In re Soma Mohite Joint Venture (GST AAAR Maharashtra)
The Maharashtra Appellate Authority for Advance Ruling held that the services provided by the Appellant in the impugned matter qualifies for inclusion under entry 3(vii) of the Notification No. 12/2017-C.T. (Rate), dated 28.06.2017 (as amended by Notification No. 31/2017-C.T. (Rate) dated 13.10.2017).
It is evident that as per the work order, the work deals with excavation of earth and depositing it on the sides. As per the above definitions, it is clear that Earthwork includes excavation and as per the contract the Earthwork constitutes more than 92.66% of the contract by value. Thus apparently all the conditions of the entry are fulfilled.
Now we will deal with the observation of the AAR that the service provided by the appellant does not qualify for the entry as the present work is the construction of tunnel and its allied work and therefore said work cannot be considered as earthwork as contemplated by entry no. 3(vii) above. On a careful reading of the entry, we find ourselves in disagreement with the finding of the AAR. The entry says that the Composite supply should have earthwork forming more than 75% of the contract by value. Thus it very much clear from the wording that the Contract may be for something else- be it construction of building, tunnel, canal, road and in these contracts if the earthwork constitutes more than 75% then it qualifies for the above entry. If the intention of the Legislature had been to cover only pure contract of earthworks in it then a qualifying condition of more than 75% by value wouldn’t have been provided. We therefore find the reasoning of the AAR untenable.
We therefore hold that the Services provided by the appellant in the impugned matter qualifies for inclusion under entry 3(vii) of the Notification No. 12/2017-C.T. (Rate), dated 28.06.2017.(as amended by Notification No. 31/2017-C.T. (Rate) dated 13.10.2017).
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, MAHARASHTRA
PROCEEDINGS
(Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 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 such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 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 M/s. Soma Mohite Joint Venture. (herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-08/2019-20/B-100 dated 24.09.2019.
BRIEF FACTS OF THE CASE
1. Appellants herein, M/s. Soma Mohite Joint Venture (Joint Venture between Soma Enterprises and DM Corporation Pvt. Ltd.) are registered under Goods and Services Tax Act, 2017 having GST registration No. 27AAEAD1739FIZI and are having their Office at 3, Siddhivinayak Society, Soma Heights, Karve Road, Kothrud, Pune – 41 1 033.
2. Appellants are engaged in business of Construction of Infrastructure projects. On 27th December 2008, a Joint Venture was formed between Soma Enterprises and DM Corporation Pvt. Ltd. (formerly known as Mohite & Mohite Engineers & Contractors Pvt. Ltd.) to undertake construction of tunnel and its allied works for Nira-Bhima Link No. 5 of Indapur Taluka, Pune under Krishna Bhima Stabilisation Project awarded by Godavari Marathwada Irrigation Development Corporation, Aurangabad.
3. On On 26th April 2019, Appellants filed an online Application for Advance Ruling before the Authority for Advance Ruling of Maharashtra (hereinafter referred to as “AAR”) seeking Advance Ruling in respect of following Question:
i. Whether the said contract is covered under SI No – 3A, Chapter No 99 as per Notification No. 2/2018-Central Tax (rate) dated 25thJanuary 2018, w.e.f. 25th January 2018?
ii. Whether the said contract is covered under the term “Earth Work” and the covered under SI No – Chapter No. 9954 as per Notification No. 31/2017 Central Tax (Rate) dated 13th October 2017?
iii. If Appellants are covered under SI No. 3 Chapter No. 995 as per Notification No. 31/2017 Central Tax (Rate) dated 13th October 201 w.e.f. 13′h October 2017, then what is the meaning of “Earth Work”?
4. On 23rd May 2019, preliminary hearing in the matter was held before the AAR which was attended by the Appellants and the GST Department was represented by the Assistant Commissioner of ST, Pune. AAR was pleased to admit the Application. On 3rd August 2019, final hearing was held before the AAR which was attended by the Appellants and the Jurisdictional Officer wherein, the Appellants filed the Written Submissions.
5. On 23rd August 2019, ignoring the submissions, written as well as oral, made by the Appellants, AAR passed an Order No. GST-ARA-08/2019-20/B-100 (hereinafter referred to as the “impugned Order”) and rejected the Application filed by the Appellants seeking Advance Ruling.
6. Being aggrieved and dissatisfied by the aforementioned impugned Order dated 23rd August 2019, the Appellants are filing the instant Appeal before this Hon’ble Appellate Authority on the grounds mentioned here under which are to be taken independently and without prejudice to one another.
GROUNDS OF APPEAL
7. The AAR erred on both laws as well on facts while passing the impugned Order.
8. AAR hopelessly erred in answering / deciding Question No. 1, in negative, without recording any of the submissions of the Appellants and without giving any findings whatsoever in support of its Decision. It is settled law that any Decision of an Authority without assigning any reasons and / or finding is in gross violation of Principles of Natural justice and is nonest, nullity and is without or in excess of Jurisdiction.
9. AAR ought to have appreciated that Appellants would be squarely covered under S. No. 3A of Notification no. 12/2017-CT (Rate) dated 28th June 2017, as amended by Notification No. 2/2018-CT (Rate) dated 25th January 2018, in as much as contract awarded to the Appellants is in the nature of a Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
10. AAR ought to have appreciated that Godavari Marathwada Irrigation Development Corporation falls within the meaning of the term Governmental Authority or a Government Entity in the light of Definition 2(zb) of the Notification No. 12/2017-CT (Rate) read with Explanation to Section 2(16) of the IGST Act. Appellant crave leave to refer to and rely upon further evidence in support of this submission when produced.
11. AAR ought to have appreciated that Sr. No. 3 of Eleventh Schedule of Article 243G of the Constitution which covers “Minor Irrigation, water management and watershed development” and Sr. No. 5 of Twelfth Schedule of Article 243W of the Constitution which covers “Water supply for domestic, industrial and commercial purposes” would cover the activities carried out by the Appellants herein.
12. AAR ought to have extended the benefit of Entry 3A in view of its finding that “Godavari Irrigation Development Corporation …. is entrusted with work of …. and irrigation Management of Major, Medium and Minor projects in Godavari River Basin”.
13. AAR misdirected itself in concluding that the term “Earth Work” means (only) Structures made from Earth especially an embankment or construction made of Earth.
14. AAR erred in arriving at the above conclusion despite acknowledging specifically the meaning of “Earth Work” in Merriam Dictionary as “2: the operations connected with excavation and embankments of earth” as per the findings recorded by AAR, in earlier paragraph.
15. The conclusion by AAR is again in gross disregard to a finding entered by it earlier while referring to meaning of earthwork as per Webster Dictionary that “2. Earthwork (noun) – the operations connected with excavations and embankments of Earth in preparing foundations of buildings in constructing canals, railroads etc.”
16. AAR ought to have appreciated that the Collins Dictionary defines Earth Work as “excavation of earth as in engineering construction; a fortification made of earth. The Wikipedia defines Earth Work as “Earth work are engineering works through the processing of parts of earth surface involving quantities of soil or unformed rocks.
17. It may be pertinent to note that in existence of identical facts and context, AAR, Jharkhand in (In Re: P. K. Aqarwala (2019 (20) GSTL 605 (AAR) has held excavation work to be Earthwork within the scope of S. No. 3 of Notification No. 39/2017-Integrated Tax (Rate) dated 13th October 2017 and hence eligible to 5% GST Rate.
18. AAR ought to have appreciated that the term “earthwork” has to be understood and applied in the way it is understood by the persons involved in the trade or as is understood in the common parlance.
Prayer
19. The Appellant therefore prays that;
I. Questions raised in the Application before the AAR be decided in Appellants favour,
II. Order dated 23th August 2019 be quashed and set aside,
III. Further and such other reliefs as the nature and circumstances may require be granted:
IV. Appeal be allowed.
APPELLANT’S SUBMISSION dated 09.12.2019
20. Application was filed by the present Appellants, before the Advance Ruling Authority (Hereinafter referred to as “the AAR”), seeking an Advance Ruling in respect of following Questions:
I. Whether the said contract is covered under SI NO-3A, Chapter No 99 as per Notification No. 2/2018-CT (Rate) dated 25th January 2018, w.e.f. 25th January 2018?
II. Whether the said contract is covered under the term “Earth Work” and therefore covered under SI No — Chapter No. 9954 as per Notification No. 31/2017 Central Tax (Rate) dated 13th October 2017?
III. If Appellants are covered under SI No. 3 Chapter No. 995 as per Notification No. 31/2017 Central Tax (Rate) dated 13th October 2017? w.e.f. 13th October 2017, then what is the meaning of “Earth Work”?
BENEFIT OF EXEMPTION UNDER NOTIFICATION NO. 12/2017-CT (Rate)
21. The AAR has noted Question No. 1, and as also answered the same in the negative without assigning any reason whatsoever and therefore the Order to that extent is bad in law.
22. It is an admitted position that:
A. Contract / Transaction under consideration is Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017;
B. Services are provided to the Central Government, State Government, Union territory, local authority, a Governmental Authority or a Government Entity;
C. Excavation Work constitutes approximately 92.66% of the value of Works Contract.
D. Godavari Marathwada Irrigation Development Corporation is entrusted with planning, designing of projects, maintenance of completed project, construction of projects and irrigation management of the Major, Medium and Minor Projects in Godavari river basin.
E. No. 3 of Eleventh Schedule of Article 243G of the Constitution which covers “Minor Irrigation, water management and watershed development” and Sr. No. 5 of Twelfth Schedule of Article 243W of the Constitution which covers “Water supply for domestic, industrial and commercial purposes” would cover the activities carried out by the Appellants.
23. In view of the above admitted position, benefit of exemption under Sr. No. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, as amended by Notification No. 2/2018-CT (Rate) dated 25th January 2018, w.e.f. 25th January 2018 must be extended to the Appellants.
24. It may please be appreciated that the issue of eligibility to exemption under Serial No. 3A of the Notification No. 2/2018-CT (Rate) dated 25th January 2018 has been decided is assessee’s favour in identical set of facts IN RE : Arihant Dredging Developers Pvt. Ltd. (2019 (25) GSTL 582 (AARGST)).
BENEFIT OF EXEMPTION UNDER NOTIFICATION NO. 11/2017-CT (Rate)
25. The AAR has answered Question No. 2 in the negative and thereby denying the benefit of concessional rate of GST under Entry No. 3(vii) of the Table to Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by Notification No. 31/2017 Central Tax (Rate) dated 13th October 2017. (Copy enclosed). The relevant Entry reads as follow:
