The Appellate Authority for Advance Ruling (AAAR), Uttar Pradesh, has recently, while deciding upon an application filed before it, held that supply, installation and commissioning of plant & machinery, mechanical engineering works, electrical works etc., amounts to composite supply of work contract service.
The aforesaid observation was made by the Authority when an appeal was preferred before it by the appellant HYT Engineering Company Pvt. Ltd, as against the advance ruling order No. UP ADRG 92/2022, dated 24.01.2022, issued by the Authority for Advance Ruling (AAR), Uttar Pradesh.
The brief facts of the case were that the appellant had entered into a joint venture with M/S Indwell – HYT Joint Venture, wherein the joint venture was allocated work related to construction of PEB shed, structure, water supply, drainage, sewage, road work, track work, power supply, general electric work, OHE works, signal and telecommunication work, commissioning of machinery and plant in connection with setting up of electric loco shed at SaiyedpurBhitri U.P, by Rail Vikas Nigam Limited (RVNL).
The Joint Venture had awarded the contract to the Joint Venture partners on a back to back basis vide the Joint Venture agreement dated 10.10.2018, with the specific execution of the works contract between the partners, wherein the appellant was allocated with the work of supply, installation and commissioning of the plant & machinery, mechanical engineering works, electrical works etc., as per the Joint Venture Agreement between the Joint Venture partners.
The party having sought the advance ruling on the questions as to whether the work awarded to the applicant is a composite supply of work contract service, the Authority for Advance Ruling, vide order UP ADGR 92/ 2022, dated 24. 01. 2022 ruled in negative, and it is being aggrieved by aforesaid order of the AAR, that the appellant has filed the instant appeal before the Appellate Authority.
The grounds of the appellant’s appeal being that the AAR has failed to appreciate the fact that the items of plant and machinery supplied, installed and commissioned by the appellant were of permanent nature and that the Indian Railways have no intention to move them from the site in the foreseeable future which is apparent from the definition of the terms “Permanent Works” and “Plant”, as contained in the general terms of the contract agreement entered into by the Joint Venture with the RVNL, the Authority observed as follows :
“We observe that for classifying any contract under works contract the property involved in the same has to be of any immovable nature.”
“Further, immovable property has not been defined under the provisions of GST. However, immovable property stands defined under section 3(26) of the General Clauses Act,1897 to include land, benefits to arise out of land and things attached to earth, or permanently fastened to anything attached to earth. Section 3 of the Transfer of Property Act, 1882 stipulates that unless there is something repugnant in the subject or context, “immovable property does not include standing timber, growing crops or grass”, the Authority added.
Finally, pronouncing its ruling the Authority consisting of S.Kannan, the AAAR CGST Member and Ministhy S, the AAAR SGST Member ruled :
“The work awarded to the appellant is a composite supply of work contract service”.
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