TMI Blog2023 (1) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... d to , which has been interpreted and elaborated by the Appellant under their submissions made. In this regard, the Appellant have interpreted that the meaning of the term to should be construed as towards or concerned . Here also, we tend to agree with the interpretation and meaning drawn in respect of the word to on the basis of the dictionary meaning of the said word. Now, after having drawn the interpretation and meaning of the aforesaid words and phrases, we proceed to interpret the scope of the pertinent entry, i.e., entry under SI. No. 24 (ii) of the Rate Notification. On bare perusal of the said entry and on application of the fundamental principle of literal rule of interpretation, it is observed that the said entry covers only such activities or services which are used directly in the mining operations as understood by the dictionary meaning of the term mining which essentially entails the excavation of the land or sea to extract the valuable substances therefrom - it is the services provided by the EPC company who are undertaking the actual infrastructural work for increasing the production capacity of their client, VL, would be classified under the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act. 2. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as CGST Act and MGST Act ] by M/s. Worley Services India Pvt. Ltd., New Energy House. Ramkrishna Mandir Road, J B Nagar Kondivita, Andheri East, Mumbai - 400059. ( hereinafter referred to as Appellant ) against the Advance Ruling No GST-ARA-27/2020-21/B-38 dated 31.03.2022., pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as MAAR ). BRIEF FACTS OF THE CASE 3.1 The Appellant is a company registered under the Indian Companies Act, 1956. The Appellant is part of Worley Parsons Limited, which is a global engineering company providing project delivery and consulting services to the resources and energy sectors and other complex process industries. 3.2 The Appellant is inter alia engaged in the provision of project management consultancy (hereinafter referred as PMC' ) services. The Appellant is registered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, hunting, forestry, fishing, mining and utilities) (ii) Support services to exploration, mining or drilling of petroleum crude or natural gas or both. 12 3.7 In view of the above, the Appellant approached the MAAR seeking advance ruling on the following questions: (i) Whether the services provided by the Appellant are classified under SI No. 24(ii) of heading 9986 of the Rate Notification as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 and attracts GST @ 12% in terms of Si. No. 24(ii) of Rate Notification. (ii) Alternatively, whether the services provided by the Appellant are classified under SI No. 21(ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21 (ia) of Rate Notification. (iii) Further, if the subject services are not classifiable under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject. It has contracted with an EPC contractor for the purpose of development of Raageshwari well pads, pipelines and OHL, new RDG gas processing terminal with associated infrastructure and utilities, and a new 132 KV grid line as well as executed contracts with the EPC Contractor inter alia covering Tight Oil - ABH and Tight Gas - Wells for execution of development wells and surface facilities. The said new installations would increase prospect of mining and the pursuant sale of gas, procured from the fields in the Projects. 4.3 VL was required to review, monitor and manage the activities of such EPC contractor for the development Project at RDG as well as the All Development/Production - Debottlenecking Project, however, it has outsourced the same to the Appellant vide separate agreements covering the scope of PMC services. As per the agreements, all such operational, consulting and management services, related to the Project development at RDG as well as the All Development/Production - Debottlenecking Project, are carried out by the Appellant. 4.4 The Appellant have submitted that the pertinent Projects are essentially for development/augmentation of existing oil and gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heading, or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 454 Heading 9986 Support services to agriculture, hunting, forestry, fishing, mining and utilities. 462 Group 99862 Support Services to Mining 463 998621 Support services to oil and natural gas extraction 998622 Support services to other mining nowhere else classified Term 'support service' has a wide meaning 4.9 Heading 9986 of the SAC relates to support services and inter alia covers mining. The term support services' has not been defined under the CGST Act, 2017. The principle of nomen juris suggests that where definition of a term is not provided in a particular Act, the definition of the same can be borrowed from any other Act or statute. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance may be resorted to. The term 'to' is generally understood as below: Dictionary Meaning Words Phrases Legally defined, LexisNexis, Fourth Edition I think we ought to construe the word 'to' as meaning 'towards'. That is the sense in which the word is always used in all instruments connected with or relating to marine assurance. It has that meaning in a bill of lading, and I don't know why we should adopt a different meaning in this policy of insurance'. - College v Harty (1851) 6 Ech 205 at 210, per Pollock CB Merriam Websters Dictionary Used as a function word to indicate movement or an action or condition suggestive of movement toward a place, person, or thing reached; used as a function word to indicate contact or proximity 4.14 From the above, it can be seen that the term 'to' indicates contact or proximity to the subject or, more specifically, means 'towards'. Applying this to the present case, the Appellant submits that the 'support services to exploration, mining .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activity of extraction would qualify as mining, but also, it would include development of existing mining facilities, in order to bolster the quantum of mined goods or increase in sales or efficiency. 4.18 It is pertinent to note that the activity of mining pertaining to extraction of oil and gas is carried out by VL in relation to Project 1 and Project 2 as outlined below: Project 1 On a plain perusal of the agreement in relation to Project 1, it is clear that VL is the operator of the block, and it mines and processes gas from inter alia Raageshwari gas fields. In order to increase the gas sales in the concerned terminal, VL has proposed to develop new gas facilities by way of augmenting and increasing the present production capacity by constructing new well pads and improve pipelines. The development Project also includes upgrading the present gas facility and improving the capacity at RGT. Project 2 On a plain perusal of the agreement in relation to Project 2, it is clear that surface facilities infrastructure in existing Aishwariya field shall be utilized and augmentation shall be done based on adequacy studies. The Project inter alia entails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanatory Note clearly shows that the Chapter Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard has been made to following decisions: (a) Tetragon Chemie Private Limited and Ors Vs CCE and Ors [2001 (138) ELT 0414 Tri-LB]; (b) StoveKraft Pvt. Ltd. Vs State of Karnataka [2006 (2) TMI 603) ; (c) Bharat Coop. Bank (Mumbai) Ltd Vs Coop Bank Employees Union [2007(4) SCC 685] 4.24 In view of the inclusive nature of the phrase 'includes' used in the Explanatory Note to 998621 as well as in light of the judicial precedents, the services provided by the Appellant to VL will be classified under 'support services to exploration. mining or drilling of petroleum crude or natural gas. or both' under SI. No. 24 (ii) of heading 9986 of the Rate Notification under SAC 998621. ALTERNATIVELY, THE SUPPLY OF SERVICES BY THE APPELLANT SHOULD BE CLASSIFIED AS 'OTHER PROFESSIONAL TECHNICAL AND BUSINESS SERVICES RELATING TO EXPLORATION. MINING OR DRILLING OF PETROLEUM CRUDE OR NATURAL GAS OR BOTH' UNDER HEADING 9983 OF SI. No. 21(4) OF THE RATE NOTIFICATION 5.1 Without prejudice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is settled law that the term 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. The said word is succeeded by the phrase 'any trade, commerce, manufacture, profession whether or not it is for a pecuniary benefit'. The definition of the word 'business' under the CGST Act makes it amply evident that it covers within its ambit, a wide range of activities. The said definition would also include operational, consulting and management services. 5.4 Entry (ia) of SI. No, 21 of Rate Notification was inserted vide Notification No. 19/2019 with effective from October 1, 2019. The aforesaid entry was introduced by the Government in order to classify particular services such as management and consultancy services relating inter alia mining, and which do not merit classification as support services to mining under Heading 9986 of the SAC. 5.5 The Appellant have further emphasized that Entry (ia) of SI. No. 21 of Rate Notification uses the phrase 'relating to', which signify that any professional, technical and/or business services provided relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the first question raised by the applicant will have to be answered in the negative. (iii) From reading of the circular and the relevant explanatory notes to service codes 998341 and 998343 of the scheme of classification of services, it is clear that the impugned services are not covered by the said explanatory notes since the notes to service code 998341 is restricted to Geological and geophysical consulting services and the notes to service code 998343 is restricted to mineral exploration and evaluation and the impugned services cannot be considered as being connected to either geological and geophysical consulting services or mineral exploration and evaluation of services. Thus, it is observed that the impugned services are not covered under Sr. No. 21(ia) also of notification 11/2017-CTR dated 28.06.2017 as amended by notification No. 20/2019-CTR dated 30.09.2019(SAC 9983). (iv) Even though the subject services consist of professional, technical and business services, the same are not covered under Sr. No. 21(ia)(SAC 9983) and Sr.No. 24(SAC 986) of Notification 11/2017-CT(R) dated 28.06.2017as amended. Therefore, the said professional , technical and business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the impugned AMC (Project Management Consultancy) services provided by the Appellant can be construed as support services to exploration, mining or drilling of petroleum crude or natural gas or both as enumerated under the entry at SI. No. 24(ii) of the Rate Notification attracting GST at the rate of 12%; (b) If answer to the above question is in negative, whether the impugned services provided by the Appellant can be construed as Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both under the entry at SI. No. 21 (ia) of the Rate Notification attracting GST at the rate of 12%; (c) If the answer to the above question is also negative, then what will be the classification of the impugned services, and what will be the rate of tax thereon? 10. Now, we proceed to examine the first moot issue as to whether the impugned PMC (Project Management Consultancy) services provided by the Appellant can be construed as support services to exploration, mining or drilling of petroleum crude or natural gas or both as enumerated under the entry at SI. No. 24(ii) of the Rate Notification attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly involves mining or exploration of gas. They have also referred to the various dictionary meanings of the word 'to' for deriving the interpretation of the clause support services to exploration, mining or drilling of petroleum crude or natural gas or both , and eventually derived the meaning of word to used in the aforesaid clause to be construed as towards or concerned . Based on this, they have contended that since their management activities related to the projects are ultimately directed towards the mining of petroleum crude or natural gas or both, their services would be construed as support services to exploration, mining or drilling of petroleum crude or natural gas or both , falling under entry at SI. No. 24(ii) of the Rate Notification. They have also made reference to the Circular No. 114/33/2019-GST dated October 11, 2019 ( Circular') wherein clarification on the scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both has been provided. The said Circular has made reference to the Explanatory Notes to the Scheme of Classification of Services which inter alia includes the explanation of the SAC 998621, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributing to the reason that the impugned activities of management and supervision of the projects have been outsourced by VL to the Appellant as per the agreement entered between them. 14. Further, the aforesaid entry under SI. No. 24 (ii) of the Rate Notification inter alia contains the term mining'', which is relevant in the context of the present case. Since the meaning of the term mining has not been provided under the CGST Act, 2017, we would resort to the dictionary meaning of the said term, which is being reproduced hereinunder: As per Cambridge Dictionary: the industry or activity of removing substances such as coal or metal from the ground by digging: 15. Thus. on perusal of the aforesaid meaning of the term mining , it is observed that, in common parlance, mining is construed as digging up of earth for extracting something valuables. It is further observed from the aforesaid notification entry under SI. No. 24 (ii) that the phrase support services and the phrase mining of petroleum crude or natural gas or both have been connected with the word to , which has been interpreted and elaborated by the Appellant under their submissions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining and extraction operations whereas the services provided by the Appellant are not so as the said services are in the nature of review, monitoring, management and supervision of the project works which are done towards realization of mining activities. Hence, we agree with the MAAR observation wherein it has been held that it is the services provided by the EPC company who are undertaking the actual infrastructural work for increasing the production capacity of their client, VL, would be classified under the entry at SI. No. 24(ii) of the Rate Notification, and not the Project Management Consultancy services provided by the Appellant which are not directly concerned with the mining operation. 17. Further, the use of the word include in the pertinent explanatory note to SAC 998621 does not suggest in any manner that the activities which are not similar in the nature and import to the ones enumerated in the said explanatory note will be covered under the scope of the subject SAC. Since, the Appellant's activities are not in the similar nature to those of activities enumerated under the subject explanatory note, hence there is no question of inclusion of the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied by the Appellant are incidental to the activity of mining and would accordingly fall under heading 9983 of the Rate Notification under 'other professional, technical and business services relating to exploration. 20. The Appellant further relied upon the Circular 114/33/2019-GST dated October 11, 2019 ('Circular') wherein it has been stated that most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986 of the SAC. Further, it has been clarified that certain services such as technical and consulting services in relation to exploration, would merit classification under the Heading 9983 of the SAC. The relevant extract of the Circular is reproduced hereinbelow: '2. The matter has been examined. Most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986. A few services particularly technical and consulting services relating to exploration also fall under heading 9983. Therefore, following entry has been inserted under heading 9983 with effect from 1 st October 2019 vide Notification No. 20/2019- Central Tax (Rate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices; evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying; providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magnetometric methods other subsurface surveying methods This service code does not include - test drilling and boring work, cf. 995432 998343 Mineral exploration and evaluation This service code includes mineral exploration and evaluation information, obtained on own account basis. 23. On perusal of the above, it is evident that services covered under the SAC 998341 are essentially related to the survey and exploration of the mineral deposits and the study of their properties, which is certainly not the case with the impugned services which are in the nature of project management and supervision, and hence the contention put forth by the Appellant are devoid of any merit and cannot be accepted. It is also pertinent to mention that the CBIC Circular No. 114/33/2019-GST dated October 11, 2019 clearly specified that the scope of the entry at Sr. No. 21 (ia) under heading 9983 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
