In re M/s Triveni Turbine Limited (GST AAAR Karnataka)
The appallate authority for advance ruling has set aside the rulings passed under section 98(4) of the CGST Act 2017 vide NO.KAR.ADRG 28/2018 dated 17/11/2018 i.e. Contention of the appeallant is allowed based on the Circular No 80/54/2018-GST dated 31.12.2018, at Para 11, has clarified that the concession of 5% rate as per entry Sl.No 234 of Notification No 01/2017 would be available only to such machinery, equipment, etc which fall under Chapter 84, 85 and 94 and used in the initial setting up of renewable energy plants and devices including Waste to Energy Plants. In the Appellant’s case, as can be seen from the terms of the contract and the project report, the Turbine Generator set is to be supplied to Jindal Urban Waste Management (Guntur) Ltd, a company formed to execute the waste to energy project awarded by the Government of Andhra Pradesh. Therefore,the said turbine generator set is eligible for the levy of 5% GST in terms of Sl. No 234 of Schedule I of Notification No 01/2017 IT (R) dated 28.06.2017.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KARNATAKA
At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act. 2017 and KGST Act, 2017) 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 corresponding similar provisions under the KGST Act.
The present appeal has been filed under Section 100 of the CGST Act, 2017 and the KGST Act, 2017 by M/s. Triveni Turbine Limited (hereinafter referred to as ‘Appellant’) against the Advance Ruling No KAR ADRG 28/2018 dated 17-11-2018 pronounced by the Karnataka Authority for Advance Ruling.
Brief facts of the case:
1. The Appellant is a Public Limited Company and is engaged in the manufacture and supply of steam turbine solutions for Industrial Captive and Renewable Power. The appellant manufactures steam turbines upto 100 MW. The Appellant is a manufacturer of steam turbines for providing renewable power solutions specifically, for Biomass, Sugar & Process Co-generation, Waste-to-energy and District Heating.
2. Apart from manufacturing, the Appellant also provides aftermarket services to its customers as well as turbine users of other manufacturers supported by its customer care support, which operates through a network of service centers.
3. The Appellant enters into agreement with their customers for design, manufacture and supply of Steam Turbine Generator Sets and also for commissioning and installation of Steam Turbine Generator sets at the site of the customers. In the course of such supplies, the applicant uses the Steam Turbines manufactured by them, while other components like condenser, Gear box, alternator. AVR panel, etc are procured from outside vendors. In some other agreements. the applicant merely supplies the Turbine Generator sets and supervises the erection, commissioning and installation carried out by contractors engaged by the customers.
4. As a part of Swachh Bharat Mission and to comply with Solid Waste Management Rules, 2016, the Andhra Pradesh Government has been promoting generation of power from Municipal Solid Waste (MSW). In this context, the Andhra Pradesh Government awarded the project for development of MSW Waste-to-energy plants in three clusters in Guntur. Vishakhapatnam and Tirupati districts of Andhra Pradesh to JITF Urban Infrastructure Ltd.
5. For the execution of the projects, the following three companies were incorporated with JITF Urban Infrasturcture Ltd as the promoter:
i. Jindal Urban Waste Managament (Guntur) Ltd
ii. Jindal Urban Waste Management (Vishakhapatnam) Ltd
iii. Jindal Urban Waste Management (Tirupati) Ltd
6. As per the project specification document issued by MIs. Korus Engineering Solutions Pvt.Ltd, the technical consultants for the project implementation, each of the project sites are to comprise of the following facilities:
i. Receiving and storage facility for MSW delivered at doorstep by the urban local bodies (ULB)
ii. Processing facility to improve the quality of MSW for use as fuel in boilers;
iii. Incinerators with boilers to produce superheated steam along with flue gas treatment;
iv. Steam turbine generator for producing electricity;
v. Air cooled condensers;
vi. Balance of plant and other associated auxiliary facilities.
7. Further, the appellant has stated that the Waste—to-energy project would be an integrated facility for processing Municipal Solid Waste delivered by the Municipal Corporation and other urban local bodies forming a part of the cluster. Fresh mixed MSW would be transferred to the receiving pits from the transport vehicles. After separation of the leachate, further drying would take place in the storage pits. Manual and mechanical segregation of inert and hazardous material would be carried out before delivery of processed MSW feedstock to buffer storage pits for boiler feeding. The MSW would be used as file) in the boiler for generating steam. In this process the combustion energy present in the MSW is transformed to steam. The steam is made to expand in the turbine and the heat energy in the steam is converted into work i.e Kinetic energy. The rotating movement of the rotor is transferred to a generator through a coupling and power is produced. The very intention of the waste to energy project is to use MSW as an input and generate electrical energy as the output. The steam turbine used in the MSW based power projects are specifically designed and tailor made for these projects. These turbines once manufactured for Waste-to- energy projects cannot be used for the normal power projects.
8. The appellant filed an application on 06.02.2018 before the Karnataka Authority for Advance Ruling under Section 97 of CGST,KGST Act,2017& IGST Act,2017 read with Rule104 of CGST / KGST Rules,2017 in form GST ARA-01, seeking a ruling on the following question:
Whether the turbine generator set to be supplied by the applicant to the buyer for use in waste-to-energy project is covered under SINo.23.1 of Schedule I of Notification No. 1/2017-IGST(Rate) dated 28.06.2017 as “Renewable energy devices and parts for the mwntfacture of waste to energy plants/devices” attracting 5% levy?”
9. The Karnataka Authority for Advance Ruling, vide Advance Ruling No. ADRG 28/2018 dated 17th November 2018 (hereinafter referred to as ‘Impugned Order) gave the following ruling:
“The Turbine Generator Set to be supplied by the applicant for use in waste to energy project is not covered under SI.No.234 of the Schedule I of Notification No.01/2017 dated 28.06.2017.”
10. Aggrieved by the said ruling of the Authority, the Appellant has filed an appeal under Section 100 of the CGST Act, 2017 / KGST Act, 2017. The appeal has been filed on 09.01.2019 after a delay of 13 days and hence the Appellant has sought for condonation of delay in filing the appeal. They submitted that they had filed a representation before the Central Board of Indirect Taxes and Customs seeking additional clarity on the scope of SI. No 234 of Schedule I of Notification No 01/2017 CT (It) dated 28.06.2017; that the clarifications were issued only on 31.12.2018 and in the light of the clarifications issued, they filed the appeal. Further, on account of the calendar year closing, the Company personnel could not provide the requisite information for filing the appeal. Therefore, they pleaded that the Authority may condone the delay in filing the appeal in the interest of justice.
11. As regards the issue at hand, the Appellant filed the appeal against the AAR order on the following grounds:
11.1 The appellant submitted that the Notification No.1/2017-Integrated Tax(Rate) dated 28.06.2017(as amended) notified the rate of IGST which shall be levied on the Inter State supply of goods. As per the Notification, the applicable rate of tax that shall be levied on supply of goods, the description of which is specified in the corresponding entry in column (3) of the Schedules under the Notification, falling under the tariff item, sub heading, heading or chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Notification.
11.2. They submitted that Explanation (iii) to the Notification No.01/2017-IGST provides that ‘Tariff item’ sub-heading”heading’ and ‘chapter’ shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act,I975.
11.3. Further, they submitted that Explanation (iv) provides that the rules for the interpretation of the First Schedule to the Customs Tariff Act,1975, including section and chapter note and the general explanatory notes of the First Schedule shall, so far as may be, apply to the interpretation of this Notification.
11.4. They submitted that the product supplied will undisputedly be covered under tariff heading 84 of the Customs Tariff Act,I975, which deals with Nuclear Reactors, boilers, machinery and mechanical appliances; parts thereof
11.5. The drew the attention to Schedule I of the Notification No.1/2017-Integrated Tax (Rate) which provides the list of goods that attract IGST at the rate of 5%. Extract of the SI.No.234 of the Notification reads as below:
