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TMI Blog2019 (1) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation of law & relevant facts and requested for advance ruling on classification of services rendered by them and rate of tax applicable. They have submitted a copy of Challan evidencing payment of application fee of Rs. 10,000/-. 3. A personal hearing was held in this case and the assessee have appeared for personal hearing on 3-4-2018 along with their Advocate Dr. T. Ramesh Babu and explained their case as under : (a) The applicant is a contractor to Telangana State Mineral Development Corporation Limited (TSMDC). TSMDC has entrusted the following work to the applicant: * excavation of sand including loading with machinery at reach * transportation of above sand from the reach to stockyard * loading the so stocked sand to the lorries for further transportation by the contractee * formation of ramps, roads and their maintenance (b) The place where the above contract is being executed in all its respects is in fact related to the Kaleshwaram project when it comes into existence, the sand existing there would hit the flow/ storage of water when the object of the project is sought to be achieved and therefore it is the reason for removal of sand there from. The State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, a registered partnership firm dealing with mining business and having its place of business at Yellareddyguda, Hyderabad (contractor/applicant for brevity), we find that TSMDC had accepted the tender submitted by the applicant who emerged as L1 Bidder by quoting Rs. 74.36 per CBM of sand for excavation of 15,60,000 CBM of sand from Block III, Damerakunta-III, over an extent of 52 Ha., at submergence areas of Annaram Barrage, Kaleshwaram Project and transport the same quantity of sand to nearby stockyard (within 1 Km from the submergence area) and again loading of sand into Lorries at stockyard. TSMDC had issued the letter of intent to the contractor on 27-1-2017 for execution of the agreement for excavation of the sand as mentioned above. (a) On perusal of the scope of the work specified in the said agreement, it is found that the contractor shall excavate sand and transport the same to the stockyard and again load the same into the lorries at stockyard. The equipment/vehicles and manpower required for the said activities is the responsibility of the contractor. The services to be rendered by the contractor as part of the agreement consists of the following components. (i) ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junction with each other in the ordinary course of business, one of which is a principal supply"; The three components of the services: (i) excavation of sand; (ii) transportation of the excavated sand from the submergence area to the identified stockyard and (iii) loading of the sand into lorries at the stockyard, as mentioned above are naturally bundled and the principal supply is 'excavation of sand'. Without excavation of sand, transportation and loading of sand to the lorries doesn't arise. The services of transportation of sand and loading of sand to the lorries are ancillary to the service of 'Excavation of sand' and hence excavation of sand is the principal supply in the composite supply of the services rendered by the applicant. In view of the above discussion, the contention of the applicant that the impugned contract needs to be treated as 'Works contract' is not acceptable and hence the question of application of tax rate of 5% (2.5% + 2.5%) as per Notification No. 46/2017-CGST (Rate), dated 14-11-2017 and Notification No. 31/2017 of TGST Act in G.O.Ms. No. 23-11-2017 does not arise. 4. The alternate argument put forth by the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the applicant. The word 'vessel' has been defined under clause (z) of Section 2 of Major Port Trusts Act, 1963 and the same is extracted here under: "(z) "vessel" includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson" As per Section 2(34) of the CGST Act, 2017 "Conveyance" includes a vessel, an aircraft and a vehicle. Hence the words "Transport of goods in a vessel" as Specified at (ii) under column (3) against Sl. No. 9 of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 mainly refers to the mode of transport, and the word "vessel" cannot be considered as a "container" as argued by the applicant. 7. In terms of the above statutory provision, vessel includes all types of transport conveyances by water like ships, barges, boats, tankers, etc. But the case on hand is distinguishable as the vehicles used for transportation of the 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 the Notification No. 11/2017. 8. Thus in view of the above discussion, and the service rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity 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 for laying & maintenance of roads shall be borne by the Contractor...... Page 8. Letter of intent dated 27-1-2017: At its page 1 the acceptance of price for CBM consisting the above contract fixed at Rs. 74.36 and accepted and communicated by the contractee. In view of the above terms of tender called for which was fructified into an agreement between TSNMDC and the applicant since the applicant quoted the lowest bid and hence was successful in the bid and need to execute this contract. Understanding by the applicant: about the nature of contract and rate of tax there on : 1. Firstly as per the information/ details provided along the application for ruling and also written submissions filed at the time of hearing the case, the applicant opines this contract is a works contract falling under Section 2(119) and hence when it is being done to Government connected to Kalaeswaam Projected and hence liable to CST @ 2.5% CGST and 2.5% SGST as per the Notification No. 31/2017, dated 13-10-2017, vide G.O.Ms No. 253, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore proceeding further, it needs to kept in view that in Rs. 74/- the same ratios as mentioned above are there for the independent components of supplies since there is no change in the denoted supplies in the tender and the agreement, the change is in overall price only. Basis for the agreement is the tender and such fact is not to be ignored. 2. For brevity in the foregoing paragraphs, TSMDC is referred to as 'receiver' and the applicant is as 'provider'. 3. In order to address the above questions, it is necessary to examine whether or not the work entrusted to the provider by the receiver is just for a 'supply' simplicitor or does it involved with more than one 'supply' viz.: in combination of 'supply of goods and supply of services' or 'supply of different services joined together' in the event of which the transaction between the provider and the receiver is in the nature of a 'Composite supply' under the scheme of the Act. 4. Though in the letter of intent and in the Agreement it is referred that the price is for one CBM of work done such work is not just simple as 'excavation' i.e. culling out sand form the nature and placi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... starts. 11. Last service is formation of the road from the stockyard to the nearest village road and its maintenance till the entire contract is over. To form these roads, the provider needs to use goods and labour/service. In the contractual terms it is very clear that this service is to be done by the provider only. Then only the so loaded lorries would ply on the so formed roads which needs to be maintained by the provider only Hence the last actions of the provider ends with maintenance of roads formed by him only which too require men and material/ service and labour which again amounts to Works contract. These roads also facilitate the transportation of sand. 12. Important to notice laying ramps and roads and maintenance thereof is not for the provider himself but it is a part of the whole activity. 13. Thus formation of ramps, internal roads, formation of external roads and their maintenance are works contract only but they are facilitating supplies to the main supply of transportation of sand from one place to other. Hence, transportation of goods needs aid of laying ramps and roads rather than the excavation needing laying of ramps and roads. 14. In view of the above a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be examined in the back drop of several factors. 21. In the instant case the recipient for whatever may be the reasons, instead of engaging different providers for different supplies engaged one supplier for all the supplies referred to above in detail. This fact only making the instant contract a composite one. In the facts of this case, laying internal ramps and roads excavation of sand, loading to containers, transportation of sand, unloading, stacking, loading to 3rd party containers, making ready the external roads and their maintenance for free flow of transportation of integrally connected to each other and they are bundle of services and it is possible in these types of contracts. 22. The intention behind the contract is to shift the goods viz. sand from one place to other distinguishable from 'excavation' simplicitor. 23. The value of transportation being 32.5% and the value 7.5% i.e. of formation of internal ramps and roads and external roads and their maintenance which are interlinked and for transportation of sand put together comes to 45%. 24. Here, it is pertinent to go through the Section 8 of TGST Act, 2017: Section 8. The tax liability on a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST, or 18% under residuary entry. 30. The applicant stated in the application for ruling and also in his written submissions his contract is not works contract, it is transportation of goods by vessel. 31. The meaning of 'vessel' is not defined under the Act. 32. As per the condition in column 5 in respect of 'Transportation of goods by vessel' the position of input tax credit is as under: '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. 33. Therefore, the meaning of 'vessel' can be ascertained from the above proviso to the enumeration of 'Transportation of goods by vessel' and when it is done so, vessel include bulk carriers and tankers any goods used for transportation of other goods. Thus the meaning of vessel for the purpose of this entry stands as container which contains other goods which carries the goods from one place to other. 34. The difference between enumeration (ii) and (v) above in the above notification is the former carry the disentitlement of input tax credit and the latter carries no such disentitlement. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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