Allowed

M/s Apar Industries Limited

GST AAAR12 Jul 2022GUJ/GAAAR/APPEAL/2022/14

Case brief

AI extract

What is this about?

This appeal challenges an Advance Ruling that declined to decide the tax rate for Solar DC Cables due to lack of formal contracts. The appellate authority held that purchase orders submitted by the appellant constitute valid contracts under the Indian Contract Act, allowing them to avail the concessional 5% GST rate for supplies used in Solar Power Generating Systems until 30.09.2021.

What did the court decide?

Advance Ruling modified to hold Solar DC Cables eligible for 5% GST under Entry No 234 until 30.09.2021, and 12% thereafter under Entry No 201A.

M/s Apar Industries Limited — GST and Indirect Tax | GST AAAR (2022)

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GUJARAT APPELLATE AUTHORITY FOR ADVANCE RULING GOODS AND SI;RVICES^'tAX -f,,|fl.* D/5, RAJYA KAR BHAVAN, ASHRAM ROAI), 's{MAFKET AHMEDABAD - 380 OO9.

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ADVANCE RULTNG (APPEAL)NO. GUJ/GAAAR/APPEAL/20226D(lN APPLICATION NO. Advance Ruting/SGST&CGST/2021lAR/08)

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Date: tl .07.2022

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Nameandaddressofthe appellant	IWs.AparIndustriesl.imited, SurveyNo.l89/Pl,GIDCRoad,Tal.Umbergaon, Valsad, Gujarat-396I7I
GSTIN oftheappellant	24AAACG184OMI7-I{
AdvanceRulingNo.andDate	GUJ/GAAR/R/02/2021dared 20.01.2021
Dateofappeal	04.03.2021
DateofPersonalHearing	31.05.2022
Presentfortheappellant	ShriAmalDave, Advocate

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At the outset rve would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Guj arat 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 diff'er 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 AcL 2017 rvould also mean reference to the corresponding sirnilar provisions in the GGST Act. 201 7.

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The present appeal has been filed under Section 100 of the CGSI'Act,2017 and the GGST Ac|2017 by M/s. Apar Industries Ltd (hercinatlcr referred to as Appellant) against the Advance Ruling No. GUJ/GAAR/R/02/2021 datcd 20.01 .2021 .

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The appellant has submitted that they are manu I'aclurer and supplier of various goods such as Power/Electric cables, House \' cablcs , Marine/pressure tight cables and non-pressure tight cables, Solar DC cables, XLPE ( ables etc. fallin g 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. lor supply of "Solar DC Cables" lor use as parts in the manufacture of Solar Power Generating System.

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The appellant has raised the flollowing questions for advance ruling in the application for Advance Ruling filed by it.

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"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. I /20 I 7- lntegrated Tax^(Rate) or^{not? "}

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The appellant has submitted that Entry at Sr.No. 234^{ol Schedule-Iof Notification} No. 01/2017- Integrated Tax^(Rate) dated^{28.06.2017provides that goods, fallingunder} Chapter 84, 85 or 94, ii used as Parts for^{the manufactureof renervable energydevices} such as Solar Power Generaling System,^{willattract concessionalrate of 5Voof IGST} [or 2.5%;o each of GGST & sGSTl. The appellanr fu(her^{submittedthat cBIC vide circular} No.80/5412018-GST dated 31.12.2018 at^{Para 11.2 clarifiedthat the notification} specitically applies onty to the^goods falling^{under chapters 84, 85 and 94 of the Tariff:} that therefbre. this concession rvould^be available only^{to suchmachinery, equipment, etc'} which fall undcr 84, 85 and 94 and used in initial setting^{up of renewable energy plants} and devices inctuding WTEP; that this entry does^{not cover goods fallingunder other} chapters, say a transport vehicle f'atling under chapter^{87 that rnay be used for movement} of waste to WTEP; that the^goods Solar DC Cables,^{manufacturcdand designedby them} tbr use as parts in the manulacture by Solar Power^{Projectsfallsunder Chapter85 which} is covered under Sr.No. 234 ol Notification^{No. 0ll20l7- Integrated Tax (Rate)and} benefit of concessional rate ol GST at 5% is admissible^{to them. The appellantalso} submitted that they are accredited by International Authority^{'TuV' to manufactureas per} EN-5061 8:20 l4 specs which is cxclusively for^{the productstbr Solar Power applications.}

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The Gujarat Authority for Advance^{Ruling (herein after referredto as 'the} GAAR'), vide Advance Ruling No. GUJ/GAAR/R/02/2021^{dated 20.01.2021,inter-alia} observed that product viz. Solar DC Cables, do form^{an integral part of the Solar Power} (ienerating Systern, horvever as to whether the DC Cables manulactured and supplied by appellant will be used in Solar Power Generating System,^{GAARobservedthat appellant} did not provide supply contracVorder but submitted^{twopurchase orderswhicharenot} legal document and after going through the clause "l.^{SCOPE OF WORK/FACILITIES"} of purchase order, GAAR obscrved that it^{contains some hidden meaning within and} there is also likelihood ol supply of DC Cables accompanied^{by services'}

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In view of the foregoing, the GAAR ruled^as follows:-

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"l(hether the applicability or determination of liability to pay Tax on our said goods at 50% GST rate is legalty coruect and in order^{in terms of ScheduleJ of} Notification No. 1/2017- lntegrated^{Tax (Rate)or not?}

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Ans: In view of non-submission of copies of^{contract/agreement/} tender/technical specifications as^{mentioned above, by the applicantlul/s Apar} Indwtries Ltd, Plot No. 189/P^I , GIDC^{Road, Tal: Umbergaon, Valsad,it would} not be possible for us to^give a decision^{in the matter} for^{lhe reasonsdiscwsed} hereinabove.^"

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Aggrieved by the aforesaid advance^{ruling,the appellant has filedthe present} appeal.

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7 .1 The appellant in the^{groundof appeal has submitted that the GAAR observedthat} to avail the benelit entry at Sr.No.^{234 of Notification No. 0112017- Integrated Tax (Rate)} appeltant has to satisfu two conditions,^{first,the go} ods must bc covered under

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Heading 84, 85 or 94 and second, the goods shall satisfi the description 'renewablc energy devices & parts for their manufacture i.e. Solar Porver Generating System; GAAR observed that appellant's product indeed covered undcr 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.

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7.2 The appellant submitted that in this digital world of paperless economy, demanding documents such as tender/contract/agreement/tcchnical specification which are not readily available or parted with the appellant by I']roject Authority as the process of tendering were done through E-mail correspondence only. That in commercial contracl of sale/purchase, the Iegal documents placed on supplier/vendors/sub-contractors by main contractor/project developers/project authority is recognized as either 'purchase order' or 'sales order' and this document were already submitted before GAAR.

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7 .3 As regards to GAAR's observation that purchasc 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 contact, for a lawful consideration and with a lawful object. and are not hereby expressly declared to be void." The appellant submitted that in prcscnt case. the purchase order is placed by the purchaser, with free consent, by both parties to contract. lor lawful consideration with a lawful object and expressly accepted by mail conflrmation 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.

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7.4 The appellant subrnitted that GAAR. despitc holding that appcllant's product fulfill both the mandatory conditions that the product/ goods supplicd to Solar Power Project are falling within notified/ admissible ITC (lls) Code 85 and the said goods are 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 i.e. packing, freight forwarding and transit insurance to arrange delivery either at ex-works sale basis or for destination sale basis. The above relerred services are inbuilt and naturally bundled rvith principal supply of goods and hence cannot be equated or treated separately as supply of service or works contract for the purpose of separate lcvy.

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7.5 The appellant submitted that there is no elemenl 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 manulacturing and then delivery was given at FOR destination basis including transportation and transit insurance. Therefore. services listed at clause 1.1 of I "SCOPI OF WORK/FACILITIES" of purchase order are inbuilt and

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naturally bundted with sale of goods in terms of Sale of^Coods Act,^{1930 and CGST} Act,2017 .

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'1 .6 The appellant submittcd that they already placed on record an ''Undertaking/lndcmnity/End Use Ccrtificate" before GAAR, confirming by project authority that DC cables will be^purchased from^{appellant on outrightpurchase basis} where no elements of works contract service is^provided by^{appellant. The appellantalso} submitted an affidavit dated 26.02.2021 issued by Mundra Solar^{PV Limitedand affidavit} dated 25.02.2021 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.

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FINDINGS:-

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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.}

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The main issue to be decided, on the basis of^{advance ruling soughtby the} appellant is. whether the benellt of concessional rate of GST^{in termsof Sr. No. 234 of} ScheduleJ to Notification No. li20l7-lT^(Rate) dated^{28.06.2017rvill be applicableto} the DC Cables (Solar DC Cables) designed, manufactured^{and suppliedby the appellant} lbr use as parts in the manufacture of Solar^{Power Generating System/ SolarPower} Projects.

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To decide the issue rve flnd it necessary to^go through^{the Entry No. 234 appearing} under Schedule-l to the Notification No.0l/20l7lT^{(Ratc)dated 28.06.2017 which} provides applicable rate of GST at sYo and which reads as under:

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Sr. No.	Chapler/Heoding/Sub- Heading/Tariff Item	DescriptiortofGootls
	84, 85or94	Followingrenewableenergtdevices&^partsfor^their manufacture (a)Bio-gasplant (b)Solorpowerbased devices (c)Solar powergenerotingsystem (d)Windmills,Wind OperatedElectricityGenerator (woEG) (e)Wasteto energt plants/devices O^{Solar lantern/solar lamp} @) ^{Oceanw aves /tidalw aves e nergtdevices /plants}

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on going through the^{provisions of the above entry, lve findthat in order to avail} benefit ofabove notification.^{appellanthas to satisfo two conditions, first, the goodsmust} be covered under Chapter^{Heading 84, 85 or 94 and second, the goodsshall satisrythe} description 'renewable energy devices &^{parts for theirmanufacture'i.e. Solar Power} Generating System.

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;ire)ffi"1riii,

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l0.l As regards to first condition, after going through thc appellant's submission. we agree with the findings of GAAR that DC cables are covered under Chapter Heading 8544 of the Customs Tariff Act, 1975.

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10.2 As regards to second condition, we find that the GAAR while discussing, in detail, about Solar Power Generating Systern at Para 15 of ruling held that DC Cables are an integral part of the Solar Power Generating System as u,ithout these interconnecting cables, the components like Solar Panels and others cannot generate usable power. Based on the technical write up submitted by appellant beforc GAAR and before this appellate authority we are in agreement with the findings of the GAAR.

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Further, there is no departmental appeal against the above findings ol GAAR.

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Further, GAAR observed that to avail the benelit of Entry at Sr.No. 234 of the Notification No. 01/2017-Integrated Tax (Rate) datcd 28.06.2017. it is neccssary to confirm that DC cables are indeed used as parts ol Solar Power Generating System. Further in view of Board Circular No. 80/541201 8-CS'l' dated 3 I . 12.20 I 8 appellant has to satisff himself with the requisite document from the buyer such as supply contracVorder from the concemed authorities before supplying goods clairning concession under entry No.234. The GAAR observed that appellant had not submitled any supply contracts or orders but submitted only copies of two purchase ordcrs bearing No. 4500328493 dated 03.07 .2020 and No. 4500327829 dated 17.06.2020 which is not a legal document.

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We find that Section 10 of Chapter II of Indian Contract Acq 1872, as referred by appellant, says that "al[ agreements are contracts if they are made by the lree consent of parties competent to contract, for a lawful consideration and with a lawlul object. and are not hereby expressly declared to be void." The purchase orders submitted by appellant may be treated as contract if they follow conditions prescribed under Indian Contract Act, 1872 i.e. they are made for lawful consideration and with a lawful object and made by the free consent of both parties. The GAAR in Para 7 of ruling has observed that appellant submitted copies of various e-mails exchanged betrveen parties to shorv that purchase order had been duly accepted by appellant and that emails enclosed a copy of'sales order for these transactions to prove that the purchase order was accepled. Furthcr Board in its Circular No. 3 l/2013-Cus dated 6s August 2013 has held as under:

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"In regard to the scope of the terms "deed of contact" it is seen that as per Section l0 of the Indian Contract Act, 1872 a valid contract is one that contains the foIlowing ingredients: -

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(i) it is entered into by free consent ofparties competent to contract;

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(ii) there should be lawful consideration;

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(iii) there should be a lawful object; and

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(iv) it is not expressly declared to be void (i.e. void under the statute).

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In view of the aforementioned legal position it is evident that a purchase order that contains all the essential ingredients of a valid contract must be treated as one under the Indian Contract Act, 1872."

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After conjoint reading of above observation ol'GAAR, provisions under Indian Contract Act, 1872, and above referred Board's Circular dated 6.8.2013, rt d that purchase orders, submitted by appellant rvould amount to a valid contr

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appettant fulfills the condition^{prescribedin Board Circular No. 80/54/2018-GST dated} 3l. i2.2018 lor availing benefit^{underentry 234.}

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We rel'er to Para ll.3^{of CircularNo. 80/54/2018-CSTdated 31.12.2018which} states as under:

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11.3 Anolher related doubt raised^{is as to how would a suppliersatisfy} himself that^goods falling under^{Chapter 84, 85 and 94, say a turbineor a boiler,} required in a ryTEP, would be^{usedin the IITEP. In this contextit is clarified that} GST is to be self-assesser) by^{o raxpayer. Therefore, he need to satisfy himselfwith} the requisite document front a buyer^{such as supply contracts/order} for^WEP from^{fhe concerned authoritiesbefore supplying goods claimingconcession under} said entry 234.

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On perusal ol above^para of the^{circular,it is clearly expressedthat (i) GST is self} assessed which mcans if^a taxpaycr/supplier^{is claiming exemptior/concession under any} notification issued under CST Act,^{he has to satisly himselfthat he fulfillsthe mandatory} conditions for claiming thc^{same,onus to provethat he is eligible for such} exemption/concession lies on that^{laxpayer, and (ii) the rvords used in abovepara of} circular^"...he need to satisfy^{himself with the requisitedocument} from^{a buyer such as} supply contracts/order...^{"provides cxamples, using word'such as', of documents} required lrom buyer, for satislhction^{of taxpayer that goods arc indeed used in WTEP.} Therefore, we find that meaning ol^{above para cannotbe construed to includeonly} .supply contracts/order' but it will include all such docurtents rvhich can satisry the supplier regarding usage ol^{thcirgoods by theirbuyers.In the prcsentcase we find that} appellant has received^{purchaseorders No. 4500328493 dated 03.07.2020from Mundra} Solar PV Limited and No.4500327829^{dared 17.06.2020from M./s. Adani Green Energy} Ltd., for supply of Solar DC Cables.^{They have acccptedthe said purchase orders and as} discussed above the said^{purchase orders are a valid contractbased on which the} appellant can claim exemplion/concession^{tbr their supplies undcr referred entryno.234.}

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As regards to GAAR's^{obscrvation that clause *1.SCOPEOF} WORK/FACILITIES" of^{purchaseorder contains some hiddenrneaningwithin and there} is also tiketihood of supply ol^{DC cables accompanied by scrvices.The appellant} submined that in everl' salc/purchase^{contract, elements of packing,freightforwarding} and transit insurance are involved^{before goods are supplied eitherat ex-worksbasisor} FOR destination basis and thcy^{had not provided any after salc service viz' erection,} installation, construction etc in^{respect of solar power generating system and therefore,} the above relened services are^{inbuiltand naturally bundledwith principalsupplyof} goods and not provided beyond the^{sale of goods.The appellant also submittedan} affidavit dated 26.02.2021^{issucdby Mundra Solar PV Limited and affidavit dated} 25.02.2021 issued by Adani^{(]reen Energy Limited,confinr.ringthat the purchase orders} placed with appellant involvc only supply^{of goodsand doesnot involveany kind of} service which can be separately^{taxed under the CGSTAct,2017. On going throughthe} abovementioned affidavits^{and appellant'ssubmission,we find that these servicesare} inbuilt and naturally bundled^{with principalsupplyofgoods scope of these services is not} beyond the sale of^{goods and that thereis no elementof 'works contractservice' involved} or performed by appellant^{as sub-contractor to the Solar PowerGeneratingSystem.}

l. Ct

Therefore, amendment made to Sr.234 of Notification No. 0112017 -lnregrated Tax (Rate) vide Notification No. 2512018- Integrated Tax (Rate) dated 3i.12.2018 and Notification No. 2812018-Integrated Tax (Rate) dated 31.12.201 8, for deciding value of services and rate of GST thereon, will not be applicable as there is no provision of service supplied by the appellant with respect to Solar Power Generating Systcm.

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Further we find that the Entry No. 234 appearing under Schedule-l to the Notification No.O1/2017-IT (Rate) dated 28.06.2017 which provides applicable rate ol GST at 5% on supplies of renewable energy devices & parts for their manufacture viz. Solar power generating system, falling under Chapter 84,85 or 94, was omitted vide Notification No. 8/202 1 -lT (Rate) dated 30.09.2021 . The description of goods covered under Entry No.234 now appears at Entry No.20lA under Schedule-ll to the Notification No. 01/2017-IT(Rate) dated 28.06.2017, amended vide Notification No. 8/2021-IT (Rate) dated 30.09.2021 w.e.f. 1.10.2021, which provides for applicable rate of GST at l2%. The description of renewable energy devices & parts lor their manulacture viz. 'Solar power generating system' appearing at entry No. 234 of schedule-l now stands amended as 'Solar power generator' under Entry No. 20lA ofschedule-ll.

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15.1 Therefore we find that the product in question viz. Solar DC Cables supplied for Solar Power Generating System, classified under Chapter 85. fbnns integral part ofSolar Power Generating Systern is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021 . Thereafter the same will be covered under enrry Sr.No. 20lA appearing under Schedule-ll to the Notiflcation No.Ol /201 7-11' (Rare) dated 28.06.2017 amended vide Notification No. 08/2021-11' (Rate) dated 30.09.2021 and liable to be taxed @12% GST w.e.f. 0l . 10.2021 .

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In view of the foregoing, we modify the Advance Ruling No. GUJ/GAAR/R/0212021 dated 20.01.2021 of the Gujarat Authority lor Advance Ruling in the case of IltVs. Apar Industries Limited and hold that

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(i) The product Solar DC Cables to be used in the rnanufacture of Solar Power Generating System./ Solar Power Generator is eligible for benefit of Entry at Sr.No. 234 under Schedule-l of Notification No.0l/2017- Inr.egrated^'l-ax (Rate) dared 28.06.2017 and liable to be taxed at 5% GST upb 30.09.2021 and thereafter under Entry at Sr.No.201A of Schedule-Il o1 Notification No.0l/2017-lT (Rare) dated 28.06.2017 amended vide Notification No. 08/2021-lT (Rate) dated 30.09.2021 and liable to be taxed at l2% GST w.e.f. 0l .10.2021 .

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,i
(M nd Torawanc) ,
Member (SGST)
Gs-r

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Jr-.^^-, N*N (Seema Arora) Member (CGST)

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Place : Ahmedabad Date i17.07.2022

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PageT of7

M/s Apar Industries Limited

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M/s Apar Industries Limited

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