2018 (9) TMI 1183 – APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – TMI – Rate of tax – supply and setting up of ‘solar power generating system’ – Composite supply – Whether contract for supply of/construction of a solar power plant, wherein both goods and services are supplied, can be construed to be a composite supply in terms of Section 2(30) of the Central Goods and Services Tax Act, 2017 as claimed by the appellant or the same is works contract services as per the ruling made by the AAR? – Challenge to AAR decision.
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Held that:- It is seen that there is a single contract for supply of ‘60 MW/81 MW Solar Power Plant’ in the State of Karnataka and the owner has appointed the appellant for supply of the ‘Solar Power Plant’ which as per (B) of the agreement includes ‘engineering, design, procurement, supply, development, testing and commissioning of the Plant’ as per Scope defined in the Schedule of the Contract – The contract fulfills the condition of composite supply. The
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e bundled in the ordinary course of business would depend upon the normal or frequent practice followed in the area of business. It also says that in order to qualify for a composite supply one of the characteristic would be that ‘none of the individual constituents are able to provide the essential character of the service’.
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Thus, the contract for providing the design, procurement, supply, development, testing and commissioning of the Plant which includes the supply of both goods and services is a composite supply as per the definition in the Act. There are two taxable supplies- one of goods and the other of services and they both are naturally bundled and it is natural and also a practice to expect that the contractor who will supply the goods will also supply the services alongwith it. In the business of contracts for the Solar Power Generating System, it is a practice to provide a Plant as a whole along with the supply of services – the order of AAR is differed with.
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Im
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y of ‘services’ – there arises no occasion to go into the issue of ‘principle supply’.
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Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors? – Held that:- The ARA has held that no details were brought before them and therefore in the absence of documents they have expressed their inability to deal with the question. As no fresh documents were produced before us and also there being no original ruling of the ARA, we hold that we will not deal with the question in the present proceedings.
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Order: Supply of the said turnkey EPC contract is a ‘composite supply’ u/s.2(30) of the CGST Act, 2017. The said composite supply falls within the definition of works contract u/s.2(119) of the CGST Act, 2017.
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We have treated the transaction as a ‘Composite supply’ and a works contract falling u/s. 2(119) of the CGST Act, 2017 and Para 6 of SCHEDULE II [ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUP
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erein after referred to as the Appellant ) against the Advance Ruling No. GST-ARA-01/2017/B-01 dated 17 February, 2018. = 2018 (5) TMI 854 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA CONDONATION OF DELAY The first issue relates to the issue of condonation of delay in filing the appeal as the Appellate Authority for advance Ruling was not formed in the State of Maharashtra during the period of limitation. The appellant has therefore prayed that in view of the above, the time period as mentioned in the Act should be calculated from the day of setting up the authority as no recourse was available before that. The Appellate authority was constituted through notification no. MGST-1018/C.R.38/Taxation-1 dt 10.5.2018 and the appellant applied through appeal dated 6.6.2018. As the appellant had filed letters within 30 days of the communication of the advance ruling, and it was only because the Appellate authority was not formed that he could not file an appeal as also because the appellant fi
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and services and hence is for the supply of solar power generating system. D. The intent of the contract is that the entire contract would be undertaken by the Appellant for supply and setting up of the solar power plant which includes supply of both goods and services as well as setting up of transmission lines for transmission of the electricity generated up to the storage or the GRID. E. There may be a single lump sum price for the entire contract for supply of both goods and services and payment terms may be defined depending on agreed milestones. F. The Appellant filed an Application dated 24 November, 2017 for Advance Ruling for seeking clarification basis draft contracts of the Appellant, in view of the provisions of composite supply and the rate of tax provided for solar power generating system (hereinafter referred as SPGS ) under GST, the Appellant sought clarification in respect of the following: a. Whether contract for supply of/construction of a solar power plant wherein b
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ether benefit of concessional rate of 5% of SPGS and parts thereof would be available to sub-contractors it was held that no documents were provided and hence this question was not dealt with in the proceedings. GROUNDS OF APPEAL 1. The proposed transaction is for composite supply of solar power generating system ( SPGS ) as a whole and hence the rate of GST should be at 5% 1.1. Rate of solar power generating system Under GST regime, various rates have been prescribed for goods and services. Per, Notification No. 1/2017 – Integrated tax (Rate) dated 28 June 2017, solar power generating systems and parts for their manufacture are taxable at 5%. The relevant entry reads as follows: Chapter Heading Description 84 Or 85 Or 94 Following renewable energy devices and parts for their manufacture a) Bio-gas plant b) Solar power based devices c) Solar power generating system d) Wind mills and wind operated electricity generator e) Waste to energy plants/devices f) Solar lantern/solar lamp g) Oce
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power system has been defined under Solar Power -Grid Connected Ground Mounted and Solar Rooftop and metering Regulation -2014 issued by State of Goa. Solar power system as per the regulation means a grid connected solar generating station including the evacuation system up to the Grid inter-connection point . Typically the term system has a wide ambit. As per the Oxford Dictionary, the definition of the term system is a complex whole, a set of things working together as a mechanism or interconnecting network . Similarly, the system is defined in Chambers 20th Century Dictionary as anything formed of parts placed together or adjusted into a regular and connected whole . Hence, system typically includes various components/ parts which are manufactured/ assembled together for performing a function. In the present case, the term system should include all goods provided under the contract which help in end to end generation as well as transmission of electricity. 1.2.3. Furthermore, under
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ine controller (14) Water pumping wind mill, wind aero-generator and battery charger (15) Bio-gas plant and bio-gas engine (16) Agricultural, forestry, agro-industrial, industrial, municipal and urban waste conversion device producing energy (17) Equipment for utilising ocean waves energy (18) Solar lantern (19) Ocean thermal energy conversion system (20) Solar photovoltaic cell (21) Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20. Reference in this regard is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics & Instruments Ltd. vs. Commr. Of C. Ex., Jaipur = 2004 (7) TMI 259 – CESTAT, NEW DELHI wherein it was held that: 7. The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is ent
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f the above, expert opinion, we hold that e impugned item can be considered as solar power generating system and is entitled for the benefit of the exemption Notification. Therefore, we allow the appeal with consequential relief. Per the above, the Appellant submits that in the instant case where the contract is awarded as a whole for supply of solar power generating system consisting of various components (as highlighted above) as well as services, the entire contract should qualify as supply of solar power generating system taxable at the rate of 5%. This is in line with the concept of composite supply in which case the taxability is as per the principal supply which, in the instant case, is the SPGS. The Appellant s submissions on the concept and taxability of composite supply and thereby supply being made by the Appellant in the instant case being a composite supply of SPGS has been provided hereunder in detail. 1.3 Concept and taxability of composite supply Concept under GST Laws:
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ply of goods is a principal supply. Further, Section 8 of the CGST Act provides that a composite supply comprising two or more supplies, one of which is a principal supply will be treated as supply of such principal supply. The relevant para of Section 8 of the CGST Act provides as follows: 8. Tax liability on composite and mixed supplies. – The tax liability on a composite or a mixed supply, shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply Per the above, the essential conditions for a supply to qualify as composite supply can be highlighted as under: a. 2 or more taxable supplies of goods or services or both b. The taxable supplies should be naturally bundled c. The taxable supplies should be supplied in conjunction with each other d. One taxable supply should be a principal supply In such case, the supply which is the principal supply
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d by the CBEC in the year 2012 ( the Education Guide ). The relevant extract of the Education Guide is reproduced as under for ease of reference: Bundled service means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of bundled service would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differentia/ treatment as a manner of determination of value of two services for the purpose of charging service tax is different. The Education Guide also clarifies that in cases of composite transactions, i.e. transactions involving an element of provision of service and an element of transfer of title in goods in which various elements are so inextricably linked that they essentially form one composite transaction th
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bundle offered by a majority of airlines The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are: There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use
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risprudence – Meaning of composite supply: 1.3.3. The concept of composite supply is a global concept and has been discussed in various countries. Provided below is relevant extract from various countries regarding the same: Australia In terms of Goods and Services Tax Ruling 2001/8 issued under Australia, Composite Supply means a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. Composite supply is treated as supply of one thing. There have been various precedents in which the courts have defined a composite supply. Few are highlighted below: The Full Federal Court in the case of Luxottica found that while supply is widely defined it invites a commonsense, practical approach to characterisation . It was observed that while Supply is defined broadly, it nevertheless invites a commonsense, practical approach to characterisation. An automobile has many parts which are fitted together to make a single vehicle. Although, for
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modation part of the supply. Per the above, composite supply is taxed as supply of the dominant activity to which others are merely ancillary. In the present case also, the dominant supply is those of goods (which constitutes solar power generating system ) and services is merely incidental to provision of such goods. European Union Per the European Union Directive, a composite supply is a transaction where supplies with different VAT treatments are sold together as one. The supplies with a composite supply may consist of parts that, if assessed separately, have different tax rates. Some have standard rates, reduced rates or are exempt from VAT. The European Court of Justice ( ECJ ) has delivered several judgements on the aspect of composite supply under European Union Value Added Tax laws ( EU-VAT ). In the case of Card Protection Plan Ltd. Vs. C & E Commrs [1994] BVC 20, the ECJ held that a service must be regarded as ancillary to a principal service if it does not constitute for
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t to attend classes which would be standard rated. The Court decided that there was a single standard rated supply of the right to belong to the playgroup and the T shirt and magazine were incidental to that main supply. No one who was not in the playgroup would have bought the T shirt or magazine separately. Per the above, it is clear that globally also composite supply means a supply of more than one goods/services wherein one supply qualifies as principal supply. Therefore, taxes as applicable on the principal supply are applied on the whole composite supply. Supply of SPGS is a composite supply: 1.3.4. The Appellant most humbly submits that in the instant case, since the scope of work of the Appellant includes provision of both, goods and services, the entire contract would qualify as composite supply of SPGS. It is further submitted that the supply of SPGS should form the principal supply and the entire contract should be taxed as supply of SPGS itself since service portion of the
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by the fact that the main intent of the contract is provision of the SPGS as a whole which consists of various components such as PV modules, structures, inverter transformers, cables, SCADA, transmission lines, etc. The contract also includes services like civil installation and commissioning as well as construction which are incidental to provision of such goods and form an ancillary part of the contract. Drawing reference to the provisions under the erstwhile law as well, the Appellant would like to point out that even the customer in the instant case perceives that the entire contract is for supply of solar power generating system as the intent of both the parties is supply of the goods/system which would help in generation of electricity. Hence, the entire contract (both goods and services) are bundled and linked wherein the main intent is provision of SPGS. Further, the Appellant would like to make a reference to the Draft Contract for supply of 60Mw Solar Power Plant (hereinafte
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r: The Contractor shall Supply all the Equipment as per the terms of this Contract and in accordance with the Execution Schedule, to the Plant Site and complete development, installation and Commissioning of the Works in accordance with Technical Specifications, Applicable Law, Applicable Permits and the terms of this Contract, in addition to the detailed drawings/ documents finalized during engineering. The detailed Scope of the Contract (including the Supply of Equipment and the performance of Works) is set out under Schedule 1. Reference is also made to Schedule I of the Draft Contract which defines the scope of work to be executed by the Appellant. The said schedule clearly outlines the entire scope to be undertaken and provides that the Appellant would be responsible for supply of solar power generating system. Schedule I of the Draft Contract reads as under: The Contractor would be responsible for Supply of Equipment and undertake all necessary activities ancillary to such suppli
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ot qualify as immovable property and hence are outside the domain of works contract. Further, it has been highlighted that if the supplies under the contract can be treated as composite supply with supply of solar power generating systems as the principal supply, then such suppliers may be eligible for 5% GST rate as a whole. Relevant extracts of the MNRE Circular are reproduced below: Structurals, as such, do not qualify as immovable property and, hence, are outside the domain of works contract service . Whether the EPC contracts qualify as composite supply (u/s 2(30) of the CGST Act) as supply of goods or services or both, naturally bundled or supplied in conjunction with each other in the ordinary course of business will depend on the facts of the case. If such (EPC contracts) supplies could be treated as composite supply with supply of solar power generating systems as the principal supply, then such supplies may be eligible for 5% GST rate as a whole…. Accordingly, in the instan
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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 . Further, in terms of Serial Number 6 of Schedule II to the CGST Act, works contract is treated as a supply of service and the general rate of tax applicable on works contract is 18%. Therefore, in order to determine whether the supply made by the Appellant is of works contract, it is imperative to understand: (i) the essence of the contract and the intention of the parties involved in the contract to determine whether the parties intend to undertake works contract or supply of solar power plant and (ii) whether the activities are undertaken on an immovable property for the contract to qualify as works contract. Essence of the contract and intention of
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d undertake all necessary activities ancillary to such supplies (such as erection, civil works etc.) to ensure complete supply of solar power plant. Both parties agreed that of the total supplies, the most critical part of the plant are the supply of the mounted PV module which constitutes 60-70% of the total contract value. Further, it is also agreed that the contractor is responsible for the whole of the contract that is for setting up/supply of the plant. For the purpose of undertaking compliances under laws constituted in India, the parties may agree to define prices of the equipment to be supplied as part of the contract. The same shall not in any manner exceed lump sum price agreed between the parties and also does not in any manner dilute the responsibility of the contractor. Hence, as also discussed in point 1 above, it is amply clear that the intention of the parties is to supply/procure a completely functional SPGS, and the intention is not to undertake any activity which wil
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held that if fixing of a plant to a foundation is only for providing stability to the plant and where there is no intention to make such plant permanent, the foundation provided would not change the nature of the plant and make it an immovable property. In a judgment of the Hon ble Supreme Court in the matter of Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998 1 SCC 400), = 1997 (12) TMI 109 – SUPREME COURT OF INDIA in case of a paper making machine, it was held that merely because the machinery was attached to the earth for operational efficiency, it does not automatically become an immovable property. If the appellant wanted to sell such goods, it could always remove it from the base and sell it. Relevant extract from the judgment is reproduced below for ease of reference: The Tribunal held that the machine was attached to earth for operational efficiency. The whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine a
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Relying on the aforesaid judgment, the Hon ble Supreme Court, in the matter of Commissioner of Central Excise v. Solid and Correct Engg Works & Ors. (2010 (175) ECR 8 (SC)) = 2010 (4) TMI 15 – SUPREME COURT, held that Asphalt Drum/Hot Mix Plants were not immovable property as the fixing of the plants to a foundation was meant only to give stability to the plant and keep its operation vibration free. Further, it was held that the setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. Hence, the said plants were held to be movable. Relevant extract of the judgement is reproduced as under for ease of reference: Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (
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pment of the touring cinema would fall within the category of immoveable property. We have no hesitation in holding that it does not. In the question referred to us, the properties are described as collapsible and capable of being removed. In the very nature of things, properties of that nature cannot be immoveable property. The expression permanently fastened occurring in the question is a little misleading. Actually some of the machinery or the poles of the tent may be imbedded in the earth, but they are imbedded only temporarily and not permanently, If they were permanently fixed, the equipment would not form part of a touring cinema. Further, it is worthwhile to note that the Madras High Court in the matter of Sri Velayuthaswamy Spinning Mills v. The Inspector General of Registration and the Sub Registrar (2013 (2) CTC 551) = 2013 (3) TMI 681 – MADRAS HIGH COURT, while deciding whether setting up of windmills can be treated as movable property for the purpose of payment of stamp du
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extracts of the judgment are reproduced below for ease of reference: We find ourselves in agreement with the second part of these observations, which is apposite to the instant case. In the case before us, the attachment of the oil engine to earth, though it is undoubtedly a fixture, is for the beneficial enjoyment of the engine itself and in order to use the engine, it has to be attached to the earth and the attachment lasts only so long as the engine is used. When it is not used, it can be detached and shifted to some other place. The attachment, in such a case, does not make the engine part of the land and as immovable property. ….. In view of the aforesaid judgments, it is submitted that in the instant case, the solar power plants supplied by the Appellant is commissioned and installed only for the beneficial enjoyment and for the purposes of better functioning of the plant and are capable of being removed and transferred from one place to another. Hence, the fact that the
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ntioned judicial precedents and has given a finding that the Draft Contract would qualify to be an immovable property, is perverse. 2.5. The Appellant further submits that the fact that solar power plant is capable of being moved from one place to another without damage to the plant can be further substantiated by making a reference to Clause 4.1(xiii) of the Draft Contract, which contemplates possibility of transferring the plant: (xiii) Any costs incurred by the Contractor for any changes made in the land/premises of the owner, while development of plant, due to the requirement of transferring the plant to another location, would be borne by the owner. Such costs incurred would be charged by the contractor from owner separately and does not form part of the Contract price highlighted in Schedule 3 of the contract. The amount to be charged due to the changes will be mutually decided between the parties. 2.6. Further, the Impugned order is not in line with the MNRE vide which it has be
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is also placed on the Chartered Engineer s Certificate (hereinafter referred to as CEC ) which clearly states that the SPGS proposed to be supplied by the Appellant can be easily shifted from one place to another and it is highly movable. 2.8. In this regard, the Appellant also submits, that the Central Board of Customs and Excise (hereinafter referred to as the CBEC ), vide 37B Order No. 58/1/2002 – CX issued under F.No. 154/26/99 – CX-4 dated 15 January, 2002 (hereinafter referred to as the Circular ), issued the following clarifications with respect to plant and machinery assembled at site: (v) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. (vi) If any goods installed at site (example paper making machine) are capable of being sold or shifted as such after removal
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ers: 1. There is a definition of SPP – means 60MWAC/81MWDC Solar Power Plant to be supplied, installed and commissioned at the plant site by the contractor, which is forming part of the solar power generating system . The contract would be to develop a 60MAC/81MWDC solar power plant for onward sale of power to its consumers. It is a big project and has a permanent location. Such a plant would, therefore, have an inherent element of permanency. 2. Further, here the output of the project i.e. the power would be available to an identifiable segment of the consumers. Thus, this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals. 3. The project would be using goods which would be imported. Are such high end equipments frequently dislocated? Would there not be damage to the materials if moved places frequently and if so, would it perform as effectively as it wo
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ataka Power Transmission Company Limited]. This means that the project would be established under government rules and regulations. It is most unlikely that a project would be moved from place to place once it has been put into place after obtaining the essential permits and licenses. 6. The upshot of being a renewable energy project to generate electricity for consumers would be connected to the grid. And we find the definitions in the agreement clauses thus Grid means grid substation to which plant is to be connected for commercial operations; Grid Substation shall mean 110/33kV government substation situated at and in the state of Karnataka, India Thus, it can be seen that the plant would be connected to the grid substation for the purposes of the commercial operations. After having established and commissioned such a project which is connected to a grid substation, who would be taking the project to a different location. It would be farfetched an argument that the project could be
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t, due to the requirement of transferring the plant to another location, would be borne by the owners. Would by no means amount to making the impugned transaction, a works contract resulting into movable property. Such type of clauses fall in the precautionary nature of clauses in legal documents. In this regard, the Appellant would like to submit that the AAR has completely misinterpreted the provisions of law and the settled judicial precedents in this regard and has disregarded the facts of the Appellant s specific case. As submitted above, various parts of solar power generating system is only installed together to the grid sub-station so that the same is capable of functioning as a system together. It is further submitted that though SPGS may be shifted from one place to another only in rare circumstances, the same is still capable of being removed and hence cannot, by any stretch of imagination, be said to be an immovable property. The AAR in the Impugned order has failed to expl
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enjoyment it is necessary to fix it on earth though permanently i.e. when it is in use, it is not immovable property. In the instant case the components/parts both essential and non-essential are fixed to earth for its beneficial enjoyment and by fixing it to the earth it does not become part of the earth, and therefore, it is not immovable property. It is also not disputed that X-ray equipment can be dismantled and shifted. From the records we find that the dismantling charges were also collected from one of the customers. 51. Therefore, we are of the view that X-ray equipment is not immovable property. In view of the aforesaid, it is clear that even if it is necessary to fix something on earth permanently till it is in use, it cannot be said that it is an immovable property if the nature of the same is movable. Hence, relying on the aforesaid, it is submitted that SPGS is movable in nature and hence, does not qualify to be works contract. Further, as discussed above, there are vario
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as movable, as is the case in the Appellant s matter. 2.10. It is further submitted that the AAR has wrongly relied on the judgement of the Hon ble Supreme Court in the case of T.T.G. Industries Vs. CCE, Raipur [(2004) 4 SCC 751] = 2004 (5) TMI 77 – SUPREME COURT OF INDIA wherein hydraulic mudguns and tap hole drilling machines required for blast furnace were held to be immovable property on the basis of the finding that the said machine could not be shifted without first dismantling it and then re-erecting it at another site. It was also observed that even if the machines were attached to a concrete base just to prevent wobbling of the machine, it would be classified as immovable property. In it is submitted that AAR has grossly erred in relying on the decision of TTG Industries as the facts of the case are not applicable to the Appellant s case. The level of construction work in case of TTG (T.T.G. Industries Vs. CCE, Raipur [(2004) 4 SCC 751] = 2004 (5) TMI 77 – SUPREME COURT OF IND
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.6 metres, and the height 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at various levels to melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one metre thickness. Thus, the drilling machine has to drill a hole through one metre thickness of the refractory brick lining. The drilling machine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in the nature of a concrete platform around the furnace. The cast house floor is at a height of 25 feet above the ground level. On this platform concrete foundation intended for housing drilling machine and mudgun are erected. The concrete foundation itself is 5 feet high and it is grouted to earth by concrete foundation. The first step is to secure the base plate on the said concrete platform by means of foundation bolts. The base plate is 80 mm mild sheet of about 5 feet diameter. It is welded t
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udgun is 1.5 x 4.5 x 1 metre and that of the drilling machine 1 x 6.5 x 1 metre. Having regard to the volume and weight of these machines there is nothing like assembling them at ground level and then lifting them to a height of 25 feet for taking to the cast house floor and then to the platform over which it is mounted and erected. These machines cannot be lifted in an assembled condition. From the above, it is apparently clear that the level of construction work involved in the installation of hydraulic mudguns and tap hole drilling machines is enormous and hence the machines were rightly held to be immovable property. However, the Appellant would like to draw the attention to the fact that the setting up of solar power plant does not require this degree of construction work. In the case of solar power plant, commissioning is done only for setting up various equipments which constitute a solar power generating system so that they become a system and function together. The constructio
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C online Bom 907 :(2015) 77 VST 434], = 2014 (9) TMI 38 – BOMBAY HIGH COURT wherein Base Trans receiver System (hereinafter referred to as the BTS ) was held to be immovable on the ground that the BTS system is not marketable. It was observed that in case the BTS site has to be relocated, all the equipments like BTS, microwave equipment, batteries, control panels, air conditioners, UPS, tower antennae etc. are required to be dismantled into individual components and then they can be moved from the existing site and reassembled at new site. It was held that the act of dismantling the system from the permanent site would render the goods non- marketable and hence the goods cannot said to be immovable property. In it is submitted that solar power generating system is capable of being moved from one place to another without substantial damage and hence cannot said to be immovable property. The fact that the solar power generating system is capable of being moved without substantial damage
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the earth only for operational efficiency and not with the intention of permanently affixing the plant to the earth. The AAR has distinguished the aforesaid judgment on the basis that the plant was indeed moved after the road construction or repair project for which it is set up is completed. In this regard, it is submitted that the fact that something is capable of being moved shows that it is not immovable in nature. The fact whether it is actually moved or not, does not change the nature of the property, and hence, the AAR has misinterpreted the judgment in the instant case. Reliance in this regard can also be placed on the judgement of the Hon ble Supreme Court in the matter of Sirpur Paper Mills Ltd (supra) wherein in case of a paper making machine, it was held that merely because the machinery was attached to the earth for operational efficiency, it does not automatically become an immovable property. If the appellant wanted to sell such goods, it could always remove it from the
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rty, therefore the same should be taxable as a composite supply of SPGS at the rate of 5%. 3. Alternatively, PV module is the principal supply, hence the contract should be taxable at 5% 3.1. Without prejudice to the above and in the alternative, the Appellant submits that mounted Photovoltaic module (PV module) comprises around 60%-70% of the entire Solar Power Plant, and the rest of the components constitute for around 30-34% and are merely parts or sub parts which are required for panel housing or setting up the module such as controllers and switches. This is due to the fact that PV module is a packaged, connect assembly of typically photovoltaic solar cells, which constitute the photovoltaic array of a photovoltaic system that generates and supplies solar electricity. In other words PV modules are nothing but an assembly of solar cells that helps in converting solar power into electricity. The fact that solar PV modules constitutes 60-70% of the total contract can also be substant
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In the said case also, the CERC, of the total cost of the project including land cost, PV Modules cost is considered as 62%. 3.4. Reliance in can also be placed on Chartered Engineer s Certificate which provides that the most critical component is PV modules both in terms of the value and functionality that such modules perform. 3.5. Further, the Appellant would like to make reference to Schedule I of the Draft Contract which provides as below: The contractor would be responsible for Supply of Equipment and undertake al/ necessary activities ancillary to such supplies (such as erection, civil work etc.) to ensure complete supply of solar power plant. Both parties agree that of the total supplies, the most critical part of the Plant are the supply of the mounted PV module which constitutes 60%-70% of the total contract value. Further, it is also agreed that the Contractor is responsible for the whole of the contract that is for setting up/supply of the Plant. For the purpose of the unde
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ower Generating System. Relevant extract of the judgement is reproduced below for ease of reference: 7. The adjudicating authority admitted the fact that Solar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. Therefore, the denial of benefit of notification by the adjudicating authority is not sustainable. The impugned order is set aside and the appeals are allowed . 3.8. In the present case, the intention of both the parties is to supply the whole of solar power generating system in totality which consists of various goods and services incidental to provision of such goods. What the customer wants is a functional solar power system and services such as erection, commissioning etc. are only a means to provide the main supply of the goods. 3.9. Basis the above submissions, it is clearly e
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able energy products and parts thereof, the same should be applicable to all suppliers providing such products as long as it can be established (through certification or otherwise) that these are to be used in solar power generation system. This would also be in line with practice under erstwhile excise law wherein benefit was extended to sub-contractors also through MNRE certification. In view of the aforesaid, it is humbly submitted that the Impugned Order passed by the Advance Ruling Authority is based on erroneous reasoning, misinterpretation of the facts and hence is incorrect and bad in law. Hence, in view of the aforesaid submissions, the Appellant would like to reiterate that the AAR, in its order, has incorrectly assumed that the contracts which are in relation to supply of SPGS are generally in the nature of immovable property, and hence are works contract. In this relation, the Appellant would like to conclude that as per the detailed submissions made by the Appellant above,
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not considered by the AAR in its order. Hence, the Appellant would like to plead that the contract for supply of SPGS is a contract for supply of SPGS as a whole, and hence, should be taxable at the rate of 5%. The AAR s findings that the contract for SPGS is an immovable property, and hence, qualifies as works contract taxable at the rate of 18% is without any substance and is bad in law, and hence, the Impugned order should be set aside. Alternatively, even if the contract under question qualifies as a composite supply, the principal supply can be said to be that of PV modules (forming 60-70% of the contract value and being the most critical component of a SPGS), which is taxable at the rate of 5% In addition, the Appellant would like to reiterate that as submitted above, the benefit of concessional rate of tax should be eligible to sub-contractors as well. In view of the above, the appellant prayed that – a. Set aside/modify the impugned advance ruling passed by the Authority for A
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liability to pay GST: (a) Supply of goods or services or both (b) At such rates… as may be notified by the Government; (c) On the value determined under section 15; (d) And collected in such manner as may be prescribed; (e) And shall be paid by the taxable person. 7. The scope of supply is set out at Section 7 of the CGST Act, which reads as under: 7. (1) For the purposes of this Act, the expression supply includes- a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; …. (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. 8. In terms of Section 7: The concept of supply under Section 7(1)(a) takes in supply of goods for a consideration, or a supply of services for a consideration. Separately, as per Section 7(1)(d), Schedule Il to the CGST Act determin
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wer generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants/devices (f) Solar lantern/solar lamp (g) Ocean waves/tidal/waves energy devices/p/ants (h) Photo voltaic cells, whether or not assembled in modules or made up into panels Services: Sl.No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition 3 Heading 9954 (Construction services) (ii) of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. 9 – (xii) Construction services other than (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x)and (xi) above. 9 – 10. Section 8 of the CGST Act then prescribes the tax liability in case of inter alia a composite supply , as follows: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such prin
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02) services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged (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. It is also important to note that Section 2, which is the definition section, commences with the words unless the context otherwise requires . Accordingly, a particular context may alter the definition of any particular term under Section 2. View taken in the Impugned Order frustrates the intent of the Legislature and renders the ent
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t; A system could be movable or immovable. 15. In this regard, the word system (which is undefined under GST) is to be understood as follows: Ordnance Factory vs. CCE, Nagpur [2013 (295) ELT 600 (Tri-Mum)] = 2011 (12) TMI 401 – CESTAT, MUMBAI As per the Oxford Dictionary (Tenth Edition), the definition of the term system is a complex whole, a set of things working together as a mechanism or interconnecting network . Similarly, the system is defined in Chambers 20th Century Dictionary as anything formed of parts placed together or adjusted into a regular and connected whole . P. Ramanatha Aiyar s Advance Law Lexicon (5th Edition) System means a set of inter-related or interacting elements 16. In terms of the aforesaid, given that S. No. 234 refers to the fully interconnected SPGS, the said entry refers to all of the parts/ components as well as the necessary services to achieve such interconnection. 17. Accordingly, the clear intention of the Legislature is that the system must be taxed
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n will have to be interpreted consistent with the coverage specified by the notification. Therefore, qua a supply of a system , whether under one contract or more, irrespective of the form in which the system is, the levy of GST must be at 5%. 19. The interpretation adopted by the Impugned Order, that all contracts for supply and services qua SPGS must be treated as a works contract and taxed at 18% on the full value, will render the taxing entry of SPGS wholly otiose/ nugatory. As per the settled law, any such interpretation is always to be avoided (Oswal Agro Mills Ltd. vs. CCE [1993 (66) ELT 37 (SC)]; = 1993 (4) TMI 73 – SUPREME COURT OF INDIA, Akbar Badruddin Jiwani vs. CC [1990 (47) ELT 161 (SC)]). = 1990 (2) TMI 50 – SUPREME COURT OF INDIA. 20. In the present case, the clear intent of the Legislature/Government is to tax SPGS at 5% being a source of renewable energy. Accordingly, no such interpretation can be adopted which would defeat this intention and place all SPGS contracts
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permanency; (b) it would not be possible or prudent to shift the plant from time to time; (c) the words commissioning in the Agreement brings out the scale of operations; (d) the project would be connected to the grid and is unlikely to be shifted (refer Pg. 77-78 of the Appeal Memo). Once it has been determined that the transaction is a works contract , it would be taxable as a works contract . Since we have elaborately discussed and observed that the impugned transaction is a works contract u/s 2(119) of the GST Act, we need not even enter into the discussion as to whether the impugned transaction is a composite supply u/s 2(3) of the GST Act. (refer Pg. 78 of the Appeal Memo). 22. It is submitted that the aforesaid findings under the Impugned Order are completely unsustainable and bad in law, as the same completely misread the provisions of: (i) Schedule Il to the CGST Act pertaining to works contract ; and (ii) the rate prescription for works contract under Notification 11/2017. Bo
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e findings in the Impugned Order that the SPGS is immovable property are erroneous and unsustainable: 24. The Impugned Order proceeds on the basis that the SPGS is an immovable property . The said findings are unsustainable in view of: (i) The certificate provided by the expert (i.e. qualified Chartered Engineer) which clearly states that the SPGS is highly moveable as it is capable of being dismantled and re-assembled at another location (refer Pg. 139 of the Appeal Memo). The said expert evidence has not been controverted in any manner, the expert has not been cross-examined and no contrary evidence has been brought on record as well. It is well settled that expert evidence can only be countered with expert evidence and a judicial/ quasi-judicial authority cannot substitute his own views for that of the expert (Inter Continental (India) vs. Union of India [2003 (154) ELT 37 (Guj) =2002 (2) TMI 129 – HIGH COURT OF GUJARAT AT AHMEDABAD] maintained in Union of India vs. Inter Continenta
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judgements of the Hon ble Supreme Court, the relevant test for determining whether a given item is movable or immovable is whether the affixation of the same is for the purposes of the beneficial enjoyment of the movable item (i.e. to ensure full functionality of the movable item by providing structural support, ensuring it is wobble-free etc.) or for the beneficial enjoyment of the immovable property (i.e. construction of a building/ structure to enjoy and utilize the land). In particular, it has been held that where the item can be dismantled and erected at another location without destroying or damaging the item, the said item would be movable and not immovable. Reliance in this regard is placed on the following: Sirpur Paper Mills vs. CCE, Hyderabad [1998 (1) SCC 400] = 1997 (12) TMI 109 – SUPREME COURT OF INDIA CCE vs. Solid and Correct Engg. Works & Ors. [2010 (175) ECR 8 (SC)] = 2010 (4) TMI 15 – SUPREME COURT Board of Revenue, Chepauk, Madras vs. K. Venkataswami Naidu [AIR
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ssembled and erected. In fact, the decision in Solid and Correct (supra), while laying down the definitive tests on this movability/ immovability, has also distinguished the decision in TTG Industries (supra) at paragraph 32 on this factual basis. (m) In this regard, it is also submitted that the various precedents have not laid down a requirement that the item must be capable of being moved as such to another location without dismantling. The relevant judgements only contemplate that the item must be capable of being dismantled and reassembled at another location without being destroyed in the process. In this regard, the conclusion in the Impugned Order that the SPGS is immovable property as it could not be shifted without first dismantling it and the reerecting it at another site, is wholly erroneous, and contrary to the test established by the Hon ble Apex Court. (n) It is further submitted that the test is not one of whether the items are, in fact, dismantled and moved by an asses
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= 2014 (9) TMI 38 – BOMBAY HIGH COURT is distinguishable on this basis under GST, in as much as the statute itself views telecommunication towers as being in a distinct category from plants (such as a solar power plant). 25. In view of the aforesaid, the SPGS is not in the nature of immovable property , and, therefore, cannot qualify as a works contract . Consequently, the agreements cannot be taxed as a service at 18%. Without prejudice, the transaction is in any event not a works contract , but is taxable per the principal supply, at a rate of 5%: 26. Without prejudice to the foregoing, a works contract will still not be constituted, as a works contracts by definition is a contract for construction which also involves a transfer of title/ ownership in goods. The predominant element is, therefore, that there must be a contract for rendition of services, viz. construction services. Accordingly, where the predominant element is supply of manufactured goods which are imported, or, locall
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. 234. Accordingly, any and all goods required for the creation of the system would qualify for the 5% rate under this entry (refer submissions at paragraphs 23 to 28 hereinabove). (iii) In any event, as per a plethora of precedents and CBEC clarification (largely in the context of solar projects and windmill projects), it is settled law that parts/ components of a system would equally merit the rate prescription for the system : Rajasthan Electronics & Instruments Ltd. vs. CCE, Jaipur [2005 (180) ELT 481 (Tri-Dei)] = 2004 (7) TMI 259 – CESTAT, NEW DELHI BHEL vs. CCE, Hyderabad [2008 (223) E.L.T. 609 (Tri. – Bang.)] = 2007 (10) TMI 165 – CESTAT, BANGALORE Phenix Construction Technology vs. CCE, Ahmedabad-II [2017-TlOL-3281-CESTAT-AHM] = 2017 (8) TMI 307 – CESTAT AHMEDABAD Jindal strips Ltd. vs. CC, Bombay [2002-TIOL-347-CESTAT-DEL-LB] = 1997 (5) TMI 152 – CEGAT, NEW DELHI Gemini Instratech Pvt. Ltd. vs. CCE, Nashik [2014 (300) EL T 446 (Tri-Mum)] = 2013 (7) TMI 464 – CESTAT MUMBAI
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546 or 8547) are to be classified according to the following rules : (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute
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s a system would attract the 5% rate of GST. 30. In view of the foregoing, even a supply of parts/ components by the sub-contractor would equally merit the 5% rate of GST. HEARING The appellants were heard on 02.07.2018 where the appellant reiterated the submission made in the application filed before the Advance Ruling Appellate Authority. The appellant also made additional written submissions on 02.07.2018 reiterating all the submissions made in the application and certain additional grounds also. Copy of the additional submission was enclosed to the appeal. Both the submissions of the appellant are -kept on record. FINDINGS We have heard both the parties and have gone through the entire case records and written and oral submissions made by the appellant as well as by the respondent. The main issue to be decided is (i) Whether contract for supply of/construction of a solar power plant, wherein both goods and services are supplied, can be construed to be a composite supply in terms of
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ccordance with Technical Specification, Applicable law, Applicable terms and the terms of this contract, in addition to the detail drawings finalised during engineering. 33. The total scope of the contract is set out under schedule-I which says the following: .. The contractor would be responsible for Supply of Equipment and undertake all necessary activities ancillary to such supplies (such as erection, civil work etc.) to ensure complete supply of Solar Power Plant. 34. As per Clause 4.2, which defines the Obligations of the Contractor , the contractor is required to do the following,- i) Design and engineering of the plant as per Schedule-2 (Technical specification). ii) Procure the equipment as per the Schedule-4 (Execution schedule). iii) Construction of civil structure or building. iv) Insurance required during the transportation of equipment, supplies by the contractor and insurance required for its representative, engineers and labors until commissioning. v) Supply of such item
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Clause 15.5. Commissioning (i) Upon being ready for Commissioning, the Contractor shall provide the Owner or the Owner s Representative, 5 (five) Business Days written notice for being present at the Commissioning ( Notice of Commissioning ). In this regard, the following shall be the pre-requisites for achievement of Commissioning: (a) successful installation, testing and Commissioning including generation of electrical energy and charging of 100% DC capacity of Relevant MW size of the Plant; (b) the Plant is mechanically and electrically completed meeting minimum functional, technical and safety requirements; (c) the data acquisition system has been commissioned and able to log data as required by the utility; (d) that the Plant has been continuously running for a minimum period of 3days except for minor faults and Grid non- availability. 37. Let us also see the clause 20 about the Risks and liabilities. 20. RISKS AND LIABILITIES 20.1. The risk and liabilities pertaining to all the e
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and hence the entire contract should be taxable @ 5%. The term composite supply is given under clause (30 )of Section 2 of the CGST Act. composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration. – Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; It is important to see the definition of principal supply and goods along with the same. principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; A reading of the definition of composite supply shows t
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d installation thereof. 40. In order to understand the scope of a composite supply and also to know what may be the criteria to judge a supply as a composite supply , the CBIC has published an e-flier on the subject. As per the e-filer, Composite supply entails the concept of naturally bundled supply , and whether services are bundled in the ordinary course of business would depend upon the normal or frequent practice followed in the area of business. It also says that in order to qualify for a composite supply one of the characteristic would be that none of the individual constituents are able to provide the essential character of the service . What is the normal frequent practice in the trade can be ascertained from the following indicators, The participation of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in t
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es the supply of both goods and services is a composite supply as per the definition in the Act. There are two taxable supplies- one of goods and the other of services and they both are naturally bundled and it is natural and also a practice to expect that the contractor who will supply the goods will also supply the services alongwith it. In the business of contracts for the Solar Power Generating System, it is a practice to provide a Plant as a whole along with the supply of services. We differ with the order of the Advance Ruling Authority in this respect. 42. WHETHER IMMOVEABLE PROPERTY 42.1 Now though we have come to the conclusion that the same is a composite supply, we have to decide the issue about what would be the principal supply and whether it would be a supply of services or supply of goods. The ARA has held that the impugned transaction for setting up and operation of a solar photovoltaic plant which is in the nature of a works contract in terms of clause (119) of Section
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re contracts for building, construction, fabrication etc of any immovable property. Whether the erection of the Solar Power Generating System amounts to erection of immovable property? In order to answer this question, we have to go through the clauses given in the agreement brought before us. 42.2 It can be seen from the definition that Works Contract involves activities of 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. However, these activities should be in terms of immovable property. In order to decide whether the transaction is a works contract it is for us to decide whether it is in terms of immovable property. The term immovable property has not been defined under the GST Act. The appellant has submitted
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f annexation and object of annexation have been applied as relevant test in this country also. If the fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free then it cannot be called as Immoveable property . If the setting up of the plant itself is not intended to be permanent at a given place and if the plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed, then also it cannot be termed as Immoveable property . 42.3 So what to be seen above is that in deciding whether a property is movable property we have to see what is the mode of necessary annexation and the object of annexation. If object is so annexed that it cannot be removed without causing damage to the land then it gives a reasonable ground for holding that it was intended to be annexed in perpetuity. Also whether the intention of the parties while erecting the system was that the plant has to be
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PV modules), string inverters, inverter to convert from DC power to AC power, Switchgears, Transformers and transmission lines etc. The entire mechanism of a SPGS is that solar panels/PV modules are connected together to create a solar array. Multiple panels are connected together both in parallels and in series to achieve higher current and higher voltage. The electricity produced by solar array is direct current, and therefore, inverters are required to convert Direct Current into Alternating Current and connection to utility grid is made through High Voltage Transformer. The appellant has submitted in the write up that in setting up of a solar power generation plant, the following steps are involved: Soil and Topo Survey Plant coordinate fixing, Boundary fencing and Plant layout T/L Survey, Piling, Building Construction Structure erection, inverter erection, equipment foundation Charging transmission, DC system erection, module mounting DC cabling Commissioning of the solar power p
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o choose a location that receives the ideal amount of daily sunlight and uses space effectively. Installing ground-mounted solar panels always starts with building a stable base. Traditional ground-mount systems, essentially all work the same-systems anchor to the ground and hold a large number of stacked panels, often two but sometimes three or four panels high. Two rails usually support each panel, whether oriented in landscape or portrait. The anchoring to the ground is the tough part of these installations, as there are many different types of foundations. If the soil is clear of debris, steel beams are driven into the ground and the racking system is attached to the beams. If ground conditions are not suited for smoothly driven beams, anchor systems may be used – helical piles, ground screws. These can take more time to install as they have to power through boulders and other large debris. It is usually a more complicated installation process than putting solar panels on a roof. W
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bed above is a solar power system for a home. What we have in the instance is a WHOLE SOLAR POWER GENERATION SYSTEM. one look at the Agreements gives an idea of the scope of the work. The array of goods includes Solar PV Modules, inverters and Inverter Transformer, Tracker Components, Module Mounting Structure, Switchyard Supply, Transmission Line Supply, AC/DC Cables ,Chain Link Fencing ,Battery Charger, Power Transformer, LD Switchgear and complete switchyard, Inverter transformers and auxiliary transformers, Battery and battery charger, SCADA system, Module cleaning system, Illumination and ventilation system, Earthing system ,Site enabling facilities and Mandatory spares. The initial steps includes the drawings and detailing of the system. The activities given in Schedule-I (Scope of work) shows that the Obligation of the Contractor amongst other things includes Plant information and Plant Information in turn includes works relating to Plant land which in turn includes identificati
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ng down of the OHT line which includes line survey, procurement of materials and erection of poles. Item 10 of the Schedule-I shows that lot of approval and permissions are required not only for transportation of materials but also for payment of land related taxes, approval from local bodies, environmental clearance, NOC from utilities, final occupancy approval and commissioning certificate as well as their requisite approval from KPTCL and other government agencies. The above itself shows the huge work and detailing of the project. Clause 4.2 refers to the Obligation of Contractor . The Obligation of the contractor include amongst other things design and engineering of the Plant, procurement of the equipment, construction of the civil structure or obtaining of the necessary approval for land labour etc. Clause 5 of the contract delineates the scope of designing and engineering. It details that the contractor shall design the Plant and also submit the drawing .1 layouts, specification
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echnical and safety requirement. c) The data acquisition system has been commissioned. d) The Plant has been continuously running for minimum period of 3 days. Clause 20 which refers to liabilities provided that all the risk and liabilities shall be borne by the Contractor till the completion of the Plant. It is only of the completion of the Plant that the risk and liabilities are shifted to the owner. All of the above (quoted from the details given by the appellant) goes to show that the erection of the solar power generating system is not as simple or movable as it is made out to be. It is an entire system comprising a variety of different structures which are installed after a lot of prior work which involves detailed designing, ground work and soil survey. As said earlier, the amount of drawings done indicates the magnitude of the work done. Solar systems tend to be tailored specifically to fit the dimensions and orientation of the needs of the project. It is not easy to move them
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ntended to be bought is not the PV module but an entire system. Thus, we affirm the conclusion drawn by the ARA that the Agreements made lead to the erection of a Solar Power generating System. 42.7 We shall refer to certain judgements in this regard. The Advance Ruling Authority has referred to the Supreme Court judgement in the case of M/s. T.T.G. Industries Ltd., vs Collector Of Central Excise,. on 7 May, 2004 Appeal (civil) 10911 of 1996. = 2004 (5) TMI 77 – SUPREME COURT OF INDIA The contract here was for the design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace and the issue was whether the same is immoveable property. The Apex Court observed, … Keeping in view the principles laid down in the judgments noticed above, and having regard to the facts of this case, we have no doubt in our mind that the mudguns and the drilling machines erected at site by the appellant on a specially
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iece by piece on a metal frame, and the components are lifted by a crane and landed on a cast house floor 25 feet high. The volume and weight of these machines are such that there is nothing like assembling them at ground level and then lifting them to a height of 25 feet for taking to the case house floor and the to the platform over which it is mounted and erected. It observed that the machines cannot be lifted in an assembled condition and after taking note of these facts, it concluded that the same is immoveable property. The Court further held that it cannot be disputed that such Drilling Machine and Mudguns are not equipment which are usually shifted one place to another nor it is practicable to shift them frequently. The court also referred to its own judgments in the case of Quality Steel Tubes (P) Ltd. 75 ELT 17 (SC) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA and Mittal Engineering Works (P) Ltd. 1996 (88) ELT 622 (SC) = 1996 (11) TMI 66 – SUPREME COURT OF INDIA. In the case
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nt and machinery in the fertilizer is goods or immoveable property. The Apex Court held that the same is immoveable property and observed the following, ….. The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the same as a fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of conveyance
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nt – mean 60MWAC/81MWDC Solar Power Plant to be Supplied, installed and Commissioned at the Plant Site by the Contractor, which is forming part of the solar power generating system . The contract would be is to develop a 60 MWAC/81 MWDC solar power plant for onward sale of power to its consumers. It is a big project and has a permanent location. Such a plant would, therefore, have an inherent element of permanency. Further, here the output of the project i.e the power would be available to an identifiable segment of consumers. Thus, this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the Plant elsewhere at frequent intervals. 43. The appellant has produced a certificate from a Chartered Engineer stating that the Solar Power Plant is made of equipment which are largely moveable in nature, if required, the equipment can be moved from one land parcel to another. This may happen in cases where th
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he GST treatment for solar sector and cannot be taken as legal advice/opinion. The letter itself clarifies in the end that the same is not a legal advice or an opinion. The issue of classification or determination of the agreements have to be done with respect to the laws and relevant provisions. 43.2 The appellant has also produced order of the CBEC under Section 37B (Order No 58/1/2002 -CX dt 15.1.2002). The order gives directions as to what would be excisable goods and what are not (immoveable property). The clarification says in Para 5 (i) that Turnkey projects like Steel plants, Cement Plants, Power plants etc involving supply of large number of components , machinery, equipment, pipes and tubes etc for their assembly /installation/ erection/integration/inter-connectivity on foundation/civil structure etc at site will not be considered as excisable goods for imposition of central excise duty =the components would be dutiable in normal course. The clarification therefore holds the
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vices & parts for their manufacture (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Solar lantern / solar lamp (g) Ocean waves/tidal waves energy devices/plants (h) Photo voltaic cells, whether or not assembled in modules or made up into panels The above description in the notification shows the description of goods as Following renewable energy devices and parts for their manufacture . The term devices is very important here. A device means an object. The Oxford dictionary defines device as an object or a piece of equipment that has been designed to do a particular job . The solar power generating system described in the entry is used in the sense of a device. Also, we have decided the instant case on the facts and circumstances of the case. After going through the entire contract/agreement we have come to the conclusion that the agreement leads to
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e expressed their inability to deal with the question. As no fresh documents were produced before us and also there being no original ruling of the ARA, we hold that we will not deal with the question in the present proceedings. 44. JUDGEMENTS QUOTED BY THE APPELLANT Apart from the judgements already discussed in the FINDINGS part of this order, we also discuss here the other judgements quoted by the appellant. Rajasthan Construction- The judgement is given under the provisions of the Central Excise Law. Also, there was no case of any agreements made which had to be decided on the touchstone of law but a case of classification. Phenix Construction Technology vs. CCE, Ahmedabad-II [2017-TlOL-3281-CESTAT-AHM] = 2017 (8) TMI 307 – CESTAT AHMEDABAD The question here for consideration was whether the structures and parts of structures are parts of solar power plant and eligible for the benefit of Notification. This issue is also different from the issue before us. Jindal strips Ltd. vs. CC,
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ar Power System would be an immoveable property. Also, the facts in these cases are different. There is no case of a foundation in the instant case nor is there is any case of merely an engine/pump installed. Gemini Instratech Pvt. Ltd. Vs. Commissioner of Central Excise, Nashik [2014 (300) ELT 446 (Tri. – Mum) = 2013 (7) TMI 464 – CESTAT MUMBAI, Elecon Engineering Co. Ltd. Vs. Commissioner of Customs [1998 (103) ELT 395 (Tri)] = 1998 (3) TMI 359 – CEGAT, MUMBAI, In Pushpam Forging vs. CCE, Raigad [2006 (193) ELT 334 (Tri. – Mumbai)] = 2005 (7) TMI 242 – CESTAT, MUMBAI, CCE vs. Megatech Control Pvt. Ltd. [2002 (145) ELT 379 (Tri. Chennai) = 2002 (5) TMI 112 – CEGAT, CHENNAI, Ballarpur Industries (1995 (56) ECR 646) SC) = 1994 (12) TMI 156 – SUPREME COURT OF INDIA, Sealol Hindustan Ltd (1988 (17) ECR 186 (Bombay) = 1988 (3) TMI 74 – HIGH COURT OF JUDICATURE AT BOMBAY. All these cases are quoted with respect to the 2nd question posed by the appellant. As we have not given any decision in
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