In re Apar Industries Limited (GST AAAR Gujarat)
The product Solar HT/LT XLPE Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator is eligible for benefit of Entry at Sr. No. 234 under Schedule-I of Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed at 5% GST upto 30.09.2021 and thereafter under Entry at Sr.No.201A of Schedule-II of Notification No.01/2017-IT (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-IT (Rate) dated 30.09.2021 and liable to be taxed at 12% GST w.e.f. 01.10.2021.
FULL TEXT OF THE ORDER OF AUTHORITY FOR APPELLATE ADVANCE RULING,GUJARAT
At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘CGST Act, 2017’ and the ‘GGST Act, 2017’) are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the GGST Act, 2017.
2. The present appeal has been filed under Section 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s. Apar Industries Ltd (hereinafter referred to as Appellant) against the Advance Ruling No. GUJ/GAAR/R/03/2021 dated 20.01.2021.
3. The appellant has submitted that they are manufacturer and supplier of various goods such as Power/EIectric cables, House wire cables, Marine/pressure tight cables and non-pressure tight cables, Solar DC cables, XLPE (HT/LT) cables etc. falling under Chapter Heading 8544 of the Customs Tariff Act and that they received purchase orders from Solar Power Generating Projects such as M/s Adani Green Energy Ltd, Adani’s Mundra Solar PV Ltd etc. for supply of “Solar HT XLPE & LT XLPE Cables” for use as parts in the manufacture of Solar Power Generating System.
4. The appellant has raised the following questions for advance ruling in the application for Advance Ruling filed by it.
”Whether the applicability or determination of liability to pay Tax on our said goods at 5% GST rate is legally correct and in order in terms of Schedule of Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 or not? “
5. The appellant has submitted that Entry at Sr.No. 234 of Schedule-I of Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 provides that goods, falling under Chapter 84, 85 or 94, if used as Parts for the manufacture of renewable energy devices such as Solar Power Generating System, will attract concessional rate of 5% of IGST [or 2.5% each of CGST & SGST]. The appellant further submitted that CBIC vide Circular No. 80/54/2018-GST dated 31.12.2018 at Para 11.2 clarified that the notification specifically applies only to the goods falling under chapters 84, 85 and 94 of the Tariff: that therefore, this concession would be available only to such machinery, equipment, etc. which fall under 84, 85 and 94 and used in initial setting up of renewable energy plants and devices including WTEP: that this entry does not cover goods falling under other chapters, say a transport vehicle falling under chapter 87 that may be used for movement of waste to WTEP; that the goods HT XLPE & LT XLPE Cables, manufactured and designed by them for use as parts in the manufacture by Solar Power Projects falls under Chapter 85 which is covered under Sr.No. 234 of Notification No. 01/2017- Integrated Tax (Rate) and benefit of concessional rate of GST at 5% is admissible to them. The appellant also submitted that they are accredited by International Authority ‘TuV’ to manufacture as per EN-50618:2014 specs which is exclusively for the products for Solar Power applications.
6. The Gujarat Authority for Advance Ruling (herein after referred to as ‘the GAAR’), vide Advance Ruling No. GUJ/GAAR/R/03/2021 dated 20.01.2021, inter-alia observed that appllicant’s product viz. HT XLPE & LT XLPE Cables, classifiable under Chapter Heading 8544, do form an integral part of the Solar Power Generating System, however, as to whether HT/LT XLPE Cables manufactured and supplied by appellant will be in Solar Power Generating System. GAAR observed that appellant did not provide supply contracts/order original purchase order dated 25.12.2018 but submitted amendment of purchase order dated 16.02.2019 which is not legal document and on going through the amendment of purchase order dated 16.02.2019, there is a distinct possibility of supply or services involved alongwith goods.
In view of the foregoing, the GAAR ruled as follows:-
” Whether the applicability or determination of liability to pay Tax on our said goods at 5% GST rate is legally correct and in order in terms of Schedule-I of Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 or not?
Ans: In view of non-submission of copies of contract/agreement/tender as mentioned above, by the applicant M/s Apar Industries Ltd, Plot No.l89/Pl, GIDC Road, Tai: Umbergaon, Valsad, it would not be possible for us to give a decision in the matter for the reasons discussed hereinabove. “
7. Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal.
7.1 The appellant in the ground of appeal has submitted that the GAAR observed that to avail the benefit entry at Sr.No. 234 of Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 appellant has to satisfy two conditions, first, the goods must be covered under Chapter Heading 84, 85 or 94 and second, the goods shall satisfy the description ‘renewable energy devices & parts for their manufacture i.e. Solar Power Generating System; GAAR observed that appellant’s product indeed covered under Chapter 85 and, after going through the technical write-up submitted by appellant, form an integral part of solar Power Generating System; GAAR, due to unavailability or non-submission of copies of contract/agreement/tender/technical specification, erred in restraining itself to give its decision.
7.2 The appellant stated that they already submitted the original purchase order No. 4500293305 dated 25.12.2018 in original application to GAAR under covering letter dated 16.09.2020 (copy submitted with present appeal). The appellant also submitted that in this digital world of paperless economy, demanding documents such as tender/contract/agreement/technical specification which are not readily available or parted with the appellant by Project Authority as the process of tendering were done through E-mail correspondence and in commercial sale/purchase. the legal documents placed on supplier/vendors/sub-contractors by main contractor/project developers/project authority is ‘purchase order’ or ‘sales order’ which were already submitted before GAAR.
7.3 As regards to GAAR’s observation that purchase order is not a legal document enforceable by law, appellant relied upon Indian Contract Act, 1872 which says that “all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.” The appellant submitted that in present case, the purchase order is placed by the purchaser, with free consent, by both parties to contract, for lawful consideration with a lawful object and expressly accepted by mail confirmation and the same was recorded in Para 7 of ruling of the GAAR. which proves that the purchase order is the legal document enforceable by law.
7.4 The appellant submitted that GAAR. despite holding that appellant’s product fulfill both the mandatory conditions that the product/ goods supplied to Solar Power Project are falling within notified/ admissible ITC (HS) Code 85 and the said goods arc essential and integral parts of the Solar Power Generating System, did not give any ruling, observing one irrelevant general clause of purchase order and claiming that there is possibility or likelihood of service also being provided by appellant to the buyer/project authority, which is unjustified and baseless. The appellant submitted that in every sale/purchase contract, multiple elements of services are involved at the sellers/suppliers end which includes as mentioned in purchase order i.e. “Design, Engineering, manufacturing, assembly, inspection and testing at works, supply, packing and forwarding, transportation and transit insurance” which are essential to meet customer’s specifications and also arrange delivery cither at ex-factory gate basis or for destination basis. The appellant had not provided any after sale service viz. no erection, installation, construction etc. in respect of solar power generating system and therefore, the above referred services are inbuilt and naturally bundled with principal supply of goods and not provided beyond the sale of goods and hence cannot be treated separately.
7.5 The appellant submitted that there is no element of ‘works contract service’ involved or performed by appellant as sub-contractor to the Solar Power Generating System as the works contract service was rendered by project developer after buying goods from appellant and the appellant sold the goods to project developer on outright arms and length sale basis after manufacturing as per design, specification, engineering, packing, prior sale testing at appellant works and then delivery was given at for destination basis including transportation and transit insurance. Therefor services listed in purchase order are inbuilt and naturally bundled with sale of goods in terms of Sale of Goods Act, 1930 and CGST Act, 2017 and have to be performed in order to manufacture the goods as per the specification provided by buyer.
7.6 The appellant submitted that they already placed on record an “Undertaking/Indemnity/End Use Certificate” before GAAR, confirming by project authority that XLPE cables will be purchased from appellant on outright purchase basis where no elements of works contract service is provided by appellant. The appellant also submitted an affidavit dated 26.02.2021 issued by Adani Green Energy Limited, confirming that the appellant, in the present case, had supplied only the goods on outright sale basis and had not provided any service to project authority.
FINDINGS
8. We have carefully gone through and considered the appeal and written submissions filed by the appellant, submissions made at the time of personal hearing, Advance Ruling given by the GAAR and other material available on record.
9. The main issue to be decided, on the basis of advance ruling sought by the appellant is, whether the benefit of concessional rate of GST in terms of Sr. No. 234 of Schedule-I to Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 will be applicable to the HT/LT XLPE Cables designed, manufactured and supplied by the appellant for use as parts in the manufacture of Solar Power Generating System/ Solar Power Projects.
10. To decide the issue we find it necessary to go through the Entry No. 234 appearing under Schedule-I to the Notification No.01/2017-IT (Rate) dated 28.06.2017 which provides applicable rate of GST at 5% and which reads as under:
