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TMI Blog2019 (5) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... ting services and is registered under GST vide registration no. 21AAECS9864P1ZN inter-alia for the nature of business activities such as Works Contract and Recipient of Goods or Services. 2.1. The Appellant sought an advance ruling on applicability of entry no. 3 of Notification No 12/2017-Central Tax to the services provided by the applicant by way of providing energy saving street lighting services including operation and maintenance of the street lighting installations to Bhubanewsar Municipal Corporation (BMC). 2.2. The AAR, Odisha has given the following ruling against which the appellant has preferred the instant appeal. "The service provided by the applicant by way of providing energy efficient street lighting services including 0M of the street lighting infrastructure during the contracted period to Bhubaneswar Municipal Corporation (BMC) do not constitute supply of 'pure services' as it involves significant use of goods/materials with stipulation to transfer the total business assets to BMC at the end of the contract period. The benefit of exemption from tax in terms of Sl. No.3 of the notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 is not available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the appellant for entire period/ tenure of 10 years and accordingly, it was contended that neither the ownership of equipment or other fixtures nor the control and possession of the energy saving equipment is transferred to BMC during the tenure of the contract. 3.3. The Appellant further submitted that even though the Energy performance contract provides for a separate consideration for- i) installation of Energy saving equipment and its day to day management and ii) Operation and maintenance of said equipment, the said activities effectively constitute a single supply of providing lighting service to BMC for a period of 10 years, by using the Energy saving infrastructure installed by them and accordingly they were of the view that the amounts received by them by way of Energy Performance fees and O&M fees for the period of 10 years, would be a consideration for a single supply of providing lighting service to BMC by use of Energy saving equipment. 3.4. The appellant is of the view that the activity of management, operation and maintenance of energy saving equipment owned and possessed by them under the Energy Performance Contract would not qualify as a 'composite sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is not absolved of its responsibilities and it has to continuously monitor the operations and maintenance of the Energy efficient devices. Accordingly, it was submitted that they have the control and the possession of the devices and at no point of time the control, possession or ownership in the said equipment is transferred to BMC. Therefore, there is no supply of goods under the said contract with BMC. 3.8. The appellant further referred to the contract entered into with BMC in May, 2013 and stated that all replacement of the lights were completed well before end of March 2014 and since then they have been receiving Energy Performance fee and O&M fee for performing services. In other words, even assuming without admitting, the question of supply of LED lights does not arise, since it was done before implementation of GST. It was further submitted that during the O&M of the Street lightings, there may be requirement of use of material for repairs or replacement of a few lights. However, the same are covered under the newly inserted entry no. 3A in the said Notification No. 12/2017- Central Tax (Rates) dated 28.06.2017 by Notification no. 2/2018 - Central Tax (Rates). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant, at the end of the contract period/on termination of the contract will be contractually bound to hand over the lighting system in working condition. This implies that the total business assets of the applicant will be transferred to BMC without any extra consideration. In other words, the consideration payable to the applicant includes the cost of acquisition of the business assets i.e. the energy efficient street light infrastructure set up by the applicant at the end of the contract period. Such transfer of business assets from the applicant at the end of the contract period. Such transfer of business assets from the applicant to BMC is admittedly not covered in clause (c) of Para I of Schedule II of the CGST/OGST Acts, but rather covered in clause (a) of Para 4 of Schedule Il which reads as follows:- "4. Transfer of business assets (a) Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person." 4.1. The AAR further states that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT has been pleased to held that "Exemption notification should be interpreted strictly, the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject / assessee and it must be interpreted in favour of the revenue "Further at Sl.No. 3 of the notification No. 12/2017-Central Tax dated 28.06.2017 is unambiguous and it cannot be stretched or constructed otherwise. It has no extension putting any other extension is neither warranted nor intended to und would lend to absurd conclusion not called for and would render the notification entry redundant. 5.0. The appellant assailed the order of AAR inter-alia on the following grounds. 5.1. The AAR has erred in holding that supply of services made by the Appellants as not a pure service as in terms of serial no. 3 of Notification no. 12/2017- (Central Tax) dated 28.07.2017 read with corresponding notification issued under Odisha GST Act. The "supply of pure service" implies supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the benefit of exemption under serial no. 3 of the Notification no. 12/2017 (Supra) is not available to them. The above findings of the AAR are devoid of facts of the case, wherein it was clearly mentioned that neither there is any supplies in respect of an immovable property nor there is transfer of ownership in any goods during the tenure of the contract. Therefore, the findings of the Ld. AAR are without any legal basis and untenable. 5.6 In the ruling, Ld. AAR has considered submissions and opinion of the jurisdictional officer of Central Tax and State Tax. The appellants submit that during the personal hearing, neither any oral or written submission made by the jurisdictional authority, nor a copy of their submission was provided to the appellants so that the appellants could get an opportunity to counter the arguments made by the jurisdictional officers before the Ld. AAR. In other words, the AAR has considered the submissions (not sure or written) without affording the appellants any opportunity to place counter arguments. 5.7 The appellants have not made any supply of goods either under a works contract or under a contract for composite service involving supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, the scope of the service involves maintenance work and supply of goods, which falls under the works contract services. The exemption is provided to services involves only supply of services and not for works contract services. 6.1.2. The appellant has cited above facts in the grounds of appeal to support their stand. In this FAQ clarification, it is clearly clarified, taking example of governmental authority awarding the work of maintenance of street lights in a Municipal area to an agency which involves apart from maintenance, replacement of defunct lights and other spares. As such activities involves maintenance work and supply of goods, which falls under the works contract services cannot be construed as pure service. The appellant under Para 6 of the grounds of appeal has stretched the interpretation that they are not supplying any goods in the instant service. Therefore, as per the FAQ clarification, the service would be treated as supply of pure service. But admittedly, the appellant has mentioned that they are bound by the contract to replacement of the non-fixable fixtures at their own cost during the contract period and they are also installing the LED l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and titles to, and interests in, all improvements and equipment constructed or systems Installed are tested In BMC, subject to any payments made by BMC to the Contractor In accordance with Article 27.5.4 applicable, free and clear of all and any liens and encumbrances created or caused by the Contractor. The Contractor shall surrender possession of the said equipment and systems to BMC In good repair and condition, reasonable wear and tear accepted." On the contract, it is clearly specified that all installed equipments constructed or system installed are transferred to BMC in good condition. Therefore, the activities carried out by the appellant in the instant case will be considered as a supply of goods in terms of the provisions of Schedule II, Para 4-A of CGST Act, 2017 / SGST Act, 2017. The appellant under the grounds of appeal has not put forth any arguments or legal provisions to negate the applicability. Therefore, the contention of the appellant that the transaction doesn't involve any supply of goods is not sustainable. 6.3. The appellant in their grounds of appeal has also relied upon the decision in the case of EGIS India Consultants Engineers Private Limited report ..... X X X X Extracts X X X X X X X X Extracts X X X X
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