In re L & T Hydrocarbon Engineering Ltd. (GST AAR Rajasthan)
As per EPC contract the applicant has to complete the task, of setting up of MUPS2-EPC-2 project broadly ranging from designing, engineering, procurement, fabrication, manufacturing, assembly, erection and installation, facilities construction, Testing, Pre commissioning & Commissioning, Training etc & satisfactory hand over of complete various infrastructure facilities, all customised as per contract. The applicant has to start from the scratch and bring into existence a fully operational various infrastructure facilities at MUPS-2-EPC-2 project. The execution of the project would also involve the transfer of property in goods.
The contract is for the engineering, procurement and commissioning of MLJPS2-EPC-2 project including various infrastructure facilities, all commissioned. What would be transferred is the project including the civil work and land involved in project. Various civil structure would be created and various equipment would be installed.
The said project cannot be shifted anywhere; it is essentially of the nature of immovable property. The project after completion at the time of transfer will be an immobile property. It is thus, we are of the considered view that the work specified in the EPC contract qualifies as “work contract” and will be taxed accordingly.
In view of the above we find that services provided under EPC contract awarded to the applicant by M/S Vedanta for setting up of a project broadly ranging from designing, engineering, procurement, fabrication, manufacturing assembly, erection & installation, facilities construction, insulation, dismantling, Pre commissioning & Commissioning training etc. and satisfactory hand over of complete various infrastructure facilities all customised as per contract, it is a “work contract” of composite supply. The composite supply is a mixed of goods & services and would be taxed accordingly under S. No. 3 Heading 9954 (ii) of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 and GST @ 18 % (9% CGST and 9% SGST) is payable.
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.
> At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST 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 provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/ RGST Act would be mentioned as being under the “GST Act”.
> The issue raised by M/s L&T Hydrocarbon Engineering Ltd. First Floor, D-236 & 237, SDC Monarch Building, Amrapali Marg, Vaishali Nagar, Jaipur-302021, Rajasthan – (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: –
a. Classification of goods and /or services or both
> Further, the applicant being a registered person (GSTIN is 08AABCL5967DIZE as per the declaration given by him in Form ARA-01 ) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority Based on the above observations, the applicant is admitted to pronounce advance ruling.
A. Submission and interpretation of the applicant:
1.1 L & T Hydrocarbon Engineering Ltd. (“the Applicant”) is a company registered Linder the Indian Companies Act, 1956. It is a subsidiary of L&T Limited, an Indian technology, engineering, construction, manufacturing and financial services conglomerate. The Applicant is engaged in the business of engineering, procurement fabrication, construction and project management providing integrated solutions to the Hydrocarbon Industry. The Applicant carries out construction of refinery, petrochemical, chemical project, gas gathering stations, crude oil & gas terminals, etc. on turnkey basis. The Applicant is registered under the Rajasthan Goods and Service Tax Act. 2017 (‘RGST Act’) having registration number 08AABCL5976DIZE.
MANGALA UPGRADATION PROJECT STAGE 2 – EPC 2 (“MUPS2-EPC2”)
1.2 Vedanta Limited (“Vedanta”/ “Company”) is a globally diversified natural resources company which is engaged in the business of exploration and mining of various natural resources. The Applicant has been informed that Cairn (Vedanta’s upstream Oil & Gas vertical) is the operator of Onshore RN-ON-90/1 block which is located in Barmer basin and having various oil and gas discoveries, including Mangala, Bhagyam and Aishwarya fields, collectively known as MBA field, as the major producing field along with marginal producing satellite fields.
1.3 The productions from various well pads of MBA & other satellite fields are processed at the Mangala Processing Terminal (“MPT”) at Barmer district of Rajasthan. MPT is currently operational with 3 oil processing trains with combined liquid handling capacity of 680 KBLPD (Kilo Barrel of Liquid Per Day). The oil train primarily consists of slug catcher, production heaters, production separator & settling tank for oil water separation and degassing. The Stabilized oil is further treated in electrostatic dehydrators to meet the technical requirement of < 0.5%.
1.4 The produced water separated from the oil trains is treated in produced water handling facility. Subsequently, treated produced water along with makeup aquifer water is heated, filtered, and pumped to respective fields for injection/ circulation/ artificial lift purposes. By debottlenecking the produced water system, Vedanta has already increased the total liquid handling capacity of its oil trains at MPT to 800 KBLPD with installation of additional Skim tanks.
1.5 With a view to further augment facilities and infrastructure for enhancing the liquid handling capacity to 1300 KBLPD at MPT based on the projected production scenarios & expected increase in total liquid, the Applicant has entered into an Engineering, Procurement and Construction Contract (“EPC contract”) with Vedanta Limited in January, 2019 for construction of customized additional infrastructure facilities under Vedanta’s Mangala upgradation Project Stage 2 – EPC – 2 or ‘MUPS2-EPC2″ Project at Mangala wells (“Subject services”).
1.6 The Mangala field has 18 well pads out of which 15 were under ‘polymer flood’ and 3 were under ‘water flood’. The well pads are distributed in different clusters depending upon their physical location in the field and stage of development There are separate networks for evacuation of production fluid as well as for supply of injection water and power fluid.
1.7 The production fluid received from well pads are processed in three oil trains consisting of slug catchers, production heaters, production separators and settling tanks. The oil from the settling tanks is further sent to Dehydrators and export tanks (complying with the acceptable technical requirements].
1.8 The Produced water separated from different vessels and tanks in oil trains is gathered and treated in the produced water treatment facilities, whereas the power fluid requirement of Mangala is met by the power fluid pumps. The Injection Water (IW) system consists of IW tanks, IW booster pumps, IW heaters, IW filters & IW pumps which are common to both injection water & power fluid systems.
SCOPE OF WORK – AUGMENTATION OF FACILITIES & INFRASTRUCTURE UNDER MUPS2-EPC2 PROJECT
1.9 Under the MUPS2-EPC2 Project, the Applicant is required to undertake designing, planning, development, construction, installation, test run, final commissioning and hand over of various infrastructure facilities as described in the subsequent paragraphs.
Augmentation of Liquid handling capacity
1.10 The Production fluid from ‘Cluster D’ is to be routed to a new customized Slug Catcher V-240 to handle-420 KBLPD and -17 MMSCFD of liquids and gas respectively from the wells. The slug catcher is to be operating at 3.5 barg. The oil so separated is pumped by new Oil Transfer Pumps P-265A/B/C to the inlet fluid header of the existing trains. The separated water from the new slug catcher is to be routed to the inlet of the existing Produced Water Treatment System. The separated gas is to be compressed in new Booster Compressor Package 7-351 A/B/C and sent to the existing fuel gas Scrubbers.
1.11 The new customized slug catcher vessel is to be provided with online sand removal systems. Sand removal system is to be connected to a new Sand Wash Package Z-471 for facilitating online removal of solids. A piping bypass across the existing system is also to be installed to reduce the pressure drop in the existing system. Therefore, the major facilities envisaged for installation under head includes new slug catchers, booster compressor package, oil transfer pumps and associated piping, etc.
Augmentation of Produced water treatment facility
1.12 The total water handling capacity of existing produced water treatment systems is 1200 KBWPD Due to relocation of existing de-oiled water pumps & skim oil pumps elsewhere in the plant, new customized skimmed oil pumps & deoiled water transfer pumps are required and hooked up with the existing piping as part of the scope.
1.13 The major facilities envisaged for installation under head includes the following:
a. New Oiled Water Transfer Pumps (3 nos): Out of 3 nos., Vedanta will supply 03 nos. However, installation, commission of these pumps including supply & installation of all related piping, civil-structural, electrical, instrumentation etc are in the Applicant’s scope.
b. New Skimmed Oil Transfer Pumps: These will be supplied by Vedanta, however, installation, commissioning of these pumps including supply & installation of all related piping, civil-structure, electrical instrumentation etc. are in Applicant’s scope.
Augmenting existing Injection Water System capacity
1.14 The customized Injection water (IW) system consists of IW tanks, booster pumps, heaters, filters, IW pumps & Power fluid (PF) pumps. The overall injection water, requirement is -780 KBWTD & Power Fluid requirement is -400 KBWPD. Thus, the combined requirement of IW & PF is 1 180 KBWPD. This increased IW & PF requirement necessitates augmentation of existing Injection Water & Power Fluid systems.
1.15 The Power Fluid stream is currently not filtered at MPT. Hence, new customized filter beds are envisaged for filtering the power fluid. The major facilities envisaged includes, new Injection Water Booster Pumps, water Heaters, water Filters, power fluid filters, injection & power fluid pumps, all customized as per the contract.
New Back Wash System
1.16 The existing filters in the plant are presently being backwashed by filtered injection water, which has been found ineffective. Hence, Vedanta has decided to use heated fresh (Thumbli) water for filter backwashing purpose. The scheme is to be implemented for 2 nos. existing & 2 nos. new customized filter packages.
1.17 Water from the existing feed process water storage tank is to be pumped 2 nos. existing & 1 No new customized injection water filter packages & 1 no. power fluid package by Filter water backwash pump after heating through filter backwash water heaters. The filtered water from the two nos. new filter packages is to be routed to a new ETP MPT-Z-942. The major facilities envisaged are New customized filter backwash pumps, heaters and effluent treatment package with sludge handling system.
New LP Steam & condensate system at MPT
1.18 IW & PF operating temperature required in 88° C. The current IW heaters use steam to heat the IW. But, since IW has polymer content, skin temperatures higher than 110° C created problems of scaling. Hence, LP steam is to be used in new heaters to limit the skin temperatures below’ 110° C. Since the existing LP steam supply is inadequate to meet the new heaters requirement, LP is to be generated as follows:-
a. New customized power fluid pump is HP steam turbine operated. The back pressure of steam at turbine exhaust is at MP steam level. This shall be let down by PROS to generate LP steam of 4 barg.
b. The balance demand shall be met by HP steam which shall be let down to LP steam level PRDS.
1.19 LP steam generated is to be used in Filter Backwash heater & new injection water heater. The condensate from the exchangers is to be routed to a new condensate flash drum where it flashes at a lower pressure of 0.5 barg. The condensate from the flash drum is to be pumped by new LP condensate pumps to the existing Air coolers to cool it down to 90 deg C & subsequently routed to the BFW tanks. The Applicant’s scope of work for this system includes PRDS, steam & condensate network, New LP condensate flash drum and Steam condensate return pumps, all customized as per the contract.
Augmenting Instrument Air Nitrogen Capacity
1.20 The Instrument Air and Nitrogen capacity in the plant needs to be augmented by installing new custom-made Instrument Air Package. The package is to consist of two new air compressors, two new air compressors liquid separators, two new air compressors after coolers, one new air dryer, one new air pre-filter and one new instrument Air receiver.
1.21 It is also envisaged that new IW & PF filters, new ETP package, Tanks blanketing will also require nitrogen. Based on all new user requirements, apart from those listed above, the capacity of Nitrogen generation skid including its compressor, air dryer, etc. is to be finalized. Therefore, the scope of work for this system includes New customized instrument Air package, nitrogen generation package and new instrument air receiver.
Augmentation of other facilities
