In re KEI Industries Limited (GST AAAR Rajasthan)
As the question posed by the party is related to the supplies undertaken by him, prior to the date of filing of the Application for Advance Ruling, so no ruling is given on the question .
Also Read AAR Ruling- Electric cables cannot be treated as accessories or consumables for petroleum operations
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,RAJASTHAN
Proceedings
(Under Section 101 of the Central GST Act, 2017 and Rajasthan GST Act, 2017)
At the outset we would like to make it clear that provisions of both the Central GST Act, 2017 and Rajasthan GST Act, 2017 are same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act would also mean a reference to the same provisions under Rajasthan GST Act.
2. The present appeal has been filed under Section 100 of the Central GST Act, 2017 (hereinafter also referred to as ‘CGST Act’) and Rajasthan GST Act, 2017 (hereinafter also referred to as ‘RGST Act’) by M/s KEI INDUSTRIES LIMITED against the Advance Ruling No. RAJ/AAR/2018-19/09 dated 01.08.2018.
BRIEF FACTS OF THE CASE
3. KEI Industries Ltd. (hereinafter also referred to as the “Appellant”) is a public limited company incorporated in India and is engaged in the business of manufacturing and supply of various kinds of Power Cables.
4. The issue is the supply of Copper XLPE insulated armoured low tension cables (hereinafter referred to as “electric/power cables”) by the Appellant to M/s. Vedanta Ltd.
5. M/s.Vedanta is undertaking petroleum operations under PRE-New Exploration Licensing Policy (PRE-NELP) granted by the Government of India/State Government to Cairn Energy India Pvt. Ltd. in the State of Rajasthan which was vested in Vedanta after the merger of Cairn India Pvt. Ltd. in Vedanta. For carrying out such petroleum operations, it uses various kinds of machines and equipment. Almost all machines and equipment used by Vedanta for petroleum operations run on electricity and thus, electric cables are required for providing electricity to such machines and equipment.
6. M/s. Vedanta issues tender notice for supply of power cables required for its petroleum operations and further selects a supplier who is required to supply power cables in accordance with the specifications of the cables viz. the cable type, length, thickness, material, colour, etc. provided by M/s.Vedanta in the order sheet issued for this purpose.
7. The Appellant had been selected by M/s. Vedanta for supplying cables to it by raising Purchase Order No. 4500030187 and 4500030182 both dated 14.11.2017 and amended rev-01 dated 12.01.2018. Directorate General of Hydro carbons has certified through certificate dated 18.01.2018 that the goods i.e. power cables of various specifications, supplied as per attached list are required for the petroleum operations.
8. It is to be noted that in the instant case, the Appellant is not aware of the type, nature and functions, etc. of the machines or equipments for which the cables are required and therefore, the Appellant is supplying power cables to the Appellant on the basis of the job sheet provided by M/s. Vedanta. Once the Appellant receives the order sheet, it manufactures the power cables as per the specifications provided therein. The Appellant manufactures the power cables of exact length/specifications as ordered by M/s. Vedanta and the same are supplied exclusively to M/s. Vedanta and not to any other recipient.
9. It is pertinent to note that even though the cables are manufactured as per the specifications provided by M/s. Vedanta and supplied exclusively to M/s. Vedanta, the cables are not exclusively or specifically meant to be used with such machines in as much as these power cables are general power cables and are capable of being used with any machine/equipment.
10. The Appellant submitted the following questions for Advance Ruling
“Whether the power cables supplied by the Appellant would be covered under the scope of SI. No. 1 of Notification No. 03/2017-CT?”
11. Appellant contended that power cable supplied to M/s. Vedanta for supplying electricity to the machines or equipments used in its petroleum operations would qualify as ‘material’, ‘accessories’, ‘consumables’, and/or ‘stores’ of SI. No. 1 of Notification No. 03/2017-CT for running machines listed in the list annexed to that notification. (Entry No.1 to 23) and thus can be supplied at concessional rate as mentioned in the notification.
12. The AAR did not find merit in the contention of the Appellant on account of the following :-
i) On careful perusal of notification it is evident that Electric cables are not included in any of the entries of goods specified from entry no. 1 to 23 of the List of goods appended to Notification No. 03/2017-CT.
ii) Entry no. 24 of List of goods appended to Notification No. 03/2017-CT. restricts accessories, stores, materials or consumables ONLY in relation to the goods specified in the list of goods from entry no. 1 to 23. What Appellant has failed to specify is that “Electrical cables” supplied by him will be accessories, stores, materials and/or consumables to which specific goods as mentioned in entry no. 1 to 23 of the list of goods .
iii) Moreover on examination of purchase orders it is found that they too do not specify that electrical cables supplied will be accessories, stores, materials and/or consumables to which specific goods as mentioned in entry no. 1 to 23 of the list.
iv) Appellant has mentioned that Electrical Cables so supplied by them
1) are not specific and exclusive to machine used by M/s Vedanta .
2) supplied cables are capable of being used with more than one kind of machine by M/s Vedanta .
Thus it can be inferred that:
1) dealer is not aware off and has not clarified that “Electrical cables” supplied will be used as accessories, stores, materials and/or consumables to which goods falling under entry no.l to 23 of the list.
2) “Electrical cables” supplied can very well be used as by M/s. Vedanta as accessories, stores, materials or consumables for even those goods which are not covered under entry no.1 to 23 of the list.
3) It is to be noted that in the instant case, the Appellant is not aware off the type, nature and functions, etc. of the machines or equipment for which the cables are required. The Appellant is supplying power cables to on the basis of the job sheet provided by M/s. Vedanta.
v) It is a clear possibility that there are other machine and equipment and their accessories, stores, materials and consumables which though being used in process of petroleum operation but are not enjoining concessional rate as they are not covered under entry no. 1 to 23 of the notification yet being supplied electricity by these electrical cables to make them functional .
vi) In common parlance ” Electrical Cables” are generally used for setting up of a system in which by electric cabling or wiring, electricity is downloaded from the main source ( i.e. from grid or transformers ) and further transmitted , distributed or supplied to various points in working area. Machines, equipments and accessories draw supplies of electricity from these points to be functional. Hence Electrical Cables are generally used to set up a network of wires and cables which are usually permanent in nature through which electricity can flow, distributed and supplied to various points. To regard Electrical Cables as “accessories, stores, materials or consumables for running of the goods specified in the List” as mentioned in entry no. 24 of the notification is not rational by any stretch of imagination.
vii) The Appellant has failed to identify/clarify as to under which category i.e. accessories, stores, materials and/or consumables as mentioned in S.No. 1 to 23 of the list, would electrical cables fall. Further he has not given any assurance regarding restricting the use of electrical cables as accessories, stores, materials, consumables to goods falling under entry no.1 to 23 of the list, which is an essential pre requisite to claim concession.
13. Case for the Party
ELECTRIC CABLES SUPPLIED BY THE APPELLANT WOULD BE COVERED UNDER THE SCOPE OF SL. NO. 1 of Notification No. 03/2017-CT(rate) dated 28.06.2017
The LD. AAR has failed to appreciate the fact that DGH is the sole authority to certify that goods are required for petroleum operations after ascertaining the use of goods and all the other conditions as per the notification number 3/2017. Further an exhaustive procedure is being followed by DGH for issuance of essentiality certificate as DGH is the Indian governmental regulatory body established under the Ministry of petroleum and Natural gas, Government of India.
Appellant’s understanding:
1 According to the Appellant, the electric cables supplied by the Appellant to Vedanta for supplying electricity to the machines or equipment used in its petroleum operations would qualify as ‘material’, ‘accessories’, ‘consumables’, and/or ‘stores’ under SI. No. 1 of Notification No. 03/2017 for running machines listed in the list annexed to that notification. The reasons are furnished herein below:
Applicable provisions:
2 Notification No. 03/2017 provides for exemption to the intra-State supplies of goods, the description of which is specified in column (3) of the Table with relevant List appended thereto and falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Table, from so much of the central tax leviable thereon under Section 9 of the CGST Act as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions annexed to the notification. A copy of the Notification No. 03/2017-CT is enclosed as Annexure-H. A corresponding benefit is given under Rajasthan Goods and Services Tax Act vide File No. F. 12(56) FD/Tax/2017-Pt-I-42 dated 29.06.2017. Similar benefit on interstate supplies is given under IGST Act vide Notification No. 03/2017-Integrated Tax (Rate) dated 28.06.2017.
3. For quick reference, the relevant entry of Notification No. 03/2017 is reproduced herein below:
