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TMI Blog2020 (12) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... . RCC/NR/UPSO-II/ENG/PT-84/2018-19 concerning Rate Contract for Fabrication and Transportation of 20 KL &70 KL Horizontal Tanks including transportation of Steel Plates from its Depot to Applicant's works, for Dehradun, Bareilly, Moradabad, Agra & Noida Divisional offices of IOCL. (ii) Delhi & Haryana State office of IOCL has issued a tender documents vide Tender No. RCC/NR/DSO/ENG/PT-109/2018-19 concerning Rate Contract for Fabrication and Transportation of 20 KL & 70 KL Horizontal Tanks for Delhi, Gurgaon, Hissar & Panipat Divisional offices of IOCL. (b). IOCL for this specified purpose of fabrication has also supplied Steel Plates from its depots Free of Cost (FoC) and has obtained Bank Guarantee from the Applicant to cover the cost of these Steel Plates. The detailed list of components which are required by the applicant under the Contract for effecting the principal supply of fabricating 20 KL & 70 KL tanks in following Table. The items have been bought/ manufactured by the Applicant company and used as per the terms of the contract, in fabrication of tanks as per the specification mentioned in the Tender Documents of M/s IOCL: List of Fitting Required to Fabricate 20KL T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia MS Rod (as per Details) 2 No. 12 Holding Down Bracket Welded to Tank Shell (as per Details) 12 No. 13 225mm Long Turn Buckle (as per Details) 12 No. 14 25 dia x 970 Long Bolt with Hexagonal Head and RH Thread 12 No. 15 25 dia x 200 Long Bolt with Hexagonal Head and LH Thread 12 No. 16 75 x 75 x 8 Thk Angle 200 Long in Holding Down Arrangement 12 No. 17 Earthing Boss Connection as Per Drawing Details. 1 SET (c) The process of fabrication involves usage of various consumables e.g. Welding Electrodes, Gas etc. as well as all the items mentioned above along with Free of Cost Steel Plates. All these components/materials together with the labour charges constitute the value of this work undertaken by the applicant. (d) Only the Steel Plates are being provided by IOCL on Free of cast to the applicant and all other structural material and fittings required for the tank are to be arranged by the applicant without any extra financial implication to IOCL (e) It has been further stated in the Tender Document that the fabrication and erection of all MS Structural shall confirm to BIS 800 (latest edition). In conformity to Section 17 of BIS 800, the Tender Docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SN code of the main supply. (l) At present, the applicant company is charging 18% rate of GST under the HSN code 7309 from IOCL on the above stated supply without including or providing any treatment for FoC Steel Plates. (m) Further, as per directions to the applicant by IOCL vide email dated 31/08/2020, IOCL has referred to CBIC Circular No. 126/45/2019-GST dated 22/11/2019 post amendment/reduction in rate of tax for job work services under the SAC code 9988 from 18% to 12% and directed vide email dated 31.08.2020 that the applicant shall charge 12% instead of 18% on the above referred supply. 3. The applicant has sought advance ruling on following questions- I. What should be the Correct Classification with respect to the nature of 'Supply' i.e. whether the questioned supply tantamount to 'Supply of Goods' or 'Supply of Service' on the basis of the facts of the whole activity as mentioned above and supported by the documents enclosed/discussed here under? II. Whether Circular No. 126/45/2019-GST dated 22/11/2019 shall at all apply in the instant case if answer to Query (a) is 'Supply of Service' as job work service? III. What should be the Correct HSN/SAC code applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or periodic." (h) On the basis of above definition and based on general trade parlance, 'process' means a continuous mode, method, or operation by which some activity is carried over raw or semi-finished commodity to create an altogether new commercial commodity. Sometimes it results as input for another final product. In other words, process is development, change, or preparation for the purpose of sale. (i) the term 'Treatment' in trade parlance refers to correct something, apply some method, or way to make the product in commercial existence. (j) According to the second limb, the treatment or process shall have been provided by any "person" on registered person's "goods". Both 'person' and 'goods' have been defined under sections 2(84) and 2(52) consecutively. (k) the third limb of the definition focus on the term 'registered person' which is defined under Section 2(94) of the CGST Act 2017 as "Registered person" means a person who is registered under section 25 but does not include a person having a Unique Identity Number" (l) The Central Government has notified the rate of GST applicable on categories of Intra-state supply of services' by virtue of Notification No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tried to be clarified by CBIC through Circular No. 126/45/2019-GST dated 22/11/2019 in para 4 - "In view of the above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered under the CGST Act" (r) The Central Government in exercise of the powers conferred by sections 9(1) and 15 (5) of the CGST Act, 2017 has notified the rate of GST applicable on categories of 'intra-state supply of goods' by virtue of Notification No. 1/2017-Central Tax (Rate) dated 28/06/2017 which is amended time to time. The following entry specifying the rate of GST applicable on the 'supply of tank' shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which brings the tanks into existence i.e. without the use of additional inputs/material, complete final product in the form of tanks. (w) It is pertinent to point out that throughout the tender documents, invoice and other documents emphasis has been placed on the word "Fabrication" as well as the actual activity in bringing the Tanks in its desired commercial form can more closely or specifically be covered under 'Fabrication'. According to The Free Dictionary, 'fabricate' means "To construct by combining or assembling diverse, typically standardized parts. "/As per Oxford Dictionary 'Fabrication' means "the process of making or producing goods, equipment, etc. from various different materials". (x) The above definitions clarifies that while 'manufacturing' is when raw material is processed to generate a complete new commercial product having its own distinct name, character and use, 'fabrication' is the process of making a product assembling various standardized parts. The key difference between 'fabrication' and 'manufacturing' is that 'manufacturing' involves building a product from the bottom-up whereas 'fabrication' involves assembling of standardized parts. (y) It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisite rings, adopters and sleeves had also been supplied by Modipon, it could probably have been said that the appellant's work is in the nature of job-work. But that is not the case here." (ab) The above precedent has been followed in number of cases. These inter alia include the decisions of the Mumbai Bench in Navbharat Packaging Indus. Ltd. v. CCE (17.04.1996 - CESTAT - Mumbai): MANU/CM/0219/1996, Bholanath International Ltd. vs. CC (06.01.2003 - CESTAT - Delhi): MANU/CE/1207/2003 and has also been referred by the Mumbai Advance Ruling Authority In Re: S.B. Reshellers Pvt. Ltd. (02.03.2019 - Authority for Advance Rulings): MANU/AR/0160/2019. (ac) Also, both substantial supplies of FoC Steel Plates and other supplies of various material which are employed by the applicant at his own cost are all necessary for rendition of the supply of the tank. Omission of any of the supplies can result in derogation of the specifications and might even lead to breach of the contract. Hence, as far as the present contract defined by the Tender Document is concerned, every supply is dependent on each other and cannot be undertaken independently. (ad) In the present transaction or activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the GST law. If a reference to the Goods Rate Notification as mentioned above is made, then the same indicates that a rate of 18% shall be applicable on the supply of 'tanks'. (ai) It is submitted for the kind consideration of the Advance Ruling Authority, that under the erstwhile regime of Central Excise Act 1944, the Delhi and Kolkata Benches of CESTAT have examined the process of fabrication i.e. conversion of FoC steel plates into a product as'tanks' in cases of i. V.D. Engineering vs. Commissioner of Central Excise, Jabalpur (21.05.2018 -CESTAT - Delhi): MANU/CE/0700/2018 ii. H.S. Builders v. CCEx., Cus., S. Tax, BBSR and Ors. (28.07.2020 - CESTAT -Kolkata): MANU/CK/0047/2020 iii. Sesa Goa Ltd. v CCE 2000 (119) ELT 150 Tri Mumbai iv. CCE v. Shri Shanker Engineering Works (2014) 36 STR 436 (Tri-Del). The Hon'ble Benches ruled that the fabrication of tanks from steel plates provided on FoC basis has been adjudged as manufacturing of a new commercial product and were liable to excise duty. (aj) The activity of 'fabrication' amounts to 'manufacturing' was the established view under the erstwhile regime but the analysis is yet to be made under the jurisp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er structural items/material and fitting required for the tank will be arranged by the applicant. The various consumable e.g. welding electrodes, Gas etc are also part of process of fabrication of tanks. All these constitute the value of this work undertaken by the applicant and the same is chargeable from M/s. IOCL. He opined that fabrication of tanks from steel plates falls under the category of supply of goods and the Circular No. 126/45/2019-GST dated 22.11.2019 is not applicable in the instant case. As per the said report, the HSN is 7309 and rate of tax is 18%. It is also mentioned in the report that no proceedings on the question raised by the applicant are pending or decided. 7. The applicant was granted a personal hearing on 09.12.2020 which was attended by Shri Rajesh Gupta (Director), Shri Mukul Gupta & Shri Prateek Gupta (Both Advocates & Authorized representative) through video conferencing during which they reiterated the submissions made in the application of advance ruling. DISCUSSION AND FINDING 8. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant also carry steel plates from M/s IOCL to their works and fabricated tanks are delivered by the party at the depot of M/s IOCL and both the activities involves transportation of goods by them. The applicant has sought ruling on classification with respect to nature of supply (supply of goods or supply of service), applicability of Circular no 126/45/2019-GST dated 22/11/2019, correct HSN/SAC code and rate of GST. 12. The applicant in para 1.13 of Statement of Relevant facts submitted alongwith Form ARA-01 has submitted that presently they are charging 18% GST under HSN Code 7309 from IOCL on the supply of tanks and in para 4.19, the applicant has submitted that the activity falls under SAC 9988 under sl.no. iv of sl. No. 26 of the Notification No. 11/17-Central Tax (Rate) dated 28.06.2017 (i.e. manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), and (ic), (id), (ii) and (iia) and (iii) above attracting rate of tax @ 18%) upto 30.09.2019. As such, the applicant has submitted contrary submission in respect of classification adopted by them presently in as much as they are classifying the tank as supply of goods under HSN 7309 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided on FoC basis is manufacturing of a new commercial product and were liable to excise duty. i. V.D. Engineering vs. Commissioner of Central Excise, Jabalpur (21.05.2018 -CESTAT - Delhi): MANU/CE/0700/2018 ii. H.S. Builders v. CC Ex., Cus., S. Tax, BBSR and Ors. (28.07.2020 - CESTAT - Kolkata): MANU/CK/0047/2020 iii. Sesa Goa Ltd. v CCE 2000 (119) ELT 150 Tri Mumbai iv. CCE v. Shri Shanker Engineering Works (2014) 36 STR 436 (Tri-Del). 16. As such, we are of the view that fabrication of tank from steel plates supplied free of cost froth M/s IOCL is manufacture as per CGST Act, 2017. Accordingly, supply of tanks by the applicant is supply of goods. 17. In view of the above discussions, we, both the members unanimously rule as under; RULING 18. Que 1. What should be the Correct Classification with respect to the nature of 'Supply' i.e. whether the questioned supply tantamount to 'Supply of Goods' or 'Supply of Service' on the basis of the facts of the whole activity as mentioned above and supported by the documents enclosed/discussed here under? Answer- The nature of supply is Supply of goods. Que.2 Whether Circular No. 126/45/2019-GST dated 22/11/2019 shall at al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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