In re M/s Nikhil Comforts (GST AAR Maharashtra)
We observed from the Contract submitted by the applicant that the major part of the contract is supply of goods. i.e. VRF Indoor & Outdoor Units, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc. These goods are delivered to the client by the applicant and such goods that are supplied are used by the applicant to provide services of installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus we find that there is a composite supply in the subject case.
Now that we have found that there is no works contract involved in the subject case and the supply is nothing but a composite supply with supply of goods being the principal supply, we come to the second question raised by the applicant which is, whether their transaction is Composite supply liable to 14% being principal goods involved is Air- Conditioner which falls to cover under Schedule IV, Sr. no 119 of Notification No 1/2017 (Central tax rate) dated 28/06/2017.
The principal supply as mentioned above in this case is a supply of goods and therefore the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. The principal goods in the subject case is Air-conditioner units which are most important for the applicant to render supply as per the contract. We find that the final deliverable is nothing but ready to operate Air-conditioning System, which can control/cool the temperature of the rooms in the buildings/site.
We find from the GST Tariff that Air Conditioner units falling under Chapter 8415 are taxable @28% and covered under Schedule IV,Sr. no 119 of notification No 1/2017 (C.T. Rate) dated 28/06/2017.Hence the principal supply in their composite supply being goods as described under heading 8537, the applicant is liable to pay GST on the whole contract @ 28%.
In view of the fact that the subject agreement envisages a composite supply where the principal supply is supply of goods, we state that the subject supply cannot be considered as a ‘mixed supply’ because no individual supplies are made in the instant case.
Also Read AAAR Order- 28% GST Payable on Supply of Air Conditioners with Installation Services
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
PROCEEDINGS
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Service Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by M/S NIKHIL COMFORTS, the applicant, seeking in advance ruling in respect of the following question.
The transaction would be classifiable to cover under the definition of “works contact** liable to CGST/SGST/IGST covered under Sr, no 3 item no 3 of notification No 20/2017 (Central tax rate dated 22/08/2017).
OR
The transaction is Composite supply liable to co 14% being principal goods involved is Air-Conditioner which falls to cover under schedule IV, Sr. no 119 of notification No 1/2017 (Central tax rate) dated 28/06/2017
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression `GST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION — AS PER THE APPLICANT
“(A) BRIEF HISTORY OF THE CASE
M/s Nikhil Comforts, a Partnership Firm, registered under the Indian Partnership Act, 1932 is having its registered office at 1003,Sampada, Arunodaya Nagar, Mulund (East) Mumbai 400 081 and sales office at Ground & 1st floor, Mulund Utkarsha CHS Ltd., Sajjan Wadi, Mithagar Road, Mulund (East), Mumbai 400 081. The firm is registered under the GST Act having GSTIN No. 27AAAFN0812H1ZP.
M/s Nikhil Comforts (short the firm) entered into an agreement with Goa State Infrastructure Development Corporation Ltd.(in short GSIDC) for execution of Additional Air-conditioning work for the New building of Director of Education at Porvorim, Goa.” GSIDC desires to get air-conditioning work for new building of Directorate of Education at Goa & Nikhil Comforts has agreed to do the works of supply of goods and services for agreed price.
GSIDC is a wholly owned Government Company of the Government of Goa registered under the Companies Act, 1956, with the Registrar of Companies, Panaji-Goa. The Registrar of Companies has allotted, Certificate of Incorporation No.075112GA2001SGC002954 (C IN) dated 20/02/2001. GSIDC has been floated by the Government of Goa as a Special Purpose Vehicle (SPV) for speedy implementation of all the infrastructural Projects, envisaged by the Government like Roads, Bridges, Fly-Overs, Bus-Stands, Hospitals, Tourism related Projects, etc. all over the State on the similar lines of 23 similar Corporations in other States. This would help in development of infrastructural facilities all over the State of Goa. This Corporation would act as a co-ordinating agency for implementing all the projects.
(B) The slope of work comprises of air-conditioning work for new building of Directorate of Education at Goa-
1. Supply, Installation, Testing & Commissioning of VRF 4 Way Cassette Units.
2. Supply, Installation, Testing & Commissioning of VRF Hi- Wall Units.
3. Supply, Installation, Testing & Commissioning of VRF Outdoor Units,
4. Supply, Installation, Testing & Commissioning of Drain Pump for Hi-wall Units.
5. Supply, Installation, Testing & Commissioning of interconnecting Soft & Hard Copper Pipes with Insulation between IDU and ODU.
6. Supply, Installation, Testing & Commissioning of UPVC Hard Drain Pipes with Insulation.
7. Supplying installation testing and commissioning of surface/ recess mounting vertical type 415 V TPN, double door MCB DB.
8. Supplying and fixing 40 A. C series MCB suitable for lighting and other loads –
TP, Cat Providing and fixing following rating and breaking capacity adjustable 4 pole MCCB inside the existing cubicle panel board-250A Adjustable 35/40 KA, CAT A.
9. Supply & Installation of Cable Tray for Copper Pipe.
10. Supply & Laying of 3 74 of Core Armoured PVC / XLPE Insulated Aluminium & Copper Conductor Cable with Termination.
11. Supply & Fixing of MCB, ELCB for Outdoor units & Switch Socket for Indoor Unit
12. Supplying and Installing 150mm width x 50mm depth-16G MS perforated type cable tray.
13. Providing and fixing 25 mm x 5 mm GI strip and 8SWG GI wire for earthling,
(C) DOCUMENTS SUPPLIED FOR CONSIDERATION:
1. Agreement entered between GSIDC and Nikhil Comforts Dated 21st Aug.,2018 for supply, Installation, testing & commissioning of VRF Indoor and Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc.
2. Letter of acceptance dated 24th May 2018
(D) RATE OF TAX ON THE TRANSACTION:
Whether as ‘WORKS CONTRACT’ or as ‘COMPOSITE SUPPLY’ or as ‘MIXED SUPPLY The Question for advance ruling is whether the applicant requires to pay GST considering the transaction as ‘Works Contract’ or ‘Composite supply or ‘Mixed supply:
(a) WORKS CONTRACT: If the transaction is Works Contract the rate of tax would be 6% CGST covered under Sr. no 3 item no 3 of notification No 24/2017 (Central tax rate) dated 21/09/2017.
(b) COMPOSITE SUPPLY: If the transaction is composite supply the rate of tax would be CGST @ 14% being principal goods involved is Air Conditioner which falls to cover under schedule IV, Sr. no 119 of notification No 1/2017 (Central tax rate) dated 28/06/2017.
(c) MIXED SUPPLY: if the transaction is Mixed supply the rate of tax would be CGST @ 14% being highest rate of tax would be on Air Conditioner as this item attracts highest rate of tax which falls to cover under schedule IV, Sr. No 119 of notification No. 1/2017 (Central tax rate) dated 28/06/2017
(E) SUBMISSION
Your applicant is engaged in supplying goods and services and good involved in the contract are mainly 5 Nos. Of 18 HP VRF outdoor units, 12 Nos. of VRF cassette units and 29 Nos. of VRF Hi-wall units of Voltas make and 29 drain pumps of aspen make, refrigerant pipes, indoor and outdoor Stands, Cables, cable tray, Insulation material, electrical goods etc. Works Contract- Under the Goods and Services Tax regime
Section 2(119) defines “works contract” to mean a contract for building, construction, fabrication, completion, erection, installation; fitting out, improvement, modification, repair, maintenance, renovation, alteration on commissioning of any immovable property wherein the transfer of property in goods (whether as goods or in some other forms) is involved in execution of such contract. The intention of the legislature which is abundantly clear from the above definition is that the works contract under the GST should mean only the contracts in relation to immovable property. The question therefore would be how would the contract involving supply and services both in relation to movable property be taxed under the GST regime. To understand this, we must refer to the definition of composite supply of section 2(30). This definition reads as follows:
“Composite supply means a supply made by a taxable person to a recipient consisting of 2 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 principal supply. illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.
The word composite supply should not be confused with mixed supply, Section 2(74) defines mixed supply as follows:
“Mixed Supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
Illustration: A supply of a package consisting of canned foods, sweets, chocolates; cakes, dry, fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a nixed supply if these items are supplied separately.”
The contracts involving supply of goods and services in relation to movable property would also fall in the definition of composite contracts.
1. WHETHER WORKS CONTRACT’?
Section 2(119) defines “works contract” to mean a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration on commissioning of any immovable property wherein the transfer of property in goods (whether as goods or in some other forms) is involved in execution of such contract.
To know whether this is works contract the goods involved in the contract property in which requires to be transferred in immovable property.
(b) Blue Star Ltd. vs Commissioner of Central Excise [2002 (143) ELT 391 Tri Del] In that case the issue before the Central Excise Tribunal was, taxability of Central Air conditioner plant, under excise statute. The facts of that case, in brief are that the appellants engaged in the manufacture, assembly, at site of customers of Central Air-conditioning Plants and rest of the material/components such as GI sheets for ducting, GI/MS pipes, Electrical Control panels, cables, pumps, motors, valves, grills/diffusers, thermocol of PUF, Aluminium or GI cladding, aluminium foils for insulation of piping, ducting and AHU rooms, etc., were purchased from various vendors. All the equipments/ materials/components and parts were brought to the site of the customers. That the appellants undertook the work of design, fabrication, supply assembly, erection, testing and commissioning of the CAP at site of various customers against a contracted price which resulted into a distinct and excisable product which is apart from the equipment/component/ material/parts and accessories that have gone into the manufacture of CAPs. This is identifiable as CAPs in the market and is bought and sold as CAPs as is evident from the contract entered into between the appellant and the customers. This distinct product is not embedded in the ground like a tree or building, at the most some of its equipments/commonents are fixed by bolting, using nuts and bolts, to secure maximum operational efficiency and safety of the plant as a whole.
The case is decided by majority holding that it is immovable by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is the independent function of the department, as held by the Apex Court in the case of Triveni Engineering and Industries Ltd. v CCE [2000 (120) E.L.T. 273 (S.C.) , to establish the marketability of any goods before subjecting them to levy of duty of excise and the same has got to be discharged by placing on record independent cogent evidence. In the instant case, the department has not been able to establish that the CAPs were capable of being taken as such to the market for being sold. Thus the majority has held that Central Air conditioner plant fixed in the contract is immovable.
The dissenting judgment delivered by Krishna Kumar, Member, however, has taken country stand than that of the decision of the majority. He would hold that that the CAP installed at sight is the movable property of the customers. The Member (J) relied on the decision of the Apex Court in the case of Sirpur Paper Mills reported in 1998 (97) E.L.T. Page 3 (S.C.), wherein the Apex Court considered the leviability of excise duty on paper making machine which was erected by the appellant-company by using duty paid components purchased from the market and also by fabricating certain parts of the machines in their factory. The Hon’ble Apex Court held that just because plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property Thus as per the decision of the majority the transaction is of the nature which may fall to cover under the definition of ‘works Contract[section 2 sub-section (119)]
(c) Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs through its order no 37B Order 58/1/2002-CX dated 15th January 2002 has issued instructions at para 5.(iii) that “Refrigeration/Air conditioning plants. These are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They arc in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods. Air conditioning units, however, would continue to remain dutiable as per the Central Excise “Fariff.”
The Department had issued these directions treating Refrigeration/Air conditioning plants are immovable. In light of this authority the transaction is of the nature which may fall to cover under the definition of ‘works Contract[section 2 sub-section (119)]
(2) COMPOSITE SUPPLY
The goods involved in the contract are mainly 5 Nos. Of 18 HP VRF outdoor units, 12 Nos. of VRF cassette units & 29 Nos. of VRF Hi-wall units of Voltas make and 29 drain pumps of aspen make, refrigerant pipes, indoor and outdoor Stands, Cables, cable trays, Insulation material, electrical goods etc. Now it is required to see whether this is a ‘composite supply’ of taxable goods and services naturally bundled in conjunction with ordinary course of business.
It is essential to know the meaning of the term ‘naturally bundled’ – The term bundled- The term bundled goods and or service means a bundle of provisions of various goods and or services wherein an element of provision of any goods or service is combined with an element or element of provision of other goods or service then it would be naturally bundled.
It is felt that the nature of contract covers under composite supply being 18 HP VRF outdoor units, VRF cassette units and VRF Hi-wall units of volts make and drain pumps, refrigerant pipes, indoor and outdoor Stands, Cables, cable tray, Insulation material, electrical goods etc. are naturally bundled.
Once it is observed that the nature of contract covers as composite supply it comes out of the ambit of ‘mixed supply’.
(F) Advance ruling:
Considering the decisions, views, directions the applicant desires advance ruling whether the activity of supplying ‘Additional Air-conditioning work for the New building of Director of Education at Porvorim , Goa.”
The transaction would be classifiable to cover under the definition of “works contact” liable to CGST/SGST/IGST covered under Sr. no 3 item no 3 of notification No 24/2017 (Central tax rate) dated 21/09/2017.
OR
The transaction is composite supply liable to CGST @ 14% being principal goods involved is Air-Conditioner which falls to cover under schedule IV, Sr. no 119 of notification No 1/2017 (Central tax rate) dated 28/062017
In continuation of our submission dated 26th March 2019 it is submitted that-
1. The applicant- Company pursuant to the acceptance of its tender, entered into an agreement with GSIDC for design, supply, Installation, testing & commissioning of VRF Indoor and Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc. at the site of GSIDC.
2. For supply/installation/erection and assembly of complete Air Conditioning plants were procured by the company and various equipments/components/material/ parts and accessories were brought to the site of the customers GSIDC. The plant is installed /assembled mainly comprising of VRF 4 way Cassette units, VRF Hi wall units, VRF Outdoor units, Drain pump, interconnecting soft & hard copper pipes, cable tray, sheet metal ducts are fabricated at site and installed along with grills and diffusers. The ducts & piping is insulated at site & the plant as a whole is to be handed over to the customer.
3. Section 2(119) defines “works contract” to mean a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein the transfer of property in goods (whether as goods or in some other forms) is involved in execution of such contract. The intention of the legislature which is abundantly clear from the above definition is that the works contract under the GST should mean only the contracts in relation to immovable property.
4. Under the Central Excise Act 1944 (CEA), if an article is an immovable property, it cannot be termed as excisable goods. In catena of decisions it is mentioned that to have been “manufactured” as contemplated under Section 2(f) of the Central Excise Act and to have been mentioned under the Tariff, the goods must necessarily answer the test of marketability affirmatively for being held to be excisable. Classification is only for determining the applicable rate of duty under the Tariff Act, while marketability is the conclusive test for settling the broader issue of excisability of the goods under the CEA.
5. From the provisions of GST Act it is clear that the works contract should mean only the contracts in relation to immovable property i.e. in a contract of supply, where the property in goods passes in immovable, the nature of transaction would be “Works Contract”. Similarly, under the Central Excise Act where the property in goods passes in immovable there would be no excisablity. Considering the similarity in both the statutes it would be safe to refer to the decisions and authorities under the excise statute for determining the nature of activity whether property passes in immovable or not. To have the attributes of excisable goods as understood in the Excise Law. They are mobility and marketability. The article in question should be capable of being brought and sold in the market a test which is too well established by series of decisions of this Court. There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for 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 intention as well as the factum of fastening to anything attached to the earth. It also required to see that the test of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the latter part is in the positive then it would be treated as permanently attached to the earth. Thus test of “marketability” and test of “permanency” is the twin tests laid down by the Court to determine whether assembly/ erection would result in immovable property or not. Reference can be made to following judgments-
a. Court in Municipal Corporation of Greater Bombay & Ors. Vs. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18; and held that the twin tests laid down by the Court to determine whether assembly/ erection would result in immovable property or not were fully satisfied in the facts of this case. The court has observed that-
“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 independently, in para 10 above.
Accordingly applying the test laid down by the Supreme Court we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon”.
b. In Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise, UP 1995 (75) ELT 17 (SC); the court observed that-
“The basic test, therefore, of levying duty under the Act is two fold. One, that any article, must be 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, ivere not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to he goods within meaning of Section 3 of the Act”.
c. In Mittal Engineering Works Pvt. Ltd. Vs. CCE 1996 (88) ELT 622 (SC); the Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. 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.
d. In Triveni Engg. & Industries [2000 (120) E.L.T. 273 (S.C.)], the question was whether a Turbo-Alternator was excisable or not. The Tribunal had held the item to be excisable. The Apex Court set aside the Tribunal’s decision, observing that the Tribunal’s conclusion was not justified by its own finding. The Apex Court held that the marketability test required that the goods should be in a position to be taken to the market and sold. In that case, as found by the Tribunal, the Turbo-Alternator had to be separated into its components viz. Turbine and Alternator for being taken to the market. The Apex Court, therefore, held that the marketability test was erroneously applied by the Tribunal. In the instant case, the factual position is analogous to that of Triveni Engg. & Industries. Even the Revenue has no case that the CAP was capable of being taken as such to the market for sale. It required to be disassembled or dismantled into its components for the purpose of removal from its site, but then, certain parts would be damaged beyond repair and what could be taken to the market would be only the remaining parts, which would not make a CAP. The marketability test laid down by the Apex Court in Triveni Engg. & Industries is, therefore, not satisfied in the instant case.
e. Blue Star Ltd. vs Commissioner Of Central Excise 12002 (143) ELT 391 Tri Del] In that case the issue before the Central Excise Tribunal was, taxability of Central Air conditioner plant, under excise statute. The facts of that case, in brief are that the appellants engaged in the manufacture, assembly, at site of customers of Central Air-conditioning Plants and rest of the material/components such as GI sheets for ducting, GUMS pipes, Electrical Control panels, cables, pumps, motors, valves, grills/diffusers, thermocole of PUF, Aluminium or GI cladding, aluminium foils for insulation of piping, ducting and AHU rooms, etc., were purchased from various vendors. All the equipments/ materials/ components and parts were brought to the site of the customers. That the appellants undertook the work of design, fabrication, supply assembly, erection, testing and commissioning of the CAP at site of various customers against a contracted price which resulted into a distinct and excisable product which is apart from the equipment/ component/material/parts and accessories that have gone into the manufacture of CAPs. This is identifiable as CAPs in the market and is bought and sold as CAPs as is evident from the contract entered into between the appellant and the customers. This distinct product is not embedded in the ground like a tree or building, at the most some of its equipments/components are fixed by bolting, using nuts and bolts, to secure maximum operational efficiency and safety of the plant as a whole.
The case is decided by majority holding that it is immovable by saying that I am unable to accept this logic for holding the CAPs to be movables capable of being marketed. It is e independent function of the department, as held by the Apex Court in the case of veni Engineering and Industries Ltd. v. CCE [2000 (120) E.L.T. 273 (S.C.) , to %estklish the marketability of any goods before subjecting them to levy of duty of excise and the same has got to be discharged by placing on record independent cogent evidence.
In the instant case, the department has not been able to establish that the CAPs were capable of being taken as such to the market for being sold. Thus the majority has held that Central Air conditioner plant fixed in the contract is immovable.
Thus as per the decision of the majority the transaction is of the nature which may fall to cover under the definition of ‘works Contract'[section 2 sub-section (119)]
6. It submitted that the Air conditioning plant in the present case emerges by assemblage of various components procured from open market and erection and installation of the system in the customer’s premises as per the specifications of the customer. The contract is relating to commissioning of air-conditioning plants as per terms and conditions of the contract and such plants are commonly known as air-conditioning system or facility or plant. It undertakes air conditioning contracts where the contracts cover the design, supply, installation, testing and commissioning of the entire air-conditioning plants and-such plants are extended a guarantee for the performance of satisfactory functioning. The air-conditioning plant is supposed to deliver certain desired comfort to its users, which depends on temperature, relative humidity and cleanliness. Such plant includes all machineries, accessories and parts, which are required to make the plant functional.
“Air-conditioner” is different than “Air-conditioning plant”. While “Air-conditioner” is movable item like Refrigerator, Air-cooler etc “Air-conditioning plant” is immovable item. Totality of the plant cannot be shifted from one place to another, once it is installed at a particular place. It can be shifted only after dismantling the plant, which cannot be called “Air-conditioning plant” after it is dismantled.
It is the case that Air conditioning plant cannot be taken as such to the market for sale and, they did not satisfy the test of marketability. It has also submitted that, even if it be assumed that the Air conditioning plant could be disassembled into components and taken to the market for sale, all the components which had gone into the assembly of Air conditioning plant would not be available for sale as some essential components and accessories would have been damaged beyond repair and become unfit for being used again for reassembly. It is submits that the ducts and pipes with their insulations and other accessories were an essential part of the Air conditioning plant and the same would be irretrievably damaged in any dismantling or disassembly of the Air conditioning plant. If at all any dismantled Air conditioning plant could be taken to the market for sale that would be only an assortment of some components viz. VRF 4 way Cassette units, VRF Hi wall units, VRF Outdoor units etc. but never the Air conditioning plant as a whole.
Therefore it is submitted that since the Air conditioning plant as a whole is not capable of being taken to the market for sale, it was not a marketable item. If the items assembled or erected at site and attached to earth/wall cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as movable.
7. It is also pertinent to refer to the order of Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs through its order no 37B Order 58/l/2002-Cx dated 15’h January 2002 has issued instructions at para 5 (iii) that-
“Refrigeration/Air conditioning plants – These are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They are in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods. Air conditioning units, however, would continue to remain dutiable as per the Central Excise Tariff.”
The Department had issued these directions treating Refrigeration/Air conditioning plants are immovable. The taxing authorities under excise Act, following these directions have treaded Air conditioning plants as immovable since 2002. It is therefore submitted that there would not be any different view as is followed continuously for years together under Excise Act.
Keeping in view the principles laid down in the judgments and authority noticed above, and having regard to the facts of this case, it is submitted that the Air Conditioning Plant brought into existence is immovable property which could not be shifted without first dismantling it and then re-erecting it at another site and satisfies the test of permanency and non marketability, therefore is immovable hence will cover under the definition of “works contract” under the GST statute, cover under the definition of ‘works Contract'[section 2 sub-section (119)], liable to CGST/SGST/IGST covered under Sr. no 3 item no 3 of notification No 24/2017 (Central tax rate) dated 21/09/2017 being the said supply is made to state Government of Goa, (Goa State Infrastructure Development Corporation Ltd) a special purpose vehicle.
In continuation of our submission dated 3rd th May 2019 it is submitted that,-
(i) The applicant- Company pursuant to the acceptance of its tender, entered into an agreement with GSIDC for design, supply, Installation, testing & Commissioning of VRF Indoor and Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, cabling, Additional Refrigerant and associated electrical works etc. At the site of GSIDC.
(ii) BRIEF DETAILS OF WORK OF AIR CONDITIONING:
Comments are closed.