TMI Blog2019 (7) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... complete unit by itself, which is functional in all respects. Central Air-Conditioning Plant erected at the site of the client and by using different refrigeration equipments are not bought and sold like room/window machines or even splits or package unit and cannot be installed like room/split air-conditioners. In the air-conditioning industry, these are undertaken as projects or AC jobs or works contract - the applicant has installed/combined various equipments are treating the entire units, components as one air-conditioning plant, which cannot be bought or sold as such. This understanding of the applicant is flawed. They themselves have submitted that their agreement dated 21 Aug., 2018, is for supply, installation, testing commissioning of VRF Indoor Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant associated electrical works etc. now they also are saying that the entire equipments must be treated as one plant, which is not acceptable. We find that every Indoor and Outdoor units, cabling, electrical works can be removed as such and therefore cannot be considered as immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by M/s. NIKHIL COMFORTS, the applicant, seeking an advance ruling in respect of the following question. The transaction would be classifiable to cover under the definition of works contact** liable to SGST/IGST covered under Sr. no. 3 item no 3 of notification No 20/2017 (Central tax (rate) dated 22/08/2017. OR The transaction is Composite supply liable to co 14% being principal goods involved is Air-Conditioner which falls to cover under schedule IV, Sr. no 119 of notification No 1/2017 (Central tax rate) dated 28/06/2017 At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression GST Act would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT (A) BRIEF HISTORY OF THE CASE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 415 V TPN, double door MCB DB. 8. Supplying and fixing 40 A, C series MCB suitable for lighting and other loads - TP, Cat Providing and fixing following rating and breaking capacity adjustable 4 pole MCCB inside the existing cubicle panel board-250A Adjustable 35/40 KA, CAT A. 9. Supply Installation of Cable Tray for Copper Pipe. 10. Supply Laying of 3 74 of Core Armoured PVC / XLPE Insulated Aluminium Copper Conductor Cable with Termination. 11. Supply Fixing of MCB, ELCB for Outdoor units Switch Socket for Indoor Unit 12. Supplying and Installing 150mm width x 50mm depth-16G MS perforated type cable tray. 13. Providing and fixing 25 mm x 5 mm GI strip and 8SWG GI wire for earthling, (C) DOCUMENTS SUPPLIED FOR CONSIDERATION: 1. Agreement entered between GSIDC and Nikhil Comforts Dated 21st Aug.,2018 for supply, Installation, testing commissioning of VRF Indoor and Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc. 2. Letter of acceptance dated 24 th May 201 8 (D) RATE OF TAX ON ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a taxable person to a recipient consisting of 2 or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is principal supply. illustration : Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. The word composite supply should not be confused with mixed supply, Section 2(74) defines mixed supply as follows: Mixed Supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration : A supply of a package consisting of canned foods, sweets, chocolates; cakes, dry fruits aerated drinks and fruit juices when supplied for a single price is a mixed supply . Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is the independent function of the department, as held by the Apex Court in the case of Triveni Engineering and Industries Ltd. v CCE [2000 (120) E.L.T. 273 (S.C.) = 2000 (8) TMI 86 - SUPREME COURT , to establish the marketability of any goods before subjecting them to levy of duty of excise and the same has got to be discharged by placing on record independent cogent evidence. In the instant case, the department has not been able to establish that the CAPs were capable of being taken as such to the market for being sold. Thus the majority has held that Central Air conditioner plant fixed in the contract is immovable. The dissenting judgment delivered by Krishna Kumar, Member, however, has taken contrary stand than that of the decision of the majority. He would hold that that the CAP installed at sight is the movable property of the customers. The Member (J) relied on the decision of the Apex Court in the case of Sirpur Paper Mills reported in 1998 (97) E.L.T. Page 3 (S.C.) = 1997 (12) TMI 109 - SUPREME COUR T, wherein the Apex Court cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of other goods or and service then it would be naturally bundled. It is felt that the nature of contract covers under composite supply being 18 HP VRF outdoor units, VRF cassette units and VRF Hi-wall units of Voltas make and drain pumps, refrigerant pipes, indoor and outdoor Stands, Cables, cable tray, Insulation material, electrical goods etc. are naturally bundled. Once it is observed that the nature of contract covers as composite supply it comes out of the ambit of mixed supply . (F) Advance ruling: Considering the decisions, views, directions the applicant desires advance ruling whether the activity of supplying Additional Air-conditioning work for the New building of Director of Education at Porvorim , Goa. The transaction would be classifiable to cover under the definition of works contact liable to CGST/SGST/IGST covered under Sr. no 3 item no 3 of notification No 24/2017 (Central tax rate) dated 21/09/2017. OR The transaction is composite supply liable to CGST @ 14% being principal goods involved is Air-Conditioner which falls to cover under schedule IV, Sr. no 1 19 of notification No 1/2017 (Central tax rate) dated 28/06/2017 In continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty i.e. in a contract of supply, where the property in goods passes in immovable, the nature of transaction would be Works Contract . Similarly, under the Central Excise Act where the property in goods passes in immovable there would be no excisablity. Considering the similarity in both the statutes it would be safe to refer to the decisions and authorities under the excise statute for determining the nature of activity whether property passes in immovable or not. To have the attributes of excisable goods as understood in the Excise Law. They are mobility and marketability. The article in question should be capable of being brought and sold in the market a test which is too well established by series of decisions of this Court. There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for purposes of the Act. From a combined reading of the definition of immovable property in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act . c. In Mittal Engineering Works Pvt. Ltd. vs. CCE 1996 (88) ELT 622 (SC) = 1996 (11) TMI 66 - SUPREME COURT ; the Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. After considering the material placed on the record it was held that the mono vertical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the 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. d. In Trive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment/component/ material/parts and accessories that have gone into the manufacture of CAPs. This is identifiable as CAPs in the market and is bought and sold as CAPs as is evident from the contract entered into between the appellant and the customers. This distinct product is not embedded in the ground like a tree or building, at the most some of its equipments/components are fixed by bolting, using nuts and bolts, to secure maximum operational efficiency and safety of the plant as a whole. The case is decided by majority holding that it is immovable by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is the independent function of the department, as held by the Apex Court in the case of Triveni Engineering and Industries Ltd. v. CCE [2000 (120) E.L.T. 273 (S.C.) = 2000 (8) TMI 86 - SUPREME COURT , to establish the marketability of any goods before subjecting them to levy of duty of excise and the same has got to be discharged by placing on record independent cogent evidence. In the instant case, the department has not been able to establish that the CAPs were capable of being taken as such to the market for bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismantling or disassembly of the Air conditioning plant. If at all any dismantled Air conditioning plant could be taken to the market for would be sale that be only an assortment of some components viz. VRF 4 way Cassette units, VRF Hi wall units, VRF Outdoor units etc. but never the Air conditioning plant as a whole. Therefore it is submitted that since the Air conditioning plant as a whole is not capable of being taken to the market for sale, it was not a marketable item. If the items assembled or erected at site and attached to earth/wall cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as movable. 7. It is also pertinent to refer to the order of Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs through its order no 37B Order 58/1/2002-Cx dated 15 th January 2002 has issued instructions at para 5 (iii) that- Refrigeration/Air conditioning plants - These are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They are in the nature of systems and are not machines as a whole. They co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant piping and the branching joints vary from site to site. The refrigerant pipes and branching joints are joined by brazing and are insulated. Thus, the entire VRF system is a network of indoor and outdoor units connected by refrigerant piping and branching joints, suitably sized as described above. This entire network is tested for leakages and then vaccumised and charged with a specifically calculated quantity of gas. The entire network is controlled by microprocessors in indoor and outdoor units which communicate with each other through interconnecting communication cables. The commissioning process involves addressing of various components of network which is unique to each site. This VRF system cannot be used and installed at any other site as it is, since the configuration of the new site will be different in terms of various components of the system. The system will need to be dismantled, de-gassed and modified significantly and re-erected for use at another location. Many of the components of this system will either get damaged during dismantling or will not be suitable at the new site and will need to be replaced with components of different capacity and size. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect and client. PREPARATION AND APPROVAL OF TECHNICAL SUBMITTALS - With reference to the approved tender makes and specifications, technical submittals are prepared. The technical submittals include the technical specifications of the material / product to be installed. These also differ from project to project. The HVAC consultant / Client provide the approval for procurement of material. QUANTIFICATION AND PROCUREMENTS OF MATERIAL - The approved shop drawing is used to estimate / count the material / machines to be required to execute the project. Based on the estimation material procurement request were sent by planning team to purchase departments and further procurement takes place. DELIVERY OF MATERIAL AT SITE - Based on the project requirement the material can be delivered in multiple phases. This are typical based on the site development and storage space available at site. For example, supporting media like anchor fasteners, nut-bolt, angles are installed prior to installation of cable tray, copper pipes, machines etc. The site manager verifies the material specification and quantity at the time of delivery. INSTALLATION - Before commencement of any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... male Anchor Fasteners to slab and then joined by using full threaded rods and supported by MS angle. Drilling, fixing of saddle screw for the laying of communication and power cable. As per requirement for laying of conduit trenching required through wooden and civil opening, Gypsum or Core cut etc. Cable is passed and later the affected area to be finished and make it concealed. Communication Cable cutting is done as per drawing and site requirement measurement. As per shop drawing and selection of machine, the dia and length of drain pipe is decided. Accordingly cutting and bending of the drain pipe is done. Insulation of the drain pipe is done as per approved specification. As per the requirement at site condition, trenching is done in the wall and / or civil opening is made and drain piping is laid. Later they are made concealed. The joining of the drain pipes is done using Adhesive or fusion joint so that there shall not be leakage of water. Once drain line is fixed and joints are concealed it cannot be removed. TESTING AND COMMISSIONING OF SYSTEM - After the completion of Installation of the machines/Units and before closing of ceiling, pressure testing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration equipments are not bought and sold like room/window machines or even splits or package units and cannot be installed like room/split air-conditioners, In the air-conditioning industry, these are undertaken as projects or AC jobs or works contract (A) In the case of Voltas Ltd. vs State Of Gujarat decided on 4 September, 2006 = 2006 (9) TMI 519 - GUJARAT HIGH COURT by Gujarat High Court, the Court while deciding the issue rate of tax on works contract for fabrication and installation of air-conditioning plants falls under Entry 2 and, liable to tax at the rate of 15% or under Entry 5 under which it is taxable at the rate of 5%, of the Schedule to the notification dated 18-10-93 issued under Section 55A of the Gujarat Sales Tax Act, 1969? has observed that - It would be relevant to ascertain as to what is the meaning of words installation of air-conditioners and A. C. Coolers and for repairs thereof It is well settled that for interpreting the meaning of the words used in entries of taxing statute, trade meanings as well as dictionary meanings are required to be considered. In the light of dictionary, meanings of the words air-conditioner , air-conditioning et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orne particles such as dust and lint are removed. Sophisticated filters may remove microscopic pollutants as well. The filtered air is routed to air supply ductwork that carries it back to rooms. Whenever the air conditioner is running, this cycle repeats continually. Because the central air conditioning unit is located outside the home, it offers a lower level of noise indoors than a free-standing air conditioning unit. Thus, there is no manner of doubt that by executing the works contract relating to installation of air-conditioning plant, what is provided is central air conditioning system/device. Air-conditioning systems are succinctly explained in paragraph 23 of the decision in Collector of Central Excise v. Subros Ltd. (1989 (6) TMI 140 - CEGAT, NEW DELHI) . The High court has clearly made distinction between Air conditioner and Air conditioning ; air-conditioning means (1) a system or process for controlling the temperature, humidity and sometimes the purity of the air in an interior, as of an office, theatre, laboratory, house, or the like; (B) In the case of Collector Of C. Ex. vs Subros Ltd. on 7 June, 1989 Equivalent citations: 1989 (24) ECR 219 Tri D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tu per hr of heating. Most large buildings are so conditioned. Another important and somewhat parallel distinction can be made between incremental and central systems. An incremental system serves a single space; each space to be conditioned has its own, self-contained heating-cooling-dehumidifying-filtering unit. Central systems serve many or all of the conditioned spaces in a building. They range from small, unitary packaged systems to serve single-family residences to large, built-up or field-erected systems serving large buildings. When many buildings, each with its own air-conditioning system which is complete except for a refrigeration and a heating source, are tied to a central plant that distributes chilled water and hot water or steam, the interconnection is referred to as a district heating and cooling system. This system is especially useful for campuses, medical complexes, and office complexes under a single management. Conditioning of spaces. - Air temperature in a space can be controlled by radiant panels in floor, walls, or ceiling to emit or absorb energy, depending on panel temperature. Such is the radiant panel system. However, to control humi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternators, coupling and aligning them in a specified manner and installation and erection of turbo alternator on the platform would be immovable property, and as such it cannot be excisable goods. On the same reasoning, the air-conditioning system, the chilling machine, cooling towers, air treatment unit (air handling units), ducting, piping, insulation, pumps and electric panels and grills, diffusers, dampers, fire dampers, etc. are installed/fixed/erected in with each other to form an air-conditioning system or project and hence becomes immovable property and cannot be called as excisable goods. Even the department has not raised any demand or excise duty on such air-conditioning system to any job worker involved for erection of these systems/projects. The grills manufactured by the petitioner are used in air-conditioning systems, ventilation systems, basements, car parking, kitchens, industrial sheds, evaporative coolers and dummy grills for interior decoration in rooms/buildings. However, they cannot be used in the air-conditioning machines, room/split air-conditioners as these are not designed for use therein. After detailed deliberation court has allowed the petition b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission, as reproduced verbatim, could be seen thus- M/s. Nikhil Comforts is a taxable person allotted to this office for the purpose of scrutiny of returns, Audit, Assessment etc. M/s. Nikhil Comforts has applied for advance ruling under section 97 of CGST/MGST Act, 2017. The taxable person has mentioned the nature of its business activity as Supply, installation, testing and commissioning of V RF indoor and outdoor Units (Air conditioning). The taxable person has requested that a ruling be pronounced under section 97 of the CGST/SGST Act 201 7 on the following questions: - The transaction would be classifiable to cover under the definition of works contract liable to CGST/SGST/IGST covered under serial No 3 item No 3 of the Notification No 20/2017 (Central tax rate) dated 22/08/2017. OR The transaction is composite supply liable to CGST @ 14% being principle goods involved is Air conditioner which falls to cover under schedule IV serial No 119 of Notification No 1/2017 (Central tax rate) dated 28/6/2017. The applicant has submitted a copy of agreement dated 21.08.2018 entered with Goa State Industrial Development Corporation (GSIDC) by which he has undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment is fastened to the civil foundation for a wobble free operation and to provide greater stability. A fixation which does not involve assimilation of the property and is necessary for a wobble free operation cannot be considered as an immovable property by applying permanency test. The tower/shelter may be unbolted and reassembled without any damage to any other location. There is no intent to annex the equipment to the earth permanently for the beneficial enjoyment of the land owner. Hon ble Supreme Court in following paras has held, - 37. On an application of the above tests to the cases at hand, this court sees no difficulty in holding that the manufacture of the plants in question do not constitute annexation and hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property, (ii) Such plants cannot be said to be attached to the earth within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability, to the plant and keep its operation vibration free. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of Property Act, 1882 does not spell out an exhaustive definition of the expression immovable property . It simply provides that unless there is something repugnant in the subject or context, immovable property under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) of the General Clauses Act, 1897, similarly does not provide an exhaustive definition of the said expression. It reads: Section 3(26): immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. A plain a reading of Section 3 (26), shows that it defines immovable property as things attached to the earth or permanently fastened to anything attached to the earth. The term attached to the earth has not been defined in the General Clauses Act, 1897, Section 3 of the Transfer of Property Act, however, gives the to the expression attached to the earth : (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is so imbedded for the permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and submissions made by both, the applicant as well as the jurisdictional office. The applicant has submitted that they have entered into an agreement with Goa State Infrastructure Development Corporation Ltd. (GSIDC) for execution of Additional Air conditioning work for the New building of Director of Education at Porvorim, Goa . The agreement dated 21 Aug., 2018, is for supply, installation, testing commissioning of VRF Indoor Outdoor Units suitable for R-410 Gas, refrigerant piping with insulations drain piping with installation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc. Thus we find that they will be supplying various VRF Indoor and Outdoor units, stands, cables, etc, which will be installed by them. After installation of the said equipments, testing will be conducted to see whether the Air conditioning work has been done properly and after successful testing the commissioning would start. On perusing the submissions of both, the applicant the jurisdictional office, we find that the basic issue before us is whether in the subject case there is supply of Works Contract or Composite Supply. We shall therefore discuss all the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected, detailed Shop drawing are drawn which includes Indoor outdoor locations, equipment installation details, the size and route of interconnecting copper pipes, size and route of cable trays, drain pipes, interconnecting communication cables and power cables, etc. 4. Based on shop drawings, the material and equipment required are quantified, procured d then delivered at site as and when required. 5. Then as per markings made in the shop drawings, respective supports are installed for indoor unit, copper pipes, cable trays and drain piping. These supports are permanently fastened to the slab by means of female anchor fasteners, full threaded rod and angles. The back plate of hi-wall unit is fixed to the wall. Similarly, cassette units are fixed from slab with the help of anchor fastener and full threaded rod. Then outdoor units are installed on MS Platform / stand which permanently fastened to Concrete foundation. Then multiple indoor units are connected to back of outdoor units. The interconnection pipe size and Y -Branch sizes are software generated. These software outputs are project specific to the project. The route of the piping to be strictly followe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant associated electrical works etc. now they also are saying that the entire equipments must be treated as one plant, which is not acceptable. We find that every Indoor and Outdoor units, cabling, electrical works can be removed as such and therefore cannot be considered as immovable property. Thus we find from their submissions and agreement that the contract is considering a clear demarcation of goods services to be provided by the applicant, Now we have to decide whether the supplies are naturally bundled in conjunction with each other as required by the definition of composite supply. Hence we refer to the definition of Composite Supply as mentioned in sub-section (30) of Section 2 of CGST Act, 2017 which is as under:- Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. From the discussions made above we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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