TMI Blog2024 (3) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... d 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020 [ 2022 (1) TMI 385 - SC ORDER] . Thus, the appellant were required to file the appeal within 30 days from 21.09.2021 in light of the judgment of Hon'ble Supreme Court [ 2022 (1) TMI 385 - SC ORDER] We note that the appellant has filed the appeal on 29.10.2021 that is within the prescribed time limit. We find that the appeal has been filed by the appellant within the prescribed time. Therefore, we proceed further to decide the appeal on merit. We observe that according to the EPC Contract, the Appellant have been assigned the work of construction and installation of the entire facility and the proposed infrastructure being installed is aimed at capacity expansion as has been mentioned by the Appellant in the appeal that the with a view to augment the production from existing well pads at Mangala, the Appellant have entered into EPC contract with Vedanta Limited in March 2018 for constructing additional network of customized Intra-field pipelines MIPA project. The contract obliges the Appellant to handover the complete system including Non Process Buildings, road, drains, Pipeline, after completing the construction, erectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Heading No. 998621 is more specific to describe the proposed supplies is not supported by the EPC Contract as discussed. (iii) The proposed supply is covered by the scope of Construction Services of SAC Heading No. 9954 and neither the inclusions given under SAC Heading No. 998621 for Support Services nor the description of Heading 9983 covers the scope of the proposed supply, Hence, the claim for classification under SAC Heading No. 998621 or alternatively under Heading 9983 is not sustainable. (iv) The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at SI. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017. Thus, we hold that the Ruling dated 15.09.2021 of the AAR for Rajasthan in respect of the Appellant needs no interference up to the extent mentioned in item (i) to (iii) above and the same are hereby modified to the extent mentioned in item (iv) above of Part K of this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Ltd. (ONGC) of Contract Area RJ-ON-90/1 block which is located in the Barmer district in the State of Rajasthan. The RJ-ON-90/1 Block contains a number of major oil discoveries namely Mangala, Bhagyam and Aishwariya and other satellite fields. The Mangala field development consists of well pad facilities and processing hub named Mangala Processing Terminal (MPT). 3. With a view to augment the production from existing well pads at Mangala, the Appellant have entered into an Engineering, Procurement and Construction Contract ( EPC contract or contract ) with Vedanta Limited in March-2018 for constructing additional network of customized Intra-field pipelines under the MANGLA INTRA-FIELD PIPELINES AUGMENTATION PROJECT ( MIPA Project or the Project ) at Mangala wells. The brief scope of the work under the contract pertains to provision of Services for Engineering, Procurement and Construction for MIPA project as per the scope of work defined in the EPC contract. Appellant have submitted relevant extract of the EPC contract outlining the scope of work is along with appeal paper. 4. The Appellant are entitled to be paid a lump sum contract price (Inclusive of all taxes duties) by V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct whether temporarily or permanent. 7.2 CONSTRUCTION - The Appellant submitted that all the construction plant and equipment, temporary works and materials are to be provided by them, and brought on the Vedanta's site, exclusively for the construction and completion of the works. Upon completion of the work, the Appellant are required to remove from the site all construction equipment and materials brought by it on to the site. 7.3 The Appellant are responsible to provide all facilities, as customized and necessary for performance of the works including (but not limited to) water (including water for hydrostatic testing), power, transportation, handling and construction equipment, vehicles, vessels and any additional land at or about the site(s) required for the construction purpose etc. They are also required to arrange the camp facilities for its personnel, which will be in strict accordance with company HSE Policy. 7.4 OTHER TECHNICAL REQUIREMENTS - Under the contract, the Appellant are required to fulfil the following other customized technical requirements in respect of the topographical survey, geotechnical soil investigation, getting at their own cost and risk, any supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. h) Mandatory compliance to HSE requirement. i) Plan in detail the exact location and centre line for each proposed pipeline. j) Work out and finalize detailed cross Section drawings, and sequence / scheme of laying the all proposed Pipelines, in the Trench, for each Section of the network. k) Take all the necessary steps to maintain the safety and integrity of existing pipeline systems / assets owned by the Company. 8.2 Surveys - In relation to site surveys which are required, the Appellant are required to carry out pre-construction surveys and verification of the Proposed Routes and Station Locations under the contract. 8.3 Design Engineering - The Appellant submitted that in relation to the customized design and engineering, its scope of work for the facilities forming part of this project broadly include, but not be limited to the following:- Pre-bid engineering Detailed Design Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth ) or alternatively under the SAC Heading 9983 [Sr. No. 21(ia)] (viz., Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both ) and are liable to attract 12% GST under the CGST Act. By filing the application under Section 97(1) of the RGST Act/ CGST Act before the 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 - Whether the services provided by the applicant merit classification under the heading 9986 [(Sr. No. 24 (ii))] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to Support service to mining and is leviable to 12% GST rate under the CGST Act, 2017? Answer: - No Question 2 - Whether the services provided by the applicant merit classification under Heading 9983 [(Sr. No. 21(ia)] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to Professional, Technical or Business Service to mining and is leviable to 12% GST rate under the CGST Act, 2017? Answer No. Question 3 Whether the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove presumptions by the AAR, Rajasthan are outrightly incorrect, bad in law and without any basis. The findings recorded by the AAR, Rajasthan with respect to the classification of the subject services are wholly misconceived and shows lack of understanding of the activities required to be performed by the Appellant under the EPC Contract. It is a trite law that decisions based on presumption and surmises have no place in the eyes of law. In this regard, reliance has been placed upon by the appellant on the following decisions wherein it has been held that an order based on presumption, surmises and conjectures is liable to be quashed: Commissioner v. Sree Ganesar Textile Mills Ltd, 2015 (321) E.L.T. A270 (S.C.); Commissioner v. Bihariji Manufacture Co. Pvt. Ltd., 2015 (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 submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned Ruling, while denying the benefit of SAC Heading No. 9986 to the Appellant, stated that SAC Heading No. 9986 covers only those activities which are provided once the infrastructure/ facility for exploration is built complete in all respect and ready to start exploration. 11.10 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 11.11 They submitted that this view was also supported by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant submitted that under the terms of the EPC Contract, their scope of work involves laying of a network of Production pipelines, injection water pipeline and production fluid pipelines between the well pads and the processing terminal. It also includes execution of the related station facilities as per the tender specifications. 11.20 The Appellant submitted that a perusal of the aforesaid activities would reveal that they are essentially part of the overall development of the oil field wherein the catering to the increased liquid handling facility is squarely in relation to that purpose. 11.21 As per the Appellant, in view of the above, it can be seen that the activities performed by the Appellant under the EPC contract are directed towards up gradation of the field pipeline infrastructure are indelibly linked to the petroleum operations carried out by Vedanta at the RJ block. 11.22 The Appellant reiterated that the impugned Ruling, at Para 5 states that, .....Support services shall include the services to be provided for exploration, once the infrastructures facility for exploration is built complete in all respect and ready to start exploration. But it doesn't incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the increase in production capacity of the oil field. 11.26 In the light of the above, given that the activities performed by the Appellant are inextricably linked to the petroleum operations, the Impugned Ruling pronounced by the AAR, Rajasthan lacks the legal and factual basis, and accordingly is liable to be set aside. Submission III: Specific description should prevail over general description 11.27 The Appellant submitted that, without prejudice, if at all the activities performed by them appear to fall under SAC Heading No. 9954 as against SAC Heading No. 9986, still, in terms of the Rules of Interpretation, the classification entry giving more specific description to the activities performed by the Appellant shall apply over the entry providing a more general description. 11.28 The Appellant submitted that the reference is made to the Rules of Interpretation falling under the UNCPC which gains significance for the purpose of classification under the GST law because the Explanatory Notes to the Scheme itself is based on the same. 11.29 The relevant extract of the interpretative rules enshrined under the UNCPC provides thus: 56. In the CPC, the classification of products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a specific description overrules a general description: 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(All.)] Sanwar Agarwal v. Commissioner of Customs (Port) [2016 (336) E.L.T. 42 (cal)1 11.34 The Appellant submitted that without prejudice to the above submission that heading 9986 provides a more specific description when compared to the general entry under heading 9954 that even in case where the headings merit equal consideration, resort must be taken to clause (c) of the general interpretative rules. They submitted that an application of clause (c) of the interpretative rules quoted above also warrants classification under Heading 9986. 11.35 The Appellant submitted that as per the said rule, 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 therefore are of the view that as heading 9986 appears later to the SAC Heading No. 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and GST @ 18% (9% CGST 9% SGST) is payable. . They submitted that, the AAR, Rajasthan proceeded to rule on the subject services as classifiable under Heading 9954(ii). 11.41 The Appellant also submitted that the AAR, Rajasthan failed to apply the applicable provisions of the Rate Notification and missed the relevant provisions in force for the period in respect of which the present Ruling was sought. 11.42 The Appellant submitted that the AAR, Rajasthan has approached the entire issue with a premeditated mind and with the singular objective of rejecting the benign rate of GST on the services provided by them in as much as the impugned Ruling seeks to classify the services under a classification entry which was not even in force during the period for which the Ruling was sought. 11.43 The Appellant set out the relevant provisions of the SAC Heading No. 9954 (ii) as follows: (ii) Composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. The Appellant submitted that the aforesaid provision existed in the statue books since 28.06.2017. Thereafter, vide Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt services to oil and gas extraction 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 11.50 The Appellant submitted that on a reference to the above, it can be seen that the aforesaid services include, well casing, cementing, pumping, plugging and abandoning of wells, test drilling and exploration services in connection with petroleum and gas extraction. According to the Appellant, a look at the nature of services covered in the aforesaid entry reveals that it includes services relating to oil wells which include its cementing, pumping, casing, plugging and abandonment. Further, the entry also includes, inter a/in, test drilling in connection with the petroleum and gas. 11.51 The Appellant further stated that the relevant Explanatory Note uses the expression includes which mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are inextricably linked to mining operations ought to be covered within the scope of the Heading 9986. The mining and petroleum operations include a wide range of inter-related and inter-dependent activities which are indelibly linked to each other and help forming a coherent value chain. 11.56 The Appellant submitted that under the terms of the EPC Contract, their scope of work involves laying of a network of Production pipelines, injection water pipeline and production fluid pipelines between the well pads and the processing terminal. It also includes execution of the related station facilities as per the tender specifications. From this, the Appellant find it evident that they are providing support services to Vedanta by carrying out the Up-gradation of the field pipeline infrastructure. 11.57 Therefore, according to the Appellant, construction of such facilities forms an indispensable part of the support activities for mining and petroleum operations and the inclusive list provided in the Explanatory Note must be seen in that context. 11.58 The Appellant also reiterated the following from the Circular 114 issued by CBIC wherein it has been specifically stated as follows: Most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned Ruling seems to rest on the fallacious understanding of the kind of services and activities which are covered within the Heading 9986 and the activities performed by the Appellant under the EPC contract. 11.66 As per the Appellant, the impugned Ruling, at Para 7, states that, The contract is for the engineering, procurement and commissioning of fully operational Intrafield pipelines under MIPA Project, all commissioned. What would be transferred is the Intrafield pipelines including the civil work and land involved in project. Various civil structure would be created and various equipment would be installed. In case of this contract the 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. 11.67 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 fallin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.72 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. 11.73 Therefore, according to the Appellant, on this ground alone, the impugned Ruling is liable to be set aside. The view of the Appellant according to them is also supported by the Petroleum Tax Guide and GST FAQs by MoPNG 11.74 The Appellant submitted that the view that the services provided by the them fall within the purview of Heading 9986 is also supported by the Petroleum Tax Guide and the GST FAQs by the Ministry of Petroleum and Natural Gas ( MoPNG ). 11.75 Appellant referred to the FAQs issued by the MoPNG on GST with specific reference to Oil Gas sector wherein the Ministry clarified on the nature of activities that would be treated as services required for petroleum operations. The relevant extract of the FAQs is as under: S. No. Questions Answer 2 What is the meaning of Supply of Services required for Petroleum Operations? The activities involved under petroleum operations are defined unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No. 114 (supra) wherein the Explanatory Note providing for an indicative (and inclusive) list of support services to mining under Heading 998621 includes plugging and abandoning of wells . Therefore, by virtue of the Circular No. 114, plugging and abandoning of wells are part of the support services to mining under Heading 998621 as defined in the term Petroleum operations above. 11.79 The Appellant further submitted that the definition of the term Petroleum Operations includes Development Operations , which is defined by the Tax Guide as under: (e) Development Operations means operations conducted in accordance with the development plan pursuant to a Contract and shall include the purchase, shipment or storage of equipment and materials used in developing Petroleum accumulations, the drilling, completion and testing of development wells, the drilling and completion of wells for gas or water injection, the laying of gathering lines, the installation of offshore platform sand installations, the installation of separators, tankage, pumps, artificial lift and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or gas pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inclusive list provided in the Explanatory Note must be seen in that context. They submitted that in view of the 'inclusive' nature of the Note which seeks to cover support services in relation to the petroleum operations within SAC Heading 996821 together with the fact that the laying down of pipe lines forms an essential part of Development operations forming part of the petroleum operations, the Note ought to be offered its natural play to cover all such activities which are essential to the petroleum operations and in support of it. Submission VII: Alternatively, the subject services should be classified as other professional, technical and business services under heading 9983 11.83 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 to exploration, mining or drilling of petroleum crude of natural gas or both. This heading covers pure services of other Professional, technical business related and not the services provided under the EPC contract which include engineering, procurement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommencement 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 undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 11.88 The Appellant submitted that the aforesaid definition of business is an inclusive definition. That it is a settled law that the term include is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. The said word is succeeded by the phrase any trade, commerce, manufacture, profession, ... ... whether or not it is for a pecuniary benefit . The definition of the word business under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 drilling of petroleum crude or natural gas fall under heading 9986. A few services particularly technical and consulting services relating to exploration also fall under heading 9983. Therefore, following entry has been inserted under heading 9983 with effect from 1st October 2019 vide Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019; - (ia) Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both 11.93 The Appellant submitted that the aforesaid Circular clearly states that technical and consulting services relating to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 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, - 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.)], Pillar Inductions Id Ltd. v. CCE 20 04(166) E.L.T. 43 (Tri-Chennai)J, CC v. Madras Aluminum Co. Ltd. (2016(339) E.L.T. 295 (Tri-Chennai). Given that Entry (ii) under SAC Heading No. 9954 did not exist in statute book during the relevant period for which the Ruling is sought, the Ruling is bad in law and hence is liable to be set aside on this ground alone. 12.3 The Appellant submitted that the only contention raised in the impugned Order is that SAC Heading 9986 does not cover creation of infrastructure/facilities which are in nature of works contract. They added that the Appellant are providing services such as laying down customized network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 services including well casing, test drilling and exploration services, cementing etc. which are undertaken before commencement of production, also fall under the scope of the Heading 998621. Therefore, the findings in the Order that SAC Heading No. 998621 would only cover services which are provided after creation of infrastructure and facility of exploration is without any basis in law and ought to be rejected outright. Thus, the Order which is based on presumption, surmises and conjectures is liable to be quashed. 12.9 The Appellant submitted that without prejudice to any of the other submissions that if at all the services performed by the Appellant appear to fall under SAC Heading No. 9954 as against Heading 9986, still, in terms of the cardinal rule of interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l [2019 (365) E.L.T. 846 (Tri-Kolkata)], Paswara Impex Ltd. v. CC [2013 (292) E.L.T. 562 (Tri - Ahmd)], Kamal Kachola v. CCL [2004 (174) E.L.T. 87 (Tri-Mumbai]. 12.12 The Appellant submitted that by concluding that the services performed by the 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 something which does not exist. 12.13 The Appellant submitted that a plain reading of the Explanatory Notes to SAC Heading No. 998621 shows that it includes services such as well casing, cementing, pumping and abandoning of wells, derrick erection, etc. which requires labor services as well as supply of goods for providing the same. They added 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. In view of the Appellant, to bring such works contract services out of the purview of Heading 9986 is clearly a result of misreading of the law and lack of understanding of the oil and gas industry. 12.14 The Appellant submitted that alternatively, the services supplied by them would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 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 filed on the portal on 29.10.2021. 18 We find that the Appellant have not filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. However, the Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of the Hon'ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020. The Hon'ble Supreme Court in its Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020 in Para (iii) has held that In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrated 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. 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the activities as discussed in detail in the contract, the same merit classification under SAC Heading No. 998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAR in negative D.2 Classification sought under heading 9983, in the alternate was also rejected: The question of the Appellant as to whether the services provided by the applicant merit classification under Heading 9983 [(Sr. No. 21(ia)] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to Professional, Technical or Business Service to mining and is leviable to 12% GST rate under the CGST Act, 2017? has also been 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 Sl. No. 3 SAC Heading No. 9954 (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The Ruling also denies the classification of the subject services under Heading 9954 [(Sr. No. 3 (xii)] in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 pertaining to General Construction Service. E. Analysis of classification and rate of tax pronounced by AAR: We note that the Ruling as pronounced by the AAR classified the supplies involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst Heading 9986, still, in terms of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g aside of the Ruling dated 15.09.2021 pronounced by the AAR, the Appellant have stated that with a view to further to augment the production from existing well pads at Mangala, the Appellant have entered into and an Engineering, Procurement and Construction Contract ( EPC contract ) with Vedanta Limited in March, 2018 for constructing additional network of customized intra-field pipelines under Mangala intra-filed pipelines augmentation project ( MIPA project at Mangala wells. It has been stated in the appeal in Para- 1.6 that for outlining the scope of work, relevant extract of the EPC contract has been provided Appendix-II. (ii) We further observe that at Appendix-II of the appeal is a document titled as MANGALA INTRAFIELD PIPELINES AUGMENTATION PROJECT. The said document submitted by the Appellant are appears to be part of a document of larger size spread over 4686 pages of which the instant EPC SCOPE OF WORK is an integral part ranging from page 350/4686 to 433/4686. Thus, the Appellant have submitted only a part of the EPC Contract which describes in detail the scope of work proposed to be supplied by the Appellant to M/s Vedanta Limited. Since we have to decide the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed routes and Station location. (G) Contractor shall be responsible for performing engineering for procurement. (H) Contractor shall be responsible for performing construction installation engineering including reports, operation and maintenance manual, waste management plan etc. 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-Ill 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 9986 in the Explanatory Notes is titled as support services to agriculture, hunting, forestry, fishing, mining and utilities and the sub-heading 99862 is titled as support services to mining . SAC Heading No. 998621 has been des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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- Central Tax (Rate) 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 discussed above. H.2.1 Details of EPC contract w.r.t classification under Heading 998621 (i) We observe that the EPC Contract which has been submitted by the Appellant describes the nature of activities undertaken by the Appellant in detail. Explaining the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed engineering, preparation of drawing and documents, sizing, procurement, inspection, transportation to site, supply of all materials/equipments took and tackles, storing, testing and handing over of all electrical work complete in all respects . Page-431 Annexure 2- INSTRUMENTATION SCOPE OF WORK. The scope of work Instrumentation covers basic design and engineering, detailed engineering, preparation of drawings and documents, sizing, selection procurement, inspection, transportation to site, supply of all materials storing, testing and handing over of all instrumentation control works, complete in all respects as per data sheets, drawings project specifications, standards etc. (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 planned to undertake major expansion in their production and processing capacity with consequent increase proposed in the sales and the instant EPC Contract has been awarded to the Appellant with mandate to establish the required infrastructure for the expansion proposed. Additional network of Intrafield Production fluid, Power fluid injecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998621 we observe that the said heading covers support services to oil and gas extraction which is self-explanatory in as much as the services proposed to be classified under this heading provide support to the main activity of oil and gas extraction and such activity of extraction eventually requires the infrastructure facilities established. These three parts of the entire gamut of oil and gas extraction are clearly distinguished from each other. Support service has to be essentially distinct from the main activity of oil and gas extraction and establishment of infrastructure facilities in the form of various pipelines, electrical work, instrumentation work, structure, signboard, augmentation of production from existing well pads at Mangala, additional network of intrafield Production fluid, Power fluid injection Water Pipelines is required to be installed. The project involves design and installation of new Pipelines with sizes varying from 10 to 30 and piping lengths varying from 2 to 8 Km's along with a few branch (loop) lines, connecting well pads and MPT terminal to illustrate a few, is clearly a distinct feature of the activity of oil and gas extraction. Hence, support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, magnetometric methods other subsurface surveying methods. This service code does not include- test drilling and boring work, cf. 995432. 998343: Mineral exploration and evaluation: This service code includes mineral exploration and evaluation information, obtained on own account basis. 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 S1. 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, 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. First part of the Ruling declares that the supplies proposed to be un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed 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) Pre-bid engineering, Surveys, Design and Detail Engineering, Procurement supply, expediting, Fabrication, testing including engineering testing, testing of all the facilities forming part of the contract complete with tie-ins/hook-ups where required, along with all associated mechanical, piping, civil, structural, electrical, instruments control works, as required, for successful execution of the Mangala Intrafield Pipelines augmentation Project . (B) Providing mobilizing all project management resources, as required, for performance of work. (C) Appraisal and taking cognizance of site conditions. Complying with Indian Governments/State Governments' rules and regulations, bye laws, applicable codes and standards and requirements of authorities having jurisdiction over the work sites. (D) Various documents proposed to be prepared and submitted by the contractor during Design det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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. (ix) We further observe that the instant matter in hand does not simply involve supply of services only, rather as mentioned in the EPC contract and as also admitted by the Appellant in the appeals, supply of goods is also involved in the contract and such goods have been used in the execution of the EPC contract as the Appellant are required to construct the Complete Pipeline Network/System and its handove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (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 Sl. 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 S1. No. 3 which provides as under:- (xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (iii), (v), (va), (vi), (vii), (viii), (ix), (x) and (xi) above. Explanation. - For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id), (ie) and (if) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5) and shall not be levied at the rate as specified under this entry. (xiii) We observe that the said item (xii) of entry at S1. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017, as amended up to Notification No. 3/2019-CT (R), dated 29.03.2019 prescribes Central Tax @ 9% on the supplies proposed to be undertaken in terms of the EPC Contract and therefore, the supplies proposed to be undertaken by the Appellant attract tax at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ploration 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 impressed upon the fact that test drilling and exploration services and derrick erection are some of the activities that are also part of Heading 998621 and these activities are carried out before installation of the infrastructure and facility for exploration. In this regard, we observe that classification of the supplies depends upon the scope of the work assigned to the Appellant which has already been discussed at length in the above Para. (iii) As can be seen the contract in the instant case is an Engineering, Procurement and Construction (EPC) Contract awarded by Mls Vedanta Limited for provision of services for augmentation of pipelines along with Surface Facilities at MPT within RJ-ON-90/1 block and the Appellant have been assigned the responsibility to develop the infrastructure for surface facilities. The scope of the work described in details in the contract clearly established that the supplies relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 classified under SI No. 24 (ii) of heading 9986 of the Rate Notification as Support services to exploration, mining or drilling of petroleum crude or natural gas or both under SAC 998621 and attracts GST @ 12% in terms of SI. No. 24(ii) of Rate Notification. (2) Alternatively, whether the services provided by the Appellant are classified under S. No. 21(ia) of heading 9983 of the Rate Notification as Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification. (3) Further, if the subject services are not classifiable under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be imposable? (ii) Thereafter, the MAAR passed the Order No. GST-ARA-27/2020-21/B-38 dated 31.03.2022 and held that the services provided by Worley Services are neither c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (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 Heading No. 998621 is more specific to describe the proposed supplies is not supported by the EPC Contract as discussed above. (iii) The proposed supply is covered by the scope of Construction Services of SAC Heading No. 9954 and neither the inclusions given under SAC Heading No. 998621 for Support Services nor the description of Heading 9983 covers the scope of the proposed supply, Hence, the claim for c1assification under SAC Heading No. 998621 or alternatively under Heading 9983 is not sustainable. (iv) The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at SI. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017. ORDER In view of the above discussion and findings, we hold that the Ruling dated 15.09.2021 of the AAR for Rajasthan in respect of the Appellant needs no interference up to the extent mentioned in item (i) to (iii) above and the same ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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