9911796707
TMI Blog2024 (2) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rate) dated 30.09.2019, they had sought Advance Ruling before the AAR, Rajasthan to classify the said services under SAC heading 9986 or alternatively under SAC Heading No. 9983. Being aggrieved by the Rulings pronounced by the AAR, Rajasthan, they have filed an appeal before this authority. The present appeal has been filed under Section 100 of the Central Goods & Services Tax Act, 2017 (hereinafter also referred to as 'the CGST Act') read with Section 100 of the Rajasthan Goods & Services Tax Act, 2017(hereinafter also referred to as 'the RGST Act') by the Appellant on the portal on 19.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/17 dated 13.09.2021. The order was communicated to them on 21.09.2021 BRIEF FACTS OF THE CASE 1. M/s Petrofac International (UAE) LLC (hereinafter referred to as "PILL" or "Petrofac" or "Contractor" or "Appellant") and their parent company is reportedly a leading international service provider to the energy industry, with a diverse client portfolio including many of the world's leading energy companies. PILL is involved in designing, building, for the energy industries in Africa, CIS, India & Middle East. 2. The Appellant are reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction/ fabrication drawings prior to start of site construction and updating same as per actual site conditions etc. (d) Appraisal and taking cognizance of site-conditions, Government rules & regulations, bye-laws, applicable codes & standards, requirements of authorities having jurisdiction over the work site(s), environmental & pollution concerns including conditions/ stipulations laid downs by concerned authorities etc. (e) Obtaining all necessary approvals & work permits from concerned authorities for performing the work, including shifting/ relocation of existing facilities & other utilities, etc. (f) Coordinating with vendors, suppliers, fabricators & to perform all activities including expediting, inspection & testing, transportation, loading/ unloading, storing, shifting & liaison with the authorities, etc. (g) Identifying & planning access to sites as may be required for construction of project facilities. 6.2 Design & Engineering -The Appellant are required to perform the following activities at each engineering stage: (a) Pre-bid engineering (b) Design & detailed engineering (c) Engineering for Procurement (d) Engineering for Construction Install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within RDG Terminal, Intrafield Pipeline, irrigation water pipeline (quality same as potable water) approach roads between well pads. Contractor to design, engineer, procure, construct and commission the surface facilities in a manner that new terminal along with existing RGT Terminal can process -135 MMSCFD gas for sales and -20 MMSCFD for internal consumption and deliver Sales Gas as per Sales Gas Specification mentioned in Section DI-37. 2. Boundary conditions (inlet and outlet) far design is given under Section DI-37. Providing & mobilizing all project management resources, as required, for performance of works. The project management team shall be fully equipped with planning/scheduling software and analysis tools arid manned with competent and experienced manpower complete with sound project management, reporting, and project control system. It is the requirement of this Contract that all the project planning/scheduling activities shall be established, monitored and controlled using commercially available, PRIMAVERA version 6.0 or above "software. Other software are not acceptable. (ii) Clause Dl-22-Contractor shall be responsible for the detail design of RDG Gas Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended scope of tender. (v) D1-26- Construction & Installation describes those activities required to achieve Mechanical Completion of the Plant, including Packages. Contractor's scope of work and activities which are required to be performed to achieve the Mechanical Completion, shall include, but not limited to, construction activities like all site preparation, civil and infrastructure including roads and drains, approach roads between well pads, pre-fabrication, pre-assembly, fabrication, erection and installation, testing, Mechanical Completion and readiness for Commissioning of the Plant/Pipeline & OHL, Well pads with all drawings and documents compiled for the facility. 8. The Appellant have been providing the subject services in the State of Rajasthan and classifying such services under SAC Heading 9954. However, vide Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, Entry No. 24(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 has been amended to include within its ambit, support services to, inter alia, mining activities, and Entry No. 21(ia) thereof has been newly inserted to cover within its ambit professional, technical and business se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based upon erroneous presumptions as to the facts and law 11.1 The Appellant submitted that the impugned Ruling, at Para 5 states that, "From the explanatory note, it reveals that Support services shall include the services to be provided for exploration, once the infrastructure/ facility for exploration is built & complete in all respect and ready to start exploration. But it does not include the services to be provided before creating the infrastructure/ facility. Under the EPC contract, the Appellant have to undertake activities from designing, engineering, procurement, construction of customized facility, commissioning of permanent facility, test run and hand over of complete facility so designed, constructed, tested and commissioned. Thus, it cannot be treated as support services to oil & gas extraction." 11.2 In view of the Appellant, a perusal of the aforesaid basis given by the Authority for Advance Ruling would reveal that the AAR, Rajasthan has made an incorrect presumption of the support services envisaged under SAC Heading No. 9986 in the following manner: (a) That support services do not include the services provided for creating the infrastructure/ facility for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crude or natural gas or both. 11.6 The Appellant also referred to the Rules of Interpretation falling under Chapter III of the United Nations Central Product Classification ("UNCPC"). The UNCPC gains significance for the purpose of classification under the GST law because the Explanatory Notes to the Scheme of Classification of Services ("Scheme") is itself based on the UNCPC - as stated by the CBIC in Circular No. 114/33/2019-GST dated 11.10.2019. The interpretative rules for classification of services under the UNCPC are aligned with the above-mentioned settled principle of classification. 11.7 The Appellant further submitted that the Circular clarified the scope of the aforesaid entry as follows: "This service code includes derrick erection, repair and dismantling services; well casing, cementing, pumping, plugging and abandoning of wells; test drilling and exploration services in connection with petroleum and gas extraction; specialized fire extinguishing services; operation of oil or gas extraction unit on a fee or contract basis. This service code does not include geological, geophysical and related prospecting and consulting services, cf. 998341" 11.8 As per the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 9986 as per the Scheme would reveal that it covers diverse nature of activities ranging from test drilling and exploration, to casing and cementing of wells and derrick erection for the purpose of moving heavy material on the oil fields. 11.12 The Appellant submitted that the impugned Ruling, while denying the benefit of Heading 9986 to the Appellant, stated that Heading 9986 covers only those activities which are provided once tire infrastructure/ facility for exploration is built & complete in all respect and ready to start exploration. 11.13 The Appellant denied such interpretation of tire classification entry at Heading 9986 adopted by the AAR, Rajasthan, for it not only appears absurd and lacks any credible basis in law, it is also directly in the teeth of the established principle of law that classification entries should be derived from literal meaning and no addition of words or expressions should be made into it. In the case of Oswal Agro Mills Ltd. & Ors. v. Collector of Central Excise & Ors. 1993 (66) E.L.T. 37 (S.C.), the Hon'ble Apex Court held as follows: "The ordinary rule of construction is the provision of a statute must be construed in accordance with the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) CIT v. Calcutta Knitwears, 2014 (6) SCC 444 11.17 In the light of the above, the Appellant submitted that the AAR, Rajasthan has adopted a narrow view while deciding the purview of Heading 9986, in respect of which, even Circular 114 itself states that, "Most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 11.18 Without prejudice, the Appellant submitted that if at all the contention of the AAR, Rajasthan, that Heading 9986 shall include the services to be provided for exploration, once the infrastructure/ facility for exploration is built & complete in all respect and ready to start exploration, is to be accepted, still the finding held by the AAR, Rajasthan will not hold good. 11.19 Appellant reiterated that they have been contracted by Vedanta to optimize the cost and maximize the utilization of its resources to augment the surface facilities and infrastructure at the Mangala oilfield for enhancing the development of the RDG field. 11.20 The Appellant submitted that since in terms of the phases of oil extraction, the exploration has already been completed and the well pads have now been built to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture/facility. Under the EPC contact, the Appellant have to undertake activities from designing, engineering, procurement, construction of customized facility, commissioning of permanent facility. Test run and hand over of complete facility so designed, constructed, tested and commissioned. Titus, it cannot be treated as support services to oil & gas extraction." 11.29 In this regard, the Appellant submitted that one of the reasons contended by the AAR, Rajasthan for rejecting the classification Heading 9986 for the subject services is that Heading 9986 does not include services provided before creating the infrastructure/ facility for exploration. 11.30 The Appellant submitted that the AAR, Rajasthan further stated that the Appellant are carrying out EPC contract wherein it is required to undertake designing, engineering, procurement, construction of customized facility, commissioning of permanent facility, Test run and hand over of complete facility so designed. They further stated that since these activities involved designing, engineering and construction, those are in the form related to the creation of infrastructure facility, and hence cannot be treated as support service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegories as described in the divisions, groups, classes or subclasses in Sections 5 to 9 of CPC. When services are, prima facie, classifiable under two or more categories, classification shall be effected as follows, on the understanding that only categories at the same level (Sections, divisions, groups, classes or subclasses) are comparable: (a) The category that provides the most specific description shall be preferred to categories providing a more general description; (b) Composite services consisting of a combination of different services which cannot be classified by reference to (a) shall be classified as if they consisted of the service which gives them their essential character, in so far as this criterion is applicable; .. (c) When services cannot be classified by reference to (a) or (b), they shall be classified under the category that occurs last in numerical order among those that equally merit consideration" 11.37 The Appellant submitted that in the light of the above, it can be seen that the subject services are customized in nature and considering the above, it is reiterated that the services supplied by them merit classification under heading 9986 which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9986. 11.43 In this regard, the Appellant have placed reliance on the following decisions: * Biomax Life Sciences Ltd. v. Commissioner of Customs, C.Ex. & S.T. [2021(375) E.L.T. 263 (Tri. -Hyd.) * Commissioner of Customs (Port) v. Praman International [2019 (365) E.L.T. 846 (Tri.-Kolkata)] * Paswara ImpexLtd. v. Commissioner of Customs [2013 (292) E.L.T. 562 (Tri.-Ahmd)] * Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tri.-Mumbai] 11.44 The Appellant submitted that they have been classifying the subject services provided to Vedanta under SAC Heading No. 9954 - 'General construction services' and are paying GST @ 18% under Sr. No. 3 of the Rate Notification. Given the scope of work involved in the project and further by virtue of the amendment made in the Notification effective from October 1, 2019 wherein a specific amendment was made in Sr. No. 24 (ii) of the Rate Notification which attracts GST @ 12%, the Appellant stated that the subject services should merit classification under Sr. No. 24 (ii) as 'support services to exploration, mining or drilling of petroleum crude or natural gas or both' 11.45 The Appellant submitted that in view of the above, the activities perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019-Central Tax (Rate) dated 29-03-2019 w.e.f. 01-04-2019, the said clause was omitted from the Rate Notification. Therefore, the said provision existed in the status books during the period from 28.06.2017 to 31.03.2019 and post that date, it was omitted. 11.52 The Appellant submitted that the relevant period for classification of the subject services before the AAR, Rajasthan was 01.10.2019 onwards. Given that the Heading 9954(ii) was non-existent for the relevant period for which the Ruling was sought, there is no basis of law to Rule that the subject services rendered by the Appellant to Vedanta under the EPC contract merits classification under Heading 9954(ii) of the Rate Notification, evidently when such provision of law was not even existent at the relevant time. 11.53 As per the Appellant it is an established principle of law that the provision of law, on the basis of which any action has been taken by an Authority or a decision or Ruling has been pronounced, must be in force at the time of the applicable case. In this regard, reliance has been placed on the following judgments: (a) Carrier Point v. Commissioner of Central Excise, Jaipur, 2018 (10) G.S.T.L. 213 (Raj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n "includes " which means that the activities which are provided in Heading 9986 are merely indicative in nature and it can include more such services which are of similar nature or ilk. In this regard, the Appellant added that the said phrase has a very wide connotation, thereby giving the Chapter Heading an extensive scope. 11.60 The Appellant also submitted that the said phrase used in the Explanatory Note clearly shows that the Heading is to be construed in the exhaustive sense and not per se in a restrictive sense. Reference in this regard is made to Tetragon Chemie Private Limited and Ors Vs CCE and Ors (2001 (138) ELT 0414 Tri-LB], wherein in the context of interpretation of an inclusive Chapter Note, the Delhi Tribunal, inter alia, held that the Chapter Heading is to be given a wide connotation and is not to be restricted to the illustrations provided in the Chapter Note. 11.61 The Appellant also referred to the decision of Stove Kraft Pvt. Ltd. Vs State of Karnataka (2006(2) TMI 603] wherein on the aspect of classification of goods, Karnataka High Court, inter alia, held that the word 'includes' is often used in interpretation clauses in order to enlarge the meaning of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e list provided in the Explanatory Note must be seen in that context 11.67 The Appellant also reiterated the following from the Circular 114 issued by CBIC wherein it has been specifically stated as follows: "Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 11.68 According to the Appellant it is beyond doubt that their responsibility under the EPC Contract involves a wide range of activities which are clearly associated with the exploration, mining and drilling of petroleum crude. 11.69 The Appellant also submitted that a perusal of various terms of the contract would make it evident that there is a clear nexus between the functions and activities that are required to be performed by the Appellant under the EPC contract and the activities of Vedanta at the Rajasthan Block. 11.70 The Appellant also submitted that it is noteworthy that the explanatory notes referred by the AAR, Rajasthan are an inclusive definition and hence the scope is not exhaustive (but merely indicative) or limited to only the above specified services. An inclusive definition is expansive in nature and would cover all tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said project cannot be shifted anywhere; it is essentially of the nature of immovable property. The project after completion at the time of transfer will be immobile property. It is thus we are of the considered view that the work specified in the EPC contract qualifies as "work contract" and will be taxed accordingly." 11.77 The Appellant submitted that the impugned Ruling incorrectly rejects their arguments on the ground that the services supplied by the Appellant under the aegis of an EPC contract, are in the nature of a works contract falling under the SAC Heading No. 9954 of the Rate Notification and therefore taxable at the rate of 18%. As per the Appellant, in coming to this conclusion, the AAR, Rajasthan has failed to apply the settled principles on classification to the present facts of the matter. 11.78 The Appellant submitted that Section 2(119) of the CGST Act, 2017 defines "Works contract" as follows: "(119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veal that many of the aforesaid services are in the nature of works contract. Services like well casing, cementing, pumping and abandoning of wells, derrick erection, etc. are such services which requires labor services as well as supply of relevant material for providing the same. These services involve civil work as well as supply of material as part of performance of such activities and can very well take the shape of works contract. 11.83 The Appellant submitted that to bring such services as above, out of the purview of Heading 9986 is clearly a result of misreading of the law and lack of understanding of the industry in which petroleum operations are carried out. 11.84 As per the Appellant, many of the services which can be considered as work contract are clearly covered within the scope of the Heading 9986, therefore, there is no merit in the argument that the Heading 9986 does not cover activities which are in the nature of works contract. 11.85 Therefore, according to the Appellant, on this ground alone, the impugned Ruling is liable to be set aside. Submission VII: Alternatively, the subject services should be classified as 'other professional, technical and business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which is reproduced herein below for ease of reference: (17) 'business' Includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to subclause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) activities of a race club including by way of total is at or or a license to book maker or activities of a licensed book maker in such club; and (i) any activity or transaction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, they submitted that the supply of services by the Appellant to Vedanta in relation to the mining activities under the project merits classification under Heading 9983. According to the Appellant, by virtue of Sr. No. 21(ia) of the Rate Notification, it is submitted that the said activity may alternatively get covered within the broad ambit of 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and consequently attract GST @12%. 11.95 The Appellant submitted that in addition to the above, it is also relevant to note that the Para 2 of the Circular 114 specifies that most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under Heading 9986 of the Rate Notification. Further, they add that it has clarified that certain services such as technical and consulting services in relation to exploration would merit classification under Heading 9983 of the Rate Notification. The relevant extract of the Circular is reproduced herein below: '2. The matter has been examined. Most of the activities associated with exploration, mining or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Advocate and Sh. Rahul Khurana, Advocate, Authorized Representatives of the Appellant attended the hearing. They reiterated the submissions already made under grounds of appeal. Further vide letter dated 18.01.2022, the Appellant also submitted following additional grounds in support of their appeal: 12.1 The Appellant submitted that the impugned Order seeks to classify the services provided by the Appellant under Entry no. (ii) of SAC Heading No. 9954 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 ("Rate Notification") which provided a rate of tax for "composite supply of works contract as defined in clause 119 of Section 2 of Central Goods and Services Tax Act, 2017". According to them the Entry (ii) stands omitted vide Notification No. 03/2019 -Central Tax (Rate) dated 29.03.2019, effective from 01.04.2019 as under: "(b) against serial number 3, - a. item (ii) and the entries relating thereto in columns (3), (4) and (5) shall be omitted;" 12.2 It is settled principle of law that the basis of a Ruling or a decision must be in accordance with the provisions of law as it stood at the relevant time. See Carrier Point v. CCE [2018 (10) G.S.T.L. 213 (Raj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant submitted that the expansive scope of entry 998621 is re-iterated in the CBIC Circular No. 114/33/2019-GST dated 11.10.2019 which specifically states that ''Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986". 12.7 The Appellant submitted that the findings in the impugned Order at Para 5 are that the classification of support services to oil and gas extraction under Heading 9986 is only applicable when the exploration/production had started and the support services do not include services supplied before the creation of the infrastructure for production, suffers from fallacy and complete non-consideration of facts. Without prejudice and even assuming this contention to be valid, the Order has utterly failed to appreciate the fact that the contract was awarded during the year 2018/2019 and the original production of oil and gas in the oil field had in fact started in the year 2010. Being one of the largest onshore oil discoveries in India, the information is readily available in the public domain. 12.8 The Appellant submitted that in terms of the Explanatory Notes, several support serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dabur India Ltd. v. CCGST [2020 (34) G.S.T.L. 9 (AIL)], Sanwar Agarwal v. Commissioner of Customs (Port) [2016 (336) E.L.T. 42 (Cal)]. 12.11 The Appellant submitted that even in case where the headings merit equal consideration, resort must be taken to clause (c) of the general interpretative rules which states that when services are classifiable prima facie under two headings, the same should be classified under the heading which occurs last in the numerical order. The Appellant are of the considered view that as Heading 9986 appears later to the SAC Heading No. 9954 in the numerical order, the services are classifiable under Heading 9986. Reliance has been placed on Biomax Life Sciences Ltd. v. CC. [2021 (375) E.L.T. 263 (Tri. - Hyd.)], CC (Port) v. Praman International [2019 (365) E.L.T. 846 (Tri.-Kolkata)], Paswara Impex Ltd. v. CC [2013 (292) E.L.T. 562 (Tri.-Ahmd)], Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tru-Mumbai], 12.12 The Appellant submitted that by concluding that the services performed by tire Appellant are outside the purview of Heading 9986 merely because it is a 'works contract' service, the impugned Order seems to have misread the law and tried to read somet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summary of the submissions dated 13.09.2023, which is a brief of grounds already submitted during appeal and additional submissions already made by them. 15. The Counsel vide letter dated 19.09.2023 (received on mail on 20.09.2023) made additional submissions which are already submitted by them and nothing extra has been added. DISCUSSION AND FINDINGS 16. We have carefully gone through the entire material available on record, appeal papers filed by the Appellant, Ruling pronounced by the AAR Rajasthan, additional written submissions dated 18.01.2022, 16.03.2022 & 19.09.2023 made on behalf of the Appellant and oral submissions made by the authorized representatives of the Appellant at the time of personal hearing held on 11.01.2022 as well as on 13.09.2023. 17. Before proceeding to decide the appeal, we need to first decide as to whether the appeal has been filed within stipulated period (i.e. thirty days from the date on which the Ruling sought to be appealed against is communicated to the Appellant) prescribed under Section 100 (2) of CGST Act, 2017 or not. We find that the date of communication of the Order of AAR, Rajasthan to the Appellant was 21.09.2021 and the appeal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under support service of business- Heading 9986 C.2. Classification under other professional, technical & business services- Heading 9983 D. Ruling pronounced by the AAR D.1. Classification suggested under SAC Heading No. 998621 rejected D.2. Classification suggested under Heading 9983, in the alternate, also rejected D.3. What is the correct classification E. Analysis of classification and rate of tax suggested by AAR F. Appellant's arguments against Ruling of AAR F.1. Non-existing entry suggested by AAR F.2. Nature of activity undertaken not appreciated F.3. Rules of classification not referred F.4. Alternates suggested G. Questions for determination G.1. Classification under Heading 998621 G.2. Classification under Heading 9983 G.3. Classification under Heading 9954 G.4. AAR's ruling- classification vis-a-vis rate of tax H. Examination of submissions and analysis of evidence H.1. Nature of activities as per EPC contract H.2. Ingredients of services classifiable under Heading 998621 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Appellant's understanding of law on the subject: The Appellant have referred to the rules of interpretation of the United Nations Central Product Classification as also CBIC's Circular No. 114/33/2019-GST, dated 11.10.2019 and argued that the services they supply can be defined as support services to oil and gas extraction deserving classification under Heading 998621. B.1. Main contention of the Appellant is that the activities performed by them in accordance with their contract with M/s Vedanta Limited deserve to be classified under SAC Heading No. 998621 as most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under Heading 9986 as per Circular No. 114. B.2. In the alternate it has been contended that the subject services can also 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. C. Appellant's analysis of the activity for classification: The Appellant have analysed the activities proposed to be carried out by them in pursuance of the EPC Contract and found that based on the ingredients of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt services to exploration, mining or drilling of petroleum crude or natural gas or both' and attract GST @ 12% has been answered by the AAR in negative D.2. Classification sought under heading 9983, in the alternate was also rejected: The second question of the Appellant as to whether the services provided by them are classifiable under 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' under Sr. No. 21(ia) (Heading 9983) of the Notification No. 11/2017- CT (R) dated 28.06.2017 (as amended) and attracts GST @ 12% was also answered by the AAR in negative. D.3. What is the correct classification: The AAR, Rajasthan pronounced in their Ruling that the activities of supply of survey, designing, installation, commissioning of project under EPC contract by the Appellant shall attract GST @18% under SI. No. 3 SAC Heading No. 9954 (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. E. Analysis of classification and rate of tax pronounced by AAR: We note that the Riding as pronounced by the AAR classified the supplies involved in survey, designing, installation and commissioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cardinal rule of interpretation for purposes of classification of goods and services, the classification entry giving a more specific description to the activities performed by the Appellant shall apply over the entry providing a more general description. It is their contention that SAC Heading No. 9954 is a general entry which is applicable for works contract services while even if the services supplied under the EPC contract are considered to be a composite supply in the nature of a works contract, the service will still merit classification under SAC Heading No. 998621 which is a specific entry for services that support the activity of oil and gas extraction. F.4. Alternates suggested The Appellant have primarily sought classification under SAC Heading No. 998621 which according to them includes services such as well casing, cementing, pumping and abandoning of wells, derrick erection etc. which require labor services as well as supply of goods for providing the same. It has been submitted by the Appellant, that these services, involve civil work as well as supply of goods as part of performance of such activities and can very well take the shape of works contract and brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 13.09.2021 pronounced by the AAR, the Appellant have stated that with a view to further augment facilities and infrastructure for enhancing the development of the RDG field in order to maximize the resource monetization with cost optimization, M/s Vedanta awarded the Engineering, Procurement and Construction Contract ("EPC Contract") to the Appellant for provision of service for development of Integrated Gas Surface Facilities for Rageshwari Deep Gas Field within RJ-ON-90/1 block. It has been stated in the appeal in Para- 1.29 that for examining the exact nature of services in detail, scope of above services has been captured in clause D1-18 of the terms of Contract Agreement. (ii) We further observe that at Appendix-II of the appeal is a document titled "Raageshwari Deep Gas Field Development- RJ-ON-90/1 Block- Exhibit B- Scope of Services- Development of Integrated Gas Surface Facilities". The said document submitted by the Appellant appears to be part of a document of larger size spread over 1421 pages of which the instant "Scope of Services" is an integral part ranging from page 89/1421 to 171/1421. Thus, the Appellant have submitted only a part of the EPC Contract which de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l well pads to the Company, complete with applicable hook-up & tie-in with the existing & proposed facilities. (B) Contractor's scope also include engineering, procurement and construction of laying of 8 inch Stabilized Condensate Pipeline from RDG terminal to AGI which shall primarily include FBE coated, 50 mm PUF insulated with 5 mm HD PE jacketing and other necessary requirements as Contractor deems fit to ensure compliance to scope of work. No external cathodic protection is required for condensate pipeline from RDG terminal to AGI-05. (C) Contractor scope includes laying of water disposal line from RDG Terminal including well hook to disposal well located at well pad RP-07. RP-07 is located south of RDG terminal within same premises. (D) Contractor scope includes coordinating with Rajasthan State Electricity Board (RSEB) to establish grid power connectivity for 100% power back up to captive power generators (provided by Contractor). Any cost towards establishing necessary infrastructure (excluding Land procurement for ROW) by RSEB (like Bay extension at the nearest Rajasthan State Grid Substation (GSS), Line extension from GSS to receiving end substation at RDG Terminal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, resolution of site queries, managing the construction activities including storage and issuance of materials, logistics, managing the Sub-Contractors (if any) complete with routine reporting of the site progress through Daily Progress Reports (DPRs) as well as weekly/monthly construction reports complete with look-ahead and mitigation plans. It is required that Contractor shall depute experienced and competent team so as to work in sync with the design engineering & procurement team, project management team, local & statutory authorities. (K) Company has acquired the land for installation of proposed facilities. Contractor shall optimally plan the construction methods and limit the construction works within the land already acquired by Company. Any additional land, as necessitated by Contractor for execution of works (temporary/permanent/construction aid/storage yard etc.) shall be arranged by Contractor at Contractor's sole risk and cost and is included in firm SoW of Contractor. Some of the other features of the scope of services as per the EPC Contract which are relevant to the issues at hand may also need reproduction for ease of reference but the same shall be discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices to be supplied by tire Appellant, we may make it clear that the narration under the said SAC Heading No. 998621 seeks to enlarge the scope of the service by declaring that some of the activities shall also be included in the scope of the support services. Inclusion clause, therefore, expands the scope of the service which has to be understood by the words employed to describe it. Hence, it is evident that any service that supports the activity of oil and gas extraction comes within the purview of the instant SAC Heading No. 998621 and the activities specified in the inclusion clause will also form part of the support service, whether they seem to be, or not, strictly in the nature of such service. (iv) We further observe that as claimed by the Appellant, the CBIC has also issued a clarification on the scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both through a Circular No. 114/33/2019-GST, dated 11.10.2019 with reference to the entry at SL No. 24(ii) of Heading 9986 in Notification No. 11/2017-CT(R) dated 28.06.2017. It has been specifically mentioned in the Circular that Explanatory Notes to the Scheme of Classification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We may usefully refer to some of the provisions as contained in the said Para-D 1.6 which are as follows:- (A) Page-110 -Facilities available in existing well pads to be augmented to make them suitable for supporting the enhanced production from existing well pads. - New independent HP and LP intra-field well fluid gathering pipelines is to be considered from the three new well pads. These new pipelines to connect to the trunk lines at existing well pad WP-05. - A new 20" trunk pipeline is proposed to be laid from WP-05 to RDG terminal Parallel to existing 12" pipeline. - Existing 12" trunk pipeline from well pad WP-05 to RGT is used to optimize the design of well fluid gathering pipeline. The existing 12" trunk line is proposed to be used for gathering and transportation of LP production during fluid start of life, later it is to be used for gathering and transportation of high pressure fluid. The new pipeline from WP-05 is proposed to handle HP fluid initially and subsequently LP fluid. (B) Page-111 D1-6.2. New Gas Processing Terminal In order to provide the flexibility of operating the terminal at sales gas rate of 90 MMSCFD (i.e. 22.5 KBOEPD) and 135 MMSCFD (i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PC Contract has been awarded to the Appellant with mandate to establish the required infrastructure for the expansion proposed. Augmentation of existing well pads, development of new well pads, laying of new pipelines for well fluid gathering and creation of new gas processing terminal are indicative of the fact that new facilities, in addition to the existing facilities, are being created by M/s Vedanta Limited for enhancement of gas production and sales. (iii) After analyzing the broad outlines of the contract awarded to the Appellant, we find it appropriate to examine the nature of work assigned to the Appellant under the EPC Contract in question. We observe that the Appellant have not denied the fact that supply of service under the EPC Contract in question also involves transfer of property in goods. The only contention by the Appellant in this regard is that the scope of SAC Heading No. 9986 does not exclude Works Contract Service. As can be seen from the appeal as also from the EPC Contract, the Appellant have been assigned the work related to establishment of infrastructure for the proposed expansion in the production and processing capacity. As mentioned in Para-D1-8 titl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the EPC Contract as discussed above, we find that the Appellant have been tasked with installation and construction of the proposed facilities concerning the well pads, pipe lines, terminals etc. which is aimed at capacity expansion of RDG. We also observe that the basic features of the scope of work assigned to the contractor for development of the facilities as described in Para-D1-18 of the EPC Contract are as follows:- (A) Pre-bid engineering, Fabrication, Manufacturing, Assembly, Site establishment. Complete Erection and Installation, Facilities Construction, Pipeline laying, Pre-Commissioning & Commissioning. (B) Engineering, procurement and construction of laying of 8 inch Stabilized Condensate Pipeline from RDG terminal to AG1. (C) Laying of water disposal line from RDG Terminal to disposal well. (D) Design, engineer, procure, construct and commission the surface facilities in a manner that new terminal along with existing RGT Terminal can process 135 MMSCFD gas for sales and '20 MMSCFD for internal consumption and deliver Sales Gas as per Sales Gas Specification mentioned in Section D1-37. (vii) From perusal of the said scope of Non-Process be serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n activity of oil and gas extraction. But none of these activities can be said to be related to establishment of the infrastructure facilities for oil and gas extraction. Since, the Appellant have been tasked with establishment of infrastructure facilities for oil and gas extraction, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot, by any stretch of imagination, be said to be support services to oil and gas extraction. The distinction between the activities undertaken by the Appellant in terms of the EPC contract and the activities included in the definition of SAC Heading No. 998621 is strikingly clear. Therefore, we hold that the activities undertaken by the Appellant in pursuance of the EPC Contract cannot be classified under SAC Heading No. 998621 as these are not in the nature of support services to oil and gas extraction. H.3. Ingredients of services classifiable under Heading 9983: (i) We also observe that the Appellant have, in the alternate, claimed classification of the supplies proposed to be made by them under Heading 9983 as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rilling and boring work, cf. 995432." "998343: Mineral exploration and evaluation: This service code includes mineral exploration and evaluation information, obtained on own account basis. Note: This intellectual property product may be produced with the intent to sell or license the information to others." (iii) On analysis of the contents of the explanatory notes above, we observe that so far as SAC Heading No. 998343 is concerned, the same has a very narrow scope/limited coverage of mineral exploration and evaluation information which is certainly not the activity proposed to be undertaken by the Appellant in pursuance of the instant EPC Contract as already discussed at length above. Thus, we find it difficult to agree to the suggestion that the activities undertaken by the Appellant fall under the said SAC Heading No. 998343. However, SAC Heading No. 998341 covers a wide range of activities which include provision of advice, guidance and operational assistance concerning the location of oil and gas fields including feasibility studies. But, we observe that the Appellant have not proposed to undertake any such activity rather the Appellant have proposed to undertake estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the most specific description shall be preferred to categories providing a more general description and therefore, even if it is assumed that the supply of services provided under the EPC Contract is a composite supply in the nature of a Works Contract, the service will still merit classification under Heading 9986 which is a specific entry for services that support the activity of mining of natural gas. (ii) The Ruling pronounced by the AAR has been contested by the Appellant that it is based on a non-existent provision of law. We deem it appropriate to first examine the Ruling vis-a-vis the contention accordingly. On examination of the Ruling, we observe that the Ruling consists of three different parts. Fist part of the Ruling declares that the supplies proposed to be undertaken by the Appellant answer to the description of works contract service. Second part of the Ruling suggested classification of the supplies under Heading 9954. And according to the third part of the Ruling, the supplies proposed to be undertaken by the Appellant attract GST @ 18% in terms of entry at SI. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017. (iii) We observe that there is no den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioning, Project and Construction Management; (B) Satisfactory handover of complete RDG Gas Processing Terminal including, Non Process Buildings, receiving end substation at RDG Terminal, including roads and drains within RDG Terminal, Intra-field Pipeline, irrigation water pipeline and approach roads between well pads. (C) Engineering, procurement and construction of laying of 8 inch Stabilized Condensate Pipeline from RDG terminal to AGI. (D) Laying of water disposal line from RDG Terminal including well hook to disposal well located at well pad RP-07. (E) Coordinating with Rajasthan State Electricity Board (RSEB) to establish grid power connectivity for 100% power back up to captive power generators. (F) Contractor to design, engineer, procure, construct and commission the surface facilities. (G) Contractor to design the well pad piping network and other facilities with flexibility to test the well(s) through Surface Well Testing unit. (H) All pressure vessels and columns shall be designed and constructed as per ASMF Sec VII Div 1 and shall be code ASME U stamped. (I) Providing & mobilizing all construction resources, as required, for execution of project. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. We observe that SAC Heading No. 9954 of the Scheme of Classification covers the overall construction services with SAC Heading No. 995425 the general construction services of mines and industrial plants. The explanatory notes clarify that the said service code includes construction services for mining and related facilities associated with mining operations. Since, oil and gas exploration is also a form of mining; therefore, the construction services proposed to be supplied by the Appellant for creating gas extraction facility enhancing the existing production capacity are appropriately classifiable under the SAC Heading No. 9954. (viii) We further observe that based on the stipulations of the EPC Contract under consideration, the AAR had also classified the supplies proposed to be undertaken by the Appellant under SAC Heading No. 9954 and therefore, Ruling of the AAR to that extent is legally valid and omission of a specific entry in the rate notification does not have a bearing on such Ruling in so far as classification under SAC Heading No. 9954 is concerned. Since, the nature of supply justifies its classification as construction services of mining, we observe that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omitted with effect from 01.04.2019 and, therefore, the supplies proposed to be undertaken by the Appellant could not have been eligible for the rate prescribed therein. However, we observe that up to Notification No. 3/2019-CT (R), dated 29.03.2019, major changes have been made in the said entry under SI. No. 3 of the basic Notification No. 11/2017-CT (R), dated 28.06.2017 to provide for different rates of tax for supplies under the categories of supply of construction services or supply of works contract services. On examination of the various items covered by the said entry at SI. No. 3, we observe that different rates of tax have been provided in respect of different types of supplies of construction services or works contract services under items (i), (ia), (ib), (ic), (id), (ie) and (if) or items (iii), (iv), (v), (va), (vi), (vii), (viii), (ix), (x), (xi) and (xii) of the said entry at SI. No. 3. The supplies proposed to be undertaken by the Appellant are not covered by any item other than item at SI. No. (xii) of the said entry at SI. No. 3 which provides as under:- "(xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (iii), (iv), (v), (va), ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges the Appellant to handover the complete RDG Gas Processing Terminal including Non-Process Buildings, receiving end substation at RDG Terminal, including roads and drains within RDG Terminal, Intra-field Pipeline, irrigation water pipeline and approach roads between well pads after completing the construction, erection, installation and commissioning work. Thus, we observe that the supplies proposed to be undertaken by the Appellant relate to the new facilities being awarded by M/s Vedanta Limited for enhancement of capacity and production. Therefore, the existing capacity or production from the existing facilities cannot be taken to be related to the expansion being undertaken under the instant EPC Contract. (ii) The Appellant have also argued that SAC Heading No. 9986 covers only those activities which are provided once the infrastructure/ facility for exploration is built and complete in all respect and ready to start exploration, is an interpretation which lacks credible basis in law. It has been argued that classification entries should be derived literal meaning without addition or deletion of words. The Appellant have emphasized that test drilling and exploration servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -23 dated 03-01-2023 is squarely applicable in the instant matter: (i) The Maharashtra Appellate Authority for Advance Ruling in respect of appeal filed by M/s Worley Services India Pvt Ltd, New energy House Ramkrishna Mandir Road, J B Nagar Kondivita, Andheri East Mumbai on the same issue has held similar view. Vedanta Limited had entered into separate agreements dated 29.05.2018 and 10.01.2019 with Worley Services in relation to two projects for supply of PMC services. The PMC services were customized and tailor made to suit the requirements of Vedanta Limited and further require extensive technical and sound expertise. As per the agreements, Worley Services India Pvt Ltd was required to continuously review, monitor manage and control all aspects of the execution of the Projects on behalf of Vedanta Limited to complete it with quality, on time and within the approved cost. Worley Services was appointed to manage the projects right from details to designing to commissioning and close out of Projects with Vedanta Limited. Worley Services India Pvt Ltd approached the MAAR seeking Advance Ruling on the following questions: (1) Whether the services provided by the Appellant are cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services provided by Worley Services India Pvt Limited are neither covered under SI. No. 24(ii) nor under SI. No. 21(ia) of the Rate Notification. As regards the classification of the impugned services, it is held that the impugned services of project management consultancy services provided the Appellant would merit classification under the SAC 998349 bearing description "Other technical and scientific services nowhere else classified, attracting GST at the rate of 18% (CGST @9%+SGST @9%). K. Conclusion and findings: In view of these observations we hold that:- (i) Based on the analysis of activities, the Appellant are required to carry out in pursuance of the EPC Contract and keeping in view the true nature of supplies proposed to be undertaken by the Appellant, the proposed supplies are appropriately classifiable under SAC Heading No. 9954 answering to description 'Construction Services' which are in the nature of composite supply defined as works contract. (ii) The proposed supplies are specifically covered by SAC Heading No. 9954 and the claim that 'Construction Services' of SAC Heading No. 9954 is a general description of the supplies and 'support services' of SAC Head ..... X X X X Extracts X X X X X X X X Extracts X X X X
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