5) of the CGST Act, 2017 for hearing and decision on the question on which the advance ruling is sought Brief Facts of the case: 3.1. M/s. RVRC is a registered partnership firm dealing in mining business. They had entered into Agreement (Ref.No. Contract Agreement No.08-TSMDC/DamerakuntaIll/Annaram. Sand/Legal/2017) dated 1 8th March, 2017 ( Agreement / Contract in short) with M/s. TeIangana State Mineral Development Corporation, Hyderabad ( TSMDC or service recipient in short), pursuant to TSMDC s acceptance of the tender submitted by M/s.RVRC in response to TSMDC s Tender / Short E-procurement Tender No.TSMDC / SAND / EXC / Damerakunta-III / Annaram / 2016 dated 29-12-201 6 ( Tender / Tender document ). M/S. RVRC had quoted the rate of ₹ 74.36/- per CBM in response to the said tender and emerged as the Ll bidder. The description of scope of work as per the said Agreement/ Tender, reads as follows: Excavation of Sand 1560000 CBM of Block No. 111, Damerakunta-III over an extent of 52.0 Ha at Submergence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of conveyance vide Section 2 (34) of the CGST Act, 2017 and analysing the same vis-a-vis facts of the case, held that in the case on hand, the vehicles used for transportation of sand is by road and therefore the same are not covered under vessel as specified at entry (ii) under Column (3) against Tariff Heading 9965 (Goods transport services) in Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017. (iii) The services supplied by the applicant is a composite supply as defined in clause (30) of Section 2 of the CGST Act. Out of the three components of the services involved viz., (1) excavation of sand, (2) transportation of the excavated sand from the submergence area to the identified stockyard and (3) loading of the sand into lorries at the stockyard; which are naturally bundled, the principal supply is that of excavation of sand ; the services of transportation and loading are ancillary to the said service of excavation of sand . Hence, that the services rendered by the applicant are classifiable as Excavating and Earthmoving Services under Heading 995433 of GST Tariff and rate of tax applicable is 9% CGST + 9% SGST. 3.3.2. Summary of Opinion expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. RVRC were called upon to attend a personal hearing before this Appellate Authority. Personal hearing: 6.1. Dr. T. Ramesh Babu, Advocate, representing the applicant, appeared for the hearing on 31-08-2018 and filed written submissions, which are reproduced below: a. As the Hon ble members of the authority for Advance Ruling could not have uniform opinion and referred the maters to the Hon ble Appellate Authority, the matters may please be decided as per law by the Hon ble Appellate Authority. b. Since the applicant was called on for personal hearing and also provided with a copy of the order 2nd cited, the applicant craves leave from the Hon ble Appellate Authority to point out the facts being misconceived/inconsistent and erroneous observations consisted in the opinion rendered by the Hon ble Central Member of the Authority for Advance Ruling apart from the submissions of the understanding about the whole issue by the applicant. c. The facts in the contract that the applicant entered into with Telangana State Mineral Development Corporation Ltd (TSMDC) may please be ascertained from the Short Tender Document dated 29-12-2016 and also from the Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residual entry of tax. When done so, the applicant opines his activity can be and be subjected to tax under Sl.No.9 / Heading No. 9965 i.e. Goods Transport Service-(ii) Transport of goods in a vessel. Vide Notification No. 11/2017 Central tax (rate) dated 28-06-2017. To form this view, the applicant obliges Vessel includes any container and need not necessarily be an article which floats on water i.e. a container which could able to consist in any other goods in it and capable of being road adopted is also a vessel. To have this view the applicant relies on the fact that the word vessel is not defined under the GST Acts in the event of which the general meaning of vessel is to be adopted, its meaning can t be borrowed from other Statues since Statue Books of GST Acts do not mandate so as was done so in respect of so many words in the GST Acts. The applicant could also notice in the conditions prescribed in the Notification NO. 11 dated 28-06-2016 that in order to have the concessional rate oftax therein the condition is that it shall not take Input Tax Credit charged on the goods used in supplying the services. Such restriction from having ITC has exclusion to the goods i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce these supplies are constituent part of the contract. 5. The view point of the Hon ble Central Member that the main work in the contact involved is excavation, transport and again loading to other lorries and the laying of the ramps, roads etc. is incidental is not correct. The main object in the contract is to shift the sand from one place to another by way of transportation of it, the applicant submits. 6. The view expressed by both the members that the contract of the applicant is composite supply falling under Sec.2 (30) of the CGST Act, is not being objected by the applicant as the applicant also made a submission that it is as such before the Authority for Advance ruling. 7. The Hon ble Central Member pleased to hold that it is not a works contract and since the contract is to held to be a composite supply the principal supply is excavation of sand . To hold as such, the reason assigned by the central member is without excavation of sand the transportation and loading of sand not arises. 8. The object behind the contract is in fact to take out the sand from the place at it exists to another place since the existence of sand is hinders the free flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mode of transport and the word vessel cannot be considered as container as argued by the applicant. 12. On the above aspect also the opinion rendered by the central is self-contrary i.e. on one count, by placing reliance on the definition of Vessel under Major Port Trust Act, 1963(dehorse the applicability of such a definition under the provisions of the GST Acts, for the reasons which are mentioned in the foregoing paragraphs) the Central Member while stating vessel is exclusively ship/large boat used for the transportation of goods by sea/in land waters and on the other count gives contrary opinion that the enumeration in the notification is not qua the goods and it is qua mode of transportation . This may kindly be looked into. 13. When the word Vessel is not defined under the Act, it s meaning is to be considered in general and meaning of it can t be borrowed unless mandated under the Act to be done so. In the following words GST Act mandates meaning of certain words from the other Acts. a. actionable claim shall have the same meaning as assigned to it in section 3 of the transfer of Property Act, 1882 (4 of 1882); b. associated enterprises shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tender document. However, on query from the Bench he admits that this is not mentioned explicitly anywhere in the agreement. 2. It is his contention that on a combined reading of the tender document and the agreement, it is clear that the quoted rate ofRs.74.36 is towards the performance of all the activities mentioned on the said page 8 of the tender document, and therefore the activity being performed by them should be taken to be a composite supply in terms of the GST Law. 3. He therefore conceded that they are no longer pressing the claim for considering the activity as Works contract, and therefore the submission made at Sl. No. (a) at the end of his written submissions filed today may be taken to be deleted. 4. He next explained that on going through the nature of the various component activities as mentioned on page 8 of the tender document, and as explained in their written submission, it is their claim that the component activity of transportation should be considered to be the principal supply and therefore it is their claim that in terms of the relevant provisions of GST Law, the entire composite supply deserves to be treated as principal supply, namely t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding in support of his claim that the conveyances being used by them are vessels for the purpose of the present dispute. And therefore they are entitled for the concessional rate of 2.5% under the said Sl. No.(ii) of the said notification. He has nothing further to add . DISCUSSION FINDINGS DETERMINATION OF THE REFERENCE: 7. We have carefully considered the material on record, the reference order passed by the lower Authority and the applicant s written and oral submissions as also the statutory provisions, Notification-entries etc., which are relevant to the issue on hand. 8.1.1. At the outset, we observe that Section 98 (5) of the Act requires the Members of the Advance Ruling Authority to state the point/points of difference and make a reference to the Appellate Authority for a hearing and decision on such question. Whereas vide the subject reference, the Authority citing lack of uniform opinion on the issues, referred the application filed by the applicant to this Appellate Authority for hearing and decision on the question on which the advance ruling was sought The point(s) on which the Members have differed, though are reflected within the refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst entry Sl.No.9 in the Table given under Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017] is not applicable to the instant case, as the vehicles used for transportation of sand are by road and not covered under vessel which as per definition of vessel in Section 2(z) of the Major Port Trusts Act, 1963 includes only transport conveyances by water like ships, barges, boats, tankers etc. As against the above, (iii) The State Member held that the principal supply (in the composite supply) is transportation of sand and the services rendered by the applicant are classifiable as Goods transporting by vessel and the rate of tax applicable is 2.5% CGST + 2.5 % SGST subject to condition of non-entitlement to ITC (input tax credit) to the extent mentioned in the relevant Notification. (iv) The State Member also held that the meaning of vessel for the purpose of the Notification-entry (read with the proviso in Column (5) against the said entry) would stand as container which contains other goods which carries goods from one place to other and hence concluded that the applicant s case is covered by the entry Transport of goods in a vessel . 8.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax . 9.2. Notification No. 1 1/201 7-Central Tax (Rate) dated 28-6-2017 issued under Section 9 of the Act provides for the levy of GST on intra-State supply of services. The Notification prescribes the rates of the tax applicable to various services and also provides for a Scheme of Classification of services, as given in Annexure to the Notification. The relevant entries in the Notification are reproduced and referred at the appropriate places in the further course of our discussions. 10.1. Coming to the services involved in the case, the scope of work as described in the Agreement / Tender has already been mentioned earlier. However, the specific clause in the Contract Agreement dated 18th March, 2017 which describes the work merits a reference and hence, reproduced as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument dated 29-12-2016, which has been referred in the hearing before us]. (iii) As seen, the scope of work described in either the preamble to the Agreement or the specific Clause 3(i) therein or as given in the Tender documents does not mention the element/activity of formation of ramps / maintenance of roads which however appears in the breakup given for the Upset price. However, in the Agreement, under Clause (3) captioned Conditions of contract , subclause (ix) (appearing on the 8th page) reads as under: ix) Laying of Roads: It is the sole responsibility of the Contractor to lay / form required road from stockyard to nearby connectivity road for plying of Lorries / vehicles, any incidental expenditure incurred and involved thereon for laying maintenance of roads shall be borne by the Contractor . From the above, it appears that there can be no dispute that the impugned include the element of formation/maintenance of roads apart from those of excavation, loading, transport etc., mentioned in the Scope of Work . (iv) Clause 3(vii) of the Agreement, inter-alia, specifies Contractor s possession and deployment of a minimum (numbers) of equipment v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something which is more important or noticeable than others in a set of people or things ; which is present as the strongest or main element . In respect of goods, discerning the predominant element can be based on tangible, quantifiable, measurable factors such as by weight, composition, functionality etc. Whereas in respect of services which are intangible - determination of predominant element from among those in a composite supply would have to take into account inter-alia, the nature of activities, quantum of work/labour etc., involved, values assigned for the different elements and more importantly the intention of the parties as per the Terms of the contract / agreements work orders etc. 12.3. In the instant case, we observe the following salient factors features: (i) The Contractee - TSMDC is a Corporate entity created by the State Government of Telangana with the objectives of development of mineral resources including Exploration, exploitation and beneficiation 6 . Sand, undisputedly, being a mineral resource the same belongs to the State of Telangana; TSMDC is the State-instrumentality which is entrusted with the objectives as above. (ii) The Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly related to the transport, is the predominant portion in impugned services; incidentally there is no separate /specific mention of any value/rate for only excavation activity in the said Upset price. 12.5. In the lower Authority s reference, the Central Member s reasoning was that without excavation of sand, transportation and loading of sand to the lorries doesn t arise and hence excavation constitutes predominant element / principal supply and the others are ancillary. This reasoning does not appeal to us on a comprehensive, holistic analysis and consideration of the facts involved herein, as detailed above. As mentioned earlier, the said view at best would only reflect that activity of excavation was the first among the various inter-linked ones, but not necessarily the predominant element in the services involved in question. 12.6. The State Member s view (expressed in para 22 of the subject reference order) that the intention behind the contract is to shift the goods viz., sand from one place to other distinguishable from excavation simplicitor is in a nut-shell, the correct conclusion arrived, with which we are in agreement with in view of the findings m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Description 107 Heading 9965 Goods Transport Services 108 Group 99651 Land transport services of Goods 109 996511 Road transport services of Goods including letters, parcels, live animals, household and office furniture, containers and the like by refrigerator vehicles, trucks, trailers, man or animal drawn vehicles or any other vehicles 110 996512 Railway transport services of Goods including letters, parcels, live animals, household and office furniture, intermodal containers, bulk cargo and the like 111 996513 Transport services of petroleum and natural gas, water, sewerage and other goods via pipeline 112 996519 Other land transport services of goods nowhere else classified 14.3. From the above, it can be seen that the broad catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Service Rate (per cent.) Condition (1) (2) (3) (4) (5) 9 Heading 9965 (Goods transport services) (i) Transport of goods by rail [other than services specified at item no. 2.5 Provided that credit of input tax charged in respect of goods in supplying the service is not utilised for paying central tax or integrated tax on the supply of the service (ii) Transport of goods in a vessel. 2.5 Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). Explanation . goods transport agency means any person who provides service in relation to transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken Accordingly, inferred that the term vessel has been used in the proviso as including bulk carriers and tankers as also any goods used for transportation of other goods. Hence, the meaning of vessel for the entry would mean any container which contains other goods for movement from one place to other. (iv) The applicant referred to definition of vessel vide Section 3 (63) of the General Clauses Act, 1897 as also meaning thereof as per Law Lexicon 7 , which read as follows: Section 3 (63) of the General Clauses Act, 1897 (63) vessel shall include any ship or boat or any other description of vessel used in navigation; Meanings as per Law Lexicon: Vessel includes boats, rafts, timber and other floating bodies. [Pun. Act VIII of 1873 (North Indian Canal and Drain) S.3, Cl.)3)]; includes every ship, boat and other vessel used in navigation, whether propelled by navigation or otherwise. (Explosives Act (IV of 1884), S.4]; includes anything made for the conveyance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is reproduced below: IX Two different expressions in a statute must be construed to carry different meanings : 49. As Parliament has used two different expressions in the Explanation to two distinct provisions, this Court cannot presume the effect of both the Explanations to be the same. When two different expressions are used by the same statute, one has to construe these different expressions as carrying different meanings. [ Kailash Nath Agarwal v. Pradeshiya Industrial Investment Corpn. of U.P. Ltd. - (2003) 4 SCC 305] = 2003 (2) TMI 338 - SUPREME COURT OF INDIA . Different use of expressions in two provisions of a statute is for a purpose for, otherwise, the same expression would have been used. [ B.R. Enterprises v. State of U.P. - (1999) 9 SCC 700 = AIR 1999 SC 1867 = 1999 (5) TMI 498 - SUPREME COURT OF INDIA ]. It would be difficult to maintain that, when two expressions of different import are used in a statute in two consecutive provisions, they are used in the same sense, and the conclusion must follow that the two expressions have different connotations. [ Member, Board of Revenue v. Arthur Paul Benthall - AIR 1956 SC 35 = (1955) 2 SCR 842 = 1955 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996519 Other land transport services of goods nowhere else classified 113 Group 99652 Water transport services of goods 114 996521 Coastal and transoceanic (overseas) water transport services of goods by refrigerator vessels , tankers, bulk cargo vessels, container ships and the like 115 996522 Inland water transport services of goods by refrigerator vessels tankers and other vessels .. 121 996601 Rental services of road vehicles including buses, coaches, cars, trucks and other motor vehicles , with or without operator 122 996602 Rental services of water vessels including passenger vessels, freight vessels and the like with or without operator 123 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principle laid down in the above-cited case laws squarely applies in this context to arrive at the conclusion that the word vessel as used in the Notification would not cover the trucks or lorries or tractors/tippers used by the applicant in the impugned services. 15.6. The applicant s contention in this regard is that the definition / meaning of vessel as per General Clauses Act and Law Lexicon as also that of conveyance in the Act is an inclusive definition and hence as also by considering a general meaning, the word vessel in the impugned entry would also cover their vehicles -trucks/lorries. We find no merit in the above contentions on various counts, as detailed below: (i) Firstly, as detailed above, the Notification uses the word vessel specifically and distinctly only in relation to water transport . Hence, there is no scope for treating vessel as covering means of land transport also, merely because of usage of includes in the cited definition / meanings. (ii) The mention of the word includes in a statutory definition does not envisage that the definition can be expanded beyond any limit to cover all or any items which have no relation wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductive inference from the words appearing in the proviso to the said entry, is thus found to be incorrect. The proviso only specifies a condition for fulfilment in respect of the particular service transport of goods in a vessel . The wording used in such a condition can by no means be interpreted in a manner negating and distorting the meaning assigned in the Act/Notification to the word vessel as detailed earlier. The reference in the proviso to goods or the exclusion clause ships, vessels including bulk carriers and tankers also has to be construed harmoniously vis-d-vis the scope of the service-description wherein the word vessel appears and which as detailed above, is denoted to be that pertaining to water transport only. 15.8. The Central Member s opinion that vessel would not cover the trucks/lorries in this case is therefore found to be correct in view of what has been discussed above; though the analysis and reasoning given for the same is seen to be rather cryptic and not comprehensive and further the reference to external aid of another Act i.e, MPTA being not at all warranted, in view of our above discussions. 16. In view of the above, we ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the aforesaid discussion and findings, we pronounce the Advance Ruling in respect of the question framed by the applicant in the instant proceedings, as follows: S.No. Question framed for Advance ruling Ruling by this Appellate Authority A) The combination of services of excavation of sand including loading with machinery at reach, Formation of Ramps and Maintenance of Roads, Transportation charges for the tractors/tippers of sand from reach to stockyard and Loading cost at sand from stockyard to lorries, whether is Works Contract or Composite Supply and what is the rate of tax on the consideration received therefor ? In the said services held by lower Authority as composite supply , the principal supply is Transport of goods by road and hence, these are classifiable under Service Code 996511 of the Scheme of Classification of Services vide Annexure to Notification No. 11 /2017-CentraI Tax (Rate) dated 28.06.2017. In terms of Section 8 of the Act, the rate of tax on the said services is 9% CGST as specified under Column (4) against the item ..... X X X X Extracts X X X X X X X X Extracts X X X X
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