In Re : Fermi solar Farms Private ltd
GST
2018 (5) TMI 963 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (14) G. S. T. L. 35 (A. A. R. – GST), [2019] 66 G S.T.R. 337 (AAR)
AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – AAR
Dated:- 3-3-2018
No. GST-ARA-03/2017/B- 03
GST
Shri B.V. Borhade, joint Commissioner of state tax And Shri Pankaj Kumar joint Commissioner of central tax
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 Goods and Services Tax Act, 2017)
No. GST-ARA-03/2017/B- 03 Mumbai, dt. 03/03/2018s
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act”] by Fermi Solar Farms Private Ltd., the applicant, seeking an advance ruling in respect of the following questions :
* Whether in case of separate contracts for supply of goods and servic
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ENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
[A] AS SUBMITTED ALONGWITH APPLICATION
“Statement of the relevant facts having a bearing on the aforesaid clarification(s)/transaction(s)
1. M/s. Fermi Solar Farms Private Ltd. (hereinafter called as “Fermi”) is engaged in operation of renewable energy power plant projects. These typically include operation of solar power plants set up across India for generation and distribution of electricity generated. Fermi is emerging as a leading builder of renewable energy projects.
2. Fermi is established under Independent Power Producer ('IPP') category for setting up and sale of power produced from Fermi's power plant to third party.
3. 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 er
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ply
* 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
* Mandatory spares
6. As part of the services contract, various services are provided including the following:
* Construction of complete buildings including control rooms and inverter rooms, roads and drainage system, boundary walls/fencing, bore walls
* All civil and foundation works for switchyard, solar plant and all other equipment
* Site enabling facilities
* Leveling and grading
* Erection, commissioning and testing for solar modules, mounting structures, power transformers, inverters, SCADA, complete switchyard, inverter transformers, connectors, earthing lines etc.
7. Please note that the
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te) (The notification is attached herewith as Annexure -A), dated 28th Jun 2017, Solar power, generating systems and parts for their manufacture are taxable at 5%. The relevant entry read 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)
Ocean waves/tidal waves energy devices/plants
h)
Photo voltaic cells, whether or not assembled in modules or made up into panels
Per the above, concessional rate of 5% has been provided to the following (when covered under heading 84, 85 or 94):
* PV modules
* Solar power generating system – This term has not been defined
* Parts for manufacture of solar power generating system and PV modul
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lain reading of the definition of composite supply, it emerges that the following conditions must be satisfied for a supply to qualify as a “composite supply”:-
* the supplies being made must be taxable supplies
* the supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business
* there must be a principal supply
1.4 Our understanding in present context
Per the above legal provisions, we understand that in present case, since there are separate contracts for supply of goods and services, the taxability should be as under:
* Contract for goods wherein solar PV modules are also supplied- Entire contract should qualify as supply of solar power generating system and should be taxable at 5%
* Contract for goods wherein solar PV modules are not supplied – In such case, the goods which qualify as parts of solar power generating system and are covered under heading 84,85 or 94 should be eligible to concessional rate of 5%
* C
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he 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.
2.4 Further, under erstwhile law also, solar power generating systems have not been defined. However, under erstwhile excise law, various exemptions were extended to non-conventional energy devices which included solar power generating systems – List 8 of Notification no. 12/2012-Central Excise, Dated 17th March 2012.
2.5 Since 'Solar Power Generating System' has not been defined in the present law, in order to understand the ambit of the said system, judicial pronouncement under the Excise law can be examined.
2.6 Reference is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics & instruments Ltd. vs. Commr. Of C. Ex., Jaipur wherein it was held that '7. The adjudicating author
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constitutes solar power generating system as it performs the function of generating the required high frequency AC power from Sun-light with, the help of SPV module and supplying it to the compact fluorescent lamp of a solar lantern. In view of the above, expert opinion, we hold that the 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.”
2.8 In M/s Phenix Construction Technology vs. Commissioner of Central Excise and Service Tax, Ahmedabad-II [2017-TIOL-3281-CESTAT-AHM] the question under consideration was whether the structures and parts of structures cleared for initial setting up of solar power plant are eligible for the benefit of Notification 15/2010-CE. The point of dispute in the said case law was that whether the aforesaid goods would qualify as components of the solar power plant. Hon'ble CESTAT has decided that the items required for in
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so supported by the concept of 'composite supply' in which case the taxability is as per the principal supply.
2.12 Composite Supply has been defined as '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;
2.13 Further, Principal Supply has been defined in Section 2(90) of the CGST Act as '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'. Thus, principal supply refers to the supply which is the predominant element in a composite supply.
2.14 In terms of Section 8 of the CGST Act, it has been clarified that a composite supply comprising two or more suppli
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NRE as well.
3. Taxability of parts of solar power generating system
3.1 In certain cases, not all parts of solar power generating system are supplied by EPC contractors (as some parts may be procured separately). For example, PV modules may be procured by the Project Developer directly and only balance contract is awarded to EPC contractor for supply of remaining goods .
In such case, even though the entire contract may not qualify as solar power supplied should be eligible to concessional rate of 5% as the entry covers 'Renewable energy device and parts for their manufacture'.
3.2 A 'part' is essentially a section, which, when combined with other sections, make up a whole system/product.'
In the case of equipment, various parts would combine to make up the whole equipment, which has a specific function.
3.3 Compared to a 'part', an accessory is essentially a piece which enhances the functionality of equipment and adds to the function of the equipmen
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eld that specific goods supplied for such generators would also be eligible for the exemptions extended to the generators as 'wind operated electricity generator.'
* In Gemini Instratech Pvt. Ltd. Vs. Commissioner of Central Excise, Nashik [2014 (300) ELT 446 (Tri. -Mum)] the issue involved was whether doors specifically designed to be used with tower on which wind operated electricity generators are installed be eligible for benefit of notification which provides exemption form payment of excise duty to wind operated electricity generators and its components and parts thereof. It was held that such doors would also be eligible for the exemption. This was also ratified by the Supreme Court [2015 (315) ELT A82 (SC)]
* In Elecon Engineering Co. Ltd. Vs. Commissioner of Customs [1998 (103) ELT 395 (Tri)] the issue was whether power cables, earthing cables, wind farmer computer will be eligible for benefit of exemption under Notification No. 64/94 – Cus. The Tribunal held that
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ectricity generators and will be eligible for exemption.
In regard to the above, though there has not been any judgment with respect to components of solar power plants, on similar lines of the precedents discussed above for wind power, the components of solar power generating system should also be covered under concessional rate of taxes under GST.
3.7 It is submitted that generation of power by way of solar energy is one of the key promoters for the Government's aspiration of 'Make in India'. The Government has set target of 175 GW of renewable power by 2022 which includes 100 GW of solar power. Per “Make in India” website set up by the Government of India, india's annual solar installations would grow four times by 2017. If the goods supplied under the contract for construction of solar plants is taxed at separate rates applicable on the individual goods, it would lead to higher tax burden on the developer of the solar power plants. Please note that since electrici
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does not specify the persons who would be eligible for concessional rate of 5% i. e. developer, EPC contractor or manufacturer/ supplier/ sun-contractor.
4.3 Since the concessional rate of 5% is provided to renewable 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.
5. Taxability of contract for services
5.1 A separate contract is awarded to the EPC contractor for provision of services which consists of the following:-
* Construction of complete buildings including control rooms and inverter rooms, roads and drainage system, boundary walls/ fencing, bore walls
* All civil and foundation works for switchyard, solar plant and all other equipment
*
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as been deemed to be a service under GST and is taxable at 18% typically. In the present case, the above contract on a stand-alone basis should qualify as a works contract service, liable to GST at 18%.
6. Conclusion
6.1 Where there are two separate contracts – one for supply of goods to be used in solar power plant and one for services, both would be taxed separately
6.2 Contract for goods should qualify as 'solar power generating system' taxable at 5% and contract for services should qualify as works contract services taxable at 18%. For the contract of goods (where PV modules are also provided as part of the contract), the same should qualify as composite supply and all goods supplied should get covered as part of principal supply of 'solar power generating system' and taxable at 5% GST.
6.3 Even where contract of goods do not include all products (such as where PV modules are not supplied and are procured by developer on its own) and only balance products are su
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erating system.
1) Solar panel consisting of solar cells, i.e. solar photovoltaic cells-
2) Inverter to convert DC power to AC power-
3) HT Switchgear, isolator, circuit breaker. Auxiliary transformer, main transformer-
4) Transmission line-
(II) Fermi solar farms Pvt. Ltd supplies following engineering and construction services to the buyer for setting up solar power generating system.
1. Earthing
2. Inverter Room
3. Cable routing
4. Solar panel foundation arrangement.
5. Arrangement of roads and drains.
(III) As per Notification dates 15.11.2017 chapter heading 84,85, or 94 following renewable energy device & Parts for their manufacture are taxed@ 5%
a. Bio-gas plant
b. solar power based devices
c. solar power generating system
d. wind mills, wind operated Electricity Generator
e. Waste to energy plants-
f. solar lantern/lamp
g. Ocean wave/tidal waves energy devices
h. Photo voltaic cells, whether or not assembled in modules or made up into panels.
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such situation supplier has to raise to separate invoices i.e. one for supply of goods and other for supply of services. The supplier is expecting separate consideration for each agreement. Again on page No.35 of the agreement. The condition will elaborate the same facts. It says “All the major equipment /material/items shall be procured by owner &will be handed over to contractor for erection & commission for works.
Thus as per definition of composite supply as per section 2(30)” though the supply of goods and services are naturally bundled and supplied in conjunction with each other as per agreement both are different supply made under different agreements. Hence it will not constitute composite supply. The supplier has to make to separate invoice for each of the agreement as per the terms & conditions mentioned there in.
(VI) Therefore, after going through the submission of the dealer, I am of the opinion that-
(1) The applicable GST rate for supply of equipment's for solar p
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ement is customarily the way in which transactions of the nature as before us are effected. There are two sets of agreements which have been stated to be for –
1. Contract for supply of equipments
2. Contract for supply of services
Question no.1 has been framed in respect of these contracts. To answer the question, we look at each of the above agreements thus –
CONTRACT CONTENDED TO BE FOR SUPPLY OF EQUIPMENTS
The title of the agreement says “AGREEMENT FOR SUPPLY OF SOLAR POWER GENERATING SYSTEM”. A Solar Power Generating System (SPGS) is not available as a system as such. It consists of various components which are to be assembled, synchronized and, subject to the fulfillment of the attending requirements, to be tested so as to be made operative. Despite being so, we would look at the clauses of the agreement to understand the exact nature of the agreement.
* –
(A) The Buyer desires to set-up and operate solar photovoltaic plants with a total capacity of 60 MW (AC)/81 MW (
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5 (five) years.
* “Applicable Permits” means all permits, clearances, authorizations, consents, licenses, lease, ruling, exemption, filing, agreements, or approvals, any valid waiver, variance, franchise, order of or from any Governmental Instrumentality, court or other body having jurisdiction over the subject matter in question, and in connection with the Scope of Supplies to be performed hereunder as may be effect form time to time and as listed in Schedule N herein;
* “Certificate of Commissioning” shall mean plant commissioning certificate issued from competent Government Authority for complete capacity.
* “Equipment, Spare Parts and Materials” shall mean the equipment and materials and Spare Parts to be delivered by the supplier under this Agreement and as specified in Schedule A and Schedule E;
* “Final Acceptance” means, the date of commencement of commercial operations of the Plant, provided that if at any point with respect to the supply items are pending as on the da
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which shall in no event be later than ___________ or such other extended date as notified by the Buyer in writing for 60 MW (AC).
* “Scope of Supplies” shall have the meaning set forth in Clause 2.1.1 hereof;
* “Spare Parts” shall mean the spare parts listed in Schedule E;
* “Specification” shall mean the specifications prescribed by the Buyer for the Equipment, Spare Parts and Materials as more specifically set-out in Schedule J;
* shall have the meaning set forth in Clause 3.1 hereof;
* “Sub-vendors” shall have the meaning set forth in Clause 3.1 hereof;
* “Supply Commencement Date” shall have the meaning set forth in relevant Clause hereof;
* “Supply Schedule” means the schedule set forth in Schedule C hereto as such schedule may be adjusted from time to time in accordance with this Agreement;
* “Terms of Payment” means the terms set forth in Schedule B hereto for payments to be made by the Buyer to the supplier;
* “Variation” means any addition, deletion from, or
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part of the Plant, at the Plant Site (for onshore supplies)/destination port in India for off shore supply items (ICD, Airport, Seaport) as set out in detail in Schedule A and Schedule E as per the Specifications (the “Scope of supplies”) in accordance with the terms of this Agreement. The Equipment, Spare Parts and Materials shall be suitable and fit for its intended purpose as provided in this Agreement. All Equipments, Spare Parts and Materials supplied shall be new and without defects. Separate prices are specified for different equipments which are supplied under the agreement for commercial convenience. However, as a general trade practice all the equipments which are being are supplied under the agreement are supplied together for setting up a solar power generating system.
Further, the document in title of the equipment imported and supplied is directly transferred to the owner by way of High Seas Sale for commercial convenience and in order to avail benefit of concessional c
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) If at any time, the Supplier becomes aware that it or suppliers or manufacturers of Spare Parts has discontinued the manufacture of certain Spare Parts, or is for any reason unable to manufacture or supply such Spare Parts, the supplier shall:
(i) immediately provide written notice of such facts to the Buyer and such notice shall be of sufficient detail to enable the Buyer to order a final batch of the relevant Spare Parts from the Supplier; and
(ii) if requested by the Buyer to do so, deliver and obtain for the Buyer (at no expense to the Buyer), all drawings, patterns and other technical information relating to the Spare Parts.
(c) The Supplier warrants that all Spare Parts supplied under this agreement will be free from defects or deficiencies.
2.2 Commencement of Supplier's Performance
The Supplier shall commence performance of the Supplier's obligations hereunder on the date that the Buyer specifies (the “Supply
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tly on shore supplies as detailed in Schedule A. The Supplier shall be obligated to adhere to the supply Schedule thereby agreed and any variation there from shall require the prior written consent of the Buyer. Provided that the Buyer may vary the Supply Schedule on account of occurrence of a Force Majeure Event or with prior written notice of 30 (thirty) days to the Supplier. In the event of such variation of such Supply Schedule by the Buyer, the Buyer shall be liable for and shall compensate the Supplier for additional costs agreed in writing by the Buyer on account of such change.
2.4.3 Inspection Not A Release
Neither the inspection at the port of entry in India or following delivery at the Plant Site, no matter whether the Buyer's personnel have been present, shall release the Supplier from any of the obligations or Warranties stipulated in this Agreement.
3. SUB-VENDORS
3.1 Subvendors and Equipment Suppliers
3.1.1 All consultants and Sub-vendors providing Equipment,
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ions under this Agreement. The Supplier shall be liable to the Buyer for the acts and omissions of Subvendors and those of employees and agents of the Subvendor as if they were acts and omissions of the Supplier.
4.1 Contract Price
As full consideration to the Supplier for the complete solar power system and parts thereof to be provided hereunder including Spare Parts and for performance of all its obligations under the Agreement in accordance with the terms of the Agreement, the Buyer shall pay, and the Supplier shall accept, the contract price as specified in Schedule B as such sum may be adjusted in accordance with the terms of this Agreement (the “Contract Price”). The Contract Price shall be deemed to be inclusive of all Taxes including GST and duties payable under Applicable Laws with respect to the obligations to be performed by the Supplier under this Agreement.
4.2 Terms of Payment
…………………………………………….
In the event that the Supplier has
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deemed to be agents, representatives, employees or servants of the Buyer in the performance of the Supplier's obligations hereunder, or any part thereof, or in any manner dealt with herein. Similarly, neither the Buyer nor its Sub-vendors nor the employees of either shall be deemed to be agents, representatives, employees or servants of the Supplier in the performance of the Buyer's obligations hereunder, or any part thereof, or in any manner dealt with herein. The Buyer shall not have the right to control or any actual, potential or other control over the methods and means by which Supplier or any of its agents, representatives, the Sub-vendors or employees conducts its independent business operations. The Parties covenant and agree that in the performance hereunder, they shall not perform any act or make any representation to any person to the effect that it is or any of its agents, representatives or Sub-vendors, is the agent of the other Party.
19.14 Title to the Equipmen
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ope of Supplies covered under this Agreement is described herein below. The scope for providing the solar project generating system shall include design, engineer, manufacture, inspection; shop testing, packing and shipment of Equipments, Spare parts and Materials forming part of solar power generating system. These are integral parts of the solar power generating system being provided and would not be used separately.
1.2. In respect of equipment and systems listed below, all items required to make the equipment and/or system complete in all respects are deemed to be included whether or not these items are specifically mentioned in the Agreement.
1.3. The Supplier shall provide the erection procedures/manuals for the equipment being supplied. The “preliminary” erection procedure / manuals document shall be submitted within 15 (fifteen) days of signing this agreement.
2. MAJOR EQUIPMENT, SPARE PARTS AND MATERIALS LIST.
The list of equipment and material to be supplied under the
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icable)
* Power Transformers
* Complete Switchyard, Bay extension and remote end works as applicable.
* Inverter Transformers
* Auxiliary Transformers
* 110 kV Transmission line as per connectivity approval
* SCB, PV Connectors
* HT & LT Switchgears, HT & LT power and control Cables (AC as well as DC and communication cables)
* Illumination and ventilation system
* Supply required for AC BoS and DC BoS
* Earthing system (maintenance free)
* Scada system along with SLDC telemetry arrangements.
* Lightening Protection through ESE.
* Battery and battery charger.
* Module cleaning system
* Site enabling facilities including porta cabin, security cabin etc.
* Supply items required if any for civil works for the entire plant.
* Mandatory Spares for all electrical items as per list to be agreed later.
The list of Spare Parts to be supplied under the terms of the Agreement shall be as detailed in Schedule E hereto and shall be deemed to form a part of the Sc
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ortionately on Submission and approval of LI Schedule & BBU
2
On receipt of material at site
70%
Proportionately on dispatch of material at site as per agreed BBU against MDCC
3
on successful Plant Completion
5%
on successful Plant Completion
SCHEDULE- J
SPECIFICATIONS
Specifications/ Design Basis for various equipments shall be mutually agreed between Supplier and Buyer during the early engineering period. However, Supplier agrees and confirms that all equipment shall be as per latest engineering/industry practice and shall conform to relevant IEC/IS.
SCHEDULE -N
LIST OF APPLICABLE PERMITS
The parties having the primary responsibility to obtain permits / approvals from appropriate authorities are listed below.
Part A: Buyer Permits
1. Import Export Certificate (IEC)
2. KPTCL approval for power evacuation
3. GST Registration
Part B: permits to be obtained by the Supplier
1. Local transportation approvals
2. Permission for movement of capital goods
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er, we see that there is Schedule J which says that Specifications/Design Basis for various equipments shall be mutually agreed between Supplier and Buyer during the early engineering period. Thus, the Supplier's involvement in the project is from the engineering and Design stage and not merely for supplying the equipments.
4. We find the definition of “Other Contractors” which is defined to mean other contractors engaged by the Supplier to implement, operate and maintain the Plant. This clause shows that the Supplier would implement, operate and maintain the Plant. 'Plant' is defined as “Plant/s” shall have 60 MW (AC) Solar PV Power Project at ____, Karnataka. Thus, the agreement does not stop at supply of equipments but extends to implementation, operation and maintenance, as well. When the Supplier is to implement, operate and maintain the Plant, on what basis could such a contract be termed as a contract merely for 'supply of goods'.
5. There is a clause whi
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ract was for supply of 'goods' only.
We are convinced that the impugned contract is for supply of a solar power generating system, as a whole, and in addition, further responsibility in respect of execution and implementation of the Project/Plant is also proposed to be undertaken by the Supplier as per terms and conditions of the contract submitted before us. Having certain clauses in the agreement that the Supplier would supply only the equipments or goods would not change the nature of the contract. We need not even go beyond the agreement to look at the actual intention. We say so as clauses in the very agreement present a situation contrary to the claim being laid forth. As is commanded by the Hon. Courts, an agreement has to be read as a whole. Herein we could refer to the decision of the Hon. Bombay High Court in National Organic Chemicals Industries Ltd, v. State of Maharashtra, 2012 SCC OnLine Bom 2128: (2012) 54 VST 271 = 2012 (8) TMI 407 – BOMBAY HIGH COURT &n
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on line fittings, cleaning/clearing of ROW, hauling and stringing of pipes, trenching (minimum depth will be 0.9 mtr. From the top of the pipe to ground surface), welding, laying testing of pipeline as per specifications, road crossings and restoration of the surface of the road to its original condition, Nullah crossing, river crossing etc., Supply and installation of marker posts, constructions of valves chambers including supply of all materials, constructions of PRS including supply of brick, cement, M.S. rod, MS. door, safety valve, control valves, AUDCO valves, M.S. piping and other small items, testing of lines at 6 kg/sq.cm. and commissioning of the whole system as per specifications. All equipments involved for execution including testing and commissioning of the above job shall have to be supplied by the contractor and the company will be liable for clearance of R.O. Supply of all on line non-HDPE materials, MS line from trunk line Tee point to PRS station with a value, flan
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set out in clause 3 “scope of work” ultimately to see that the HDPE pipes are laid for transportation of natural gas. In our view, the acts to be committed by the applicants could not be divided into two parts, namely, supply of pipes and laying down the pipes. The payment terms set out in the clause 9 clearly indicates that the applicants were entitled to get money from Assam Gas depending upon the performance of various acts required to be done for the successful fulfilment of terms of the contract. The applicants were entitled to have mobilization of advance to the extent of 10 per cent of the contract value on furnishing of bank guarantee from a nationalized bank for equal amount with the work order. Clause 9 refers to the term “contract value” and in our view use of this term contract value clearly indicates that the consideration payable to the applicants was to be calculated as a whole and not in parts as suggested by the respondents. If at all the contract was intended to be d
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ct.
27. We have considered the argument advanced by learned advocates on both sides with reference to the contents of annexure I. By said annexure l, parties had arrived at an understanding as to at what rate the job done by the applicants would be charged. The arguments advanced by learned advocate Mr. Sonpal that the cost of the pipe was separately shown cannot be accepted to hold that the pipes were merely sold to Assam Gas. If that would have been the understanding between the parties, the terms of the annexure I would have been different inasmuch as the installation rate rupees per meter would not have been quoted to form a part of the total amount payable in respect of a particular description of a pipe. Annexure I also indicates the expected quantity of pipes which would be required for the purposes of laying down the pipeline as per the terms of the agreement. The amount of money payable was dependant upon total quantity of pipes which would be used to create the pipeline. Sa
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accepted. The said invoice at page 47, specifically mentions that the articles mentioned in the invoice are for home consumption. This would mean that the said articles were not to be sold in the market but the said articles were to be used in performance of an obligation cast upon the applicants to comply with the said agreement. The fact that the said invoice was raised in the name of Assam Gas clearly indicates that pipes mentioned in the said invoice were to be used in performing the contract. It is pertinent to note that the applicants have specifically passed an endorsement” no tax being works contract”. In our view, this endorsement would support the stand of the applicants that the invoices were not raised to show that goods covered by the invoices were sold to Assam Gas. The said invoices appear to have been raised to show that that the particular quantity of pipes will be used while performing the works contract with Assam Gas. The applicants have raised commercial invoices a
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ver, the intended purpose to present the agreement as a contract for supply of goods ONLY has not achieved the desired purpose. The agreement is for supply of an effectively running solar power plant. The agreement clauses reveal that the Supplier is involved in the process right from the early engineering period to procurement and implementation stage. We have seen that the payment for this agreement is also linked to the successful Plant completion. If the agreement was for supply of materials ONLY, there should have arisen no occasion to link the payment to the completion of the Project. What more do we need to prove that the impugned agreement contended to be for supply of goods is actually a works contract involving engineering, design, procurement and commissioning of the solar power plant.
Having satisfied ourselves that the impugned agreement is actually a works contract agreement, we look at the definition of 'works contract' under the provisions of the GST Act,

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repair or commissioning of any movable or immovable property. Thus, activities in relation to movable and immovable property were covered earlier whereas the GST regime requires it to be restricted to immovable property only. In contracts of such a nature, the liability of the contractor doesn't end with the procuring of materials but it extends till the successful testing and commissioning of the system. The transaction is a 'works contract' but it is for us to decide whether it is a 'works contract' in terms of the GST Act. The term 'immovable property' has not been defined under the GST Act. However, there are a plethora of judgements of the Hon. Supreme court and the Hon. High Courts which have helped understand the term 'immovable property'. One such decision is T.T.G. Industries Ltd. v. CCE, (2004) 4 SCC 751 = 2004 (5) TMI 77 – SUPREME COURT OF INDIA . We shall first look at the facts of the case.
“2. The facts o
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ved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall 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-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
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ete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base plate could be moved to the concrete platform and secured. The same trolley helps in the movement of various components to their determined position. The various components of the mudgun and drilling machine are mounted piece by piece on a metal frame, which is welded to the base plate. The components are stored in a storehouse away from the blast furnace and are brought to site and physically lifted by a crane and landed on the cast house floor 25-feet high near the concrete platform where drilling machine and mudgun have 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 is nothing like assembling them at ground level and then lifting them to a h
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sembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole-drilling machine results in erection of immovable property. She noticed the judgment of this Court in Name Tulaman Manufacturers (P) Ltd. [(1989) 1 SCC172: 1989 SCC(Tax) 64: (1988) 38 ELT 566: 1988 Supp (5) SCR 1 = 1988 (9) TMI 51 – SUPREME COURT OF INDIA ] and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CCE [(1993) 65 ELT 121 (cegat) = 1992 (10) TMI 188 – CEGAT, NEW DELHI ] which held that the issue of immovable property was never raised before the Manufacturers (P) Ltd. [(1989) 1 SCC 172 : 1989 SCC (Tax) 64 : (1988) 38 ELT 566 : 1988 Supp (3) SCR 1 = 1988 (9) TMI 51 – SUPREME COURT OF INDIA] she found support for her conclusion in the decision of this Court in Municipal Corpn. of Greater Bombay v. Indian Oil Corpn. Ltd.[1991 supp. (2) SCC 18 = 1990 (11) TMI 407 – SUPREME COURT
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nd tap hole-drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon.”
18. The core question that still survives for consideration is whether the processes undertaken by the appellant at Bhilai for the erection of mudguns and drilling machines resulted in the emergence of goods leviable to excise duty or whether it resulted in erection of immovable property and not “goods”.
21. The appellant has placed considerable reliance on the principles enunciated and the test laid down by this Court in Muncipal corpn. of Greater Bombay [1991supp (2) SCC 18 = 1990 (11) TMI 407 – SUPREME COURT ] to determine what is immovable property. In that case the facts were that the respondent had taken on lease land over which it 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 layer
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place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the latter place? If the answer is yes to the former it must be a movable Property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth.”
22. Applying the permanency test laid down in the aforesaid decision, counsel for the appellant contended that having regard to the facts of this case which are not in dispute, it must be held that what emerged as a result of the processes undertaken by the appellant was an immovable property. It cannot be moved from the place where it is erected as it is, and 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.
23. The technical member, however, held that the aforesaid decision was of no
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sition further.
24. In Quality Steel Tubes (P) Ltd. v. CCE [(1995) 2 SCC 372 : (1995) 75 ELT 17 = 1994 (12) TMI 75 – SUPREME COURT OF INDIA ] the facts were that a tube mill and welding head were erected and installed by the appellant, a manufacturer of steel pipes and tubes, by purchasing certain items of plant and machinery in market and embedding them to earth and installing them to form a part of the tube mill and purchasing certain components from the market and assembling and installing them on the site to form part of the tube mill which was also covered in the process of welding facility. After noticing several decisions of this Court, the Court observed that the twin tests of exigibility of an article to duty under 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
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duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. The material on record described the functions and manufacturing process. A mono vertical crystalliser is fixed on a solid RCC slab having a load-bearing capacity of about 30 tons per square metre. It is assembled at site in different sections and consists of bottom plates, tanks, coils, drive, frames, supports, plates, etc. The aforesaid parts were cleared from the premises of the appellants and the mono vertical, crystalliser was assembled and erected at site. The process involved welding and gas-cutting. The mono vertical crystalliser is a tall structure, rather like a tower with a platform at its summit. This Court noticed that marketability was a 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 dec
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garding excisability of turbo alternator. In the facts of that case, it was held that installation or erection of turbo alternator on a concrete base specially constructed on the land cannot be treated as a common base and. therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be an excisable goods falling within the meaning of Heading 85.02. In reaching this conclusion this Court considered the earlier judgments of this Court in Municipal Corpn. of Greater Bombay [1991 Supp (2) SCC 18], Quality Steel Tubes [(1995) 2 SCC372: (1995) 75 ELT 17] and Mittal Engg. Works (P) Ltd. [(1997) I SCC 203: (1996) 88 ELT 622] as also the earlier judgment of this court in Sirpur Paper Mills Ltd. v. CCE [(1998) 1 SCC 400: (1998) 97 ELT 3] . This Court observed: (SCC pp. 35-36, para 14)
“14. There can be no doubt that if an article is an immovable property, it cannot be termed as 'excisable good
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t the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to the earth like a building or a tree.
27. 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 made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform , brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. we have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are sa
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e without their aid a blast furnace cannot operate. It is not necessary for us to express any opinion as to whether the mudguns and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machine are erected and installed upon concrete structures, they do not answer the description of “goods” within the meaning of the term in the excise Act.”
Thus, it can be seen that the Hon. Supreme Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it at another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of 'immovable property' as something attached to the earth.
We will also look at the decision of the Hon. Supreme Court in the case of Commissioner of C
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the present appeals is a marketing company engaged in the manufacture of asphalt drum/hot mix plants at the sites provided by the purchasers of such plants. It is common ground that Solidmec advertises its products and undertakes contracts for supplying. erection, commissioning and after-sale services relating thereto. It is also admitted that all the five concerns referred to above are closely held by Shri Hasmukhbhai, his brothers and the members of their families.
5. An inspection of the factories of the respondents by a team of officers from the Central Excise, preventing Wing, Headquarters. Ahmedabad, led to the issue of a notice dated 30-11-1999 to the four manufacturing units as well as to Solidmec calling upon them to show cause why the amounts mentioned in the said notice be not recovered from them towards Central excise duty. The notice accused the four manufacturing units of having wrongly declared and classified parts and components being manufactured by them as complete
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to manufacture of such plants as a distinct product with a new name, quality, usage and character emerged out of the said process. Resultantly, the end product, namely, asphalt drum/hot mix plants became exigible to Central excise duty, which duty Solidmec had successfully avoided The notice also proposed to levy penalties upon all the five concerns under appropriate provisions of the Central Excise Act.”
The Hon. Court has very elaborately dealt with the issue as can be seen thus –
22. Section 3 of the Transfer of Property Act, 1882 does not spell out an exhaustive definition of the expression “immovable property”. It simply provides that unless there is something repugnant in the subject or context, “immovable property” under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) of the General Clauses Act, 1897, similarly, does not provide as exhaustive definition of the said expression. It reads:
(26) 'immovable property
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n the earth, as in the case of walls and buildings;
(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. ”
25. It is evident from the above that the expression “attached to the earth ” has three distinct dimensions, viz. (a) rooted in the earth as in the case of trees and shrubs (b) imbedded in the earth as in the case of walls and buildings, or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1= feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbe
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d plantatur solo, solo cedit. This maxim, however, has no application in India. Even so, the question whether a chattel is imbedded in the earth so as to become immovable property is decided on the same principles as those which determine what constitutes an annexation to the land in English law. The English law has evolved the twin tests of degree or mode of annexation and the object of annexation.
27. In Wake V. Halt (1883) 8 App Cas 195 Lord Blackburn speaking for the Court of Appeal observed:
“The degree and nature of annexation is an important element for consideration; for where a chattel is so annexed that it cannot be removed without great damage to the land, it affords a strong ground for thinking that it was intended to be annexed in perpetuity to the land.”
28. The English law attaches greater importance to the object of annexation which is determined by the circumstances of each case. One of the important considerations is founded on the interest in the land wherein the
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ressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built.
30. 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 could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the houses. They have no separate existence from the house. Articles at
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. Supreme Court has reiterated the same principles as were seen in the earlier decision of T.T.G. Industries Ltd. v. CCE (cited supra). The Hon. Court observed that the expression “attached to the earth” has three distinct dimensions – (a) rooted in the earth as in the case of trees and shrubs (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. It has been categorically observed that the attachment of the plant to the foundation at which it rests does not fall in the third category [attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached], for the reason that an attachment to fall in the third category it must be for permanent beneficial enjoyment of that to which the plant is attached. The Hon. Court even went on to distinguish and record with approval earlier decisions issue of 'immovable property'. We may have a lo
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ovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the 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.”
38. Reliance was placed by Mr Bagaria upon the decision of this Court in Quality Steel Tubes (p) Ltd. v. CCE [(1995) 2 SCC 372: (1995) 75 ELT17] and Mittal Engg. Works (P) Ltd. v. CCE [
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: (1995) 75 ELT 17] with the setting up of a hot mix plant as in this case. As observed by this Court in Triveni Engg. & Industries Ltd. case [(2000) 7 SCC 29 : (2000) 120 ELT 273], the facts and circumstances of each case shall have to be examined for determining not only the factum of fastening/attachment to the earth but also the intention behind the same.
40. In Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622] this Court was examining whether the mono vertical crystallisers erected and attached by a foundation to the earth at the site of the sugar factory could be treated as goods within the meaning of the Central Excise Act, 1944. This Court on facts noted that mono vertical crystallisers are fixed on a solid RCC slab having a load bearing capacity of about 30 tonnes per square metre and are assembled at site with bottom plates, tanks, coils drive frames, supports, plates, distance places, cutters, cutter supports, tank ribs, distance plate angles, water ta
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oundations to the earth and, therefore, were not, in any event, marketable as they were. ”
This decision also, in our opinion, does not lend any support to the case of the assessee in these appeals as we are not dealing with the case of a machine like mono vertical crystallisers which is permanently embedded in the structure of a sugar factory as was the position in Mittal Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 ELT 622]. The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts in order to provide stability from vibrations during the operation.
42. So also in T.T.G. Industries Ltd. v. CCE [(2004) 4SCC 751 : (2004) 167 ELT 501], the machinery was erected at the site, by the assessee on a specially made concrete platform at a level of 25 ft height. Considering the weight and volume of the machine and the processes involved in its erection and installati
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in a permanent structure, the movable character of the machine becomes extinct, The same cannot thereafter be treated as Movable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing.
44. 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 attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. Our a
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re as the towers being a new product with a distinct name, characteristics and use and is distinct from the components used in the manufacture as contended on behalf of the Revenue. The Division Bench after making the following observations in paragraphs 7 to 9 held that the towers being not moveable, saleable and marketable, they would not be subject to excise duty. Paragraphs 7 to 9 reads as under:-
“7. It is, therefore, clear that the goods must be excisable or that the goods covered having the attributes of excisable goods as understood in Excise Law which includes marketability. The real question, therefore, that arises is whether, the Transmission Apparatus is goods and secondly if even so whether they are marketable. The Commissioner noting the various equipments held that the transmission apparatus meets the test of manufacture. The Commissioner further noted the various equipments installed at the BTS site room.
The following equipments/apparatus were foun
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equipments installed at site were individual machine was rejected. The Commissioner further held that with the assembly of various equipment installed what emerges is a commodity with a distinct name, identity, character and use: distinct from inputs and classifiable under chapter 8525 of Central Excise Tariff and the same is distinct and separate from the various equipments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property.
8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other netw
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S/BSC site are not marketable. It also held that the test of marketability would also not be satisfied for another reason being, that for the installation of every BTS/BSC, licence from WPC/SACFA a wing of Department of Telecommunications, Government of India has to be obtained which invariably is user specific and site specific, meaning thereby if one wishes to sell the site to another user, it is not permissible under law, as the 'approval granted by the aforesaid authority for the frequency allocation and the site is for the user only and the purchaser would have to reapply for the license for that site. It cannot be sold/purchased marketed unattended and be equated to marketable goods. BTS/BSC site, therefore, are neither marketable nor capable of being marketed. The learned Tribunal also held that the appellants are not manufacturers and they are engaged in providing cellular mobile services by virtue of a license granted by the Government of India under the provisions of sect
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rketability recorded by the Tribunal namely that BTS/BSC is not marketable as licence is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that Whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which tire embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from
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annot be dismantled without substantial damage to their components and thus, cannot be reassembled, as non excisable. The new product would not be considered as movable and, therefore, will not be an excisable good. Para 6 of the said circular will not apply to the facts of this case. In our opinion, therefore, though a new product comes into existence, yet as it is not movable, saleable and marketable, it would not be subject to excise duty. ''
The principles laid down in the judgments discussed above stand good under all statutes unless any specific definition is available under the statute. What we want to say is that these principles cannot be circumscribed to any particular statute. In the facts before us, we are convinced that the transaction of supply of the Solar Power Plant does result into transfer of an 'immovable property' for reasons that the solar power plant could not be shifted without first dismantling it and then re-erecting it at another site.
An
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defined) for the Plant and the Contractor has agreed to provide same to the Owner in accordance with the terms and conditions herein specified.
(C) The Parties are entering into this Agreement to define their respective mutual rights and obligations and to lay down the terms and conditions of their understanding with respect to execution of the Work by the Contractor.
1.1 Definitions
* “Addenda” shall mean changes to the Work before the commencement of the Works;
* shall mean all plant, machinery, tools, vessels, material, vehicles including but not limited to solar photovoltaic modules and inverters necessary for the completion of the Work to be provided by the Owner;
* are all supplies, including consumables, used by the Contractor for performance of the Work of Plant;
* shall mean 60 MW (AC) Solar PV Power Project at Village – ___________ Karnataka;
* “Work Completion Deadline” shall have the meaning set forth in Schedule I of this Agreement;
* “Work Completion Certi
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ordance with which the Contractor is required to complete the Work in Plant;
* shall mean every Person (other than employees of the Contractor) employed or engaged by the Contractor or any person directly or indirectly in privity with the Contractor (including every sub-subcontractor), in accordance with Clause 3.1, to perform any portion of the Work, whether the furnishing of labor, materials, equipment, services or otherwise;
* “Work/s” shall mean the entire engineering civil and construction work set out in Schedule III which is to be supervised and facilitated by the Contractor, including the supply of construction material required for construction work.
2. APPOINTMENT
The Owner hereby appoints and the Contractor hereby accepts its appointment to carry out and facilitate the Works for the Project in accordance with the terms and conditions of this Agreement. Owner shall give in writing Notice to Proceed for commencement of work.
3. SCOPE OF WORK
3.1 The Contractor agrees
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executed by the Contractor with such Affiliate(s) or the Subcontractors, the terms whereof shall be in conjunction and not in contravention to any of the term(s) or provisions of this Agreement.
3.3 In addition to the Work, the Contractor agrees and undertakes that it shall execute and perform all such acts, deeds, works and services as may be conducive, incidental, necessary and requisite for performance of its obligations under this Agreement and for the successful completion and commissioning of Plant on or before the agreed Work Completion Deadline respectively. The equipments shall be arranged by Owner and handed over to the Contractor for performing work as per defined scope.
3.4 The Contractor agrees that it shall at all times execute the Work in accordance with the terms of this Agreement and with Good Industry Practice. The Work shall be performed such that the same shall be suitable and fit for its intended purpose as provided in this Agreement and shall comply with the pro
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ctor for performing work as defined scope.
7.4 Prime subcontractors
Contractor shall retain the major construction Subcontractors (the “Prime Subcontractors”) for the Work and due performance of this Agreement. The Contractor, will select the Prime Subcontractors by an evaluation process that evaluates potential candidates based upon relevant criteria, including experience, reputation, and demonstrated success in relevant construction projects.
10. INSURANCE
The Contractor (by itself or through its sub-contractor) /Owner (to be mutually decided) shall effect and maintain all insurance covers as per best industry practices and as advised by Lender's insurance advisor at its own cost, such insurances for such maximum sums as may be required under the financing agreements, and the Applicable Laws and such insurances as may be necessary or prudent in accordance with good industry practice.
Further, all insurances need to be endorsed in favor of Lender / Security Trustee of the
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mercial operations and that it shall continue to be liable to rectify any Defect in the Plant and be liable and responsible for the Works done and Plant till the expiry of the Defects Liability Period. Upon identification of a Defect, the Contractor agrees and covenants that it shall undertake, at its own costs and expenses, all such acts as may be necessary and requisite to cause and ensure that the Owner is satisfied with the Work and that such Defect has been rectified.
21. DESIGN DOCUMENTS
21.1 Owner's Review
It is expressly understood and agreed that the Design Documents and other related design information and any other documentation or drawings reasonably requested by the Owner (other than any such documents or drawings pertaining exclusively to Contractor's machinery, equipment and other proprietary processes) and Results of any supporting design calculations, that are prepared in connection with the performance of obligations under this Agreement shall, upon thei
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with the Equipment and Materials, including without limitation the as-built drawings/documents and all such information and documents listed in Annexure A to Schedule III hereto (collectively, the “Design Documents”).
21.4 Ownership
Notwithstanding anything to the contrary contained elsewhere or in this Agreement, the Contractor agrees that all Design Documents and other documents prepared by Contractor with respect to performance of its obligations under this Agreement (other than any documents/information pertaining exclusively to the Contractors proprietary processes) shall be the sole and exclusive property of the Owner subject to the Contractor having received payments for the Work performed and the designs contained in them shall not be reproduced or used by Contractor in connection with any other project. The Contractor agrees that all such documents, as well as any drawings, tracings, specifications, calculations, memoranda, data, notes and other materials that are supplie
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ign, Engineering and studies, transportation, unloading, storage and site handling, installation and commissioning of all equipments and material , services as per scope, complete project management as well as supply and construction related to various other packages for complete PV plants within specified terminal points) including but not limited to the following:
* All documentation requirements, obtain necessary clearances and liaison with applicable customs/other authorities and/or destination port / authorities in India for clearance of Owner supplied off shore items like Solar modules, PV connectors, Y connectors, DC Cables. Solar Inverter. All payment towards taxes and obtaining of all clearances as may be required at the destination port to import the above mentioned Equipments shall be in scope of Contractor. However, Custom Duty shall be arranged by Owner
* Transportation of the above off shore Equipments, Spare Parts and Materials from Indian Port to the Plant Site and
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control Cables (AC as well as DC and communication cables).
18. Illumination and ventilation system
19. AC BOS and DC BOS
20. Earthing system (maintenance free)
21. Lightening Protection.
22. Battery and battery charger.
23. AC/DC trench work and cabling
24. Module cleaning arrangement as applicable
25. Any other items required for the completion of the agreed scope
Handing over of entirely completed 60 MW-AC solar power project as per agreed scope
Arranging the land for the complete project, free from all encumbrances shall be the scope of Owner
All the major equipments / materials / items shall be procured by Owner and will be handed over to Contractor for erection and commissioning works. However, all the construction material shall be in scope of Contractor
TERMINAL POINT: Remote end substation of Karnataka Power Transmission Company Limited (KPTCL) 110kV Switchyard
DESIGN BASIS FOR 60 MW AC SOLAR PV POWER PLANT
Contractor shall submit the design basis meeting the a
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ing and intersecting electric lines and poles, telephone lines and poles, highways, bridges, waterways, railroads, sewer lines, natural gas pipelines, drainage ditches, culverts, fences, walls, and any and all physical property of others from damage as a result of its performance of the Works. In the event that any such physical property is damaged or destroyed in the course of the performance of the Works due to reasons attributable to Contractor or any Subcontractor, Contractor shall rebuild, restore or replace such damaged or destroyed physical property.
ANNEXURE A
LIST OF DRAWINGS AND DOCUMENTS TO BE SUBMITTED BY CONTRACTOR FOR THE OWNER'S APPROVAL
1 Site Map showing the following areas : Solar Equipment, Switchyard, Site Office and Access
2 Solar Plant Layout showing module and string layout, Inverters, major Cables, switchyard equipment evacuation point and transmission line
3 Earthing layout
4 ELECTRICAL DIAGRAMS, DOCUMENTS AND DRAWINGS
1. Single line diagram
2.
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n, and other terms and conditions.
d. Solar Radiation and other weather data measurement methodology, automation, calibration procedures
e. Equipment DIAGRAMS AND DRAWINGS
SCHEDULE IV: PAYMENT OF CONSIDERATION
Contract Price
Item No
Description
Contract Price
1
Engineering, Procurement, Construction and associated works for 60-MW AC Solar PV Project including all tax and GST
Total contract price
SCHEDULE XI: ACCEPTANCE TESTS
Prior to commissioning the Plant, tests shall be conducted on the AC side to ensure trouble-free operation of all components, including but not limited to. Modules, Inverters, transformers, switchyard, switchgear, relays, sensors and monitoring systems. All equipment shall comply with all applicable IEC and IS standards and acceptance reports should be submitted in standard formats. All tests shall be conducted in mutual conjunction with the supplier, Contractor and the Owner as per relevant IEC and IS specifications
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etting up of a solar power plant results into immovable property. In view thereof, we are of the view that this agreement, too, is a “works contract” in terms of clause (119) of section 2 of the GST Act.
In fact, we have to categorically observe that the applicant has tried to bifurcate the works contract of setting up of a solar power plant into contract for supply of goods and supply of services. We see that both the agreements tendered are for setting up of a Plant, a 60 MW (AC) Solar PV Power Project in Karnataka. Thus, it is for the contract of setting up of the same Power Plant. However, for some obvious reasons, sometimes, the contract of setting up of a Power Plant is executed by devising two agreements in terms of supply of goods and supply of services.
However, we have seen earlier that this arrangement fails. In the first agreement purported to be for 'supply of goods', there were clauses such as – other contractors engaged by the Supplier to implement, operate a
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etting up of a solar power generation plant is a “works contract” in terms of clause (119) of section 2 of the GST Act. In view thereof, we would not enter into any discussion as to the transactions involving a 'composite supply'. Since the transaction is treated as a “works contract” and not as a “composite supply”, there would be no relevance of “principal supply”
All the submission of the applicant was on the point that where there are two separate contracts – one for supply of goods to be used in solar power plant and one for services, both would be taxed separately. However, we have seen above that such are not the facts of the instant case. The interpretation and ascertainment of tax implications is to be had in respect of the facts and the documents. There cannot be any straight jacket formula in respect of agreements where there is any ambiguity or an artificial bifurcation. We reiterate that it is only the actual facts and agreements that would determine the nature o
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of this question, the applicant has tendered the two agreements which have been discussed above. Through various clauses in the agreement, we have seen that the first agreement as claimed to be for supply of goods was in fact a “works contract” in terms of clause (119) of section 2 of the GST Act. As regards the second agreement claimed to be for supply of services, we have seen that the same involved supply of goods and services, as well and has been inferred by us to be a “works contract” in terms of clause (119) of section 2 of the GST Act.
Having seen so, we observe that depending upon the nature of supply, intra-State or inter-State, the rate of tax would be governed by the entry no.3(ii) of the Notification No.8/2017-Integrated Tax (Rate) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) or the Notification no. 11/2017 – Central Tax / State Tax (Rate) under the CGST Act and MGST Acts, as reproduced below. The rate of tax would be 18% under the IGST Act and 9% each
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ct, 2017 (IGST Act) which states thus –
234
84 Or 85 Or 94
Following renewable energy devices and parts for their manufacture
* Bio-gas plant
* Solar power based devices
* Solar power generating system
* Wind mills and wind operated electricity generator (WOEG)
* Waste to energy plants/devices
* Solar lantern/solar lamp
* Ocean waves/tidal waves energy devices/plants
* Photo voltaic cells, whether or not assembled in modules or made up into panels
As can be the seen, the above entry is under the notification prescribing the tax rate on 'goods'. We have to observe that the facts of the transactions have to be seen in terms of what the sub-contracting agreement says, what has been supplied, whether the item supplied is a part. Such and many other questions have to be answered. No details have been brought before us. If the transaction is a supply of “goods” then the applicable Schedules (exempt or taxable) would have to be seen. In the absence of any d
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the questions are answered thus –
Q.1 Whether in case of separate contracts for supply of goods and services for a solar power plant, there would be separate taxability of goods as 'solar power generating system' at 5% and services at 18% ?
A.1 The agreements tendered in support of this question reveal that the impugned transaction of setting up and operation of a solar photovoltaic plant is in the nature of a “works contract” in terms of clause (119) of section 2 of the GST Act. Schedule II [Activities to be treated as supply of goods or supply of services] treats “works contracts” u/s 2(119) as supply of 'services'. Depending upon the nature of supply, intra-State or inter-State, the rate of tax would be governed by the entry no.3(ii) of the Notification No.8/2017-lntegrated Tax (Rate) under the Integrated Goods and Services Tax Act, 2017 (IGST Act) or the Notification no.11/2017 -Central Tax/State Tax (Rate) under the CGST Act and MGST Acts. The rate of tax would
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