TMI Blog2022 (5) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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. An illustration provided under the said definition provides that 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 - it is obvious that the supply of packing material, supply of service of insurance or transport is not independent of the supply of goods. Hence, the transportation of goods, supply of packing material and insurance are covered by the definition of composite supply with the supply of goods which is a principal supply in the illustration. The supply of different type of items such as Solar Panel, Controller, Solar Pump or Structure in different possible combinations, if any, without anyone of the goods being supplied as principal supply would be covered by the definition of mixed supply of different type of goods - In the instant case the appellant is obliged to sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter also referred to as the CGST Act ) read with Section 100 of the Rajasthan GST Act, 2017(hereinafter also referred to as the RGST Act ) by M/s Utsav Corporation (Legal Name Sapna Gupta) Gurjar Ki Thadi, Jaipur (hereinafter also referred to as the appellant ) against the Advance Ruling No. RAJ/AAR/2021-22/10 dated 03.09.2021. BRIEF FACTS OF THE CASE 3. M/s Utsav Corporation (legal name Sapna Gupta) Gurjar Ki Thadi, Jaipur (herein after referred as appellant) have filed appeal against Ruling issued by Authority for Advance Ruling Rajasthan vide order No. RAJ/AAR/2001-22/10 dated 03.09.2021. The Appellant has submitted appeal on online portal on 06.10.2021 and in hard copy on 18.10.2021. Fee of CGST Rs. 10000/- and SGST Rs. 10000/- have been paid vide Challan dated 23.09.2021. Brief facts of the case are as under: - 3.1 M/s Utsav Corporation, Gurjar Ki Thadi, Jaipur (hereinafter referred to as appellant ) is a proprietorship concern engaged in providing products and services in energy conservation, renewable energy sources, water infrastructure and water treatment project management. The appellant is engaged in supply of solar energy-based products under var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture): -Since, Solar Water Pumping System is not the whole device it is made of Solar panel, Controller, Solar Pump, Structure etc. includes procurement, development, testing, commissioning etc hence, it is a mixed supply for goods and services and highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.7 Solar panel + Solar Controller + Solar Pump, Solar Pump + Solar Panel, Solar Pump + Controller, Solar Panel + Controller: -Since the above composition is the mixed supply of goods, as already discussed in above para, hence the highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.8 Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water application: - It is a works contracts Service and attracts 18%rate if GST S. NO. 3 of Heading 9954 (ii) of Notification No. 11/2017 dated 28.06.2017. 4. Aggrieved by the ruling, appellant has filed appeal before this forum on following grounds: - 4.1 Appellant submitted that technical details and use of the products Solar Controllers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an electronic DC power to DC power converter and is often called a maxi miser as it aids in maximum use of power generated by the solar panel array. In the sunlight, the MPPT algorithm of solar drive extracts maximum power and also operates the motor at a variable speed based on the power input to drive. When the sunshine varies during the day, the power input to the drive also varies and the solar drive generates variable ratio to control the speed of the motor. The above drive with MPPT is assembled in an enclosure to form a solar converter. MPPT technology is not used in conventional electric pumps and it has no use there because the technology functions to maximize the use of DC power generated by solar panel array by the solar pumping systems only. It is a distinguishing factor of solar controllers. MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems specifically provide that Maximum Power Point Tracker (MPPT) shall be included to optimally use the power available from the SPV array and maximize the water discharge. Since in the case of appellant the controllers comprise of Variable Frequency Drive (VFDs) with MPPT, it is apparent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance of SPY water pumping systems arrangement for seasonal tilt angle adjustment and three times manual tracking in a day should be provided. In order to make structure rigid, the gap between Telescopic pattern supports should be minimal, further, for bearing of centre load of whole structure only pins should be used instead of threaded bolts. As far as general classification of iron structures in Customs tariff is concerned, the relevant Heading is HSN 7308 which has following description: Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge-sections, lock-gates, towers, lattice masts, roofs, roofing frame-works, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel However, in the case of appellant, the product in question is not general iron structures but Water Pumping System Mounting Structure . They are parts of specific machines. Hence it is important to refer the Section Note according to which parts of machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly used being required for initial setting up of a solar power generation project or facility, hence eligible to the benefit of exemption Notification No.15/2002CE dt.27.02. 2010, as amended. As relied upon in the above judgment also, MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems dated 17.7.2019 specifically state that PV Modules should be mounted on metallic structures of adequate strength and appropriate design. Hence structures designed for mounting of PV modules for solar water pumping system are essentially parts of Solar water pumping system. In the case of Elecon Engineering Co. Ltd. 1998 (103) ELT 395 (Tribunal), it was agreed that power cables cut to specific size and used as a protection to the wind mill from short circuit should be treated as an essential part of the Wind Turbine Controller. Hence above facts and judgment strengthen the facts that structures are parts solely for use in Solar water pumping system. Applying the above Section Note 2 to structures in the given case, these are parts not included in Chapter 84 or 85, so they out of (a) above. Thus structures are other parts and as per Note 2(b), since these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Appellant submitted that as per the definition, characteristics of mixed supply are as under: 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 4.2.1 Appellant submitted that pre-requisite of a mixed supply is that the individual supplies therein are made by the taxable person for a single price. However the given transaction of sale will be made by the appellant on separate prices clearly bifurcated for all the parts of Solar Water Pumping System. Copy of sample Purchase Order by a customer of the appellant for previous periods has been attached. 4.2.2 Appellant submitted that it is abundantly clear from the above definition that a mixed supply is a combination which does not constitute a composite supply. Hence without applying and refuting the applicability of composite supply, conclusion regarding mixed cannot be reached. Now in the given facts, it was expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich of course qualifies as a Solar Power generating system or Solar power based device . This understanding is backed by a rule of interpretation that a heading of classification should be understood in a sense to include that article in unassembled or disassembled form also. Rule 2 of General Rules for the Interpretation of Customs Import Tariff is applicable here which provides as under: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled. Rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponents (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. 4.2.12 The solar pumping system is a machine which consists of individual components being the above products. As explained in detail above, these products are intended to contribute together to form a Solar Water Pumping system which has to perform the function of water pumping and pumps for handling water are classifiable under Heading 8413.Hence according to the Section Note 4, Solar Water Pumping System is classifiable under Chapter 8413. 4.2.13 It is further submitted that the Solar pumping system sold by the appellant consisting of the individual components in unassembled form will still be included in Heading 8413 only as per Rule 2(a) which clearly provides that a reference to a heading should be taken to include a reference to that article presented in unassembled or disassembled form. 4.2.14 Now as it is understood while classification of sola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... energy and it is an energy saving device used for automatic switching off the street lights making proper use of grid power and increasing the life of the lamps by operating the street light from sunset to sunrise. The contention of the Revenue is that whole system is not on the solar power generating system. Only one part of the system i.e. SPV module, can be called as `Solar Power Generating System . The other part of the SPVDDS is application part where the power generated by the SPV module is consumed by which the Dusk Down System functions. Hon ble Delhi Tribunal held as under: The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. 4.2.18 The Authority for Advance Rulings of Uttarakhand in case of Eapro Global Limited has confirmed the taxability for supply of same goods in similar combinations where the appellant in exactly similar background asked the following questions: (a) Applicability of GST rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to Won-conventional energy devices ; Observes that (i) manner in which the goods were being cleared was in a package comprising of two lanterns along with a SPV panel, (ii) assessee did not sell the lantern individually whereas the packaging and marketing of product showed that both the lamps in the package were marketed as solar lanterns and (iii) assessee did not sell the single lantern individually or separately; Remarks The classification of the goods need to be determined in the form and manner in which the same is cleared and not by unbundling/vivisecting the package into individual components to determine their classification ; Relying upon the technical opinion provided by IIT, concludes that the assessee clears nothing but Solar Power Generating System or Solar Photovoltaic Lantern and the exemption claimed by the assessee in respect of same under SI No 237 of Not No 6/2002-CE .is admissible to the whole package : Mumbai CESTAT. 4.2.20 That in the view of appellant based on explanations given below, all the items supplied in the transaction of sale are classifiable under Entry 201A of the Notification No. 1/2017-CT (Rate) dated 28.06.2017 amended as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Section Notes. Being parts for manufacture of Solar water pumping system and falling under Chapter 84 or 85, all these parts or any combination of them being intended to be sold by the appellant must be classified under Entry 201A of Notification No. 01/2017 - CT(Rate) dated 28.06.2017 i.e. GST Tariff for Goods. 4.4 Appellant submitted that supply of Solar Water Pumping System along with its installation, the ruling given has been framed in complete ignorance to specific provisions applicable in the present case and ruling given by AAR is reproduced below: - In the present case, the applicant is proposed to supply the functional solar water pumping system as a whole. which include supply. installation, commissioning maintenance. The proposed supply including installation, commissioning maintenance would fall under the ambit of works contract service as per Section 2(119) of CGST Act,2017 and attracts 18% GST. 2.Further, we observe that the supply. supplied by the applicant i.e comprising of goods (Solar Panel Solar Controller + Solar Pump + Structure) along with the installation is a composite supply of works contract, and the rate of tax in given service shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g forward to provide to the main contractor Solar Pumping Systems comprising of following goods: Solar Panels Solar Pumps Solar Controllers Structure LED Lights Installation and commissioning of the Solar energy based bore well pumping system at the respective sites. A sample proposal for scope of work for sub-contracting arrangement has also been enclosed. 4.4.4 Appellant submitted that the GST rates on goods have been notified by the Government in Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 which has been amended by various notifications and the extract of the said notification amended till date relevant for the present issue is reproduced as under: SI.No. Chapter Description 201A 84, 85 or 94 Following renewable energy devices parts for their manufacture: a) Bio-gas plant b) Solar power based devices c) Solar power generator d) Wind mills, Wind Operated Electricity Generator (WOEG) e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-20 dated 15.05.2019 (copy enclosed), wherein it was held as under: 23. On careful consideration of the abovementioned entries of the said notifications, we find that the Solar Energy based bore well water pumping system (hereinafter also referred to as the System ) deserve classification under entry No. 234 of the Notification No. 01/2017-Central Tax (Rate) as Solar Power based devices . The Appellant has contended that benefit of Not cation Nos. 24/2018-Central Tax (Rate) and 27/2018- Central Tax (Rate) inserting Explanation in the entry No. 234 ibid and inserting entry No. 38 ibid respectively should be available to them. After going through the amended entries 234 and 34 ibid, we find that the benefit is available only when the Solar Power based devices i.e. the System is supplied along with other goods and Services, one of which being a taxable service specified in the entry at S. No. 38 ibid. We find that a standard Solar Energy based bore well water pumping system comprises SPV panels, Structures, Storage tank Controller, Pipe and Cables. The Appellant is also adding De-fluoridation unit (DFU) and also accomplishing the task of installation, commissioning, operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration (Sapna Gupta), Jaipur. During the course of personal hearing, the authorised representative reiterated the submissions already made by them in the appeal under the head of grounds of appeal . DISCUSSION AND FINDINGS: 6.1 We have carefully gone through the Appeal papers filed by the Appellant, the Ruling dated 03.09.2021 given by the AAR, Rajasthan, written as well as oral submissions made by the authorized representative(s) of the appellant, at the time of personal hearing held on 08.12.2021. 6.2 We find that the Appellant has claimed that they are engaged in supply of solar energy based products under various contracts and on the basis of purchase orders from customers they supply these products with or without installation service. The appellant has sought advance ruling as to the classification of the goods proposed to be supplied by them and the rate of GST applicable on different types of sale (supply) of such solar energy based products such as Solar Water Pumping System as a whole or sale of one of the specified products on standalone basis or sale of the products under different combinations to be undertaken by them and also supply of parts of the sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it has been claimed by the appellant that technical details and use of the product i.e. solar controller have been ignored by the AAR, Rajasthan in determining the classification of the product. We find that the relevant entries in GST Tariff for controller classifiable under Chapter 85 are as under: SI.No. HSN Description Rate 375. 8504 Electrical transformers, static converters (for example, rectifiers) and inductors, other than charger or charging station for Electrically operated vehicles 9% The appellant has relied heavily on the guidelines of the Ministry of New and Renewable Energy for Solar Water Pumping Systems to claim that controllers to be supplied by them are essentially parts for the manufacture of solar water pumping system which is a solar power based device attracting GST rate of 5% as per entry number 201A of Notification No. 01/2017- Central Tax (Rate), dated 28.06.2017. Based on these guidelines, it is their claim that an SPV Controller converts DC voltage of the SPV array into sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the appellant that the product in question i.e. steel structure is not a general iron structure rather the same is specifically designed as per technical specifications of solar water pumping system and, therefore, it is a part of the solar water pumping machine. Claiming that the structures in the given case are suitable for use solely with a particular kind of machine i.e. solar water pumping system, the appellant has relied upon the judgment of Hon ble CESTAT in the case of M/s. Phenix Construction vs Commissioner of Central Excise Service Tax, Ahmedabad-II as reported at 2017-TIOL-3281-CESTAT-AHM wherein it was held that structures and parts of structures would be considered as components of the reflector, undisputedly used being required for initial setting up of a solar power generation project or facility. We find that the judgment relied upon by the appellant was given in the context of exemption provided under Notification No. 15/2010-C.X., dated 27-2-2010 issued under Section 5A(1) of the Central Excise Act, 1944 which was contingent upon fulfillment of certain conditions. For better appreciation of the provisions of the notification, the relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and submission of undertaking are the distinguishing factors which are absent here. The appellant has claimed that the structures in the given case are specifically designed as per technical specifications of solar water pumping system and therefore, the same are intended to be parts of solar pumping systems. We find that structures of iron and steel are specifically classified under Chapter Heading 7308 which covers a variety of structures intended to be put to different uses some of Which have been illustrated in the said heading. As a matter of fact, each of the iron structures is designed according to the specification as per the intended use and no structure is manufactured in isolation without taking the specifications for intended use into consideration. But such specifications of the design of a structure can not take the structures out of the definition of structures to make them parts of the item to which they are attached or part of the item which they are supposed to support. If such a contention of the appellant is accepted every structure of iron and steel etc. would be called a part of the item to which it is attached or the item which it supports. In such a sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the rate of GST applicable to solar power generating system should also apply to supply of such items in different types of combinations. We observe that there are clear provisions in the GST Act itself as regards composite supply as defined under Section 2(30) and mixed supply under Section 2 (74) of CGST Act, 2017 which deal with situations where supply consisting of two or more taxable goods or services or both is involved. In this regard, we agree with the appellant s primary contention to the effect that without applying and refuting the applicability of composite supply , conclusion regarding mixed supply cannot be reached. Accordingly, we find it appropriate to examine the matter with reference to the concept of composite supply in order to reach a logical conclusion. We find that as per Section 2(30) of the CGST Act, 2017 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. An illustration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplies constitutes a principal supply or that the supplies are naturally bundled in the ordinary course of business. Further, each of these goods, as submitted by the appellant, are capable of being sold individually as standalone and such supply individually does not require simultaneous supply of other goods let alone principal supply of other goods. The instant factual position leads us to the logical conclusion that the supply of each one of the items in question as proposed by the appellant in different possible combinations is independent and each one of the items can be supplied separately in the appellant s own case. We, therefore, observed that from the definitions it emerges that a supply, consisting of any possible combination of more than one type of goods which are independent of each other in terms of their supply but which are sold together as a bundle simply because the buyer has ordered purchase of such combination of goods, does not constitute a composite supply as the absence of the element of principal supply and natural bundling in the ordinary course of business weighs against the definition of composite supply. We, therefore, hold that the supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and maintenance thereof. We observe that the Rajasthan Authority for Advance Ruling (AAR) in its Ruling No. RAJ/AAR/2021-22/10 Dated 03.09.2021 has observed that the proposed supply comprising of solar panel, solar controller, solar pump and structure along with the provision of installation service for installation of the said system is a composite supply classifiable under the definition of works contract and accordingly, the supply shall attract GST @18% in terms of Sl. No, 3(ii) (Heading 9954) of Notification No. 11/2017-CT(R), dated 28.06.2017. The appellant has mainly submitted that the entries in tariff notifications for both goods and services have been amended since 01.02.2019 itself to give effect to taxability of contracts for supplies of goods with installation services in the sector of solar devices in a ratio of 70:30 with an effective rate of 8.9%. It is their further submission that the relevant notification has been further amended vide Notification No. 8/2021-Central Tax (Rate), dated 30.09.2021 (after pronouncement of Advance Ruling in the instant case) to increase the tax rate of goods portion from 5% to 12% resulting in the effective tax of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese entries concerning supply of goods and services respectively are inter-connected by the respective explanations given below them. The said entry No. 38 alongwith its explanation reads as follows:- (1) (2) (3) (4) (5) 38 9954 or 9983 or 9987 Service by way of construction or engineering or installation or other technical services, provided in relation of setting up of following, - 9 - (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills. Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants devices (f) Ocean waves/tidal waves energy devices/plants Explanation :- This entry shall be read in conjunction with serial number 234 of Schedule I of the notification No. 1/2017- Central Tax (Rate), published in the Gazette of India. Extraordinary. Part II. Section 3. Sub-section (i) dated 28th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Rajasthan Appellate Authority for Advance Ruling in the case of Kailash Chandra (Proprietor of Mali Construction) involving similar situation. The Advance Ruling Authority in the instant case had held that the instant supply comprising supply of goods in the form of solar energy based bore well water pumping system alongwith installation and commissioning of such water pumping system is a composite supply of Works contract attracting GST 18% in terms of entry SI. No. 3 of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. However, the ruling that the composite supply of goods and services in the instant case deserves to be classified as works contract service is not supported by legal position which has been correctly interpreted by the Authority for Advance Ruling for the State of Uttarakhand in the case of M/s Premier Solar Systems Pvt. Limited as reported at 2019-TIOL-79-AAR-GST by holding that the supply of solar irrigation water pumping system along with design, erection, commissioning and installation would constitute a composite supply attracting GST @ 5% on goods portion and GST @ 18% on services portion as prescribed in the relevant entry of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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