TMI Blog2022 (2) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Whether the work of drilling and blasting with explosives, which has been sub contracted to the applicant, falls under Sr. No. 3 (x) of Notification No 11/2017-CT (Rate) dated 28.06.2017? - HELD THAT:- Sr. No. 3 (x) of Notification No 11/2017-CT (Rate) elated 28.06.2017 states that Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity - the impugned service supplied by the applicant will be covered under Sr. No. 3 (x) of Notification No. 11/2017 - CTR dated 28.06.2017 only if the services provided by M/s Balajee to M/s CIDCO, a Government entity, falls under Sr. No. 3 (vii) of Notification No.11/2017-CT (Rate) dated 28/6/2017. Notification No.11/2017-CT (Rate) dated 28/6/2017 was amended vide Notification No. 15/2021 - CT(R) dated 18.11.2021 (with effect from 01.01.2022) and in Sr. No 3 (vii) of the amended Notification No. 15/2021-CTR dated 18.11.2021, the words Governmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive control and possession of the owner, M/s City and Development Corporation of Maharashtra Limited (hereinafter referred to as CIDCO ). 2.3 M/s Balajee Infratech Constructions Pvt Ltd (Balajee) has been awarded work order from CIDCO for Drilling, Blasting, Mucking and allied job and reclamation works for the land Development respectively pertaining to Ulwe NMIA at the said QUARRY. 2.4 The applicant is in lawful possession of Explosive License Number vide E/WC/MH/22/2007 EIII559) E/WC/MH/22/2005(E111560) with validity 31/03/2022 and E/WC/MH/22/2006 (E111556) with validity:31/03/2023 in Form-22 for stocking of Explosives and to provide Blasting operation with the usage of explosive materials having validity till 30th November'2021 under the Explosives Act, 1884 and Explosives Rules, 2008 made there under. 2.5 Balajee has approached the applicant to provide blasting operation with the usage of explosives for extraction of boulders at the said QUARRY on certain terms and conditions. 2.6 That the drilling and blasting work has thus been allocated to applicant by Balajee for Navi Mumbai International Airport land Development work site. The applicant has to undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication 2. the operations connected with excavations and embankments of earth 3. a work of art consisting of a portion of land modified by an artist Wikipedia, the free encyclopedia 2. As per Civil engineering use [edit]- earthwork means:- Typical earthworks include road construction, railway beds, causeways, dams, levees, canals, and berms. Other common earthworks are land grading to reconfigure the topography of a site, or to stabilize slopes. 3. As per Military use [edit]- earthwork means:- In military engineering, earthworks are, more specifically, types of fortifications constructed from soil. Although soil is not very strong, it is cheap enough that huge quantities can be used, generating formidable structures. Examples of older earthwork fortifications include moats, sod walls, motte-and-bailey castles, and hill forts. Modern examples include trenches and berms. 4. As per English Cambridge dictionary earthwork means: noun - a raised area of earth made, especially in the past, for defence against enemy attack. 5. 4s per Princeton's Word Net earth work means : earthwork (noun) an earthen rampart 6. That as per Wiktionary, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts of case is as under:- It is clear from the work order itself that the applicant is engaged for construction of airport by drilling and blasting technique for excavation of land. Hence it is a contract for construction. The land for airport is undoubtedly immovable property. Now, it needs to be interpreted whether there is transfer of property in goods (whether as goods or in some other form) involved in execution of contract, based on provisions of law and legal jurisprudence available in this regard. The materials used for drilling and blasting are movable property in their own identity before incorporation in execution of the project. Now for the question beforehand that whether there is transfer of property in goods involved in execution of project, a very important point of consideration is that instead of only using the word goods, the statute has used an expression being goods (whether as goods or in some other form) in the definition of works contract. 2.16 It is relevant to the issue that an exhaustive debate has taken place dealt with by a three judge bench of Supreme Court in Larsen and Toubro Limited and another vs. State of Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve our approval. We, therefore, set aside the order of the High Court and allow this appeal. 2.18 Applicant is of a view that all the conditions of works contract under Section 2(119) are met for the work of balance land development by drilling and blasting techniques. Further the view has been taken by the Advance Ruling Authority of Gujarat in case of M/s KHEDUT HAT [2018-TIOL-173-AAR-GST] that blasting work with use of explosives is a composite supply. The ruling pronounced is as under: There is deemed supply of explosives in this case in view of the judgement of Hon'ble Supreme Court in the case of Bharat Pest Control - 2018-TIOL-310-SC-VAT as well as the supply of service in the form of the blasting work - Therefore, the situation as narrated by the applicant is a 'composite supply' of goods and services and shall be covered by Section 2(30) and Section 8(a) of the CGST Act, 2017 and the GGST Act, 2017: AAR. 2.19 Further City and Industrial Development Corporation of Maharashtra Ltd., (CIDCO), a company wholly owned by the Govt. Of Maharashtra is a Governmental Authority as defined under Explanation 4(ix) of the Notification No 11/2017-CT dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity. 2.24 The supplies classifiable under the above entry are taxable at the rate of 5% and hence the appellant is of the view that the activity carried out by appellant shall be taxable under the above classification under HSN 995432 and be taxable at the rate of 5%. After the concerned jurisdiction officer filed the written submission dt 22/12/2021, the applicant also made its submission in reply to the said submissions made by the concerned jurisdiction officer, in which contentions as made in application as above are reiterated in short and point wise reply is submitted in response to the said written submission filed by the concerned jurisdiction officer. The said reply by applicant is considered while deciding the matter. 03 CONTENTION - AS PER THE CONCERNED OFFICER: The submissions of the jurisdictional officer are as under:- Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explosive is not falling in either labour charges nor it is service provided to the contractor. As per Clause (e) referred above, the consumable items are only the items used ancillary in works contract and those can be water, electricity and fuel etc., as these items are not the goods transferred to the contractor in execution of works contract and providing above or like items, the contractor is given some facilities by the Principal engaged in works contract. In mining operation, the main article with which operation can be given effect to, is the explosive and that explosive can be put to blast with the help of electricity, which may be generated or obtained from different source. The explosive is the item like cement, iron etc., for which tax is leviable. In mining operation, fuel is consumed to run the machinery like in other works contract and the machineries are run by electricity and fuel and in that process, there may be consumption of water. Therefore, the explosives are not those consumable items which can be equated with the water, electricity or fuel. When in the definition clause or a list prescribing certain items, is not exhaustive and uses the words- such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3 of the CGST Act, 2017 involving predominantly earth work (that is constituting more than 75 per cent of the value of the works contract) provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity. 3.7 Entry 3(x) of Notification No. 11/2017-CT (Rate) dated 28/6/2017 also provides for the tax rate of 5% on composite supply of works contract as defined in clause (119) of section 3 of the CGST Act, 2017 provided by a subcontractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity. 3.8 The main rider to the entry 3(vii) and thereby also to entry 3(x) is that the taxable person should predominantly be performing earth work and that too constituting more than 75 per cent of the value of the works contract. In the case in hand, however, the Applicant is not entrusted with the activity of performing any earth work and is definitely not doing any. As such, the Applicant will not fit in the activity defined under entry 3(x) vide the above mentioned n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is classifiable under HSN Code 9954 under Construction Services . C. Applicant does not concur with the view of jurisdictional officer that, its activities are not classifiable under entry 3(x) of the notification no 11/2017-CT Rate dated 28.06.2017. The applicant's understanding is that its activities for M/s Balaji as a sub-contractor are duly classifiable under entry 3(x) of the Notification No 11/2017-CT (Rate) and are taxable under GST at the rate of 5%. The specific rebuttal to the view of Jurisdictional officer are advanced in following paragraphs: C.1 The Main under to the entry 3(x) of the N.N. 11/2017-CT (Rate) is not that the taxable person should predominantly be performing earth work and that too constituting more than 75 per cent of the value of the works contract as understood by the jurisdictional officer. The extracts of both the entries is reproduced as under Entry 3(vii) Entry 3(x) [(vii)Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of its work. C.5. work to be done by M/s Balajee is for CIDCO which is Governmental Authority. C.6. The work to be executed by Balajee Infratech Construction Pvt Ltd involves material and services both and is for immovable property (development of land). Thus same qualifies as works contract C.7. Hence, it is clear that contract executed between Balajee and CIDCO is a works contract which predominantly involves earthwork (in fact completely earth work only). Thus same get classified under entry 3(vii) of the Notification No 11/2017-CT (Rate) dated 28.06.2017. C.8. The learned jurisdictional officer has erred in not understanding that main contractor who is supplying services to CIDCO is giving works contract service which involves earth work only. The invoice issued by Balajee to CIDCO is also under HSN Code 9954 and with rate of tax at 5%. C.9. Once it is settled that main contractor is giving services to Governmental Authority classifiable under entry 3(vii) of the N.N. 11/2017-CT dated 28.06.2017, the activity of applicant automatically classifies under entry 3(x) of Notification No 11/2017-CT dated 28.06.2017. C.10. That it is relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ladda, learned CA, Smt. Shuchi Sethi, learned CA and Shri Chirag Mehta, learned CA, appeared and made submissions. The jurisdictional officer Smt Manisha Bhadage, STO Pune VAT C 508, was present and has filed written submissions as above. The application was heard. 06. OBSERVATIONS AND FINDINGS: 6.1 We have understood the facts of the matter, considered the documents on record and the oral/written submissions made by both, the applicant as well as the jurisdictional officer. 6.2 The registered taxable person M/s Kapil Sons Explosives LLP (Applicant) is engaged in drilling and blasting works using Industrial explosives and other materials. 6.3 Applicant has submitted that, M/s CIDCO has given a contract to M/s Balajee Infratech and Constructions Pvt. Ltd. (Balajee) for Drilling, Blasting, Mucking and allied job and reclamation work of the land development for Navi Mumbai International Airport land Development work site at the Vahal Ulwe site of M/s CIDCO. Thereafter, M/s Balajee has subcontracted with the Applicant, to provide only drilling and blasting operation with the usage of explosives for extraction of boulders at the aforementioned site of M/s CIDCO. The work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite supply and since the said supply is in respect of immovable property i.e. Airport Land, we find that the applicant is providing Composite supply of works contract as to M/s Balajee. 6.8 Now, what we need to find is whether the work of drilling and blasting with explosives, which has been sub contracted to the applicant, falls under Sr. No. 3 (x) of Notification No 11/2017-CT (Rate) dated 28.06.2017. 6.9 Sr. No. 3 (x) of Notification No 11/2017-CT (Rate) elated 28.06.2017 states that Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity. 6.10 It is clear that the Entry 3(vii) of Notification No.11/2017-CT (Rate) dated 28/6/2017 provides for the tax rate of 5% on Composite supply of works contract as defined in clause (119) of section 3 of the CGST Act, 2017 involving predominantly earth work (that is constituting more than 75 per cent of the value of the works contract) provi ..... 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