Case Title | Vertiv Energy Private Limited |
Court | Maharashtra AAAR |
Honorable Judges | Member Sungita Sharma & Member Rajiv Jalota |
Citation | 2020 (02) GSTPanacea 26 HC Maharashtra MAH/AAAR/SS-RJ/22/2019-20 |
Judgement Date | 07-February-2020 |
Council for Petitioner | Nupoor Agarwal |
Council for Respondent | B.B.Rath |
Section | Section 2(30) 2(90) 2(119) & 100(1) |
In Favour of | In Favour of Assessee |
The Maharashtra bench of Member Sungita Sharma & Member Rajiv Jalota has held that supply of UPS Systems and supply of services like erection, commissioning, installation, testing, etc., it would not be proper to claim one of the supplies as the “Principal Supply” as envisaged under section 2(90) of the CGST Act, 2017, as both the supplies i.e. the supply of goods and the supply of services are equally important and indispensable, because in the absence of any of these two, the objective and purpose of the subject agreement cannot be achieved. Thus, even this key requirement of the ‘Composite Supply’ is not satisfied by the supplies under question.
FACTS OF THE CASE
Bench have gone through the ruling pronounced by the Advance Ruling Authority, wherein the AAR has held that the supply of the UPS Systems and as well as the supply of the services like erection, commissioning, testing, installation etc. of the said UPS Systems by the Appellant to DMRC in terms of the subject agreement would be construed as ‘Composite Supply’ in accordance with the provision of section 2(30) of the CGST Act, 2017 read with section 2(90) of the CGST Act, 2017.
In the instant appeal, the Appellant has not challenged the ruling pronounced in respect of the questions posed by the Appellant in their advance ruling application filed before the Advance Ruling Authority.
The main question asked by the Appellant in their advance ruling application was whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as supply of works contract under Section 2(119) of the Central Goods and Services Tax Act, 2017.
In response to the above- mentioned question, the AAR held that the said supply of the UPS systems and its erection, installation, commissioning, testing, etc. would not be construed as works contract service as interpreted by the Appellant, Subsequently, The AAR went on to hold that the said supply of UPS systems and its erection, installation, commissioning, testing, etc. would be rather considered as the ‘Composite Supply’ in terms of section 2(30) read with section 2(90) of the CGST Act, 2017.
Now, the Appellant has preferred appeal over this very observation of the AAR, wherein they held that the impugned supply made by the Appellant to DMRC in terms of the subject agreement would be considered as Composite Supply in accordance with the provision of section 2(30) read with section 2(90) of the CGST Act, 2017.
COURT HELD
Considering the facts as recorded, held that supply of UPS Systems and supply of services like erection, commissioning, installation, testing, etc., it would not be proper to claim one of the supplies as the “Principal Supply” as envisaged under section 2(90) of the CGST Act, 2017, as both the supplies i.e. the supply of goods and the supply of services are equally important and indispensable, because in the absence of any of these two, the objective and purpose of the subject agreement cannot be achieved. Thus, even this key requirement of the ‘Composite Supply’ is not satisfied by the supplies under question.
The AAR based its ruling on the sole premise that the supply of the said goods as well as the services have been agreed to be provided by the Appellant to the Recipient under the single contract, thereby concluding the supplies under question to be the composite supply without appreciating the fact that the said supply of goods and services are made by the two distinct taxable persons, i.e. Maharashtra (GSTIN)unit and the Delhi (GSTIN) unit of the Appellant.
Here, it is stated that just because some supplies of goods or services or both have been included, or made part of, the one single agreement/contract, as per the convenience of the parties entering into the said agreement, does not make those supplies as composite supply. It is further opined that for any supplies to qualify as the composite supply, it has to satisfy the various essential conditions, which have been discussed herein above.
In the present facts and circumstances of the case, it is observed that supplies under question do not satisfy those essential conditions stipulated for the Composite Supply under section 2(30) of the CGST Act, 2017. 50.
Thus, in view of the above discussions, it is observed that the observation made by the Advance Ruling Authority, against which the Appellant has preferred the present appeal, is not proper and legal, and hence the same warrants to be set aside
ANALYSIS OF THE JUDGEMENT
Whether the aforesaid said supply would be construed as Composite Supply or not. At the outset, Bench would like to first examine the meaning of ‘Composite Supply’ as provided under section 2(30) of the CGST Act, 2017, which is being reproduced herein under: – (30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
The Appellant the supplies under the present case are not being made in the conjunction with each other, as the supply of services i.e. erection, commissioning, installation, testing etc. are undertaken only after the supply of the goods, i.e. UPS systems and other accessories, have been effected to the recipient of the goods, i.e. DMRC after carrying out all the inspection procedures by the persons, authorized by the Recipient in this regard. It is also argued by the Appellant that services of erection, commissioning and installation of the UPS Systems by the Delhi unit begins only after the ownership/title of the said goods has already been transferred from the Appellant to the Recipient. Hence, the above said services cannot be said to be supplied in conjunction of the supply of the said goods, thereby, precluding the said supplies from being in the nature of “Composite Supply” as envisaged under section 2(30) of the CGST Act, 2017. Here also, bench find the Appellant’s argument cogent and compelling
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