ORDER

1. In terms of Section 102 of the Telangana Goods & Service Tax Act, 2017(“the Act”, in short), this Order may be amended by the Appellate Authority so as to rectify any error apparent on the face of the record, if such error is noticed by the appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.

2. Under section 103(1) of the Act, this advance ruling pronounced by the appellate Authority under Chapter XVII of the Act shall be binding only

(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for Advance ruling:

(b) On the concerned officer or the jurisdictional officer in respect of the applicant.

3. Under Section 103((2) of the Act, this advance Ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.

4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.

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Subject:- GST- Appeal filed by M/s. Medha Servo Drives Private Limited, Hyderabad, under Section 100(1) of TGST Act, 2017 against Advance Ruling TSAAR Order No. 17/2021 dated, 04.09.2021 – Passed by the Telangana State Authority for Advance Ruling – Order-in –Appeal Passed – Regarding

Order-in –Appeal No. AAAR/ 02 /2022

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1. The subject appeal has been filed under Section 100(1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “ TGST Act, 2017” Or “ the Act”, in short) By M/s. Medha Servo Drives Private Limited, Sy No.780,781, Jodimetla X Roads, Chowdaryguda Village, Ghatkeshar, Korremula, Medchal – Malkajgiri, Telangana having GSTIN No. 36AABCM3917A1ZY (hereinafter referred in short as “M/s. Medha Servo Drives Private Limited” or “ the appellant”) against the Order No. 17/2021 dated 04.09.2021(“ impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax)(“Advance Ruling Authority” / “AAR”/ “ Lower Authority”) in respect of an Codes and rate of tax in respect of the following question raised by AR as under.

2. Vide impugned order, the Advance Ruling Authority had given the following advance rulings:

1) That based on the facts they need clarification regarding their supplies as to whether they comes under composite supply or mixed supply or normal individual supply under provisions of GST Act as per purchase order.

Mixed supply.

2) Further they sought clarification as to whether all these items which are related to Locomotive parts can be classified under a single HSN Code of 8607 as Locomotive parts considering the end usage of the product irrespective of product / item description. They raised a 3rd question at the time of hearing regarding a contract entered by them with Irrigation department of State Government of Karnataka on 12-10-2018 vide reference no. KBJNL/DDN/PB-1/TND/SCADA P-2/481

Do not fall under HSN code 8607

3) That they are executing a contract for M/s. KBJNL for design, manufacturing, supply, installation, operation and maintenance of phase 2 of SCADA and GIS based automation. They request clarification as to whether the scope of work can be treated as supply of goods or works contract services and also request for the applicable rate of tax for the same.

The clarification can’t be issued on supplies made in Karnataka.

The present appeal challenges the ruling given on question (1). For the 2^nd & 3rd question, the applicant has not challenged before the Appellate Authority for Advance Ruling.

3. Whether the appeal is filed in time

3.1 In terms of section 100(2) of the Act, and appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 04.09.2021was received by the appellant on 22.10.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 18.11.2020, which is within the prescribed time-limit.

4. Brief Facts:

4.1 The Facts in brief, are as follows

The applicant Medha Servo Drives are manufacturers of electronics equipments for locomotives and coaches for Indian Railways and Metro Railways. They have submitted that they were issued purchase order from Integrated coach factory Chennai for supply of multiple items. Some of these items are manufactured by the applicant and some of them are procured for supply to the coach factory. In the opinion of the applicant majority of the items supplied are taxable at the rate of 18%. The relevant terms of the contract are:

a. The invoice would contain HSN code for each item indicating GST rates separately (point 9 of the purchase order).

b. The payment will be released for complete rake set and not for part supplies (Annexure – D)

The applicant is desirous of ascertaining whether their supplies made for the above purchase order amounts to composite supply or mixed supply.

Further they have also entered into a contract with Krishna BhagyaJala Nigam Limited for Design, manufacturing, supply, installation, operation and maintenance of Phase-II of SCADA and GIS based automation, for NLBC, SBC, JBC, MBC & IBC canal network systems including maintenance of the system for 5 years after commissioning of the scheme on turnkey basis. The applicant is desirous of clarification as to whether the scope of work can be treated as supply of goods or works contract services and also request for the applicable rate of tax for the same.

5. Aggrieved by the above ruling, the present appeal has been file by the appellant on the following grounds:

1. The order of the Authority of Advance Ruling, Hyderabad dated 04-09-2021 passed under section 98(4) of the CGST/TGST Act, 2017 is erroneous, contrary to law and facts of the case.

2. Authority of Advance Ruling is not justified in treating Supplies made against purchase order of Integral Coach Factory as Mixed Supply when items are supplied at Individual separate prices with individual separate HSN code and GST rates. The very basic condition of Mixed supply is that two or more items to be supplied for consolidated single price without assigning individual price for each item is not meeting in their case as each item has its own individual price, HSN code and GST Rate hence, their supplies in present case cannot be treated as Mixed Supply. When the goods and services are supplied separately at individual price, then it shall neither be a mixed supply nor a composite supply. It has to be “segregated/independent supply with applicable HSN code and GST rates to each item”.

3. In this connection the appellant contended that “Mixed supply is combination of more than one individual supplies of goods or services or any combination thereof made in conjunction with each other for a single price, which can ordinarily be supplied separately. For example, a shop keeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can easily be priced and sold separately.”

It was contended that, from above it is clear that Mixed supply is a supply of two or more independent item supplied together without assigning individual price to each item and they are deliberately supplied for a single consolidated price.

4. Further, it was submitted that in their case two or more items are supplied and invoiced separately and not supplied together. Individual price and HSN code for each item are assigned and all items are not supplied together for a single price. Hence, it was contended that the supplies made to ICF, Chennai cannot be a Mixed Supply it has to be into segregated/Independent supply with applicable HSN code and levy GST rate to each item separately. Further, the applicant brought to the notice of the Hon’ble members about the case of Advance Ruling, Karnataka in case of M/s Healersark Resources Pvt. Ltd., dated 06-12-2021. The applicant has enclosed copy of the ruling for ready reference

Relevant Extracts of the same are reproduced as below:

1. The Applicant provides various services for a consideration of Rs. 9000/- per candidate per month as below:

a. Rs. 3500/- towards rent for the accommodation at fixed cost

b. Rs. 5500/- towards the food and other facilities on head count basis/actuals number of candidates residing at hostel.

2. The applicant has submitted few sample invoices raised by him towards services provided by him, which shows that he is raising 2 separate invoices, one towards hostel rent and one towards hostel food. Also, from the agreement it is seen that charges are defined separately for accommodation and for food. “Since the applicant is raising separate invoices for services supplied by him, there is no provision of bundled servicesby the applicant, but two separate supply of services.”

“b. It is neither a composite supply nor mixed supply but the two separate supplies.

c. The accommodation service (SAC 99632) provided by applicant is exempted vide Notification no.12/2017(rate) dated 28.06.2017 as declared tariff of a unit is below one thousand rupees. But the service provided by applicant through supply of food(SAC 99633) attracts [email protected]% as per Sl.No.7(ii) of Notification no.11/2017-Central Tax (rate) dated.28.06.2017 as amended by Notification no.13/2018 –Central Tax (Rate) dated.26.07.2018.

5. The applicant contended that above ruling is very much similar to their case, since they also supplying two or more items by invoicing separately for each item mentioning the individual price to each items along with applicable HSN code and GST rate to each individual item. Hence, their supplies are neither a composite supply nor mixed supply but separate individual/segregated supplies with applicable HSN code and GST Rate to each item individually.

6. Hence it was submitted that Authority Advance Ruling is not justified in treating Supplies made against purchase order of Integral Coach Factory as Mixed Supply and requests Hon’ble Appellate Authority of Advance Ruling to allow their appeal and modify the order by classifying the referred supply of items as “Separate/Segregated/Independent Supply with applicable HSN code and GST rates to each item.”

6. Personal Hearing

6.1 In terms of Section 101(1) of the Act, the appellant was given personal hearing, in virtual mode on31-01-2022 Sri K. Lokesh, CA & AR appeared for the appellant. He reiterated the written submission given in their appeal and requested to consider the same.

7. Discussion, Finding and Determination of the Appeal:

We have gone through the contentions raised by the applicant and arrived at the following conclusions:

The applicant contends that the supply made to M/s Integral Coach Factory is not a mixed supply as the goods and services are supplied at individual price separately but not for a single price.

It is therefore required to examine the definition of Mixed supply as per Sub-section (74) of section 2 of the CGST/TGST Acts. The contents of the section is extracted here as under:

mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

The Hon’ble High Court of Gujarat in the case of Torrent power Limited Vs Union of India (R/SPECIAL CIVIL APPLICATION NO. 5343 of 2018) (Judgment dated 19-12-2018) held that

“…28. While on behalf of the petitioners it has been contended that the services rendered by them are in the nature of composite supply, on behalf of the respondents it has been contended that the same are in the nature of mixed supply within the meaning of such expression as contemplated in section 2(74) of the CGST Act and would, therefore, fall within the ambit of clause (b) of section 8 of that Act which provides that a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. Mixed supply has been defined under section 2(74) of the CGST Act to mean two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. The illustration thereunder reads thus:

“Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;”

The above illustration gives an indication of the intent of the legislature, viz. it makes it clear that what is to be treated as “mixed supply” is a combination of supplies wherein each of the items forming part of the supply can be supplied separately and are independent of each other, but are supplied in conjunction with each other.

For a supply to be termed as mixed supply, the determining factors are:

(i) There should be two or more individual supplies

(ii) The supplies should be made in Conjunction with each other

(iii) The supply should be made for a single price by a taxable person

(iv) Such supply does not constitute a Composite Supply.

In the present case ,the applicant is involved in the supply of ‘design , development , manufacture , supply, testing and commissioning of 152 sets of 25 KV AC micro processor controlled IGT based 3 phase propulsion system and equipment to rdso specification’.

As per the Purchase Order ‘PO No 08/17/1119/1101/F’ the price of each set was quoted to be Rs.4,77,82,716-00. This price is for design, development, manufacture, supply, testing and commissioning of each set. Each set consists of multiple items including both goods and services which are made in conjunction with each others for a single price of Rs.4,77,82,716-00 per set. Some of the items are Main traction converter, TCMS /Multiplexing system, Pneumatic system comprising of main air compressor along with mounting frame, Set of MCBs, Contactors, relays, inter vehicle couplers, supervision of installation, training of personnel etc.

As per the PO the IGST rate of tax has been mentioned as 28% and the amount of Rs. 4,77,82,716-00 is inclusive of 28% of the IGST.

As per the payment terms, all payments are to be released for complete rake sets and not for part supplies and after inspection and receipt of material as per delivery schedule. The Purchase order also contains delivery schedule, the total delivery was split into 3 schedules. First schedule is for 92 sets (Start date 31-05-2018 for four sets and end date 31-07-2019 for 4 sets ; to be supplied in 15 instalments) , second for 36 sets (Start date 30-09-2018 for four sets and end date 31-07-2019 for 8 sets ; to be supplied in 8 instalments) and third for 24 sets (Start date 31-07-2018 for 2 sets and end date 30-06-2019 for 4 sets ; to be supplied in 10 instalments).

The applicant has contended that as per Terms and conditions of Purchase order

11.9(ii): Item wise HSN codes and GST rates as per Annexure B will be included in purchase orders and suppliers to invoice the items separately with GST rates as applicable for individual items.

11.10: Price breakup:

Item wise breakup of rate of main equipment shall be based on the unit rates and breakup of rates of specific tools &instruments , and essential spares shall be as per Annexure A-I , A-II & A-III for schedule I , II and III respectively.

The item wise price breakup is examined. The Annexure A-I, A-II, A-III contain the prices of 92 sets, 36 sets and 24 sets respectively. The price mentioned is of individual items used in all the 92 sets and it is not possible to arrive at the price of each item of a single set. Further, when the Purchase Order is seen as a whole, the applicant is obligated to design, develop, manufacture, supply, testing and commissioning of each set. The price agreed upon by the applicant and their client includes the cost of design, development, manufacture, supply, testing and commissioning of each set. In other words, though item wise pricing is adopted in their Annexures, but the price still remains for the whole gamut of supply of goods and supply of services entrusted to the applicant.

Price break up doesn’t necessarily imply that the items are being supplied separately for separate prices. Here, though the supplies are capable of being made individually, the essential concomitant of the present agreement is that they should be supplied in conjunction with each other to function as one complete rake set. The schedule of delivery mentions that the entire set is to be delivered at once but not the individual items separately. Even as per terms of payment, payment is done for the entire set and not individual items, implying the supply is being made for single price per unit. Further, this supply cannot be termed a composite supply because the supplies involved are not naturally bundled and only one of the supply cannot be determined as a principal supply.

Hence, in this case there are two or more individual supplies, supplied in conjunction with each other by a taxable person for a single price, which does not constitute a composite supply. Thereby, the supply satisfies all the pre-requisites to be termed as a “Mixed Supply”. The decisions relied upon by the applicant are distinguishable to the facts of the case on hand.

In view of the above discussions, the said supply is held to be a mixed supply.

In the light of the foregoing, we pass the following:

ORDER

Issue 1: The Supply provided by M/s Medha Servo Drives Private Limited (Appellant) to M/s Integral Coach Factory, Chennai is a mixed supply. Therefore the order passed by the Advance Ruling Authority is being upheld on this issue.

The subject appeal is disposed accordingly.