2018 (9) TMI 1256 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (17) G. S. T. L. 547 (A. A. R. – GST) – Classification of goods – supply of Copper XLPE insulated armoured low tension cables – Whether the power cables supplied by the Applicant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CT?
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Held that:- Notification provides concessional rate only for the goods falling under entry no. 1 to 24 subject to certain other specific conditions. Electric Cables, being accessories, stores, materials, consumables does not automatically qualifies them for enjoying concessional rates as mentioned in Notification no.03/2017-CT. – Electric cables are not included in any of the entries of goods specified from entry no. 1 to 23 of the List of goods appended to Notification No. 03/2017-CT.
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It is agreed that cables supplied to ws Vedanta by applicant will be used to supply and transmit electricity for petroleum operations at work site (Block RJ-ON-90/1). But w
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nning of the goods specified in the List” as mentioned in entry no. 24 of the notification is not rational by any stretch of imagination – If we regard Electrical Cables as accessories, stores, materials and/or consumables for running of the goods specified in the List, then going through this logic poles, insulators, transformers and all other equipments used to ensure flow of electricity at work site from the main source to the supply point are to be covered under this classification.
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The applicant has failed to identify/clarify as to under which category i.e. accessories, stores, materials or consumables as mentioned in S.No. 1 to 23 of the list, would electrical cables fall. Further he has not given any assurance regarding restricting the use of electrical cables as accessories, stores, materials, consumables to goods falling under entry no. I to 23 of the list, which is an essential pre requisite to claim concession.
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Ruling:- “Electrical Cables” do not fall under Entry
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roceedings nor proceedings were passed by any authority. Based on the above observations, the application is admitted to pronounce advance ruling . 1. Submission of The Applicant: 1. KEI Industries Ltd. (hereinafter referred to as the Applicant ) is a public limited company incorporated in India and is engaged in the business of manufacturing and supply of various kinds of Power Cables. 2. The present application pertains to the supply of Copper XLPE insulated armoured low tension cables(hereinafter referred to as electric/power cables ) by the Applicant to M/S. Vedanta Ltd. 3. M/s. Vedanta is undertaking petroleum operations under PRE-New Exploration Licensing Policy(PRE-NELP) granted by the Government of India/State Government to Cairn Energy India Pvt. Ltd. in the State of Rajasthan which was vested in Vedanta after the merger of Cairn India Pvt. Ltd. in Vedanta. For carrying out such petroleum operations, it uses various kinds of machines and equipment. Almost all machines and equi
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r equipments for which the cables are required and therefore, the Applicant is supplying power cables to the Applicant on the basis of the job sheet provided by M/s. Vedanta. Once the Applicant receives the order sheet, it manufactures the power cables as per the specifications provided therein. The Applicant manufactures the power cables of exact length/specifications as ordered by M/S. Vedanta and the same are supplied exclusively to M/s. Vedanta and not to any other recipient. 7. It is pertinent to note that even though the cables are manufactured as per the specifications provided by M/s. Vedanta and supplied exclusively to M/S. Vedanta, the cables are not exclusively or specifically meant to be used with such machines in as much as these power cables are general power cables and are capable of being used with any machine/equipment. 8. The Applicant submits that issue on which advance ruling is sought in the instant matter relates to applicability of Notification No. 03/2017-Centra
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h is specified in column (3) of the Table with relevant List appended hereto and falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, from so much of the central tax leviable thereon under section 9 of CGST Act as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions annexed to the notification .A corresponding benefit is given under Rajasthan Goods and Services Tax Act vide File No. F.12 (56)FD/Tax/2017-Pt-1-42 dated 29.06.2017. Similar benefit on inter-state supplies is given under IGST Act vide Notification No. 03/2017-lntegrated Tax (Rate) dated 28.06.2017. 12. Further, Sl. No. I of Notification No. 03/2017-CT provides that the said benefit would be available for the goods provided in List 1 of Notification No. 03/2017-CT. The List of goods appended to Notification No. 03/2017C
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ns undertaken under the specified contracts. However, the term specified contracts is not defined under Notification No. 03/2017-CT. On a careful perusal of Sl. No. l, it can be inferred that specified contracts are those contracts which are entered under the policies specified in the list. However, unlike other clauses of Sl. No. I, clause (b) does not provide the policy under which the specified contracts are entered. 15. Applicant further stated that Condition No. I to SI. No. 1 which provides that the goods should be supplied to the organization/companies who have entered into contract with the Government of India. On a conjoint reading of clause (b) along with condition no. 1(ii), it can be inferred that specified contracts referred in clause (b) are those contracts which are entered into with the Government of India in relation to petroleum operations. 16. Applicant stated that prior to introduction of New Exploration Licensing Policy, licenses for petroleum explorations were gra
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Notification No. 03/2017-CT. Moreover, it is also not defined in the CGST or IGST Act. In common parlance, an Indian Company would mean any company who is established and registered in India in accordance with the relevant laws prevailing at that time. 20. To substantiate the same, reference is made to the definition provided in the Income Tax Act, 1961, which defines Indian Company under section 2(26) as under: (26) Indian company means a company formed and registered under the Companies Act, 1956 and includes……………. 21. Dealer stated that in view of the above, it can be concluded that to claim benefit of concessional rate of tax under Notification No. 03/2017-CT the following conditions are required to be satisfied cumulatively in the instant case: i. The goods must be covered under the list to the Notification No.03/2017-CT; ii. The goods must be supplied in connection with petroleum operations undertaken under specified contracts; iii. The goods are supplied to an Indian c
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by the Applicant to Vedanta are used for supplying electricity to the machines which are used for undertaking petroleum operations under the specified contract i.e. the contract entered into with the Government of India. Thus, it can be concluded that the supply of power cables is in connection with the petroleum operations under the specified contract. 24. Condition No. 3: In the instant case, the Applicant is supplying electric cables to Vedanta which is a public limited company registered under the Companies Act, 1956. Thus, the Applicant is supplying goods to an Indian Company. Such cables are supplied to Vedanta in relation to their petroleum operation being undertaken in the State of Rajasthan. It is to be noted that the license for petroleum exploration in field RJ-ON-90/1 was given to Cairn Energy India Pvt. Ltd. under the Pre-NELP. Subsequently, Cairn Energy India Ltd. was merged into Vedanta Ltd. Thus, with this merger, the petroleum exploration license granted to Cairn Ener
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achines covered under the List appended to Notification No. 03/2017-CT. However, the term accessories is also not defined in Notification No. 03/2017-CT. so applicant has relied on the dictionary meaning of the term accessories , which have been extracted here under: (i) The New Merriam-Webster s Dictionary a person or thing that aids subordinately, an adjunct, appurtenance, accompaniment (ii) The Oxford Advanced Learners Dictionary an extra piece of equipment that is useful but not essential (iii) The Collin s Co build English Dictionary for Advanced Learners accessories are items or equipment that are not usually essential, but which can be used with or added to something else in order to make it more efficient, useful or decorative (iv) The Chamber s English Dictionary subsidiary, present along with something more important 29. Moreover, while determining the meaning of the term accessories , the Applicant has relied on various judgments: a) Hon ble Apex Court in the matter of Annap
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ive to the machines used by Vedanta. In fact, the said power cables so supplied to M/S Vedanta are capable of being used with more than one kind of machines. It is submitted that even though a particular product is capable of being used with more than one kind of machines, the same would still qualify as accessories . This is supported by the decision of Hon ble Apex Court in the matter of Annapurna Carbon Industries Co. vs. State of Andhra Pradesh [AIR 1976 SC 1418] = 1976 (3) TMI 156 – SUPREME COURT OF INDIA,. The relevant extract of the said decision is reproduced as under: 7. ………Apparently, the deciding factor is the predominant or ordinary purpose or use. It is not enough to show that the article can be put to other uses also. It is its general or predominant user which seems to determine the category in which an article will fall. 10……."Accessories" are not necessarily confined to particular machines for which they may serve as aids. T
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nificant (ii) The Oxford American Desk Dictionary, New edition, 2000 important, essential, relevant (iii) The Chambers Dictionary, New edition that out of which anything is or may be made, that which may be made use of for any purpose (iv) The New Lexicon Webster s Dictionary, Vol. 1 necessary tools, equipment, etc, (v) Collin s English Dictionary for Advanced Learners, new edition materials are the things that you need for a particular activity (vi) Oxford Advanced Learner s Dictionary (pl.) things that are needed in order to do a particular activity 33. Applicant stated that on careful perusal of the above extracted dictionary meanings of the term material , it is apparent that the term material means and includes all those things, equipment or implements which are necessary or important for carrying out any particular activity. 34. In view of the above discussions applicant states that the power cables supplied are required for a particular purpose i.e. providing electricity to the
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under Notification 10/97-C.E. 36. According to applicant, it can be safely concluded that power cables supplied by the Applicant to M/s. Vedanta are the goods covered by the list (entry no, 24) appended to Notification No. 03/2017-CT. Moreover, the power cables are supplied to M/s. Vedanta, an Indian company, against the certificate issued by the Directorate General of Hydrocarbons. As all the conditions prescribed in Notification No. 03/2017-CT for Sl. No. 1 are satisfied, the Applicant is eligible for the benefit of concessional rate of duty under Notification No. 03/2017-CT. 37. Applicant contents that intention on the part of the Applicant and M/S Vedanta to supply/procure such power cables for the purpose of running machines to be used in petroleum operations. 38. Based on above the applicant states that it can be inferred that the power cables supplied by the Applicant to Vedanta which are meant to be used for running the machines would be covered under either of the several hea
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ld fall within the scope of Sl. No. 1 of Notification No. 03/2017-CT and thus, leviable to concessional rate of CGST and SGST or IGST, as may be applicable. 7. Personal Hearing (PH): In the matter personal hearing was given to the applicant. Ms Jyoti Pal (Advocate) appeared for personal hearing on 28.07.2018. During the PH she submitted a written additional statement containing the definition of term accessories and material and certain judicial precedents in support of their application which was placed on record. She reiterated the submission already made in the application for Advance Ruling and further requested that the case may be decided as per the submission made earlier in Advance Ruling Application. 8. Opinion of Jurisdictional Officer: The jurisdictional Officer in his comments has stated that sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods relates to the one specified in this list. Which
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wer Cables . b) The applicant has to supply electrical cables in accordance with the specifications of the WS Vedanta Ltd. which is undertaking petroleum operations in Rajasthan and electrical cables are needed for providing electricity to machines and equipments. c) Directorate General of Hydrocarbons certifies that goods i.e. power cables of various specifications are required for the petroleum operations. d) Applicant contends that power cable supplied to M/s. Vedanta for supplying electricity to the machines or equipments used in its petroleum operations would qualify as material , accessories , consumables , and/or stores of SI. No. 1 of Notification No. 03/2017-CT for running machines listed in the list annexed to that notification. (Entry no.l to 23) and thus can be supplied at concessional rate as mentioned in the notification. e) Notification No. 03/2017 provides for the intra-State supplies of goods, the description of which is specified in column (3) of the Table with releva
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r New Exploration Licensing Policy in which goods are being supplied to the organization/companies who have entered into contract with the Government of India in relation to petroleum operations. h) Further, this benefit would also be subject to the conditions of certification from the Directorate General of Hydro carbons certifying that the goods are required for the petroleum operations referred in the SI. No. 1. i) Thus it can be concluded that to claim benefit of concessional rate of tax under Notification No. 03/2017-CT, the following conditions are required to be satisfied cumulatively in the instant case: i. The goods must be covered under the list to the Notification No.03/2017-CT; ii. The goods must be supplied in connection with petroleum operations undertaken under specified contracts; iii. The goods are supplied to an Indian company or a foreign company or a consortium or a contractor thereof in connection with the operations undertaken under a contract with the Government
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goods appended to Notification No. 03/2017-CT. m) In Advance Ruling Application the applicant has citied certain judgements and citation from various courts for categorizing Electrical cables as accessories, stores, materials and/or consumables as mentioned in entry no. 24 of the notification, which were carefully examined. To qualify for concessional rate of tax, these Judgements and citations have to be analysed and applied strictly in light of condition laid down in Notification No. 03/2017-CT. Notification provides concessional rate only for the goods falling under entry no. 1 to 24 subject to certain other specific conditions. Electric Cables, being accessories, stores, materials, consumables does not automatically qualifies them for enjoying concessional rates as mentioned in Notification no.03/2017-CT. Entry no.24 of the list specifies 24. sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods spec
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es not hold good. o) Moreover on examination of purchase orders it is found that they too do not specify that electrical cables supplied will be accessories, stores, materials and/or consumables to which specific goods as mentioned in entry no. 1 to 23 of the list. p) More so the applicant in Advance Ruling Application has himself stated that even though the cables are manufactured as per the specifications provided by Vedanta and supplied exclusively to Vedanta, the cables are not exclusively or specifically meant to be used with such machines in as much as these power cables are general power cables and are capable of being used with any machine/equipment. (pg. 7 of ARA) Further the applicant has declared In the instant case, the power cables supplied by the Applicant are not specific or exclusive to the machines used by Vedanta. In fact, the said power cables so supplied to M/S Vedanta are capable of being used with more than one kind of machines. (pg. 20 of ARA) Here again the appl
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ectorate General of Hydrocarbons dt. 18.01.2018 (purchase order no. 4500030187 & 450030182) it clearly states that This Certificate would stand withdrawn in case the said good are used for purposes other than its intended use. r) Thus the notification restricts the entry no. 24 of List of goods vis-a-vis only to the goods falling under entry no I to 23 of the list for claiming concessional rate. Use of Electrical Cables supplied for all other purposes or for all other equipments will not only withdraw the certification by Directorate General of Hydrocarbons but also disqualify the concessions. s) It is agreed that cables supplied to ws Vedanta by applicant will be used to supply and transmit electricity for petroleum operations at work site (Block RJ-ON-90/1). But will these electrical cables supplied be used as accessories, stores, materials and/or consumables for goods ONLY covered under entry no. 1 to 23 is not clear from the documents and evidences submitted by the dealer. Even
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lectricity is downloaded from the main source ( i.e. from grid or transformers ) and further transmitted , distributed or supplied to various points in working area. Machines, equipments and accessories draw supplies of electricity from these points to be functional. Hence Electrical Cables are generally used to set up a network of wires and cables which are usually permanent in nature through which electricity can flow, distributed and supplied to various points. To regard Electrical Cables as accessories, stores, materials or consumables for running of the goods specified in the List as mentioned in entry no. 24 of the notification is not rational by any stretch of imagination. If we regard Electrical Cables as accessories, stores, materials and/or consumables for running of the goods specified in the List, then going through this logic poles, insulators, transformers and all other equipments used to ensure flow of electricity at work site from the main source to the supply point are
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