In Re: M/s. Tag Solar System,
GST
2018 (9) TMI 1333 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (17) G. S. T. L. 532 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 18-8-2018
AAR No. RAJ/AAR/2018-19/11
GST
NITIN WAPA AND SUDHIR SHARMA MEMBER
Present for the applicant: Shri Pankaj Ghiya (Authorised 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 Issues raised by the applicant are fit to pronounce advance ruling as they fall under ambit of the Section 97(2) (e), it is as given under:
(e) Determination of the liability to pay tax on any goods or services or both
Further, the applicant being a registered person, GSTIN: 08AAKFT3688D1ZT, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is
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n by the Applicant which involves both the Supply of Goods and Supply of Services.
5. Applicant has no clarity with respect to the rate of tax on such Supply. As per their understanding it will be taxable at the rate of 5% being covered under Chapter 84 / 85 under the item “Solar Power Generating System”. Applicant has confusion that whether it would be treated as a Supply of goods and taxable at 5% or will it be treated as a works contract and charged at 18%.
2. Applicant's interpretation of law and/or facts:
RATE OF SOLAR POWER GENERATING SYSTEM
The item “Solar Power Generating Systems and parts for their manufacture” are taxable @ 5% under GST Act, 2017 vide Notification No. 01/2017-CT (Rate) dated 28.06.2017. The entry is reproduced herein below for your kind perusal:
Chapter
Heading
Particulars
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 generatin
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ice” is reproduced as under:
“a thing made or adapted for a particular purpose, especially a piece of mechanical or electronic equipment”
Solar Water Pumping System is an equipment which harnesses solar energy in order to pump water. Therefore, it can also be alternatively classified as a “Solar Power based device” under Chapter 84 or 85.
Applicant has stated that item cannot be termed as an immovable property as these Solar Water Pumping Systems are screwed by nuts and bolts into the ground and can be removed by simply unscrewing the nuts and bolts and in no way do they get attached or affixed to the earth. The pumping sets do not get permanently attached to the ground and can at any time be removed from the fields. They are assembled at the site for maximum operational efficiency. When the item can simply be dismantled and removed from the ground at any given time and is not affixed to the earth permanently, the said goods cannot be categorized as an immovable property. As per app
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able property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property.”
The same has also been held in the case of Commissioner of Central Excise vs. Solid & Correct Engg. Works & Ors. = 2010 (4) TMI 15 – SUPREME COURT, as under:
“23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal-shaping and electro-plating which was attached by bolts to special concrete bases and cou
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question are not per se immovable property.
(ii) Such plants cannot be said to be “attached to the earth” within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.
(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.
(iv) 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.
33. ….. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or att
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lates to Supply of Solar Water Pumping Systems. There is one single Supply Tender which involves the Supply of the Systems to the recipient and the work of installation, maintenance, commissioning is ancillary to the activity of Supply of the Solar Water Pumping Sets. Since, the scope of Supply of the applicant involves provision of both goods and services, where the entire Supply is one transaction; it would qualify as a composite supply. The principal Supply in the present scenario would be provision of Solar Water Pumping System and so the entire contract should be taxable at the rate of 5%. As the service element forms only about in the whole provision of Supply.
3. Question(s) on which Advance Ruling is required:
1. Whether Supply, commissioning, installation and maintenance of Solar Water Pumping System would be taxable at the rate of 5% considering it as a composite supply where the principle supply being that of goods i.e. supply of Solar Power generating system having HSN Co
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licant was instructed to submit copy of Work Order and some sample bill which was done by them on a later date.
4.2 The jurisdictional officer in her comments has stated that the contract given to the applicant is of supply, installation, commissioning and maintenance of Solar Water pumping system in which the dealer has to deliver a functional solar water pumping system. Hence, it is a one single contract so it is to be treated as works contract and taxed @ 18% under GST. She further stated that separate bills one for supply of goods and other for supply of services cannot be generated as it is a single contract.
5. Findings and analysis:
As per copy of contract submitted by the applicant i.e. M/s. Tag Solar System has to execute “Supply of Solar Photovoltaic (SPV) water pumping system”. After going through the written submissions, copy of contract and other additional statements following findings and analysis are made:
a) M/S Tag Solar System, is a partnership firm is engaged in
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f the Final Acceptance.
e) Schedule IV -(Scope of works) of EOI clearly spells out the terms and conditions where contractor has to undertake works of supply installation and commissioning of Solar Photovoltaic (SPV) water pumping system as per specific demands of the owner. So it is not the something sold out of shelf.
f) There is a single lump sum price for the entire work undertaken by the applicant.
g) After completing installation and commissioning of system, final payment shall only be made on basis of satisfactory inspection and verification report.
h) The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94, for description:
* Following renewable energy devices & parts for their manufacture
(c) Solar Power Generating System
The rate of CGST has been mentioned as 2.5%. According to assessee, the correct classification of given supply should be Chapter 84: Solar Power Generating System at t
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contract service.
j) Applicant has relied upon following judgment and Circular in furtherance of their arguments of Solar Photovoltaic (SPV) water pumping system being movable property and not immovable:
i) Sirpur Paper Mills Ltd. v. Collector – 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 – SUPREME COURT OF INDIA
ii) CBEC circular number 58/1/2002-CX dated 15/1/2002
iii) Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works [(2010) 5 SCC 122 = 2010 (4) TMI 15 – SUPREME COURT
Relying on aforesaid judgements and citations the applicants contention is that as the Solar Photovoltaic (SPV) water pumping system, once installed is capable of being removed and transferred from one place to another without substantial damage hence same should qualify as movable property. Hence in view of above precedence and facts of the case, the given supply should be treated as supply of Solar Photovoltaic (SPV) water pumping system.
k) As per the terms and condition lai
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OF ALLAHABAD, wherein, the Court held that a machinery fixed to their bases with bolts and nuts although easily removable are not movable property when they have been set up with definite object of running an oil mill and not with intention of being removed after a temporary use.
2. In decision of M/s. T.T.G. Industries Ltd vs Collector of Central Excise, (2004) 4 SCC 751 on 7 May, 2004 = 2004 (5) TMI 77 – SUPREME COURT OF INDIA. The facts of the case are as follows:
The facts of the case are not in dispute. The appellant-company pursuant to the acceptance of its tender, entered into an agreement with M/s. SAIL, Bhilai Steel Plant for design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace Nos. 4 and 6 of the Bhilai Steel Plant. For this purpose, it imported several components and also manufactured some of the components at their factory in Marai Malai Nagar, Chennai. These components were
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for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719 m cubic metre capacity and the size of its outer diameter is 10.6 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 grout
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gh near the concrete platform where drilling machine and mudgun has to be erected. The weight of the mudgun is approximately 19 tons and the weight of the drilling machine approximately 11 tons. The volume of the mudgun 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.
The judicial member noticing these facts observed that it is a physical and engineering impossibility to assemble mudguns or the drill tap hole machines elsewhere in a fully assembled condition and thereafter erect or install the same at a height of 25 feet on the cast floor of the blast furnace. She found that even the Adjudicating Authority conceded the fact that the equipments have to
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Tulaman Manufacturers Pvt. Ltd = 1988 (9) TMI 51 – SUPREME COURT OF INDIA. She found support for her conclusion in the decision of this Court in Municipal Corporation of Greater Bombay & Ors. v. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18 = 1990 (11) TMI 407 – SUPREME COURT; and held that the twin tests laid down by this Court to determine whether assembly/erection would result in immovable property or not were fully satisfied in the facts of this case. She concluded :-
“The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and drill tap hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion in
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had put up, apart from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Each tank rested on a foundation of sand having a height of 2 feet 6 inches with four inches thick asphalt layers to retain the sand. The steel plates were spread on the asphalt layer and the tank was put on the steel plates which acted as bottom of the tanks which rested freely on the asphalt layer. There were no bolts and nuts for holding the tanks on to the foundation. The tanks remained in position by its own weight, each tank being about 30 feet in height 50 feet in diameter weighing about 40 tons. The tanks were connected with pump house with pipes for pumping petroleum products into the tank and sending them back to the pump house. The question arose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allow
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d if it becomes necessary to move it, it has first to be dismantled and then re-erected at another place. This factual position was also accepted by the Adjudicating Authority.
The technical member, however, held that the aforesaid decision was of no help to the appellant inasmuch as a leading international manufacturing firm had offered such machines for export to different parts of the world. He further observed that though on account of their size and weight, it may be necessary to shift or transport them in parts for assembly and erection at the site in the steel plant, they must nevertheless be deemed as individual machines having specialized functions. We are not impressed by this reasoning, because it ignores the evidence brought on record as to the nature of processes employed in the erection of the machine, the manner in which it is installed and rendered functional, and other relevant facts which may lead one to conclude that what emerged as a result was not merely a machine
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the Excise Act are that it must be a goods mentioned either in the Schedule or under Item 68 and must be marketable. The word “goods” applied to those which can be brought to market for being bought and sold and therefore, it implied that it applied to such goods as are movable. It noticed the decisions of this Court laying down the marketability tests. Thereafter this Court observed :-
“The basic test therefore, of levying duty under the Act is two fold. One, that any article, must be a goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded
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decisive test for dutiability. It meant that the goods were saleable or suitable for sale, that is to say, they should be capable of being sold to consumers in the market, as it is, without anything more. The Court then referred to the decision in Quality Steel Tubes (supra) and distinguished the judgment in Narne Tulaman (supra) holding that the contention that the weigh bridges were not goods within the meaning of the Act was neither raised nor decided in that case. After considering the material placed on the record it was held that the mono vertical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. This Court, therefore, concluded that mono vertical crystallisers are not “goods” within the meaning of the Act and, therefore, not exigible to excise duty. In Triveni Engineering & Indus. Ltd. v. CCE – 2000 (120) E.L.T. 273 = 2000 (8) TMI 86 – SUPREME COU
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or purposes of the Act. From a combined reading of the definition of 'immovable property' in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anything attached to the earth require determination of both the intentions as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case.”
It was also held that the decision of this Court in Sirpur Paper Mills Ltd. must be viewed in the light of the findings recorded by the CEGAT therein, that the whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and also safety. In view of those findings it was not possible to hold that the machinery assembled and erected by
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right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as “goods” within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts of the case in hand and the facts in Mittal Engineering and Quality Steel Tubes (supra) and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor it is practicable to shift them frequently. Counsel for the appellant submitted before us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate, it is not necessary for us to express any opinion as to wh
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n on instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer's field meant for supply of water using solar energy. Such plant would therefore have an inherent element of permanency.
2) The output of the project i.e. water, using solar energy would be available to an identifiable consumer. 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 Solar Photovoltaic (SPV) water pumping system cannot be shifted to any other place without dismantling the same. Further it is tailored made system which cannot be sold “as it is” to the other person.
4. Contract also includes civil work such as development of site, structure foundation for mounting PV modules on metallic structures and fencing of the system to ensure security and safety and such ot
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nt case the solar power water pumping system has an element of permanency.
7. The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 and has regarded the instant transaction as supply of i) “Solar Power Generating System and also at the same time he regards it as supply of ii) “Solar Power Based Devices” treating such supplies to be taxable at the rate of 5%.
8. The applicant has to supply a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning, maintenance for 10 years, hence instant transaction is neither a supply of i) “Solar Power Generating System” and nor a supply of ii) “Solar Power Based Devices”.
9. As can be seen, the above entry under the notification describes the Tax rate on 'Goods'. If the transaction is supply of goods i.e. supply of either “Solar Power Generating System” or supply of “Solar Power Based Devices” the
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ing System or Solar Power Based Devices under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 is not applicable.
Based on above facts along with provision of law the ruling is as follows:
RULING
1 As per the statement of facts submitted by the applicant, the scope of work includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years in respect of supply of a Solar Photovoltaic (SPV) water pumping system. Accordingly it is not getting covered under supply of 'Solar Power Generating System' under Entry 234 of Schedule I of the Notification no. 1/2017 – Central Tax (Rate), dated 28th of June, 2017 under HSN code 84 or 85. “Supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the purview of Works Contract as per Section 2(119) of GST Act.
2 The applicant has sought a clarification on division of contract in two, one for supply of materia
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