TMI Blog2020 (10) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... UPS is a significant portion of the contract and not merely ancillary to the supply of UPS system. Hence, in the present case the supply of UPS system cannot be said to be a 'principal supply' to which the supply of erection and installation services is merely ancillary - the findings of the Ld. AAR that without supply of goods i.e. UPS system, the services of erection, installation and commissioning cannot be supplied by the appellant is incorrect. Circular No. 47/21/2018-GST dated 08.06.2018 issued by the CBIC, states that in case where a supply involves supply of goods and services and the value of each such supplies is shown separately, such supplied would be liable to GST separately as supply of goods and services. Thus, even in the present case, the supply of UPS system and erection and installation services supplied by appellant would be treated as separate individual supplies. The supply of UPS System and erection and installation services are provided by two distinct persons viz. Maharashtra GTIN and Delhi GSTIN. Thus, the said supplies cannot be clubbed together to make them a composite supply . Composite Supply or not - HELD THAT:- Section 2(30) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vent of power failure. The Appellant also supplies installation commissioning and maintenance and other services to its customers. 1.2 A UPS is typically used to protect hardware such as computers, data centers, telecommunication equipment or other electrical equipment where an unexpected power disruption could cause injuries, fatalities, serious business disruption or data loss. UPS units range in size from units, designed to protect a single computer without a video monitor, to large units, powering entire data centers or buildings. 1.3 The appellant is manufacturing UPS and its components at its manufacturing unit located at Ambernath and Pune in the state of Maharashtra. Some of the UPS components like battery and cables are either manufactured by the applicant or purchased by the applicant from third party vendors. The applicant has, inter alia, obtained GST registration in the state of Maharashtra ( Maharashtra GSTIN ) and New Delhi ( Delhi GSTIN ). Contract with DMRC for supply of UPS 1.4 The Appellant entered into a contract with Delhi Metro Railway Corporation ( DMRC ) for supply, installation, testing, and commissioning of UPS systems (hereinafter re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Signaling, Telecommunication and AFC Contractors; Interface management as specified in the Specification; System operations and maintenance support services; Training for operations and maintenance staff; Preparation of Operation, Maintenance and Training Manuals; Decommissioning, removal and/ or disposal of Temporary Works; Design, manufacture, delivery and installation of foundations/ fixtures for equipment; Warranty period and defect liability support after commissioning; Providing necessary support and documents required including compliance for getting approval of the UPS system from Commissioner of Railway Safety; Maintenance support, All equipment necessary to allow the installation, testing and introduction of services on this line without disruption to Phase III services; Any other service needed to provide a complete UPS system 1.6 Further, the Annexure to the Tender document released by DMRC clearly provides a detailed break-up of value of various goods and services to be supplied under the contract. The relevant portion of the said Annexure is extracted as under- S.No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JICA Non JICA 1: Documentation, installation, Testing Commissioning of complete system at interlocking stations/depot with earthing. 13 0 10 8 Per station/ Depot 68,250 2,115,750 2 Documentation, Installation, Testing Commissioning of complete system at secondary stations with earthing 26 1 27 8 Per station 68,250 4,231,500 D. Training S N Description Quantity (JICA Unit Unit rate (INR) Price (INR) Part - 1 Part - 2 1 Trainer's man days 60 0 Man-days 8,000 4.80,000.00 2 GRAND TOTAL 30,50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be removed and used elsewhere by the appellant. In other words, the UPS systems once dispatched to DMRC's site cannot be diverted and supplied by the appellant to any other customer. 1.14 The above factual position demonstrates that the title/property in the goods stands transferred to DMRC prior to the installation/erection of the UPS system. 1.15 In the pre-GST regime, the applicants were discharging Central Excise Duty and VAT/Sales tax on the clearance and sale of UPS system. Further, the service of erection, installation and commissioning of UPS system was treated by the appellant as 'works contract' service and thus the applicants were paying service tax accordingly. Application for Advance Ruling: 2.1 In view of the above facts, the Appellant had filed an application seeking an advance ruling in Form GST-ARA-01 dated 17.05.2019 (hereinafter referred to as the application ) on the following questions - i. whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as supply of works contract under Section 2(119) of the Central Goods and Services Tax Act, 2017 ( CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of and without prejudice to each other. Grounds of Appeal 1. Section 100(1) of the CGST Act, 2017 provides that the concerned officer, the jurisdictional officer or an applicant aggrieved by any advance ruling pronounced under Section 98(4) of the CGST Act, 2017 may appeal to the Appellate Authority. 2. Further, in terms of Section 100(2) of the CGST Act, 2017, every appeal shall be filed within a period of thirty days from the date on which the ruling sought to be appealed against is communicated to the concerned officer, the jurisdictional officer and the applicant. 3. In this regard, an advance ruling was passed by the Authority for Advance Ruling, Maharashtra on 04.10.2019. The order was communicated to the Appellant on 10.10.2019 vide e-mail. 4. The Appellant, being aggrieved by the impugned ruling dated 04.10.2019 is filing the present Appeal as per Section 100(1) of the CGST Act, 2017 within the time period specified in Section 100(2) of the CGST Act, 2017. The Id. AAR in the impugned ruling has transcended its scope and jurisdiction by holding that the supply amounts to be a composite supply, which is beyond the questions posed in the application f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was never raised in the application. Thus, the Ld. AAR has travelled beyond the issue which was posed by the appellant in the application dated 17.5.2019, to that extend. 9. Therefore, it is submitted that the impugned ruling is liable to be set aside to such extent. The Ld. AAR has erred in holding the supply made under the said contract as composite supply since the conditions prescribed in section 2(30) of the CGST Act, 2017 are not satisfied. 10. Under the contract entered with DMRC, the appellant is required to supply UPS system and also undertakes erection, installation, commissioning and testing etc., of the UPS system at the sites designated by DMRC. The said contract clearly specifies the various goods and services to be supplied to DMRC and also provides separate consideration to be paid by DMRC to the appellant for the supply of goods and for the supply of services. The appellant submits that the appellant is making two separate supplies to DMRC namely supply of UPS Systems (i.e. goods) and the supply of erection, installation and commissioning service. 11. The appellants submit that the Ld. AAR has rightly held that the supply of UPS and its erection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nction with each other in the ordinary course of business, one of which is a 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 . 17. Further, Section 2(90) of the CGST Act, 2017 defines 'principal supply' as under: 2(90) principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. 18. Thus, as per Section 2(30) read with Section 2(90) of the CGST Act, 2017, for any supply to qualify as composite supply the following conditions must be fulfilled: (i) there should be supply of two or more taxable supplies of goods or services; (ii) the supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business; (ii) only one out of the various supplies should be a 'principal supply'. 19. The Appellant submits that for a supply to be composite supply, there should be supply of two or more taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar reads as under - 2.1 The taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case. 2.2 Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. 25. Thus, the aforesaid circular states that in case where a supply involves supply of goods and services and the value of each such supplies is shown separately, such supplied would be liable to GST separately as supply of goods and services. Thus, even in the present case, the supply of UPS system and erection and installation services supplied by appellant would be treated as separate individual supplies. 26. Thus, the appellant submits that the supply of goods and services under the said contract cannot be considered as composite supply in terms of Section 2(30) of the CGST Act, 2017. 27. Therefore, the finding of the Ld. AAR to such extent is not tenable and the impugned ruling is liable to be modified to that extend. The supply of UPS System and erection and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llation service to DMRC is the Delhi GSTIN of the appellant. Thus, the location of supplier for such services would be the Delhi GSTIN. On the other hand, the goods are supplied to DMRC from the Ambernath Unit of the appellant in Maharashtra. 35. Section 2(30) of the CGST Act defines composite supply to mean a supply made by a taxable person, comprising of two or more supplies of goods or services, which are naturally bundled and supplied in conjunction with each other, wherein one of the supplies is a principal supply. Thus, in order to qualify as a 'composite supply, it is essential that all the supplies under a contract are made by a single registered person. 36. In the present case, the supply of UPS system and erection and installation services are made by two distinct persons i.e. Maharashtra GSTIN and Delhi GSTIN respectively. Therefore, the appellant submits that the supply made under the said contract to DMRC would not qualify as a 'composite supply' under Section 2(30). 37. The appellant submits that the Ld. AAR has failed to appreciate the aforesaid legal position and held the supply made by the appellant to be a composite supply merely because the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er answering the main question that the supply made by the appellant could not qualify as 'works contract service' had incorrectly proceeded to determine that the said supply would amount to composite supply in term of Section 2(30) of the CGST Act, 2017, which was never raised in the application. Hence, Ld. AAR had travelled beyond the issue and impugned rulings required to be set aside. The Ld. AAR had discussed in the impugned ruling, the facts of the case, the method of supply by the appellant, the requirements of the contract entered by the appellant with DMRC etc. After discussing all this, Ld. AAR had proceeded on the definition of 'works contract' as defined under Section 2(119) of the CGST Act, 2017, and the definition of the 'composite supply' as defined under Section 2(30) of the CGST Act, 2017 had come to the conclusion and ruled in negative to the question no. 1, i.e. whether the supply the supply would qualify as 'works contract'. Hence, the discussion is not in isolation. Para B.1 to B.4: Facts are narrated and hence does not require any comments. Para B.5 to B.14: The appellant has basically challenged the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Section 2(71) of the CGST Act, which defines the 'location of the supplier of service', more specifically about Sec. 2(71) (c) of the CGST Act, 2017 where a supply is made from more than one establishment, the location of the establishment most directly concerned with the provision of the supply will apply. The submission made by the appellant is out of context. The contract agreement that is in question has been entered by the appellant having their registered office at Thane, Maharashtra and the branch office at Gurgaon, Haryana with DMRC, New Delhi. In both the cases, i.e. the supply of the goods UPS Systems and its installation, testing, commissioning of the same etc. is to be made or provided at New Delhi. The supply has not been made to two distinct persons. In fact, it has been made to DMRC, New Delhi and the basic issue is about the determination of rate of tax. Section 8 of the CGST Act, 2017 is about the tax liability on the 'composite supply and mixed supplies' The tax liability on composite and mixed supply shall be, determined in the following manner: - (a) a composite supply comprising two or more supplies, one of which is a princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional officer in the instant appeal. We have also gone through the ruling pronounced by the Advance Ruling Authority, wherein the AAR has held that the supply of the UPS Systems and as well as the supply of the services like erection, commissioning, testing, installation etc. of the said UPS Systems by the Appellant to DMRC in terms of the subject agreement would be construed as 'Composite Supply' in accordance with the provision of section 2(30) of the CGST Act, 2017 read with section 2(90) of the CGST Act, 2017. In the instant appeal, the Appellant has not challenged the ruling pronounced in respect of the questions posed by the Appellant in their advance ruling application filed before the Advance Ruling Authority. The main question asked by the Appellant in their advance ruling application was whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as supply of works contract under Section 2(119) of the Central Goods and Services Tax Act, 2017. In response to the above- mentioned question, the AAR held that the said supply of the UPS systems and its erection, installation, commissioning, testing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the UPS Systems and its accessories as well as the invoices raised by their Delhi Branch for rendering the services of erection, commissioning, installation, testing, etc. of the UPS systems. They further argued that since the Maharashtra unit and the Delhi unit are distinct persons in terms of section 25(4) of the CGST Act, 2017, the supplies under question would not be composite supply as the supply of goods and supply of services are not made by a single taxable person, rather in this case, there are two taxable persons, i.e. one Maharashtra unit and another Delhi unit, who are making two independent, distinct and separate supply, which cannot be thought of the supplies, which are being made in the conjunction with each other. 47. Here, we tend to agree with the Appellant's contention in as much as there exists two taxable persons i.e. one Maharashtra unit, undertaking the supply of UPS systems and other specified accessories and another Delhi unit, undertaking the task of the erection, commissioning, installation, testing, etc. of the UPS systems, which is manifest from the separate invoices raised by the Maharashtra and the Delhi unit of the Appellant for the supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the said supply of goods and services are made by the two distinct taxable persons, i.e. Maharashtra (GSTIN)unit and the Delhi (GSTIN) unit of the Appellant. Here, it is stated that just because some supplies of goods or services or both have been included, or made part of, the one single agreement/contract, as per the convenience of the parties entering into the said agreement, does not make those supplies as composite supply. It is further opined that for any supplies to qualify as the composite supply, it has to satisfy the various essential conditions, which have been discussed herein above. In the present facts and circumstances of the case, it is observed that supplies under question do not satisfy those essential conditions stipulated for the Composite Supply under section 2(30) of the CGST Act, 2017. 50. Thus, in view of the above discussions, it is observed that the observation made by the Advance Ruling Authority, against which the Appellant has preferred the present appeal, is not proper and legal, and hence the same warrants to be set aside. Thus, we pass the following order: ORDER We, hereby, modify the AAR ruling to the extent that the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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