• Siemens Ltd. (‘the Appellant’) along with the Foreign JV partners have been awarded contract for on-shore and off-shore supply of goods and services for complete execution of VSC based HVDC Terminals and DC XLPE Cable system, which has been divided into 6 contacts (collectively referred to as ‘Whole Contract’)
• Being the JV partner, the 2 contracts are covered under the scope of the Appellant – On-shore supply contract (i.e. for supply of goods viz. equipment, materials, spare parts etc.) and On-shore service contract (i.e., supply of services viz. loading-unloading, inland transportation, installation including civil works etc.), which are collectively referred as ‘the Contracts’
• For transportation of goods under On-shore service contract, transporters (Goods Transport Agencies) were engaged who issued Consignment Note & the Appellant discharged GST under the Reverse Charge Mechanism
• Since no CN were subsequently issued by the Appellant, an advance ruling was filed by the Appellant before the Authority for Advance Ruling (‘the AAR’) contending that the local transportation services under the on-shore service contract would be eligible for exemption under Entry No. 18 of Notification No. 12/2017 – Central Tax (Rate) (i.e., transportation of goods by roads except GTA and courier)

• The Authority for Advance Ruling made the following observations:

Ø  Both the Contracts are inter-related and one contract has no ‘leg’ unless supported by the other

Ø  Even though both are separate contracts, but the ‘cross fall breach clause’ settles the issue that they are indivisible contracts in the nature of ‘Composite Supply of Works Contract’ and therefore taxable @18%

• Aggrieved by the Order of the AAR, the Appellant filed the appeal before the Appellate Authority for Advance Ruling (‘the AAAR’)

• Whether the transportation services provided by the Appellant under the on-shore service contract (without issuance of consignment note) would be eligible for exemption from GST under Entry No. 18 of Notification No. 12/2017 – Central Tax (Rate) dated 28 June 2017?

• Contract for supply of goods cannot be executed independent vis-à-vis the contract for services
• From the ‘cross fall breach’ and other clauses, it is clear that the transportation services provided is not only integrally connected with contract of supply of goods, but it is also connected with the other contracts which are performed by the JV partners other than the Appellant
• The clauses under the Contracts make it clear that notwithstanding the breakup of the contract price under two separate agreements, the contract shall be construed as a single source responsibility of the Appellant, who remain responsible to ensure execution and successful completion of both the contracts
• The contract of transportation services is not be considered in isolation but has to be read along with the contract of supply of goods since performance of both of these contracts are interdependent and naturally bundled resulting into composite supply under GST
• By making two separate agreements, what is purported to be done is an artificial division of contracts which though done, cannot take away the true and inherent nature of the contract
• Under composite supply, whether the two taxable supplies are arising from one indivisible contract or from two separate contract is immaterial till these two supplies are naturally bundled and one supply being principal supply & other being ancillary supply to principal supply
• Even if the considerations for two taxable supplies are separately quoted or there is single consideration, both types of scenarios are covered under composite supply till the conditions for composite supply are fulfilled
• Construction of concrete cement foundations, walls, structures during the execution of the project suggest that the object of annexation cannot be to make it movable from one place to the other. Further, the completion of  installation, erection of the total project is resulting into an immovable property.