Dismissed

M/s Tecnimont Private Limited

GST AAAR28 Feb 2025GUJ/GAAAR/APPEAL/2025/11

Case brief

AI extract

What is this about?

The Appellate Authority upheld the Advance Ruling by Tecnimont Private Limited, rejecting the claim that High Seas Sale supply was distinct. The value of imported goods was held to be part of the transaction value for GST purposes on the works contract, as the contract was indivisible.

What did the court decide?

The appeal filed by the appellant against the Advance Ruling passed by the Authority was rejected and the ruling was upheld.

M/s Tecnimont Private Limited — GST and Indirect Tax | GST AAAR (2025)

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GUJARAT API'ELLATE AUTHORITY FOR ADVANCE RULING GOODS AND SERVICES TAX . NUrunnxrrt]ffo* D/5, ITA.TYA KAR I}I.IAVAN, ASIIRAM ROAD, AIIMEDABAD^_ 380 OO9.

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ADVANCE RrrLrNG (AppEAL) NO. GUJ/GAAAR/APPtrAL l202slrr (IN APPLICATION NO. Advance Ruling/SGST&CGST 120241 AR/0 1 )

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Date ?s .02.2025

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Nameandaddressofthe appellant	Tecnimont PrivateI-imited, LaxmiChamber,NavjivanPressRoad, Ahmedabad,Gui arat-380 014.
GSTIN ofthe appellant	24AAACI2628BIZ8
JurisdictionOffice	CenterCommissionerate-AhmedabadNorth Division-VII-SGI{ighwayEast Range-I
AdvanceRulingNo.and Date	GIIJ/GAAR/R/2024I02dated5.I .2024.
Dateofappeal	12.2.2024
DateofPersonalIIearing	21.t.2025
Prcscnlforthc appcllant	ShriKcvinGogri, Advocatc andShriSandccpS Khedeker.

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At the outset we would like to make it clear that the provisions of the Central Goods and Services I ax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the 'CGST Act, 2Ol7' and the 'GGST Act, 2017' are 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 CGS I Act ,2017 would also mean reference to the corresponding similar provisions in the GGST Act, 2017.

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2' M/s. Tecnimont Private Limited, [for short 'appellant'] is a wholly owned subsidiary of Tecnimont S.P.A. Milan, Italy is an EpCr Comp any and is registered with the department.

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3 ' Briefly, the relevant facts concerning this appeal as is canvassed by the appellant, is as under:

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1 llngineering procurcmcnt and Construclion

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. that they have entered into a turnkey contract with IOCL2, for executing EPC work of Acrylic Acid llnit (90 KTA) and Butyl Acrylatc tlnit (150 KTA) at Vadodara;

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that the contract No.44AC91O0-EPCC-1 entered into with IOCL, identifies two scparate set of supplies for the turnkey project

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[i]^{works contractfor EPC work pertaining to EPCC-1project and}

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[iil^{supplyof imported materialsfor the samc project;}

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tlrat the contract value is fixed on a lump sum price of I{s. 18,J2,00,48,047 .50;

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that contract is divisible in nature; that the intcnt was always to trcat supply of imporled goods and the remaining [il'C services, separately;

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. that during the course of importation, before the goods reach the Customs frontier in India, they enter into HSS3 agreement with IOCL, transferring the ownership of the goods to IOCL at the pricc agreed in the contract. The appellant raises a custom invoice with rcspcct to such goods; that IOC[. thcn filcs a l]/tr as thc impoflcr of thc said goods and dischargcs customs cluly and IGS'| by clearing thc goods for warchousing or home cor-lsumption.^'l'hc applicant treats this as a separate supply of goods distinct frorn the works contract supplies;

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. that the supply of goods in the course of import into India cannot be subject to tax as intra-state supply;

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. sale of goods on I ISS basis cannot form part of a composite supply of works contract scrvicc.

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In view of the foregoing facts, the appellant^{sought AdvanceRuling on}

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the following questions, viz:

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Whcthcr thc transaction o[ salc of^goods by^{'l'ecnimont Pvt. Ltd. ('I'CMPL)to Indian Oil} Corporation Ltd. (IOCI-) on tligh Seas Sale^{basisin terms of Contract No.44AC91O0-EPCC-1} would be covcrcd under Entry No. 8(b) of^{Schedule III of the CGSTAct and shallbe excluded} from the valuc of work contract service^{for charging GST?}

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Whcther the transaction of salc of^{goods on highseas salc basis by the Applicantto IOCL} in tcrrns ol-Cor"rtract No. 44LC9100-lrPCC-1^{would be trcatcd as workscontract and whcther} Applicalt is Iiablc to charge^{GS't'on thc goods sold on high scas salc basisto IOCL? If ycs, what} will bc the applicable ratc^{of tax on suchgoods supplied?}

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5 Consequent to personal^{hearing, the GAAR4recordedthe following}

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findings viz:

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'} thc appollant ignorcs^{thc Iact that ittsa} lT) SUITI I'PC ;^{that to dividca trlmkcY} E,PC contract into two^{parts,is legally not tenab le; that post thc contract, IOCLand thc applicant} had a rethink & carved^{out the foreign supplyof goodsUISS] fromthe turnkeyE,PC contract,} pnm arily to avail thc^{bencfitof Manufacture andotherOperationsin Warehouse Regulation,} 2019 [MOOWI{I^{andIIPCGbY fictionally dividingan otherwise single turnkey contract into [a]} supply of goods^and Ibl^{supplyo[ services;}

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in tcrms of Schcdulc^{lll,."ud*itl"r scction 7(2) ofthe CGS'I'Act,2017,supply on Fligh Sea Sale} basis, is treated^{as neither a supply of goodsnor a supplyof services and hence the question of} levy of GST^{on such supplydoesnot arise;}

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a The Epc contract,^{encompassesboth the supplyof goods and services.T'he applicant, in terms of} thc contract,^{is liable to provide the goodstsupplied on FISS basis] and hencethe subrnission that} this value^{is not to be i,cluded in ltre transaciionvalue in respectof works contract service is} legally not^{tenable more so sincethe applicantis contractually bound/liableto supply both the} goods andthe^{services. Therefore, inteims of section 15, ibid,thevalue of such imported goods} ivould form^{apartofthe transaction valuefor paymentof GST;}

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issue of^{whetherfree supply would form a part of transactionvalue, is no longerres integra} having been^{decidcdby the Hon'blc chhattisgarh High court in the casc of Mis. ShreeJeet}

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2 Indian Oil CorPoration Ltd

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i H,1iulli,ll,'".,., ror Advance Rur^{in g}

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Transport5 wherein though the recipient of the supply was legally bound via the agreement to provide for free diesel, yet the Hon'ble High Court, held that thc free supply of diesel would form part of the transaction value, for the purpose of GS'f .

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O the argument that it is a divisiblc contract entailing Ial supply ol'impor{ed goods and [bl supply of scrviccs is not bornc out from the rcading of thc contract and thc rclcvant documcnts thcrcofl.

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o that the imported goods supplied on FISS basis are subject to tax as intra state supply belies fact, since what is supplied under the works contract is not the imported goods but Acrylic Acid & Butyl Acrylate Unit of Acrylic /Oxo-Alcohol Project.

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'l'hc GAAI{, thereafter, vide the impugned ruling dated 30.5 .2024,

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held as follows:

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l. The transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on High Seas Sale [HSS] basis in terms of Contract No. 44AC9100EPCC-l is covcred under EntryNo. 8(b) of Schcdule [l ol'the CGS'| Act. IIowcver, in terms of the findings rccordcd supra, thc valuc of such I ISS supply would florm a parl of the transaction value under section 15, ibid, for computing the valuc of work contract scrvice for charging GS'l-.

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The transaction of sale of goods on high seas sale UISSI basis by the applicant to IOCL in terms of Contract No. 44AC91 00-EPCC- 1 as has bcen held supra, is covered under entry 8(b) of Schedulc III of thc CGST Act,2017 and therclore thc IISS supply is ncithcr a supply of goods nor a supply of scrviccs.

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Aggrieved, the appellant is before uS, raising the following

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contentions, viz

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r that the irnpugned ruling in so far as it holds the value of tlSS supply to form part of transaction value u/s I 5 for computing the value of WCS for charging GS't', is erroneous;

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that contract no. 44AC91OO-EPCC-l evidences supply of imported materials from rest of the EPC contract & hence is divisible in nature;

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' that supply of imported goods under HSS is not apartof WCS; that such sale is a distinct element in the contract & is separately identifiable from the rcst of the EPC work;

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that thcy would likc to rcly on thc casc o[ I]SNL6 whcrcin it was hcld that whcthcr a contract would reprcscnt two scparatc transaction and scparatc rights arising out o[ thc contract dcpends entirely on the intention of the parties;

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' that the contract cannot be treated as an indivisible contract since imported supply is a distinct supply;

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that they would like to rely on the case of Power Grid Corporation I.td 7, Gannon Dunke rly & Companyt, [, S Chandramouli and Co', Mahindra and Itiahindral0, Mirah Irxporls p [,;dll, Ilhopal Sugar I,dustrics Ltd^12, Indure Ltd and orst3, L gL'l't4

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that once the supplies are held to be distinct, the consideration of one supply cannot be added to the value of separate distinct supply for the purpose of GS1-;

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that even if it is held that the contract is indivisible, since the supply of HSS would form part of inter state trade or commorce no GST can be levicd on the same component as an intra sate supply of WCS;

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that since supply of goods on I.ISS do not constitutc a taxable supply, it cannot form parl of the cornposite supply;

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r that unlike in thc case of Shree Jeet 'fransport, where fuel was the most crucial element, this rationale is not applicable in the present case.

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s writ Petition ('r') No. r17/2o22decided on 17. 10.2023

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6_2006(2) STR 161 (SC) 7 2oo7 (l08) rrD Hyd

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8 1958 AIR 560

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e 1966 (18) s]'c 325 to 1995 (76) taL'l4s I sc rr 1998 (98) Ijt_'f 3 sc

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t2 1977 AII{ 1275

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13 2oto 9 scc 461

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t4 2015 SCC online Hyd g66

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Personal hearing in the matter was held on 21.01.2025 wherein Shri Kevin Gogri, Advocate and Shri Sandeep S Khedeker, appeared and reiterated the submissions made in the appeal. The submitted a synopsis of the case along with a compilation containing the relevant statutory provisions, circulars and case laws relied upon by the appellant.

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FII\DINGS :.

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We have carefully gone through and considered the appeal papers, written submissions filed by the appellant, submissions made at the time of personal hearing, the impugned Advance Ruling and other materials available on record.

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The averments canvassed before us can be divided into the followingviz

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(i) that thc contract is a divisiblc contract; (ii) that thc provisions of scction 15(2)(b) of the CGS'I' Act,^{2017hasbcen mis-} interpreted; (iii) that the reliance on the^judgement of M/s.^{Shree Jeet Transport of the} Flon'ble Chattisgarh Fligh Court^{is misplaced;} (iv) that cven if the contract is considered^{indivisible, no tax can be levied on that} part of the goods which are sold on FISS^basis; (v) that thc salc of importcd materials^{would not form part of thc compositc} supply & hence would not form^{part of the ovcrall workscontract;} 1vi;itrat^{the sale of goods on HSS suffersIGST & hencc treating it as a part of thc} works contract would rcsult^{in double taxation.}

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1 1. Moving on to the first^{averment that the contractis a divisible contract,} we find that the GAAR^{vide its impugned ruling dated 5.1.2024after dwellinginto} what is a works contract^{in terms of section2(ll9), ibid, and further relying on the} judgement of Kone Illcvator lndia Private^{Limitedrs held that} [i]^{works contract for} EpC work pertaining^{to EPCC-1project; &} tiil^{supply of importedmaterialsfor} the said project, is^{a lumpsumturnkey EPC contract & hencedivision of a turnkey} EPC contract into^{two parts,is lcgallynot tenablc.}

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lZ. The reliance of^{the appellant on the judgementof BSNL and Gannon} I)unkerley & Co.,^{supra, to aver that it is a divisible contractis not tenable owing}

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"2014^{(304) Ii.I..'f. 161 (S.C.)}

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to the fact that in terms of the contract the applicant was contractually bound/liable to supply both the goods and services.

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Moving on to the next averment that even if the contract is considered indivisible, no tax can be levied on that part of the goods which are sold on FISS basis and that the since the goods suffered IGST, treating it as a part of the works contract would result in double taxation. We find that in tcrms of Schedule III, read with section 7 (2) of the CGST Act, 2017 , supply on High Sea Sale basis, is treated as neither a supply of goods nor a supply of services. We find that the impugned ruling clearly states that the EPC contract encompasses both the supply of goods and services and that in terms of the contract, the appellant is liable to provide the goods fsupplied on HSS basis]. Therefore, the submission that the value is not to be included in the transaction value in respect of works contract service is legally not tenable more so since as is already mcntioned, the applicant is contractually bound/liable to supply both the goods and the services. The averments even otherwise, stand answered in paragraph34 of the impugned ruling. Hence, we agree with the finding that in terms of section 15, ibid, the value of such imported goods invariably forms an integral part of the Transaction value. Thus, the averment that the GAAR had mis-interpreted the provisions of section 15(2Xb) of the CGSTAct, 2017 is not a plausible argument.

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The next averment raised is that the sale of imported materials would not form part of the composite supply 8L hence would not form part of the overall works contract. I.he avcrment has alrcady bccn answcrcd in paragraphs 21 an{ 33 of the impugned ruling. Since nothing is produced compelling us to interfere with the said finding, we agree with the findings of the GAAR in this regard.

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'l'he appellant has further averred that the reliance on the judgement of M/s. Shree Jeet Transport, ibid, of the Hon'ble Chattisgarh High Court is misplaced. The appellant has in-fact relied upon the judgement of the Hon'ble lJttarkhand I{igh Court in the case of New Jai Ilind^'I'ransport Servicer6. The appellant has further stated that in this judgement the emphasis is on the nature of the business 8L that the Hon'ble Court seems to have completely ignored the pre-

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16 Writ Petition M/S No. 64612023

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rcquisitc of an obligation to lall under thc scope of Section l5(2Xb) of the CGST Act, 2017. While making this argument the appellant ignores the inclusions in the letter of acceptance, which is reproduced in paragraph 29 of the impugned ruling, which clearly depict that the averment that there is no obligation for supply of impugned goods is not factually true. Given the facts of the case, the findings recorded by the Hon'ble Chattisgarh High Court, we are in agreement with the view taken by the GAAR by relying on this^judgement.

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Moving on to the other averrnents raised we 6bserve that the averments have already been raised by the appellant during the course of proceedings before thc GAAI{.^'l'hc samc havc bccn answcred in detail by thc GAAI{. lhe appellant we find has repeated the averments already made before the GAAR has not been in a position to point out or place any material which would call for an interference with the impugned ruling.

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In view of the foregoing, we uphold the impugned ruling^dated 5.1.2024 and reject the appeal.

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In view of the above, we reject the appeal filed by^{appellant \zlls.} 'fecnimont Private Limited against the Advance Ruling No. GIIJ/GAAIVIV21Z4|12 darcd 5.1.2024, passed by the Gujarat^{Authority for AdvanceRuling.}

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( Rajeevl'I'opno ) Member (SGST)

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Place: Ahmedabad f)atc^'LY:02.2025

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(B V Siva Naga Kumari) Member (CGST)

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