In re Kalpataru Projects International Limited (AAAR Rajasthan)
(i) The Appellant’s proposed supplies are appropriately classifiable under SAC Heading No. 9954 answering to description ‘Construction Services’ which are in the nature of composite supply defined as works contract.
(ii) SAC Heading No. 998621 is more specific to describe the proposed supplies, This view of the appellant is not supported by the EPC Contract of the appellant.
(iii) The claim for classification of proposed supply to be covered under SAC Heading No. 998621 or alternatively under Heading 9983 is not sustainable.
(iv) The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at Sl. No. 3 of Notification No. 11/2017-CT (R), dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017.
It was held that the Ruling dated 13.09.2021 of the AAR for Rajasthan in respect of the Appellant is modified hereby modified to the extent mentioned in item (iv) above. The appeal is disposed of accordingly.
FULL TEXT OF THE ORDER OF AUTHORITY FOR APPELLATE ADVANCE RULING, RAJASTHAN
(Proceedings under Section 101 of the Central GST Act, 2017 read with Section 101 of the Rajasthan GST Act, 2017)
At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are same barring a few exceptions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act, 2017 would also mean a reference to corresponding provisions of Rajasthan GST Act, 2017.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 (hereinafter also referred to as ‘the CGST Act’) read with Section 100 of the Rajasthan Goods & Services Tax Act, 2017(hereinafter also referred to as ‘the RGST Act’) by the Appellant on the portal on 29.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/21 dated 15.09.2021. As per the Appellant, the Order of the AAR was communicated to them on 21.09.2021. The Appellant vide letter dated 20.09.2023 submitted that the appeal has been filed within limitation period in pursuance of Hon’ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020.
BRIEF FACTS OF THE CASE
1. M/s Kalpataru Projects International Limited (earlier known as MIs Kalpataru Power Transmission Limited) (“the Appellant”) registered under the Central Goods and Service Tax Act, 2017 (CGST Act) vide registration number 08AAACK8387R2ZI. They are engaged in developing infrastructure facilities mainly in power transmission projects, developing infrastructure facilities for laying of the cross country pipelines for Crude Oil, Refinery products and Natural Gas (along with all associated facilities. The Appellant executes Engineering, Procurement and Construction (“EPC”) projects in Power Transmission One Towers, Oil and Gas and Railways infrastructure, as well as undertaking power transmission projects on Build, Operate, Own, and Transfer (BOOT) model.
2. The Appellant have informed that Cairn (Vedanta’s upstream Oil & Gas vertical) is the operator on behalf of Joint Venture partners, Cairn Energy Hydrocarbons Limited (CEHL) and Oil and Natural Gas Corporation Ltd. (ONGC) of Contract Area RJ-ON-90/l block which is located in the Banner district in the State of Rajasthan. The RJ-ON-90/1 Block contains a number of major oil discoveries namely Mangala, Bhagyam and Aishwariya and other satellite fields. The Mangala field development consists of well pad facilities and processing hub named Mangala Processing Terminal (MPT).
3. With a view to augment the production from existing well pads at Mangala, the Appellant have entered into an Engineering, Procurement and Construction Contract (“EPC contract” or “contract”) with Vedanta Limited in March-2018 for constructing additional network of customized Infra-field pipelines under the `MANGLA INTRA-FIELD PIPELINES AUGMENTATION PROJECT’ (“MIPA Project” or “the Project”) at Mangala wells. The brief scope of the work under the contract pertains to provision of Services for Engineering, Procurement and Construction for MIPA project as per the scope of work defined in the EPC contract. Appellant have submitted relevant extract of the EPC contract outlining the scope of work is along with appeal paper.
4. The Appellant are entitled to be paid a lump sum contract price (Inclusive of all taxes & duties) by Vedanta for rendering customized engineering, procurement, manufacturing, fabrication, inspection & testing, packing, shipping, delivery and unloading at site, storage and preservation, complete erection and installation, site testing, pre-commissioning & commissioning, RFSU, performance test run, training, demobilization, project and construction management, interface management (Internal and external). The service under the present contract with Vedanta Limited was started in the year 2018 and invoices were raised charging 18% GST rate (9% CGST plus 9% SGST) under Sr. No. 3(xii) under the Heading 995423 provided in Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 under the assumption that such services fall under the classification Heading 995423 attracting GST @ 18%.
5. The Appellant have undertaken the activity of Engineering, Procurement, supply, Construction and commissioning works for MIPA project as described in the Scope of Work of the Contract (“subject services”).
6. SCOPE OF WORK – AUGMENTATION OF PIPELINE INFRASTRUCTURE AT MANGALA OIL FIELD
6.1 As stated by the Appellant, eighteen well-pads are operation in the Mangala Field. Further, the Appellant submitted that Vedanta planned to augment its pipeline network, to cater to the increased production capacity of these Well Pads. For this, Vedanta planned to lay down a network of new customized pipelines between the existing well pads and MPT. Three types of Pipelines which are required to be constructed, as part of MIPA project as described below:
a. Production Fluid Pipelines
b. ‘Injection water’ Pipelines
c. ‘Power Fluid’ Pipelines
6.2 Station Facilities -The Appellant submitted that they are required to construct customized piping associated station facilities, for terminating the pipelines, as per PIDs and Tender specifications.
6.3 Additional Requirements – The Appellant are also required to install the additional equipment and customized as per EPC contract such as Anchor Flanges, Valve Chambers, Provision for Temporary Pigging and Cathodic Protection.
SCOPE OF WORK — EXECUTION ACTIVITIES
7.1 SUPPLY – The supply shall include all material required for execution of the contract including but not limited to all types of pipes, supports, paints, claims, consumables, stub bolts, etc. Vedanta Ltd. shall not supply any material whatsoever nature for execution of the works included in the contract whether temporarily or permanent.
7.2 CONSTRUCTION – The Appellant submitted that all the construction plant and equipment, temporary works and materials are to be provided by them, and brought on the Vedanta’s site, exclusively for the construction and completion of the works. Upon completion of the work, the Appellant are required to remove from the site all construction equipment and materials brought by it on to the site.
7.3 The Appellant are responsible to provide all facilities, as customized and necessary for performance of the works including (but not limited to) water (including water for hydrostatic testing), power, transportation, handling and construction equipment, vehicles, vessels and any additional land at or about the site(s) required for the construction purpose etc. They are also required to arrange the camp facilities for its personnel, which will be in strict accordance with company HSE Policy.
7.4 OTHER TECHNICAL REQUIREMENTS – Under the contract, the Appellant are required to fulfil the following other customized technical requirements in respect of the topographical survey, geotechnical & soil investigation, getting at their own cost and risk, any support required in respect of encroachments. The Appellant need to appoint external competent consultant to carry out the studies addressing all risks and concerns in relation to the Parallel operation & new construction and installation. Additional safety measures are to be taken by the Appellant in respect of transport of pipes for pipelines.
7.5 COMMISSIONING – In relation to the commissioning of the project, under the contract, the Appellant are required to undertake the following activities:
a. Submit a detailed testing and commissioning procedure as per Scope of Work.
b. Coordinate with the other Company’s contractors. The Company may provide technical assistance in coordination.
c. Scope of demolition and relocation is also to include existing structures like rain harvesting tanks and pole mounted transformers falling inside the corridor.
7.6 The Appellant are also required to deploy all resources for execution of the scope of work and is also to be responsible for arranging any external assistance/support (in the form of specialized or customized task required for completion of the works), if required, at its own cost and risk.
8. RESPONSIBILITIES OF APPELLANT UNDER THE SCOPE OF WORK
8.1 General Responsibilities
Under the EPC contract, the Appellant have the following general responsibilities in relation to the design, construction and installation of customized infrastructure facilities:
a) Providing & mobilizing all project management resources for performance of works.
b) Providing and mobilizing all engineering & procurement resources for execution of project.
c) Providing and mobilizing all construction resources for execution of project. The construction team is primarily responsible for performing pre-construction activities, review of all the construction/ fabrication drawings prior to start of site construction and updating same as per actual site conditions etc.
d) Appraisal and taking cognizance of site-conditions, Government rules & regulations, bye-laws, applicable codes & standards, requirements of authorities having jurisdiction over the work site(s), environmental & pollution concerns including conditions/ stipulations laid downs by concerned authorities etc.
e) Obtaining all necessary approvals & work permits from concerned authorities for performing the work, including shifting/ relocation of existing facilities & other utilities, etc.
f) Coordinating with vendors, suppliers, fabricators & to perform all activities including expediting, inspection & testing, transportation, loading/ unloading, storing, shifting & liaison with the authorities, etc.
g) Identifying & planning access to sites as may be required for construction of project facilities.
h) Mandatory compliance to HSE requirement.
i) Plan in detail the exact location and centre line for each proposed pipeline.
j) Work out and finalize detailed cross Section drawings, and sequence / scheme of laying the all proposed Pipelines, in the Trench, for each Section of the network.
k) Take all the necessary steps to maintain the safety and integrity of existing pipeline systems / assets owned by the Company.
8.2 Surveys – In relation to site surveys which are required, the Appellant are required to carry out pre- construction surveys and verification of the Proposed Routes and Station Locations under the contract.
8.3 Design & Engineering – The Appellant submitted that in relation to the customized design and engineering, its scope of work for the facilities forming part of this project broadly include, but not be limited to the following:-
