2024-VIL-06-AAAR
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SGST AAAR

GST - Rajasthan AAAR – Classification of supply of services to augment facilities and infrastructure for enhancing the development of gas field - M/s Vedanta awarded the Engineering, Procurement and Construction Contract (EPC Contract) to the Appellant for provision of service for development of Integrated Gas Surface Facilities for Rageshwari Deep Gas Field (RDG) – the contention of the appellant that the activities performed in accordance with the EPC contract is classifiable under SAC Heading No. 998621 as most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas - In the alternate, it has been contended by the appellant that the subject services can also be classified as ‘other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both under Heading 9983 – vide the impugned order, the classification as sought by the Appellant under SAC Heading No. 998621 or under Heading 9983 were rejected by the AAR and it was held that the supplies proposed to be undertaken by them are classifiable under Heading 9954 – HELD – the Appellant have been tasked with installation and construction of the proposed facilities concerning the well pads, pipe lines, terminals etc. which is aimed at capacity expansion of RDG - Since the Appellant have been tasked with establishment of infrastructure facilities for oil and gas extraction, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot, by any stretch of imagination, be said to be support services to oil and gas extraction. The distinction between the activities undertaken by the Appellant in terms of the EPC contract and the activities included in the definition of SAC Heading No. 998621 is strikingly clear - the activities undertaken by the Appellant in pursuance of the EPC Contract cannot be classified under SAC Heading No. 998621 as these are not in the nature of support services to oil and gas extraction - SAC Heading No. 9954 of the Scheme of Classification covers the overall construction services with SAC Heading No. 995425 the general construction services of mines and industrial plants. The explanatory notes clarify that the said service code includes construction services for mining and related facilities associated with mining operations. Since, oil and gas exploration is also a form of mining; therefore, the construction services proposed to be supplied by the Appellant for creating gas extraction facility enhancing the existing production capacity are appropriately classifiable under the SAC Heading No. 9954 - the AAR had also classified the supplies proposed to be undertaken by the Appellant under SAC Heading No. 9954 and therefore, Ruling of the AAR to that extent is legally valid and omission of a specific entry in the rate notification does not have a bearing on such Ruling in so far as classification under SAC Heading No. 9954 is concerned - Since the nature of supply justifies its classification as construction services of mining, there is no conflict suggesting preference to specific description under SAC Heading No. 998621 to general description under SAC Heading No. 9954 because the nature of activities clearly indicates that the supply is classifiable under SAC Heading No. 9954 – the ruling passed by AAR is upheld and assessee appeal is rejected
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