In Re: M/s. KEI Industries Limited
GST
2018 (9) TMI 1256 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (17) G. S. T. L. 547 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 1-8-2018
AAR NO. RAJ/AAR/2018-19/09
GST
SHRI NITIN WAPA AND SHRI SUDHIR SHARMA MEMBER
Present for the applicant: Ms. Jyoti Pal, Advocate, Principal Associate. (Authorized Representative)
Note: Under Section 100 of the RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of RGST Act 2017, within a period of30 days from the date of service of this order.
The Issue raised by the applicant is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (b) which is as given under :
(b) Applicability of a notification issued under the provisions of the Act Further, the applicant being a registered person, GSTIN is 08AAACK0251C1Z7, as per the declaration given by him in Form ARA-01
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arious kinds of machines and equipment. Almost all machines and equipment used by Vedanta for petroleum operations run on electricity and thus, electric cables are required for providing electricity to such machines and equipment,
4. M/s. Vedanta issues tender notice for supply of power cables required for its petroleum operations and further selects a supplier who is required to supply power cables in accordance with the specifications of the cables viz. the cable type, length, thickness, material, color, etc. provided by M/s. Vedanta in the order sheet issued for this purpose.
5. The Applicant had been selected by M/s. Vedanta for supplying cables to it by raising Purchase Order No. 4500030187 and 4500030182 both dated 14.11.2017 and amended rev-01 dated 12.01.2018. Directorate General of Hydro carbons certifies that these goods i.e. power cables of various specifications, which are required for the petroleum operations.
6. It is to be noted that in the instant case, the Applicant
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nstant matter relates to applicability of Notification No. 03/2017-Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as “Notification No. 03/2017CT”) to the supplies made by the Applicant.
2. Issues Requiring Advance Ruling :
9. The Applicant submits the following questions for Advance Ruling and its interpretation on the question as under:
a. Whether the power cables supplied by the Applicant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CT?
3. Applicants Understanding:
10. According to the Applicant, the power cables supplied by the Applicant 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' under Sl. No. 1 of Notification No. 03/2017-CT for running machines listed in the list annexed to that notification for the reasons are furnished herein below:
Applicable provisions:
Notification No. 03/2017-CT
11. Notific
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1 of Notification No. 03/2017-CT. The List of goods appended to Notification No. 03/2017CT specifies various goods including,
“24. sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in this List”.
13. The Applicant stated that the concessional rate benefit would be available to the goods specified in the list to Notification No. 03/2017-CT provided the goods are used for the activities mentioned in the entry i.e. petroleum operations which are undertaken under the contracts/licenses specified in Sl. No. 1. The list of contracts/license provided in Sl. No. are as under:
a. License or mining leases granted by Government of India or any State Government to the ONGC on nomination basis; or
b. Specified contracts; or c, Specified contracts under New Exploration Licensing Policy; or
d. Specified contracts under Marginal Field Policy; or
e. Specified contracts under the Coal Bed Methane Polic
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rior to introduction of New Exploration Licensing Policy, licenses for petroleum explorations were granted by the Central or State Government. The licenses granted by the Central or State Government before the NELP are also known as Pre-NELP contracts.
17. Applicant further stated that the term “specified contracts” under clause (b) of SI. No. I would mean and include all those contracts which are entered into with the Government of India under the policies/rules other than specifically covered under other clauses of SI. No. I and would include Pre-NELP contracts.
18. Further according to him, this benefit would also be subject to the following conditions:
a. 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 of India; and
b. a certificate from the Directorate General of Hydro carbons certifying that the goods are required for the petroleum operat
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d 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 of India; and
iv. A certificate from the Directorate General of Hydro carbons certifying that the goods are required for the petroleum operations referred in the Sl.No. 1 is produced
4. Applicability of the above analysis to the present case:
The conditions of availing benefit under the notification are satisfied in the instant case
22. Condition No. 1 : As far as condition no. 1 is concerned, it is to be analyzed if the power cables supplied by the Applicant to Vedanta would be covered by entry no. 24 of the list appended to Notification No. 03/2017-CT which covers “sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in
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airn Energy India Ltd. was merged into Vedanta Ltd. Thus, with this merger, the petroleum exploration license granted to Cairn Energy India Ltd. was transferred to Vedanta.
25. Condition No. 4: It is also explained in the facts above that at the time of placing order with the Applicant, Vedanta produces a certificate issued by the Directorate General of Hydrocarbons certifying that the goods specified in the certificate are required for the petroleum operations undertaken by Vedanta. Thus, the Applicant supplies the goods to Vedanta only when it produces the requisite certificate
26. Applicant insisted that in view of the above, it can be safely concluded that in the instant case, condition no. 2, 3 and 4 as discussed above, are satisfied by the Applicant.
27. As far as condition no. 1, he stated that a detailed analysis of the same is given in the following paragraphs.
The power cables supplied by the Applicant qualify' as accessories which are required for running the goods (mach
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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 Annapurna Carbon Industries Co. vs. State of Andhra Pradesh [AIR 1976 SC 1418] = 1976 (3) TMI 156 – SUPREME COURT OF INDIA,
b) CCE, Salem vs. Madras Aluminum co. Ltd., [2017 (349) ELT 133 = 2016 (12) TMI 1374 – MADRAS HIGH COURT
c) CC, Bangalore vs. NI Micro Technologies Pvt. Ltd. [2014 (311) ELT 458] = 2013 (12) TMI 709 – CESTAT BANGALORE,
d) State of Punjab vs. Nokia India Pvt. Ltd. [2015 (315) ELT 162] = 2014 (12) TMI 836 – SUPREME COURT,
e) Allied Healthcare, India vs. CC, Chennai [2010 (259) ELT 711] = 2010 (6) TMI 418 – CESTAT, CHENNAI
f) CCE, Chandigarh vs. Arihant Spring Mills [2002 (147) ELT 1181]. = 2001 (5) TMI 779 – CEGAT, NEW DELHI
g) Ashoka Synthetics Ltd. vs. CCE, Bhubaneswar [1997 (96) ELT 170] = 1997 (7) TMI 340 – CEGAT, CALCUTTA,
h) Grasim Cement vs. CCE, Raipur [1997 (96) ELT 354] = 1997 (8) TMI 209 – C
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y in which an article will fall.
10…….”Accessories” are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument.
……Emphasis Supplied
31. He further stated that in view of the above discussions and the judicial decisions relied upon, it is submitted that the power cables supplied by the Applicant to Vedanta in the instant case qualify as accessories for running the machines given in the list annexed to Notification No. 03/2017-CT.
The power cables supplied by the Applicant also qualify as material for running the goods (machines) specified in the list
32. Further according to him entry no. 24 of the list appended to Notification No. 03/2017-CT also covers the materials required for running, repairing or maintaining the machines provided in that list. The term 'material' used in the list is not defined in Notification No. 03/2017-CT. Thus, it becomes imperative to refer to the di
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rticular 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 machines and thus, are essential for the functioning of machines. Therefore, the power cables so supplied by the Applicant would qualify as material required for running the machines given in the list appended to Notification No. 03/2017-CT.
The power cables supplied the Applicant also qualify as consumables or stores which are required for running the goods (machines) specified in the list
35. He further stated that besides spares, materials, accessories, entry no. 24 of the list to Notification No. 03/2017-CT also covers stores or consumables. In order to decide if the power cables supplied by the Applicant would qualify as stores or consumables, attention is invited to the decision of Hon'ble Ahmedabad Tribunal in Sanghvi Aerospace (P) Ltd. vs. CCE, Ahmedabad [2009 (247) ELT 578] = 2009 (6) TMI 808 – CESTAT
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hat 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 heads given under entry no. 24 of list to Notification No. 03/2017-CT. Therefore, supplies of power cables by the Applicant to Vedanta would be eligible for the benefit of concessional rate of duty as provided under Notification No. 03/2017-CT.
5. ISSUES REQUIRING ADVANCE RULING AND APPLICANT'S UNDERSTANDING:
In the light of aforementioned, the Applicant seeks to enter the following question for Advance Ruling and its interpretation of the question will be as under:
Question:
Whether the power cables supplied by the Applicant are covered under the scope of Sl. No. 1 of Notification No. 03/2017-CT ?
6. Applicant's Understanding:
The Applicant is supplying power cables to Vedanta which is covered under entry 24 of the list annexed to Notification No. 03/2017-CTas material or accessories or stores or consum
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ated 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 means goods used for running, repairing or maintenance of the goods specified in this list are only eligible for concessional rate. While applicant has not mentioned that in which machine/ machines specified in this list, power cable will be used as sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods. Further the applicant has stated that he is not aware of the type, nature and functions etc of the machines or equipments for which the cables are required for.
So in his opinion the condition “The goods must be covered under the list annexed to the notification no. 03/2017-CT” which is not fulfilled and hence power cable do not qualify description of goods mentioned in the notification that is to say “Goods speci
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ed 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 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.
f) Further, SI. No. 1 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. 03/2017-CTspecifies various goods including,
“24. sub-assemblies, tools, accessories, stores, spares, materials, suppli
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ken 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 of India; and
iv. A certificate from the Directorate General of Hydro carbons certifying that the goods are required for the petroleum operations referred in the Sl. No. 1 is produced
j) Applicant has claimed concessional rate on supply of electric cables tilling under entry no. 24 of the List of goods appended to Notification No. 03/2017-CT specifies various goods including sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in this List”.
k) This clearly means that sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance are only restricted and related to those goods as specified in entry no. 1 to 23
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ssional 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 specified in this List”.
“Goods specified in this List” means only those goods which are covered under Entry no. 1 to 23 of the list and concessional rate will only be available for sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of those goods which strictly fall under entry no. I to 23 of the list.
n) Entry no. 24 of List of goods appended to Notification No. 03/2017-CT. restricts accessories, stores, materials or consumables ONLY in relation to the goods specified in the list of goods from entry no. 1 to 23. What applicant has failed to specify is that “Electrical cables” supplied by him will be accessories. stores, materials and/or consumables to which specific goods as menti
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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 applicant has mentioned that Electrical Cables so supplied by them
1) are not specific and exclusive to machine used by M/s. Vedanta
2) supplied cables are capable of being used with more than one kind of machine by M/s. Vedanta.
Thus it can be inferred that:
1) dealer is not aware off and has not clarified that “Electrical cables” supplied will be used as accessories, stores, materials and/or consumables to which goods falling under entry no. 1 to 23 of the list.
2) “Electrical cables” supplied can very well be used as by M/s. Vedanta as accessories, stores, materials or consumables for even those goods which are not covered under entry no. 1 to 23 of the list.
3) It is to be noted that in the instant case, the Applicant is not aw
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perations 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 the applicant seems not sure of its uses. Concessional rate is conditional to terms and conditions of Notifications.
t) Task of petroleum operation is very vast and complex and the process involves multiple machine and equipment along with their accessories, stores, materials, consumables but concessional rate as per notification is only awarded to supply of goods mentioned in the entry no 1 to 23 of the list and their CORRESPONDING accessories, stores, materials, consumables (entry no 24).
It is a clear possibility that there are other machine and equipment and their accessories, stores, materials and consumables which though being used in process of petroleum operation but are not enjoining concessional rate as they a
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ccessories, 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.
v) Main function of Electric Cables is to supply and distribute electricity to various points at a worksite so electricity can be made available for all electrical, electronic, machines and mechanical equipments using electrical energy to function but these Electric Cables so supplied will whether be used to supply electricity ONLY to those goods which are covered under I to 23 of the list is not clear from documents submitted nor has any undertaking of this regard has been given by applicant.
w) Thus to consider Electrical Wires to strictly fall under entry no. 24 vis-a-vis goods falling under entry no. 1 to 23 will not be correct. Apart from fulfilling other condition a
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