2019 (2) TMI 1603 – APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA – TMI – Classification of supply – setting up a project in the school – supply of goods and services including training – challenge to AAR Decision – Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017, read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department – services provided under the category of Information and Communication Technology (ICT) @ School Project
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Held that:- The Appellant themselves have contended that the activities undertaken by the Appellant are under BOOT model basis and therefore, the ownership in the infrastructure developed by them would be transferred after the expiry of the contract period (i.e 5 years) This is also clearly provided in the agreement that the ownership of the entire hardware software, other equipment, etc. will be transferred at zero value at the end of the contract period Therefore, the stand taken by th
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rovided that if OKCL fails to discharge the obligation under the agreement, OMSM would discharge all the responsibilities. The agreement cited between OMSM and OKCL is not relevant to the present issue. The Appellant themselves have admitted that OKCL will release the money for the supplies made by the Appellant. The contention/pleading of the Appellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct.
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The Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017 in RE: M/S. IL & FS EDUCATION AND TECHNOLOGY SERVICES LTD. [2018 (10) TMI 780 – AUTHORITY FOR ADVANCE RULING, ODISHA] upheld. – ORDER No. 01/ODlSHA-AAAR/Appeal/2018 Dated:- 14-11-2018 – SHRI RAKESH KUMAR SHARMA MEMBER AND SHRI SASWAT MISHRA, MEMBER Present For the Appellant 1. Shri Kapil Kumar Sharma, Advocate, Partner, Lakshmikumaran & Sridharan Attorneys, 2. Smt. Saumya Dubey, Advocate, Associate, Lakshmiku
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2 The Appellant is a public limited company incorporated in India and registered under the Companies Act, 1956. The Appellant having GSTIN 21AABC12106HIZC is registered in Khordha, Odisha and falls within the jurisdiction of State of Odisha. The Appellant is the social infrastructure arm of IL&FS group and is engaged in the key areas of education, skill development, healthcare and cluster development for a long term and sustainable impact. 1.3. The present appeal concerns, one such ICT project being implemented by the Appellant in the State of Odisha. The Odisha Madhyamik Shiksha Mission (hereinafter referred to as OMSM ), Government of Odisha, has mandated the Odisha Knowledge Corporation Limited (hereinafter referred to as OKCL ) to implement ICT project in 4000 government and government aided higher secondary schools across the State of Odisha. Accordingly, OKCL floated a tender (Tender Code No.3) on e-tendering portal of Secured e-Tendering System (SeTs). 1 4 The said tender wa
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t filed an application on 27.03.2018 before the Authority for Advance Ruling of Odisha, under Section 97 of CGST Act, 2017 and OGST Act, 2017 read with Rule 104 of CGST Rules, 2017 & OGST Rules, 2017 in Form GST ARA-01 seeking an Advance Ruling on the applicability of Entry No. 72 of Notification No. 12/2017-Central Tax read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department, Government of Odisha to the services provided by them under the ICT @ School Project. Entry No. 72 of Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017, which is relevant to this appeal, is reproduced below for ease of reference SL.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 72 Heading 9992 Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Govern
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0.06.2018 = 2018 (10) TMI 780 – AUTHORITY FOR ADVANCE RULING, ODISHA, held that the applicant is not entitled to the benefit of exemption under Entry No.72 of Notification No.12/2017-Central Tax(Rate), dated 28.06.2017, and has given Ruling as under RULING (a) Recipient of the service OKCL is a body corporate which cannot be regarded as Government. (b) The supply undertaken by the applicant is in the nature of composite supply. It includes supply of goods and services which are not naturally bundled. Each of the components of the composite supply are distinctly identifiable both in terms of quantity and value. The service provided or to be provided is not exclusively in the nature of training programme. (c) Though the source of funding for the service is the State Government and Central Government, yet, as per the contract, the payment responsibility is vested on OKCL. Therefore, the activities of the applicant by way of supply of goods and services under the ICT project are not covere
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lows:- (i) To set aside the impugned ruling vide Order No- 01/ODISHA-AAR/18-19, dated 20.06.2018 = 2018 (10) TMI 780 – AUTHORITY FOR ADVANCE RULING, ODISHA and allow the appeal in full, with consequential reliefs to the Appellant; (ii) To hold that Entry No.72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, read with Entry No.72 of Notification SRO No.306/2017-Finance Department, is applicable to the services provided by the Appellant under the ICT Project. 1.11 The Appellant has also made a prayer for condonation of 5 days delay, under sub-section-2 of Section 100 of the CGST Act, 2017. 2. The grounds of appeal, as mentioned by the Appellant, in their Appeal, are summarised here-as-under; 2.1 First pre-requisite: The services are provided under the training programme: The Appellant has contended that they are carrying out various activities viz. installation, commissioning, site maintenance, operation, etc. to implement the ICT Project in the government schools and go
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vices; The Appellant has contended that in terms of the agreement, during the period of contract (i.e. 5 years), the operation and maintenance of the entire IT infrastructure equipment is to be carried out by the Appellant on its own cost. It is to be noted that during this period, the ownership of the equipment and infrastructure remains with the Appellant. This can be interred from the following terms of the contract: (a) during the period of contract, the equipment, infrastructure, etc. are to be repaired by the Appellant at its own cost. (b) it is the responsibility of the Appellant to obtain necessary insurance for the equipment, infrastructure, etc. Thus, for the entire contract period, the risk remains with the Appellant. (c) the Appellant is also claiming the depreciation of the IT equipment, infrastructure, etc. Thus, the IT equipment, infrastructure appears as assets in the books of accounts of the Appellant. Therefore, the above referred terms of the agreement clearly establ
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ct, the repair and maintenance of the equipment and infrastructure is performed by the Appellant so that it may continue to provide computer training during the contract period in a smooth manner, without any obstruction. Point No.(vi) There is no supply of goods during the period of contract: As already submitted, the activities undertaken by the Appellant are under BOOT model basis and therefore, the ownership in the infrastructure developed by it would be transferred after the expiry of the contract period (i.e. 5 years). This is also clearly provided in the agreement that the ownership of the entire hardware, software, other equipment, etc. will be transferred at zero value at the end of the contract period. In view of the above, it can be concluded that during the entire period of contract, the Appellant is not engaged in the supply of goods inasmuch as supply of goods is taking place only after the expiry of contract period of 5 years. It is to be noted that the Appellant is clai
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is responsible for provision of computer training for five years using the newly built infrastructure. Entry No. 72 of Notification No. 12/2017 requires that the services must be provided under a training programme. It is important to analyse if the services of provision of computer training by the Appellant can be considered to have been provided under a training programme. It is pertinent to note that the term 'training' used in the above referred Entry No. 72 has not been defined in the Notification No. 12/2017. Further, this term is also not defined in the CGST/OGST Act as well as in CGST/OGST Rules. 2.2 Further, the Appellant has rebutted to the findings of the Advance Ruling Authority, as mentioned herein below: (a) that under the CGST Act, the concept of composite supply is applicable only when two or more identifiable and taxable supplies of goods or services or both, which are naturally bundled, are rendered in conjunction with each other. To understand the same, atten
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t of the Appellant as regards the said transfer involving supply of goods. Conversely, in the application as well as in the additional submissions submitted by the Appellant before the Ld. AAR, the Appellant has emphasized on the fact that supply under the JCT Project involves supply of goods as well as supply of services, and whilst supply of services is the principal supply, supply of goods is merely an ancillary supply taking place at the end of the contract period, at zero value. The Appellant would like to highlight here that as per the contract entered into between the Appellant and OKCL, title in the goods/infrastructure is transferred to SMED and not to OKCL. In such a case, even by applying Para l(c) of Schedule II, it cannot be said that the Appellant is supplying goods to OKCL. (e) With respect to services provided to Government of State of Odisha, the Appellant submitted that OKCL is a corporation established under Companies Act, 1956, which has been mandated by OMSM, Gover
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State Government of Odisha, the Appellant submitted that in the instant matter, the tender document floated by the Government of Odisha specifically provides that the expenditure of implementing ICT Project in the State of Odisha would be borne by the Central and State Government in the ratio of 75:25. The Appellant has further submitted that the expression used in Notification No. 12/2017 is 'borne' ( total expenditure is borne by the Central Government. .. ) and not 'paid' by the government. There is no dispute as regards to the fact that it is the responsibility of OMSM (State Government) to ensure that appropriate funds are provided for implementation of the ICT Scheme. In fact, the said submission can be traced to Clause 5.2 of the agreement between OMSM and OKCL (Annexure-D). Therefore, even though the expenditure is 'paid' by OKCL under contract to the Appellant, the same is 'borne' by Centra! and State Government only (jointly). 3. A personal he
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that the appeal was filed on 21 08.2018, the delay in filing of appeal is reckoned to be five days. 4.3 The Appellant has also submitted that the delay in filing the present appeal is not intentional and there were rational grounds preventing the Appellant from being able to file the appeal. It may be noted that due to the demise of former Late Prime Minister Atal Bihari Vajpayee, the State holiday was declared on 17.08.2018. Further, 18.08.2018 and 19.08.2018 were Saturday and Sunday. The Appellant also submitted that the Corporate Office of the Applicant is in Noida, U.P., and the appeal was drafted by the Applicant's Attorneys, whose office is situated in New Delhi. Hence, the entire appeal book was prepared in New Delhi and it was subsequently posted to another office of Applicant in Bhubaneswar, Odisha. The appeal book and filing documents were dispatched from Delhi on 17.08.2018 through Blue Dart Express courier. The courier was expected to reach within 2 days of dispatch, i
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rime issue raised by the Appellant is, as to whether the services provided by them to M/s OKCL are eligible for exemption under Entry No.72 of the Notification No. 12/2017, Central Tax (Rate) dated 28.06.2017 and Entry No.72 of Notification SRO No.306/2017, dated 29 06.2017, issued by the Finance Department, Government of Odisha, which is reproduced below for ready reference.- SL No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 72 Heading 9992 Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration. Nil Nil * Entry No. 72 of Notification SRO No. 306/2017-Finance Department is identical to the Entry No. 72 of Notification No.12/2017-Central Tax(Rate). 4.6 On going through the aforesaid notification, it is noticed that the follow
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ich is a body corporate. The Appellant has failed to produce any documentary evidence as to how the provision of service to OKCL qualifies to be a provision of sevice to the Central Government, state Government or Union Terittory Administration. The Argument put forth by the Appellant that they are the implementing agency on behalf of the Government is not tenable, as they are not providing services to Government. 4.9 On perusal of para 8 of the Agreement dated 12.09.2013 between OKCL and the Appellant it is noticed that the Appellant is required to supply and install the specified goods provide specified services in the ICT Labs of the Govt and Govt. Aided High Schools located in the specified zones. Therefore, it is evident that the Appelant has made supplies to OKCL. which is a body corporate and registered under the Companies Act 1956 as a Company. 4.10 We notice that the Authority for Advance Ruling. Odisha, in their findings (para 5 3 of the Order)has clearly observed that OKCL w
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tive power of the Union or of a State and shall be expressed to be made by the president or by the Governor of the State under Article 299 of the Constitution of India. Article 299 of the Constitution of India does not apply to OKCL. Article 300 of the Constitution of India provides that State can sue or be sued as juristic personality in the name of Union of India and Government of a State Therefore OKCL is neither the Sate Government nor a part of the State Government of Odisha or the Central Government and therefore the supplies by the applicant to OKCL should not be held to be a supply to Government. 4.11 No counter argument has been put forth by the Appellant to substatniate their claim that the supplies were made by them to the Government. Therefor we fully agree with the finding arrived at the Advance Ruling given by the Advance Ruling (AAR), Odisha, on this point and hold so Even if some percentage of shares are owned by Government of Odisha in the OKCL. the company cannot be c
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l , the Appellant themselves have contended that the activities undertaken by the Appellant are under BOOT model basis and therefore, the ownership in the infrastructure developed by them would be transferred after the expiry of the contract period (i.e 5 years) This is also clearly provided in the agreement that the ownership of the entire hardware software, other equipment, etc. will be transferred at zero value at the end of the contract period Therefore, the stand taken by the Appellant is self-contradictory in as much as on one hand, they claim that the provision of service as operation or maintenance of self-owned equipment does not amount to supply of services to third party. But on the other hand, they claim that the ownership in the infrastructure developed by it would be transferred after the expiry of the contract period (i e 5 years). The said transfer of ownership is also unconditional Therefore we hold that the consideration received by the Appellant is in respect of prov
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ellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct. 4.15 Having held that the Appellant have failed to meet the primary requirement of the conditions of the notification i.e., the supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration; we refrain from discussing the other aspects of the notification and pass the following order: ORDER We uphold the Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017, vide their Order No- 01/ODISHA-AAR/18-19, dated 20.06.2018 = 2018 (10) TMI 780 – AUTHORITY FOR ADVANCE RULING, ODISHA. Consequently, the appeal No.01/2018 dated 21.08.2018, filed by the Appellant i.e. M/s. IL & FS Education and Technology Services Ltd., under the provisions of Section 101 of the CGST Act, 2017/Section 101 of SGST Act, 2017, is hereby rejected. – Case laws – Decisions – Judgements –
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