TMI Blog2024 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... n pursuance of the EPC contract with M/s Vedanta Limited are classifiable under SAC Heading No. 998621 of the Scheme of classification of services of under Heading 9983 or under Heading 9954? - HELD 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 Heading 9986 does not exclude Works Contract Service. As can be seen from the appeal as also from the EPC Contract submitted by the Appellant, the Appellant have been assigned the work related to establishment of infrastructure for the proposed Sulphate removal plant as well as other facility - One of the important aspects of the EPC Contract is that Appellant are responsible for doing civil or structural work which includes jungle clearance, Gabion Wall mattress around the plot, foundation, structures, buildings like control building, sub-stations, switchyard, fire stations and sheds, roads, paving and drains etc. and the contract contains provisions which prescribe the quality of various types of material such as concrete for foundation and structural steel materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 execution of Sulphate Removal Plant are appropriately classifiable under the SAC Heading No. 9954. Since, the nature of supply justifies its classification as construction services of mining, it is observed that there is no conflict suggesting preference to specific description under SAC Heading No. 998621 to general description under SAC Heading No. 9954 because the nature of activities clearly indicates that the supply is classifiable under SAC Heading No. 9954. Entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 was 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, it is observed that up to Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and the petrochemical and other industries. As a part of their business operations, the Appellant enters into Engineering, Procurement and Construction contracts ( EPC Contract ) with their customers. 2. The Appellant have entered into an EPC contract with M/s. Vedanta Limited ( Vedanta ) vide Contract No. 4600008952 dt. 14.08.2018. The Appellant have informed that Cairn (Vedanta s upstream Oil Gas vertical) is the operator of Onshore RN-ON-90/1 block which is located in Barmer basin and having 38 oil and gas discoveries, including Mangala, Bhagyam and Aishwariya fields. The relevant extract of the EPC contract outlining the Scope of Work entered between the Appellant and M/s. Vedanta has been provided by the Appellant with the appeal memo. 3. According to the said EPC contract, the Applicant have to undertake the construction of Sulphate Removal Plant or SRP with respect to the petroleum operations at Mangala wells ( subject services ). For the purpose of construction of the said plant, the Appellant will have to undertake the activities as per the specification customization laid down in the EPC contract. 4. As narrated by the Appellant, Sulphate Removal Plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d management of local contractors Commissioning, RESU, Performance Guarantee Test Site Restoration works waste management for ready for Start-up activities and performance guarantee testing Training and facility Handover Associated Quality, health and safety environment management training SPECIALIZED CUSTOMIZED SERVICES The development of Sulphate Removal Plant covers three major elements, viz., Early Civil works, Inside Battery Limit primarily covering the technology part and Outside Battery Limit primarily covering the rest of the plant. The Appellant have been given an integrated EPC contract for all the above elements. The Scope of work includes the technical compliance format, design basis and philosophy, standards specifications, engineers installation standards etc. The Scope of work also includes technical specification, design and engineering, softwares to be used, health and safety measures specific to the mining operations to be adopted, nature of vendors to make Procurement from etc. 7. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AAR, Rajasthan, the Appellant had sought to confirm this classification. The AAR, Rajasthan have answered the questions of the Appellant, vide their Ruling dated 15.09.2021 as under: Question 1 With the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, whether the services with respect to EPC contract entered for execution of Sulphate Removal Plant supplied to M/s Vedanta Limited vide contract No. 4600008952 dated 14.08.2018 is covered under Sr. No. 24 (ii) (Support Services to Mining) or Sr. No. 21(ia) (Professional, Technical or Business Service to Mining) of the Rate Notification. Answer: No Question 2 If the subject services are not classified under any of the aforesaid entry, what would be the appropriate classification for the same and what rate GST would be imposable? Answer The activities of supply of survey, designing, installation, Commission of project under EPC contract by the Appellant shall attract GST @1 8% under S. No. 3 (Heading 9954) (ii) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. 10. Being aggrieved with the Ruling pronounced by the AAR, Rajasthan, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 323) E.L.T. A23 (S. C.); Commissioner v. Modern Denim Ltd., 2006 (199) E.L.T. A181 (S.C.); Kirloskar Oil Engines Ltd. v. Commissioner of Central Excise, Nashik, 2017 (349) E.L.T. 299 (Tri. - Mumbai); Wolters Kluwer India Ltd v. Commissioner of Service Tax, 2014 (36) S.T.R 396 (Tri.-Del.); Industrial Filter Fabrics Pvt. Ltd. v. Commr. of C. Ex., Indore, 2014 (307) E.L.T. 131 (Tri. Del.) 11.4 That the Appellant submitted that Vedanta has decided to construct a Sulphate Removal Plant (SRP) with associated facilities adjacent to the Mangala Processing Terminal (MPT) in Banner district of Rajasthan to tackle with the high amount of H2S produced during petroleum operations. For this purpose, the Appellant have entered into contract with Vedanta to undertake the execution of the SRP. 11.5 The Appellant set out the relevant text of the Heading 9986 as figures in the Rate Notification: Support services to exploration, mining or drilling of petroleum crude or natural gas or both. As per the appellant, a look at the aforesaid provision would reveal that it includes support services which are related to exploration, mining or drilling of petr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration is built complete in all respect and ready to start exploration. 11.12 The Appellant denied such interpretation of the classification entry at SAC Heading No. 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 language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent manifest intention of the legislature from being carried out 11.13 They submitted that this view was also supported by the Hon ble in ITC Ltd. v. Commissioner of Central Excise, New Delhi, 2004 (171) E.L.T. 433 (S. C.). 11.14 The Appellant submitted that derrick erections help move heavy materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 Vedanta wanted to tackle the high amount of H2S produced during petroleum operations therefore they entered into a contract with the Appellant to undertake an execution of a Sulphate Removal Plant. The Appellant have to perform activities which are required for execution of the Sulphate Removal Plant to reduce sulphate ions present in the saline water so it can be used for injection during petroleum operations. 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 extract and mine the oil and natural gas, it is clear that all the performance of its responsibilities by the Appellant under the contract would be having relation to the production and extraction of oil/natural gas and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 11.28 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. 11.29 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 services to petroleum extraction. 11.30 The Appellant submitted that the services rendered by them are linked to, and in connection with, the petroleum operations. This fact has never been disputed by the AAR, Rajasthan. They added that the only contention raised by the AAR, Rajasthan to deny the benefit of SAC Heading No. 9986 to the Appellant is that SAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the understanding that only categories at the same level (Sections, divisions, groups, classes or subclasses) are com parable.. (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 11.36 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 SAC Heading 9986 which is a specific entry for services which support the petroleum operations. 11.37 The Appellant submitted that it is the cardinal rule to be applied for classification of any goods or services that in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 (375) E.L.T. 263 (Tri.-Hyd.)] Commissioner of Customs (Port) v. Praman International [2019 (365) E.L.T. 846 (Tri.-Kolkata)] Paswara Impex Ltd. v. Commissioner of Customs [2013 (292) E.L.T. 562 (Tri.-Ahmd)] Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tri.-Mumbai)] 11.43 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 11.44 The Appellant submitted that in view of the above, the activities performed by the Appellant under the EPC Contract are more directly related to the petroleum operations carried out by Vedanta at the Rajasthan Block an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on existed in the statute books during the period from 28.06.2017 to 31.03.2019 and post that date, it was omitted. 11.51 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. 11.52 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.) (b) Pillar Inductions (I) Ltd. v. Commissioner of Central Excise, Chennai, 2004 (166) E.L.T. 43 (Tri.- Chennai) (c) Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11.59 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. 11.60 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 the words or phrases occurring in the body of the statute. According to them, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Most of the activities associated with the exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986 . 11.66 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. 11.67 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. 11.68 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 transactions possessing similar features. 11.69 The Appellant are of the view that the above submission finds support from the interpretative rules for the explanatory notes under the UNCPC which expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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. 11.76 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 property in goods (whether as goods or in some other form) is involved in the execution of such contract; The Appellant submitted that a look at the aforesaid definition would reveal that works contract includes within its ambit, inter alia, services relating to construction, fabrication, completion, erection, installation, fittin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices 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 services under heading 9983 11.86 The Appellant submitted that the impugned Ruling, at Para 5 states that, Other professional, technical business services are classified under Heading 9983. The heading covers other professional, technical and business services relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s broad in its entirety, as it includes business services. The term business has been defined under Section 2(17) of the CGST Act, 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 sub-clause (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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of mining. 11.94 The Appellant submitted that the services provided by them are in relation to the mining activity of Vedanta, as stated above in detail. Hence, in 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 Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well, the impugned Ruling pronounced by the AAR, Rajasthan is liable to be dismissed. PERSONAL HEARING 12. A virtual hearing in the matter was held on 11.01.2022. Sh. Rohit Jain, 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. 3/2019-CT (R), 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of Karnataka [2006 (2) TMI 603], Bharat Coop. Bank (Mumbai) Ltd v. Coop Bank Employees Union [2007(4) SCC 685], Regional Director Employee s State Insurance Corporation v. High Land Coffee Works of Pfx. Saldanha Sons [1991(7) TMI 367] 12.6 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced reliance upon Ascent Meditech Ltd. v. CCE, Vapi [2014 (309) E.L.T. 712 (Tri. Ahmd.)] [Affirmed in 2015 (320) ELT A281 (Supreme Court)], Pepsico India Holdings Pvt. Ltd v. Dy. Commercial (A) IV, Commercial Taxes, Jaipur [2018 (16) G.S.T.L. 249 (Raj.)], Dabur India Ltd. v. CCGST [2020 (34) G.S.T.L. 9 (A11.)], Sanwar Agarwal v. Commissioner of Customs (Pont, [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 Lift 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)1, Paswara Impex Ltd. v. CC [2013 (292) E.L.T. 562 (Tri.-Ahmd)], Kamal Kachola v. CCE [2004 (174) E.L.T. 87 (Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rahul Khurana, Advocate, authorized Representatives of the Appellant appeared attended the hearing. They reiterated the submissions already made under grounds of appeal and the submissions made by them vide letters dated 18.01.22 16.03.2022. During the hearing, Counsels provided executive 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 stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section Description A. Activity in brief as narrated by the Appellant B. Appellant s understanding of law on the subject B.1. Main Contention as to classification of supply B.2. Alternate classification suggested C. Appellant s analysis of the activity for classification C.1. Classification 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RJ-ON-90/1 block, on behalf of themselves and their joint partners, Cairn Energy Hydrocarbons Limited and Oil and Natural Gas Corporation, located in Banner District in the state of Rajasthan; (ii) The RJ-ON 90/1 Block contains 38 major oil gas discoveries including Mangala, Bhagyam and Aishwarya fields, with significant gas potential in the southern area; (iii) Raageshwari Deep Gas (RDG), discovered in 2003, is a tight gas field situated in the southern area and is under production since 2010 with significant infrastructure in place. (iv) Eighteen well pads are operational in the Mangala Field. A number of wells have been drilled in the aforementioned fields for exploration, development production of hydrocarbons. (v) The oil gas produced from these fields are collected and transported to a central processing facility at Mangala through a network of existing in-field pipelines. The central processing facility is also termed as Mangala Processing Terminal (MPT). The existing pipeline corridor at Mangala Field, between MPT and various well pads, has various exiting pipelines running through it. M/s Vedanta Limited have awarded EPC contract to the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , technical and business services under Heading 9983 as the Appellant provide services by way of proper management of the project right from the detail design and planning of the project till its final test run, commission and hand over in fully functional form and it is also, inter alia, required to review, monitor, manage and control all aspects of the execution of the project along with the day-to-day administration and logistics, such as, procurement, performance, HSE, quality and schedule management, among others, on behalf of M/s Vedanta Limited. D. Ruling pronounced by AAR: The AAR for Rajasthan has pronounced Rulings vide order dated 15.09.2021 rejecting the classification as sought by the Appellant under SAC Heading No. 998621 or under Heading 9983 and held that the supplies proposed to be undertaken by them are classifiable under Heading 9954. D.1. Classification sought under SAC Heading No. 998621 was rejected : The first part of the first question of the Appellant that with the introduction of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, whether the services with respect to EPC contract entered for execution of Sulphate Removal Plant sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply of works contract as defined in clause 119 of Section 2 of Central Goods and Services Tax Act, 2017 but the said entry (ii) stands omitted vide Notification No. 3/2019-CT (R), dated 29.03.2019, effective from 01.04.2019 and, therefore, the Ruling has classified the supplies under a non-existing entry of the rate notification. F.2. Nature of activity undertaken not appreciated: The Appellant have also contended that the findings in the impugned Order of AAR to the effect 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 in as much as 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 itself. F.3. Rules of classification not referred: We also observe that the Appellant have contended that the rules of classification as per the explanatory notes require that if at all the services performed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d supplies in question under Heading 9983 is acceptable in view of the nature of supplies proposed to be made by them? G.3. Classification under Heading 9954: Whether the classification as pronounced by the AAR under SAC Heading No. 9954 is sustainable and what is the effect of AAR s Ruling pronouncing tax rate as prescribed vide entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 which stood deleted at the material point of time ? G.4. AAR s Ruling- Classification vis-a-vis rate of tax: What is the correct classification of the supplies proposed to be made by the Appellant in pursuance of the EPC Contract entered with M/s Vedanta Limited? H. Examination of submissions and analysis of evidence: In view of the questions framed by us for determination in these proceedings, we find that the nature of activities carried out by the Appellant in terms of the EPC Contract with M/s Vedanta Limited is required to be analysed and the submissions of the Appellant need to be examined in the light of the EPC Contract in question as the determination of the questions depend upon the true nature of the activities proposed to be carried out by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troleum crude or natural gas or both , we deem it appropriate to examine the nature of the activities proposed to be undertaken by the Appellant for effecting the supplies in terms of the EPC Contract. Some of the salient features of the EPC Contract relevant to the issues at hand, as contained at S. No. 7 of document titled Scope of Contractor, referred to by the Appellant as containing the scope of services, are reproduced below:- a. The scope of Contractor shall include, but is not limited to, Design Detailed engineering, project Management, HSE , Quality, construction Management, Vendor Management, Procurement and Logistics Management, Waste Management, Local contractor Management, Surveys (pre-engineering, pre-construction pre-installation and post-installation), Procurement, Manufacturing, Fabrication, Inspection and Testing, packing, shipping, shipment insurance, transportation and delivery to site, Loading/ Unloading Shifting of material, Construction, Fabrication, Dismantling, removal and disposal of existing facilities , restoration, Construction, Complete erection and installation , Mechanical Completion, Tie-ins with existing facilities, SAT, Site Testing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with other sub-contractors / vendors/ suppliers for the supply, installation, testing, commissioning of those systems which have been defined in the ITT package. l. CONTRACTOR shall provide all required construction equipment, tools, tackles, instruments duly calibrated, and consumables inclusive of erection and commissioning spare parts to enable all construction, pre-commissioning, commissioning, Operation stabilization PGTR works. m. CONTRACTOR shall be responsible for the total disposal of construction waste materials and final site clearance including removal of temporary facilities in compliance with local regulations and as per directions of COMPANY/ PMC. As regards to left over useable material including bulk material, CONTRACTOR shall duly codify the same as per the COMPANY S guidelines and return to the COMPANY without any extra cost to COMPANY n. CONTRACTOR shall procure and supply all equipment and materials required to construct the facilities. The procurement functions shall include the securing of proposals from approved suppliers, issuing of purchase orders, expediting deliveries, performing the necessary inspections including arranging third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the contractor as part of firm scope of work. The procurement activities shall be carried out in accordance with agreed Procurement Procedure covered under Tender Package. 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 later on at appropriate places where the claimed classifications are examined with reference to the nature of the activities. H.2 Ingredients of services classifiable under Heading 998621: (i) The Appellant have mainly contended that the supplies proposed to be made by them deserve classification under SAC Heading No. 998621 as support services to exploration, mining or drilling of petroleum crude or natural gas or both. It has been stated that the contention is based on the Rules of Interpretation falling under Chapter-III of the United Nations Central Product Classification (UNCPC) as the Explanatory Note to the Scheme of Classification of Services is itself based on the UNCPC as stated by CBIC in Circular No. 114/33/2019-GST dated 11.10.2019. (ii) In this regard, we observe that the broad Heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 SI. 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 of Services adopted for the purposes of GST, which is based on the United Nations Central Product Classification describe succinctly the activities associated with exploration, mining or drilling of petroleum crude or natural gas under heading 9983 and 9986. Para-4 of the circular relevant to the instant issue reads as follows:- 4. It is hereby clarified that the scope of the entry at Sr. 24 (ii) under heading 9986 of Notification No. 11/2017-CT(R), dated 28.06.2017 shall be governed by the explanatory notes to service codes 998621 and 998622 of the Scheme of Classification of Services. We, therefore, observe that the scope of services provided by the Appellant needs to be examined in terms of the description of services given in the Explanatory Notes which have already been di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. c) Sub-station comprising of HV Switch board (33 KV GIS 6.6 kV), Transformer (power distribution). d) Fire alarm system fire fighting system. e) HVAC System for buildings. f) Instrumentation Control related works for balance of Plant. g) Development of Reject Well pad and interconnecting pipeline. Development of Reject Well pad includes civil work, Solar based area lighting, Security cabin Toilet block with overhead Water tank. (ii) From the detailed scope of work as mentioned in the EPC Contract, brief extracts of which have been reproduced above, we observe that M/s Vedanta Limited has awarded instant EPC Contract to the Appellant with mandate to establish Sulphate Removal Plant along with other required infrastructure. (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 Headi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f infrastructure facilities in the form of SRP, pipelines, control buildings, sub-stations, switchyards, toilets and fire stations, to illustrate a few, is clearly a distinct feature of the activity of oil and gas extraction. Hence, support services to oil and gas extraction is clearly distinguishable from establishment of infrastructure facilities for oil and gas extraction and the former cannot be confused with the latter. H.2.2 We observe that the description of the service in the explanatory notes as support services to oil and gas extraction has been defined to include some activities specifically which are also to be considered in the nature of support to the main activity of oil and gas extraction. Analysis of the said activities, included in the service code, would reveal that these activities are such as can help the main activity of oil and gas extraction. These activities of repair and dismantling services, well casing, cementing, pumping, plugging and abandoning of wells or fire extinguishing services are, in one way or the other connected to the main activity of oil and gas extraction. But none of these activities can be said to be related to establishment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y notes, and as also clarified vide the CBIC Circular dated 11.10.2019 referred to above, we observe that the services relating to exploration, mining or drilling of petroleum crude or natural gas are described under Heading 9983, which are reproduced below:- 998341: Geological and geophysical consulting services: This service code includes provision of advice, guidance and operational assistance concerning the location of mineral deposits, oil and gas fields and groundwater by studying the properties of the earth and rock formations and structures; provision of advice with regard to exploration and development of mineral, oil and natural gas properties, including pre feasibility and feasibility studies; project evaluation services; 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, magneto metric 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 miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commissioning of project under the EPC contract to be undertaken by the Appellant shall attract GST @ 18% under SI. No. 3(ii), Heading No. 9954, of Notification No. 11/2017-CT(R), dated 28.06.2017. However, the Appellant have challenged the said classification mainly on the ground that the supplies proposed to be undertaken merit classification under SAC Heading No. 998621 as support services to oil or gas exploration or in the alternate, under Heading 9983 as other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both. It has also been contended that the Ruling has been issued based upon non-existent provision of law in as much as entry at Si. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 stood deleted with effect from 01.04.2019. The Appellant have also claimed that for deciding classification of a supply, the category that provides 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of service i.e. construction service provides only a general description of the supply while support service to exploration, mining or drilling of petroleum crude or natural gas or both is a specific description of the supplies proposed to be undertaken by them. Though there is no denying the fact that transfer of property in goods is involved in the execution of the instant EPC Contract, some of the main provisions of the EPC Contract need to be reproduced, even at the cost of repetition, to examine as to whether the proposed supplies invoke provision of construction services. (v) On going through the relevant portion of the EPC Contract which has been submitted with the appeal, we observe that the following activities have been assigned to the Appellant which form the core of the entire supply under the contract:- (A) Construction Management, Vendor Management, Procurement and Logistics Management, Waste Management, Local contractor Management, Surveys (pre-engineering, pre-construction preinstallation and post-installation), Procurement, Manufacturing, Fabrication, Inspection and Testing, packing, shipping, shipment insurance, transportation and delivery to site ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brated, and consumables inclusive of erection and commissioning spare parts to enable all construction, pre-commissioning, commissioning, Operation stabilization PGTR works. (J) CONTRACTOR shall be responsible for the total disposal of construction waste materials and final site clearance including removal of temporary facilities in compliance with local regulations and as per directions of COMPANY/ PMC. As regards to left over useable material including bulk material, CONTRACTOR shall duly codify the same as per the COMPANY s guidelines and return to the COMPANY without any extra cost to COMPANY. (K) CONTRACTOR shall procure and supply all equipment and materials required to construct the facilities. The procurement functions shall include the securing of proposals from approved suppliers, issuing of purchase orders, expediting deliveries, performing the necessary inspections including arranging third party inspections and tests to ensure quality and quantity, handling the shipping, receiving, unloading, customs clearance, transporting to the SITE and warehousing of equipment and materials. All equipment and materials shall be newly manufactured for the project. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have been assigned the task of construction of various facilities. Sulphate Removal Plant, Buildings, roads etc are some of such constructions which form part of the contract. The contract clearly provides that the Appellant are responsible for satisfactory hand over of complete SRP with buildings, roads and other facilities etc. The entire scope of activities to be carried out by the Appellant relates to construction of all the facilities relating to Sulphate Removal Plant which have been proposed to be created as a mitigating measure, sulphate free water is recommended for controlling the H2S. The Appellant are required to hand over the facility complete in all respects after the design, construction, commissioning etc. are completed. (vii) In view of what has been observed by us in the preceding paragraphs, it is necessary to examine the issue with reference to the relevant explanatory notes of the scheme of classification of services independent of the issue of composite supply which can be addressed later 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supplies involving both services and goods as proposed to be undertaken by the Appellant are, thus, covered by the definition of works contract which being composite supply, is treated as supply of services in terms of the provisions of Para-6 of Schedule-II of the CGST Act, 2017, which read as under:- 6. Composite supply The following composite supplies shall be treated as a supply of services, namely: (a) works contract as defined in clause (119) of Section 2; and (xi) Thus, we observe that so far as classification of the supplies proposed to be undertaken by the Appellant are concerned, the composite supply in the instant cases shall be treated as supply of service defined as works contract and the pronouncement of the AAR, therefore, needs no interference up to that extent. (xii) As already observed by us, entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 was 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the original production of oil and gas in the oil field had started in the year 2010. Thus, the Ruling by the AAR suffers from fallacy in as much as the same has rejected classification under the category support services to oil and gas extraction on the ground that support services shall include services to be provided for exploration, once the infrastructure/ facility for exploration is built and complete in all respect and ready to start exploration. In this regard, we observe that according to the EPC Contract, the Appellant have been assigned the work of construction and installation of Sulphate Removal Plant along with other facility to establish new infrastructure. The contract obliges the Appellant to handover the complete SRF including Non Process Buildings, receiving end substation at MPT, Intra-field Pipeline, irrigation water pipeline and approach roads 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. (ii) The Appellant have also argued that Ruling to the effect that Heading 998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail as above, in our opinion, there is no need to discuss the cases relied upon by the Appellant separately. J. Ruling of the Maharashtra Appellate Authority for Advance Ruling Order No. MAH/AAAR/DSRM/14/2022-23 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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Rate Notification, attracting tax at the rate of 18%. (iii) When Worley Services preferred an appeal against the above Order, the MAAAR upheld the MAAR Order No. GST-ARA-2772020-21/B-38 dated 31.03.2022 wherein it was held that the services provided by Worley Services India Pvt Limited are neither covered under Sl. 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 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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