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TMI Blog2023 (1) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression 'GST Act' would mean the CGST Act and the WBGST Act both. 1.2 The applicant, on being awarded a sub-contract from M/s Patil Rail Infrastructure Pvt. Ltd., undertakes the work of conversion of Short Welded Rails ("SWR") to Long Welded Rails ("LWR") by Flash Butt Welding process on the tracks running from Furkating (FKG)-Jorhat (JTTN)-Mariani (MXN), in the state of Assam. The work also includes supply of all assistance of labour for welding of rail joints. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Expansion effect due to temperature is reduced. 2.2.3 The SWR would be converted into LWR by the applicant by the process of Flash Butt Welding (FBW). FBW is a type of resistance welding that does not use any filler metals. The pieces of metal to be welded are set apart at a predetermined distance based on material thickness, material composition, and desired properties of the finished weld. Current is applied to the metal and the gap between the two pieces creates resistance and produces the arc required to melt the metal. Once the pieces of metal reach the proper temperature, they are pressed together, effectively forge welding them together. Thus, the process of welding does not require any use of materials. 2.3 The applicant submits that only welding services are provided by them by using Flash Butt Welding Machine on railway tracks which can be easily detachable from the earth without any damage and no goods are transferred in the services involved. In view of the nature of activities being carried out by the applicant, it is contended that the services provided by the applicant should not be treated as works contract and hence not classifiable under any of the entries und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty 2.5 The applicant further argues that the services provided by them would qualify as job work as defined in clause (68) of section 2 of the GST Act which reads as follows: * "job work" means "any treatment or process undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly; 2.6 The applicant submits that the goods (rail tracks) sent by the principal contractor are the property of the Indian Railways. As both the principal contractor and the Indian Railways are registered under the GST Act and the treatment or process of welding has only been carried out on such goods (rail tracks) to convert from SWR to LWR, the said services provided by them would fall under the ambit of job work. 2.7 In course of personal hearing, the authorized representatives of the applicant request to consider following questions: * Whether the supply of labour for the process of welding would be considered as a standalone supply or ancillary to the composite supply of welding? What should be the rate of tax and classification of such labour supply? The applicant, with reference to aforesaid questions, submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract' given in clause (119) of section 2 of the GST Act read with Para 6(a) of Schedule II of the Act ibid clearly denotes that works contract is a composite supply of services which shall fulfil both the following conditions: (a) the supply shall be in relation to immovable property only; (b) the supply essentially involves transfer of property in goods (whether as goods or in some other form). Even if we lay aside the first condition for the moment, still the supply being undertaken by the applicant in the present case doesn't satisfy the later condition as per submission of the applicant i.e., the supply doesn't involve transfer of property in goods. We therefore hold that the instant supply would not be treated as works contract. 4.5 We now come to the next issue related to job work i.e., whether the instant supply provided by the applicant would qualify as 'job work' as defined in clause (68) of section 2 of the GST Act or not. It appears from the definition of 'job work' that activities of any treatment or process shall qualify as job work subject to fulfilment of following two criteria: (i) the treatment or process has to be undertaken on goods i.e., on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fasteners, railroad ties and ballast plus the underlying subgrade. * The role of the subgrade in railways is similar to that of a building foundation. The applied loads are transferred by the deflection of the rail to the ballast bed and then passed on via the subgrade to the subsoil. * Traditionally, tracks are constructed using flat-bottomed steel rails laid on and spiked or screwed into timber or pre-stressed concrete sleepers with crushed stone ballast placed beneath and around the sleepers. * Sleepers: A sleeper is a rectangular object on which the rails are supported and fixed. The sleeper has two main roles: to transfer the loads from the rails to the track ballast and the ground underneath, and to hold the rails to the correct width apart (to maintain the rail gauge). They are generally laid transversely to the rails. * Fixing rails to sleeper: Various methods exist for fixing the rail to the sleeper. Historically spikes gave way to cast iron chairs fixed to the sleeper, more recently springs (such as Pandrol clips) are used to fix the rail to the sleeper chair. 4.9 The applicant in support of his argument has placed reliance on the judgement delivered by the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnectivity stretches across the states and covers a total route length of 68,103 km (source: Wikipedia.org), railway tracks are laid not only over the ground but the tracks are laid over numerous railway bridges and also the same passes through a number of tunnels. In fact, the railway tracks are considered to be the backbone of railway transportation system and to keep utmost priority on safety measures, railway tracks are firmly fastened on the sleepers. The applicant has contended that railway tracks are easily detachable and therefore should not be treated as immovable property. Considering the procedure as well as the technical aspects for laying of railway tracks, we are unable to accept the factum that railway tracks can easily dismantled from a place and subsequently can easily be laid again elsewhere. 4.11 We are therefore of the view that that railway tracks, for its permanent characteristic and in absence of mobility like other goods, would be regarded as immovable property and therefore fail to qualify to be goods. As a result, the work of conversion of Short Welded Rails ("SWR") to Long Welded Rails ("LWR") by Flash Butt Welding process cannot be treated as 'job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant for construction of railways and therefore would be treated as 'General construction services of civil engineering works' under Group 99542. Services under Tariff code 995421 and 995429 is reproduced below for reference: 995421: General construction services of highways, streets, roads, railways and airfield runways, bridges and tunnels 995429: Services involving repair, alterations, additions, replacements, renovation, maintenance or remodeling of the constructions covered above The instant services, therefore, falls under Tariff Code 995429 and to be taxed @ 18% vide serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time [ corresponding West Bengal State Notification No.1135 F.T. dated 28.06.2017]. In view of the above discussions, we rule as under: RULING The work being undertaken by the applicant as a sub-contractor for conversion of Short Welded Rails ("SWR") to Long Welded Rails ("LWR") by Flash Butt Welding process on the railway tracks along with supply of labour services shall be treated as composite supply of services falling under Tariff 995429 and shall be taxable @ 18% vide serial number ..... X X X X Extracts X X X X X X X X Extracts X X X X
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