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TMI Blog2019 (4) TMI 1623X X X X Extracts X X X X X X X X Extracts X X X X ..... ote will be eligible for exemption from SGST as prescribed in Serial no. 18 in Notification no. 12/2017-State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017. At the outset, it is made clear that since the provisions of both the CGST Act and the MGST Act are the same except for a few provisions, a reference to the CGST Act would also mean a reference to the MGST Act, unless specified otherwise. 2. FACTS AND CONTENTIONS - AS PER THE APPLICANT: (i) M/S Siemens Limited (herein after referred as the "Applicant") is registered under the Central and State GST legislations vide GSTIN 27AAACS0764L1Z6 and is situated at Plot No 2, Siemens Limited, Sector 2, Kharghar Node, Navi Mumbai 410210, Maharashtra. The Applicant is a leader in technology solutions for intelligent (smart), sustainable cities, smart grid, building technologies, mobility and power distribution. (ii) The Applicant has a contract with one of the major Public Sector Undertakings in the State of Haryana (herein after referred as "the Customer"). (iii) In terms of the said contract, the Customer has placed an order thru their "Notification of Award" (NOA) vide reference no.CC-CS/698-SR2/HVDC-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. The relevant extract of the notification is given below: Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (percent) Condition 18 Heading 9965 Services by way of transportation of goods - a. by road except the services of i. a goods transportation agency; ii. a courier agency; b. by inland waterways NIL NIL (xii) There is a similar exemption which has been provided under the Maharashtra Goods and Services Tax Act, 2017 vide Serial no. 18 in Notification no. 12/2017 - State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017. (xiii) With respect to these local transportation charges as referred in para 6(a) above and recovered by the Applicant from the Customer, the Applicant seeks this Advance Ruling under Section 97(2) of Central Goods and Services Act, 2017 (CGST Act) and the Maharashtra Goods and Services Tax Act, 2017 (SGST Act) on the applicability of tax exemption as provided under serial no. 18 of the Notification No.12/2017-CentraI Tax (Rate) dated the 28th June,2017 as indicated in para 11 above. (xiv) The Applicant has already paid the requisite fee of INR 5,000 vide Challan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of M/s Om Telecom Logistics vs. CCE, Delhi (2018-TIOL-1430), Delhi - CESTAT = 2018 (4) TMI 723 - CESTAT NEW DELHI has held that a person is to be categorized as a "goods transport agent", only when he issues the "consignment note" in manner prescribed in statute. (ix) Similar view has been taken by the Tribunals in the following matters: a. CCE Guntur vs. Kanaka Durga Agro Oil Products Pvt. Ltd, (2009) 15 STR 399 - Bangalore CESTAT = 2009 (3) TMI 130 - CESTAT, BANGALORE b. South Eastern coal Fields Ltd. vs. CCE, Raipur (2016-TIOL-2773) - Delhi CESTAT = 2016 (8) TMI 677 - CESTAT NEW DELHI c. Birla Ready Mix vs. CCE, Noida (2012-TIOL-2200) - Delhi CESTAT = 2012 (12) TMI 736 - CESTAT, NEW DELHI d. Northern coal Fields vs CCE, Allahabad (2015-TIOL-2459) - Allahabad CESTAT = 2015 (11) TMI 1256 - CESTAT ALLAHABAD e. Nangana Sihori sugar co. Ltd. vs. CCE (MANU/CE/0194/2014) - Delhi CESTAT = 2014 (5) TMI 138 - CESTAT NEW DELHI (x) The Applicant also relies upon the discussions held in the GST Council meetings with respect to applicability of GST rates on services. As per para 15.3 of the Minutes of the Meeting of the 14th GST Council meeting, the Council agreed to fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past judicial precedents on this topic, and the intention of the Government to continue with the same exemptions as existed prior to implementation of GST, the Applicant is of the view that the charges recovered by the Applicant in terms of the underlying contract with its customer, wherein no consignment note is issued by the Applicant should not be subject to levy of GST under the Central and respective State GST legislation. 3.1 Additional submission of the Applicant dt.11.12.2018. A. Advance Rulings of other applicants/States are not binding. During the hearing held on 12th September, 2018, Department Representative (DR), Shri N.G. Deshmukh made his submissions which were based on another decision of West Bengal AAR in the matter of M/s. EMC Ltd and M/s. IAC Electricals Private Limited. Basis the said decisions, learned DR tried to classify the activity carried out by the applicant of supply of goods and certain services as works contract services. * we would like to submit that first and foremost, under Section 103 of the Central Goods and Services tax Act, 2017 (CGST Act), any advance ruling is binding only on the applicant who has sought it and on the concerned offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uling of M/s. IAC Electricals Pvt. Ltd. (attached as 'Annexure 3'), the supply made by the applicant has not been held to be an immoveable property. The Authority held it to be composite supply and refrained from categorizing it as a works contract. B. Contract under consideration is not a works contract as it does not result an immoveable property * It is submitted that works contract is defined as a composite supply 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. * In the case of the applicant, the intent of the contract no.3 and 5 being executed by the applicant is not in the nature of erection, commissioning or fitting out, etc. Instead, contract no. 3 is to supply specific goods as referred in para 4(ii) and contract no.5 is purely for services which are not naturally bundled and hence cannot be treated as a composite supply resulting into works contract services. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. * The applicant is also making reference to Circular issued by Central Board of Customs and Excise ('CBEC'), vide 37B Order No. 58/1/2002-CX issued under F. No. 154/26/99-CX4 dated 15 January, 2002 ('the Circular), attached as 'Annexure 8' wherein after realizing the anomaly in case of plant and machinery assembled at site, issued the Circular clarifying the following: "(i) if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore. not be excisable goods. .... ..... ...... ..... ..... .... (vi) if any goods installed at site (example paper making machine) are capable of being sold or shifted as such after removal from the base and without dismantling into its components/parts, the goods would be considered to be movable and thus excisable. The mere fact that the goods, though being capable of being sold or shifted without dismantling, are actually dismantled into their components/parts for ease of transportation etc.. they will not cease to be dutiable merely because they are transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n what basis it can be said that any part of the said amount has been earned in India." * Further in the case of Ishikawajma-Harima Heavy Indus. Ltd. Vs Dir. Of Income Tax, Mumbai 2007 (6) STR 3 (S.C.) = 2007 (1) TMI 91 - SUPREME COURT, attached as "Annexure 11', the assessee was to develop, design, engineer and procure equipment, materials and supplies, to erect and construct storage tanks and some other services for Petronet LNG in India. The contract, inter alia, involved onshore services as also offshore services. Separate prices were mentioned in the contract. One of the contentions of the Income Tax department was that the entire contract is one composite contract and therefore, income tax is payable even on offshore services. The Supreme Court in this case held as under: "63. This case is clearly distinguishable from the facts of the present case, since the payment for the offshore and onshore supply of goods and services was in itself clearly demarcated and cannot be held to be a complete contract that has to be read as a whole and not in parts. 89. We would in the aforementioned context consider the question of division of taxable income of offshore services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also shown separately. The right of the buyer to inspect the goods before they are transported is also preserved So also, the goods are insured. When the goods were transmitted, the assessee transferred the title to the property to Cominco Binani Zinc Limited." * It is submitted that the ratio of the above decisions is squarely applicable in the facts of the present case, since even in the present case it was the intention of the parties to regard each of the activities as distinct and separate. * A similar question had arisen in the case of transportation of coal/other mined products within the mine or for transportation outside the mine. Transportation of goods by road is liable to service tax under the category of 'Goods Transport Agency Service" w.e,f, 1st Jan, 2005. The mining activity per se became liable to service tax w.e.f. 1st June, 2007. CBEC clarified in Circular dated 12th Nov, 2007 that the transportation of mined product is post-mining activity and is chargeable to service tax under the relevant taxable services, i.e., "Goods Transport by Road". The relevant portion of the circular was reproduced below: "Mining Service - Applicability of Service tax on activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en that the contract is predominantly for transportation/ freight charges only and other charges (insurance and other charges) are incidental to transportation/ freight charges. Circular - F. No. 354 / 98/20015-TRU issued by CBEC in this regard is attached herewith as 'Annexure - 15'. D. GST Council had decided to continue the same rate of GST on services as were applicable in pre GST regime * In para 8 and 9 of our application, we have quoted a few judicial precedents from the pre-GST regime, wherein the various Tribunals have upheld that issuance of a 'consignment note' is a mandatory condition to qualify a person as 'Goods Transport Agent'. * In para 10 of our application, we have also quoted the extract of the minutes of the 14th GST Council meeting wherein the Council has decided to continue with similar rates of GST on services which existed prior to introduction of GST. The applicant states that the decision of the GST Council is binding on the authorities. * We request your good self to take the above submissions on records and in case any further information or clarification is required, we will be duty bound to submit the same. CONTENTION - AS PER THE CONCERNE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt note is issued by the applicant to its customer the applicant should not be subject to levy of GST under the Central and respective State GST legislation being covered by the scope of notification as mentioned above . REPLY TO APPLICANT'S SUBMISSION- The applicant as an associate of the Joint Venture of M/S SIEMENS AG, GERMANY (lead partner) and M/S SUMITOMO INDUSTRIES LIMITED, JAPAN (other partner)has been awarded, ''Notification of Award" (NOA) vide reference no.CC-CS/698-SR2/HVDC-3249/7/GIO/R/NOA-V/7217 dated 22-03-2017 for VSC (voltage source converters) based HVDC Terminals between Pugalur and North Trichur. This involves supply of equipment and services both on off-shore as well as on-shore basis. For certain reasons the JV has proposed the division of scope into six contracts as given below: 1. off shore supply contract (VSC part) 2. off shore supply contract (cable system part) 3. on shore supply contract (VSC part) 4. on shore supply contract (cable system part) 5. on shore services contract (VSC part) 6. on shore services contract (cable system part) The applicant is concerned with contract number 3 with respect to on shore supply contract (VSC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the entire contract. Thus it is seen that, i. The contract awarded in substance and essence is a composite contract as defined in section 2(30) of the C.G.S.T. Act, 2017 for supply of goods and services. ii. The third contract cannot be executed by the applicant independent of fifth contract that is the goods cannot be supplied and used in the contract unless they are transported and delivered to the site, in other words, the third contract has no legs unless tied with fifth contract. iii. The contractee is aware of the interdependence of the two contracts as it is a single source responsibility contract. iv. The contracts are covered by the cross fall breach clause that is breach of one will be deemed as breach of other. The decisions relied upon by the applicant in support of his claim are not applicable to the facts of the case considering the fact that the nature of contract is composite. Further the question that the services rendered are not liable to GST on the ground that applicant is not a Good Transport Agency and no consignment note has been issued by the applicant has already been decided by the West Bengal authority for Advance Ruling on 12/02/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 18 of Notification no. 12/2017-Central Tax Rate F. No. 334/1/2017, dated 28 June 2017 and also for exemption from SGST as prescribed in Serial no. 18 in Notification no, 12/2017 - State Tax (Rate) no. MGST 1017/C.R.103 (11)/ Taxation-1 dated 29 June 2017 and should be held liable to tax as a works contract service 04. HEARING The case was taken up for Preliminary hearing on dt. 12.09.2018 when Sh. Vikas Garg, Director Indirect Tax, Sh. Mahesh Parnerkar, Chief Indirect Tax along with Ms. Kajal Bhadra, Senior Executive appeared and requested for admission of application as per contentions in their ARA. Jurisdictional Officer, Sh. N. G. Deshmukh, Dy. Commr. Of S.T.(RAl-VAT-E-004) C.B.D.. Belapur appeared and made written submissions. The application was admitted and called for final hearing on 07.08.2018, Sh. Vikas Garg, Director Indirect Tax, along with Ms. Kanchan appeared and argued case on merit. Jurisdictional Officer, Shi N. G. Deshmukh, Dy. Commr. Of S.T.(RAI-VAT-E-004) C.B.D. Belapur appeared and stated that they have already made written submissions. We heard from both the sides on this matter. 05. OBSERVATIONS--- We have gone through the facts of the case, oral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this view of the matter, the issue raised before us is related to the applicability of rate notification entry Sr. 18 of notf.12/2017 to the transaction carried out as per the contract made by the applicant. The issue is very limited. Before deciding the applicability of notification entry, it is necessary to examine the terms of contract made between the parties, its nature of transaction and intention of the customer. We find that, there are two separate contracts provided by the applicant which represent the nature of transaction. The relevant portion of the contracts are reproduced here for the understanding of the transaction as under, (i) The Frist contract - for On-Shore Supply Contract-I-- Sub.: Notification of Award for On-Shore supply Contract-I for 320KV, 2 X 1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu-North Trichur, Kerala) Specification No: CC-CS/698-SR2/HVDC-3249/7/G10/R International Competitive Bidding. Clauses - 2.0 AWARD OF CONTRACT AND ITS SCOPE -- 2.1 We confirm having accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Notification of Award Ref. No. CC-CS/698 SR2/HVDC-3249/7/G10/R/NOA-17213 dated 22.03.2017 for award of 'Off-Shore Contract-I' (also referred to as the 'First Contract') for the subject package, covering inter-alia, all works to be performed in countries outside India including CIF supply of all equipment and materials including mandatory spares except +/-320kV HVDC Cable(including some of its associated items), to be supplied from abroad including corresponding type tests and training to be conducted abroad, required for the complete execution of the + 320KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), as set forth in the Bidding Documents. (b) on the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO, vide our Notification of Award Ref. No. CC-CS698-SR2/HVDC-3249/7/G10/R,'NOA-11/7214 dated 22.03.2017 for award of 'Off-Shore Contract-II (also referred to as the 'Second Contract') for the subject package, for design, engineering, manufacture and CIF supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other activities inter-alia including port handling of the Plant and Equipment including mandatory Spares for +/-320kV HVDC Cable and some of its associated items to be supplied from abroad, loading, inland transportation and insurance for delivery at site, insurance, unloading, storage and handling at site, installation including civil works, testing and commissioning including Performance Testing in respect of all Plant and Equipment supplied under both 'Second Contract and 'Fourth Contract and any other services specified in the Bidding Documents, Notwithstanding the award of work under six separate Contracts in the aforesaid manner, the JV shall be overall responsible to ensure the execution of all the six Contracts to achieve successful completion and Taking Over of the works covered under the package and Operational Acceptance by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by the JV that any default or breach by the JV partners under the 'First Contract' and/or 'Second Contract and/or the 'Fourth Contract and/or the 'Sixth Contract and/or breach by the Associate of JV - SIEMENS-I under the 'Fifth Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component of the Contract Price for Main Equipment (excluding spares), you are, inter-alia, required to furnish Bank Guarantee for the equivalent advance amount, as detailed at APPENDIX (NOA)-3. Further, please note that furnishing of all the Contract Performance Securities under the 'First Contract', 'Second Contract, 'Third Contract', 'Fourth Contract', 'Fifth Contract' and 'Sixth Contract by the JV and Contract Performance Securities under "Third Contract' and 'Fifth Contract' by you (Associate of the JV i.e. SIEMENS-I) shall be one of the conditions precedent for release of advance under this Contract. 7.0 The schedule for Taking Over/Time for Completion of the Facilities by the Employer upon successful completion of the +320KV, 2X 1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala) and the Additional Time for Completion for all contractual purposes in line with the provisions of the Bidding Documents shall be as follows: Sr.No. Completion (Taking Over) of: Duration from the effective date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and commissioning including Performance Testing in respect of all plant and Equipment supplied under both 'First Contract' and 'Third Contract' and any other services specified in the Bidding Documents referred to hereinabove. The scope of work under this Notification of Award (NOA) shall also include all such items which are not specifically mentioned in the Bidding Documents and/ or the JV's bid but are necessary for the successful completion of the scope under the Contract for $320KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), unless otherwise specifically excluded in the Bidding Documents or in this NOA. 2.2. As per para 1.4 above and as tied up in Clarification Meetings, we have also notified the following Notifications of Awards: m (a) on the Lead Partner of JV i.e. SIEMENS AG on behalf of JV of SIEMENS AG and SUMITOMO vide our Notification of Award Rec No. CC-CS/698 SR2/HVDC-3249/7/G10/R/NOA-1/7213 dated 22.032017 for award of 'Off-Shore Contract-I' (also referred to as the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NS AG and SUMITOMO vide our Notification of Award Ref. No. CC-CS/698-SR2/HVDC-3249/7/G10/R/NOA-IV/7216 dated 22.03.2017 for award of 'On-Shore Supply Contract-Il' (also referred to as the 'Fourth Contract) for the subject package, for supply of some items including mandatory spares (if any) for +320kV HVDC Cable system from within India and Type Testing (as applicable), required for the complete execution of +320KV, 2XIOOOMW VSC based HVDC Terminals and DC XLPE Cable system between Pugalur and North Trichur associated with H V DC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu- North Trichur, Kerala), as set forth in the Bidding Documents. (e) on the Other Partner of the JV i.e. SUMITOMO on behalf of the JV of SIEMENS AG and SUMITOMO vide our Notification of Award Ref. No. CC-CS/698-SR2/HVDC-3249/7/G10/R/NOA-VI/7218 dated 22.03.2017 for award of 'On-Shore Services Contract-II' (also referred to as the 'Sixth Contract') for the subject package, for performance of all other activities inter-alia including port handling of the plant and Equipment including mandatory Spares for +/-320kV HVDC Cable and some of its associated items to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Contract Price for the entire scope of work under this Contract shall be INR 2,797,437,352 (Indian Rupees Two Billion Seven Hundred Ninety Seven Million Four Hundred Thirty Seven Thousand Three Hundred Fifty Two only) as per the following break-up: Sr.No. Price Component Amount i. Local Transportation, Insurance and other Incidental Services (VSC Portion) INR 623,073,872 ii Installation Charges (VSC Portion) INR 2,174,363,480 iii. Training Charges Total for Fifth Contract (i+ii+iii) Included INR 2,797,437,352 3.2 Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire contract. 4.0 You are required to furnish, at the earliest, the Performance Securities for an amount equal to 10% (Ten percent) of the Contract Price as detailed at APPENDIX (NOA)-2, in line with provisions of the Bidding Documents. 5.0 All the bank guarantees shall be furnished from eligible bank(s) as described in the Bidding Documents. 6.0 The schedule for Taking Over/Time for Completion of the Facilities by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in respect of all Plant and Equipment supplied 6. The contract is awarded for total Contract Price for the entire scope of work under this Contract. It means, it is awarded for single price which covers all activities as required for completion of the project. 7. Notwithstanding the award of work under six separate Contracts in the aforesaid manner, the JV shall be overall responsible to ensure the execution of all the six Contracts to achieve successful completion and Taking Over of the works covered under the package and Operational Acceptance by the Employer as per the requirements stipulated in the Bidding Documents. 8. we find that there is no a break-up Of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. 9. The work of Taking Over/time for Completion of the project and handing over to the Employer upon successful completion is to be completed within 38 months. 10. Applicant is one the contract party in this JV to complete the work in stipulated time who is supply of goods and services to complete the project u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith an absolute right to terminate both the contracts or claim damages. The 'cross fall breach clause', settles unambiguously that supply of goods, their transportation to the contractee's site delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as defined under Section 2(119) of the GST Act, with single source responsibility. Composite nature of the contract is clear from the facts that first Contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee's site. The two contracts for supply of the goods and allied services are not separately enforceable. The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely Works Contract for Supply, for 320 KV, 2X1000MW VSC based HVDC Terminals and DC XLPE Cable system. For the proposition of law as above, we find support from the judgment of Hon. Supreme Court in case of M/s. Indure Ltd. and Anr vs Commercial Tax Officer and Ors on 20 September, 2010 C.A. No. 1123 of 2003 = 2010 (9) TMI 883 - SUPREME COURT OF INDIA, wherein the Hon. SC held as under: 11. By way of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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