Whether the principal supply is “excavation of sand” or “transportation of good” ?

Case:M/s. R. VidyasagarRao Constructions
Citation:AAAR/02/2018
Issue: Whether the principal supply is “excavation of sand” or “transportation of good” ?
Brief facts: M/s. RVRC is a registered partnership firm dealing in mining business. They had entered into Agreement dated 18th March, 2017 ) with M/s.Telangana State Mineral Development Corporation, Hyderabad , pursuant to TSMDC’s acceptance of the tender submitted by M/s.RVRC in response to TSMDC’s Tender / Short E-procurement Tender No.TSMDC / SAND / EXC / Damerakunta-III / Annaram / 2016 dated 29-12-2016 . M/s. RVRC had quoted the rate of Rs.74.36/- per CBM in response to the said tender and emerged as the Ll bidder. The description of scope of work as per the said Agreement/ Tender, reads as follows:
“Excavation of Sand 1560000 CBM of Block No. III, Damerakunta-III over an extent of 52.0 Ha at Submergence areas of Anaram Barrage, Kaleshwaram Project and transport the same quantity of sand to nearby Stockyard (Contractor has to identify Stock yard within 1 km from the Submergence area) and again loading of sand into the Lorries at Stockyard.”
With regard to the above Agreement and work involved therein, M/s.RVRC filed an application for Advance Ruling, inter-alia, furnishing “Statement of Relevant facts having a bearing on the question raised”, “Statement containing the applicant’s interpretation of law and/or facts as the case may be, in respect of the questions raised” and the “Question on which the Advance ruling is required”- which is as reproduced earlier. Vide the application (i.e., Statement containing applicant’s interpretation), M/s. RVRC claimed that:
The above activity/services rendered would fit into the ambit of ‘Works contract’ as defined under sub-Section (119) of Section 2 of the GST Acts further read with SI.No. 6(a) of Schedule II to the GST Acts; and that the same would be eligible for the benefit of CGST 2.5% + SGST 2.5% = total 5% rate of tax in terms of Notification No. 31/2017-Central Tax (Rate) dated 31-10-2017(and G.O. Ms. No. 253, Revenue (CT-II) Department dated 23-11-2017) or
(Alternatively, the activity amounts to ‘composite services’ in which the transportation part is predominant and therefore also the rate would be 5% GST (2.5% CGST + 2.5% SGST), as per the entry ‘transportation of goods’.
After examining the issue and analyzing the terms of the Agreement / Tender documents and the scope of work involved vis-a-vis statutory provisions and Notification-entries, the two Members constituting the Advance Ruling Authority viz., Member representing Central Tax and the Member representing State Tax had given their opinion. The CGST member was of the view that the service supplied by the applicant is a ‘composite supply’ as defined in clause (30) of Section 2 of the CGST Act. The principal supply is that of ‘excavation of sand’; the services of transportation and loading are ancillary to the said service of ‘excavation of sand’. Hence, that the services rendered by the applicant are classifiable as “Excavating and Earthmoving Services” under Heading 995433 of GST Tariff and rate of tax applicable is 9% CGST + 9% SGST.
The SGST member is of the view that though a part of the contract i.e, construction of ramps/roads and their maintenance falls under works contract; the subject contract is a composite contract but not exclusively ‘works contract’.The contract being a composite supply with the individual elements therein being integrally connected to each other, the same is bundle of services as per these types of contracts; the intention behind the same is to shift the sand from one place to another as distinguishable from ‘excavation’ simplicitor. As such and also taking into account the value / rate involved in respect of the transportation-component, the principal supply is ‘transportation of goods’.The services rendered by the applicant are classifiable as “Goods Transporting by vessel” and GST tariff and rate of tax applicable is 2.5% CGST + 2.5% SGST subject to the condition that the applicant is not entitled to ITC (input tax credit) to the extent mentioned in the proviso in Column (5) of (v) entry as mentioned above as per the GO Ms. No. 110 Revenue (CT-II) Department dated 29-6-2017.
Thus, no uniform opinion was arrived at by Members of the lower Authority on the question framed for Advance Ruling. Accordingly, they referred the matter to this Appellate Authority in terms of Section 98 (5) of the Act

Appellant’s contention:Applicant submits formation of ramps and internal roads and external roads referred to above with the men and material or the applicant forms into immovable property by theory of accretion and would be the permanent property of the TSMDC and the State Government of Telangana/Local authority as the case may be. Thus, the activity of the applicant is in combination of so many supplies of goods and services and hence the applicant views that the contract is one for a composite supply of ‘Works contract’ as defined under Sec.2 (1 19) of the GST Acts, 2017 and it is being done to Governmental Authority in view of Notification No.31/2017 dr 13.10.2017 issued in G.O.Ms.No.253 Revenue (CT-11) Dept dated 23.11.2017 the rate of tax is to be 2.5% CGST AND 2.5% SGST.
The alternative urge of the applicant and its understanding is the object of the contract being to replace the sand from one place to another which could be done by moving it from it’s place of source to the Stockyard, which could only be done by the mode of transportation of it from such place to such place as the case may be the principal supply is ‘Transportation of Goods’ and other activities are incidental to such supply. In this event the applicant made a search to accommodate itself in the notified rates of tax, as after exhausting the same only by all possible means it can satisfy himself that this supply would fall under residual entry of tax. When done so, the applicant opines his activity can be and be subjected to tax under Sl.No.9 /Heading No.9965 i.e. Goods Transport Service-(ii) Transport of goods in a vessel. Vide Notification No.11/2017 Central tax (rate) dated 28-06-2017. To form this view, the applicant obliges ‘Vessel’ includes any container and need not necessarily be an article which floats on water i.e. a container which could able to consist in any other goods in it and capable of being road adopted is also a vessel. To have this view the applicant relies on the fact that the word ‘vessel’ is not defined under the GST Acts in the event of which the general meaning of ‘vessel’ is to be adopted, its meaning can’t be borrowed from other Statues since Statue Books of GST Acts do not mandate so as was done so in respect of so many words in the GST Acts. The applicant could also notice in the conditions prescribed in the Notification NO. 11 dated 28-06-2016 that in order to have the concessional rate of tax therein the condition is that it shall not take Input Tax Credit charged on the goods used in supplying the services. Such restriction from having ITC has exclusion to the goods i.e. for ships, vessel including bulk carriers and tankers. Therefore, ‘vessel’ includes bulk carriers and tankers. The word s ‘other than ships’ also carries much significance to give a meaning that ‘Vessel’ includes goods other than ships.

Respondent’s Contention and Judgment:The applicant vide the initial application and also in their submissions before the lower Authority, had claimed that their services fall under the ambit of ‘works contract’, as defined under Section 2(119) of the Act. As seen, both the Members of the lower Authority have held the said claim to be untenable; albeit based on different reasoning. However, as detailed above, during the personal hearing before us, the applicant’s Advocate conceded the above claim as not pressed. In view of the said position, we are not required to go into the question of whether or not the impugned activities amount to a “works contract”.
We also find that both Members of the lower Authority have arrived at a uniform finding that the services rendered by applicant under the Agreement with TSMDC, being naturally bundled, fall within the definition of ‘composite supply’ as defined under Section 2(30) of the Act. Therefore, since there is no difference between the views of the two members of the Advance Ruling Authority on this issue, nor is there any appeal from the Department, hence we are not required to examine the question of correctness (or otherwise) of the classification of the impugned activities as a “composite supply”.
However, the two Members have differed in their opinions on the following points:
(i) The Central Member held that in the aforesaid ‘composite supply’ provided by applicant, the ‘principal supply’ is ‘excavation of sand’ and hence, the same is classifiable as “Excavating and Earthmoving services” under Heading 995433 of GST Tariff and rate of tax applicable is 9% CGST + 9% SGST.
(ii) The Central Member further held that the entry ‘Transport of goods in a vessel’ [appearing at sub-category (ii) under Column (3) against entry SI.No.9 in the Table given under Notification No.11/2017-Central Tax (Rate) dated 28-6-2017] is not applicable to the instant case, as the vehicles used for transportation of sand are by road and not covered under ‘vessel’ which as per definition of ‘vessel’ in Section 2(z) of the Major Port Trusts Act, 1963 includes only transport conveyances by water like ships, barges, boats, tankers etc.
As against the above,
(iii) The State Member held that the principal supply (in the composite supply) is ‘transportation of sand’ and the services rendered by the applicant are classifiable as ‘Goods transporting by vessel’ and the rate of tax applicable is 2.5% CGST + 2.5 % SGST subject to condition of non-entitlement to ITC (input tax credit) to the extent mentioned in the relevant Notification.
(iv) The State Member also held that the meaning of ‘vessel’ for the purpose of the Notification-entry (read with the proviso in Column (5) against the said entry) would stand as ‘container which contains other goods which carries goods from one place to other’ and hence concluded that the applicant’s case is covered by the entry ‘Transport of goods in a vessel’.
“2. Definitions. — In this Act, unless the context otherwise requires, —
(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;
Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;
(90) “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;”
Section 8 of the Act reads as under:
“8. Tax liability on composite and mixed supplies. — The tax liability on a composite or a mixed supply shall be determined in the following manner, namely
(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and
(b) 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”.
Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017issued under Section 9 of the Act provides for the levy of GST on intra-State supply of services. The Notification prescribes the rates of the tax applicable to various services and also provides for a Scheme of Classification of services, as given in Annexure to the Notification. The relevant entries in the Notification are reproduced and referred at the appropriate places in the further course of our discussions.
Coming to the services involved in the case, the scope of work as described in the Agreement / Tender has already been mentioned earlier. However, the specific clause in the Contract Agreement dated 18th March, 2017 which describes the work merits a reference and hence, reproduced as under:
” 3. Conditions of contract:
i) Scope of the Work: The Contractor shall excavate sand 15,60,000 CBM from Block 111, of Damerakunta-111, over an extent of 52 Ha. at Submergence areas of Annaram Barrage, Kaleswaram Project and transport the same quantity of sand to nearby Stockyard (Contractor has to identify Stock yard within 1 km from the Submergence area) and again loading of sand into the Lorries at Stockyard. The contractor shall extract the sand within the assigned Geo-coordinates as specified in the tender documents. The Contractor shall not encroach upon in adjacent areas other than assigned areas without permission of TSMDC.”
We find it also appropriate to reproduce the following further / other terms in the said Agreement as also the Tender document viz., Short Tender/ E-procurement Tender dated 29-12-2016:
(i) In page 4 of the Agreement, clause 2 reads as follows:
“2. The following documents issued for the above work shall be deemed to form part and parcel of this agreement and the same may be read and construed as part of this agreement viz., (a) Conditions of contract, (b) Contractor’s bid, (c) Priced Bill of quantities, (d) Letter of intent or work order, (e) Agreement. All terms & conditions, al clauses of tender document and all other conditions as mentioned in the above documents have been agreed to by the parties and the same are binding on both the parties”.
However, the applicant had submitted copies of only the Agreement dated 18-3-2017, Tender/Short E-procurement tender notice dated 29-12-2016 and the Letter of intent dated 27-1-2017 issued by TSMDC for the purpose of the subject proceedings.
(i) The Short Tender / E-procurement tender dated 29-12-2016 issued by TSMDC contains following clauses:
`Estimated Quantity: The tenderer shall excavate 1560000 CBM of sand within a period of 18 months.
Upset Price: The Corporation upset price is Rs.100/- per CBM (Rs.30/- for loading charges for machinery at reach, Rs.7.50/- for formation of Ramps and maintenance of Roads, Rs.32.50/- for transportation charges for the tractors / tippers of sand from reach to stockyard and Rs.30/- for loading cost of sand from Stockyard to lorries) ….”.
[Reference to the same upset price as above, is also available in page 8 of the same Tender document dated 29-12-2016, which has been referred in the hearing before us].
(ii) As seen, the scope of work described in either the preamble to the Agreement or the specific Clause 3(i) therein or as given in the Tender documents does not mention the element/activity of ‘formation of ramps / maintenance of roads’ which however appears in the breakup given for the Upset price. However, in the Agreement, under Clause (3) captioned ‘Conditions of contract’, sub-clause (ix) (appearing on the 8th page) reads as under:
“ix) Laying of Roads:
It is the sole responsibility of the Contractor to lay / form required road from stockyard to nearby connectivity road for plying of Lorries / vehicles, any incidental expenditure incurred and involved thereon for laying & maintenance of roads shall he borne by the Contractor”.
From the above, it appears that there can be no dispute that the impugned include the element of formation/maintenance of roads apart from those of excavation, loading, transport etc., mentioned in the “Scope of Work”.
(iv) Clause 3(vii) of the Agreement, inter-alia, specifies Contractor’s possession and deployment of a minimum (numbers) of equipment viz., 8 No.s Excavators, 2 No.s Mobile Water Tankers and 32 No.s Tractors / Tippers.
(v) Clauses 3 (viii), (x) of the Agreement stipulate respectively, that Contractor shall (a) obtain necessary licenses, permits etc., as required under Telangana State Sand Mining Rules, 2015; and (b) identify the Stockyard within 1 km from Submergence area; for which TSMDC shall obtain Mineral Dealer License (MDL) and pay lease rental amount thereof not exceeding Rs.50,000/- per acre per annum.
For the aforesaid services, the Contract Agreement dated 18th March, 2017 mentions the consideration as Rs.74.36/- per CBM (cubic metre) of sand excavated. As can be seen, this is a single rate which has been agreed upon by the parties for the combined performance of the various activities / different elements of work involved. It is an admitted position by the applicant/Advocate that there is no item-wise break-up for the said rate of Rs.74.36/- in terms of the different activities involved (personal hearing record reproduced earlier refers); though the Tender notice mentions Upset Price of Rs.100/- with a breakup indicated, as reproduced above. Further, Clause 3(iii) of the Agreement captioned “Payments”, inter-alia, lays down as follows:
“The amount payable to the Sand Raising Contractor shall he as per rates quoted by him / them and shall be finalised by TSMDC, based on transit pass (in CBM), which shall he issued at Stockyard on Sand despatches made by TSMDC..”.
As per the statutory definition, ‘principal supply’ in a composite supply would be that which constitutes predominant element and to which other supplies forming part of composite supply are ancillary. The words/phrase ‘predominant element’ are neither defined in the Act nor any parameters such as quantum, value etc., specified for determining the same. As per common understanding as also dictionary meaningss, ‘predominant’ denotes “something which is more important or noticeable than others in a set of people or things”; “which is present as the strongest or main element”. In respect of goods, discerning the predominant element can be based on tangible, quantifiable, measurable factors such as by weight, composition, functionality etc. Whereas in respect of services which are intangible – determination of predominant element from among those in a composite supply would have to take into account inter-alia, the nature of activities, quantum of work/labour etc., involved, values assigned for the different elements and more importantly the intention of the parties as per the Terms of the contract / agreements work orders etc.
In the instant case, we observe the following salient factors & features:
(i) The Contractee – TSMDC is a Corporate entity created by the State Government of Telangana with the objectives of development of mineral resources including Exploration, exploitation and beneficiation⁶. Sand, undisputedly, being a mineral resource the same belongs to the State of Telangana; TSMDC is the State-instrumentality which is entrusted with the objectives as above.
(ii) The Agreement and the earlier Tender floated by TSMDC, in essence, aims for removal of sand located in the specified area (Submergence Area / Reach) and shifting the same to another area, termed as Stockyard @ approx..1 km distance from the Submergence area.
(iii) The said shifting and removal is to be done using Excavators and loading on to tippers/tractors or lorries/trucks as the case may be, which transport the sand by the ramps / roads to the said Stockyard.
(iv) At the Stockyard (for which TSMDC has to obtain Mineral Dealer License and also pay lease rentals), the sand is again loaded into lorries -which is for further onward despatch as per the Contractee-TSMDC’s requirements.
(v) The Agreement also requires the Contractor i.e, applicant M/s.RVRC to lay/form and maintain the necessary roads / ramps etc. in the course of and for the purpose of the above work.
(vi) The consideration agreed upon between the parties for the above work in entirety, is a single composite / aggregate rate of Rs.74.36/- per CBM of sand (transported / sold from Stockyard) for the entire work; the Agreement does not identify, specify or record an item-wise / activity-wise breakup / component of the said price. However, while floating the tender, the Contractee has indicated breakup of the Upset Price of Rs.100/- per CBM in terms of the different elements of the work involved, as detailed earlier.
On analysing the above, we find it to be evident that the basic intent and purpose of the Tender / Contract-Agreement and the concomitant description of the scope of the work therein is to move / shift the mineral sand from one place to another, by means of transport by roads/ramps; for enabling the further despatch by TSMDC. The said activity i.e., transport of sand from one place to another therefore constitutes the predominant element in the instant case; the other activities of excavation (or extraction as also mentioned in Agreement), loading, unloading and reloading as also formation / maintenance of ramps/roads, are the incidental or ancillary activities, preceding, coinciding or following the said main activity of ‘transportation from one place to another’. The breakup of the Upset Price as per the TSMDC’s Tender documents, referred at para 10.2 (ii) above, also shows that the activity of transportation and the loading activities which are directly related to the transport, is the predominant portion in impugned services; incidentally there is no separate /specific mention of any value/rate for only ‘excavation’ activity in the said Upset price.
In the lower Authority’s reference, the Central Member’s reasoning was that ‘without excavation of sand, transportation and loading of sand to the lorries doesn’t arise’ and hence excavation constitutes predominant element / principal supply and the others are ancillary. This reasoning does not appeal to us on a comprehensive, holistic analysis and consideration of the facts involved herein, as detailed above. As mentioned earlier, the said view at best would only reflect that activity of excavation was the first among the various inter-linked ones, but not necessarily the predominant element in the services involved in question.
The State Member’s view (expressed in para 22 of the subject reference order) that ‘the intention behind the contract is to shift the goods viz., sand from one place to other distinguishable from excavation simplicitor’ is in a nut-shell, the correct conclusion arrived, with which we are in agreement with in view of the findings mentioned above.
In view of the above, we hold that the principal supply involved in this case is ‘transportation of goods’ as held by the State Member and not ‘excavation of sand’ as held by the Central Member.
As determined above, the ‘principal supply’ in the instant case is that of transportation of goods i.e., sand. It is an un-disputed fact and also explicitly recorded in the Agreement and tender documents that the said transport is by road only. The Scheme of Classification of services is laid down in the Annexure to the Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017which contains the entries pertaining to Land transport services. The relevant extracts from the said Notification are as follows:
” Rate of GST on intra-State supply of specific services with Service Code Tariff (SAC):
From the above notification, it can be seen that the broad category of Goods Transport services are classified with a 4-digit Code as Heading 9965. Under the said classification, ‘Land Transport services’ is a sub-classification with 5-digit Code i.e, Group 99651. The said sub-classification is further divided into four categories of services, each with a six-digit Service Code (Tariff). The said four categories pertain to different forms / modes of transport i.e, road transport, rail transport, transport via pipeline and the residual entry covering such Land transport services other than those specified in the earlier three Service Codes.
The impugned services, being road transport services of goods evidently fall under Service Code (Tariff) 996511 which covers the specific description as “Road Transport of Goods… by trucks / other vehicles”. The other two specific Service Codes 996512 and 996513 pertain to Railway Transport and transport via pipeline, which are not applicable to the applicant’s case. In as much as by specific description of ‘road transport by trucks/ other vehicles’ the impugned services are covered by the Service Code 996511, the application of residuary entry i.e, Service Code 996519 does not arise.
On the aforesaid basis, we therefore hold that the classification of the services rendered by the applicant which have been held to be “composite supply” and in which the principal supply is found to be ‘transport of goods by road’ are correctly classifiable under the Service Code (Tariff) 996511 under the Scheme of Classification of services laid down in Annexure to Notification No. 11/2017- Central Tax (Rate) dated 28-6-2017.
In view of the above determination of the classification of impugned services as “transport of goods”, the next question for determination is “. whether the vehicles used by applicant for transport of sand i.e, lorries / trucks (or tractors / tippers, as mentioned in the application) are to be considered as covered by the
term ‘vessel’ appearing in the Notification-entry as held by the State Member or as not covered by the term as held by the Central Member ?
The applicant’s claim is that their activities, as a composite supply with principal supply of ‘transportation of goods/sand’, would be covered by the category “Transport of goods in a vessel” (appearing at sub-category (ii) under Column (3) in the entry at SI.No.9 in the Table to the Notification no.Notification No.11/2017-Central Tax (Rate) dated 28-6-2017– hereinafter referred as ‘impugned entry’). The differing views expressed by Members of lower authority as also the applicant’s claims / contentions in this regard, including during personal hearing before us, have already been reproduced above and hence, not reiterated here; but duly taken into consideration.
The relevant textual references / definitions / meanings of the word ‘vessel’ and inferences drawn therefrom by the two Members of the lower Authority as also the applicant, are summarised as follows:
(i) Uniformly, the Members as well as applicant averred to the fact that ‘vessel’ is not defined in the Act.
(ii) The Central Member referred to the definition of ‘conveyance’ vide Section 2 (34) of the Act and that of ‘vessel’ as per Section 2 (z) of the Major Port Trusts Act, 1963, (MPT Act, 1963 in short), which read as follows:
Section 2 (34) of the Act:
“(34) “conveyance” includes a vessel, an aircraft and a vehicle”..
Section 2 (z) of the MPT Act, 1963 :
“(z) “vessel” includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson”.
The Central Member opined that ‘vessel’ in the impugned entry denotes those for transport of goods by sea / inland waters and the said term cannot be considered as ‘container’ as claimed by applicant.
(iii) The State Member referred to the proviso under Column (5) against the impugned entry, which reads as follows:
“Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken”.
Accordingly, inferred that the term ‘vessel’ has been used in the proviso as including bulk carriers and tankers as also any goods used for transportation of other goods. Hence, the meaning of vessel for the entry would mean any container which contains other goods for movement from one place to other.
(iv) The applicant referred to definition of ‘vessel’ vide Section 3 (63) of the General Clauses Act, 1897 as also meaning thereof as per Law Lexicon⁷, which read as follows:
Section 3 (63) of the General Clauses Act, 1897
“(63) “vessel” shall include any ship or boat or any other description of vessel used in navigation;
Meanings as per Law Lexicon:
“Vessel” includes boats, rafts, limber and other floating bodies. [Pun. Act VIII of 1873 (North Indian Canal and Drain) S.3, Cl. (3)J;
includes every ship, boat and other vessel used in navigation, whether propelled by navigation or otherwise. (Explosives Act (IV of 1884), S.4] ;
includes anything made for the conveyance by water of human beings or of property. [Bur. Act IX of 1872 S.3)…….
“Vessel” shall include any ship, barge, boat, raft or craft, or any other thing whatever, designed or used for the transport upon water of passengers or goods [Ben. Act 111e890 (Port Calcutta), S.3 Cl. (9)1
It is the applicant’s contention that the aforesaid definition / meanings are inclusive and hence, the term ‘vessel’ is not required to be restricted to something that floats; the Central Member’s reference to definition in MPT Act, 1963 is not supported by the GST-law provisions and hence not correct. They support the finding of State Member in this regard.
With regard to the above, we find as follows:
(i) The word ‘vessel’ is not defined in the Notification nor in the Act (nor also in the allied Acts to which reference is made by sub-Section (120)⁸of the Act).
(ii) However, the word ‘vessel’ finds a mention in the Act in the definition of ‘conveyance’ cited earlier. The said definition shows that ‘vessel’, apart from ‘an aircraft’ and ‘a vehicle’ are included therein as three separate types of conveyances. In other words, in the very same statutory definition of ‘conveyance’, the words ‘vessel’ and ‘vehicle’ have been separately mentioned.
It is a settled principle of legal interpretation that when two expressions are used in a statute they have to be assigned two different meanings and both cannot be construed as having the same meaning. The said principle is enunciated / reflected in a catena of decisions. To cite a few, Hon’ble Supreme Court in Commissioner of Trade Tax, UP vs S.S. Ayodhya Distillery’, Collector of C.Exvs Himalayan Coop Milk Product Union Ltd¹° and Hon’ble High Court of Andhra Pradesh in Madhucon Projects Ltd vsCus., Ex & ST Sett.Comm., Chennai ¹¹. The relevant extract from the Hon’ble AP High Court’s judgment (in turn referring to various earlier decisions of Hon’ble Supreme Court on the principle), is reproduced below:
Two different expressions in a statute must be construed to carry different meanings :
As Parliament has used two different expressions in the Explanation to two distinct provisions, this Court cannot presume the effect of both the Explanations to be the same……. When two different expressions are used by the same statute, one has to construe these different expressions as carrying different meanings. fifailashNathAgarwal v. Pradeshiya Industrial & Investment Corpn. of U.P. Ltd. – (2003) 4 SCC 3051. Different use of expressions in two provisions of a statute is for a purpose for, otherwise, the same expression would have been used. [B.R. Enterprises v. State of U.P. – (1999) 9 SCC 700 = AIR 1999 SC 18671. It would he difficult to maintain that, when two expressions of different import are used in a statute in two consecutive provisions, they are used in the same sense, and the conclusion must follow that the two expressions have different connotations. [Member, Board of Revenue v. Arthur Paul Benthall – AIR 1956 SC 35 = (1955) 2 SCR 8421 When the Legislature has taken care of using different phrases in different sections, normally different meaning is required to be assigned to the language used by the Legislature, and there is a presumption that they are not used in the same sense. [Arthur Paul Benthall – AIR 1956 SC 35 = (1955) 2 SCR 842; Oriental Insurance Co. Ltd. v. Hansrajbhai V. Kodak – (2001) 5 SCC 175 = AIR 2001 SC 1832].
When the situation has been differently expressed the Legislature must be taken to have intended to express a different intention. [CIT v. East West Imports and Exports (P) Ltd. – (1989) 1 SCC 760] “.
It is seen that the Notification delineating the Scheme of classification of services (apart from prescribing the rates of tax) contains and shows the following distinct aspects:
(1)The word ‘vessel’ has been used specifically in respect of the category/categories of services pertaining to ‘Water transport services of goods’ only;
(2)The word ‘vessel’ has not been used in the context of Land transport services nor the services such as ‘rental’ services related to Land transport;
(3)In the entries pertaining to Land Transport service, the word ‘vehicles’ with a specific inclusive mention of ‘trucks’ has only been used.
In other words, apart from the definition in the main Act, the Notification also uses the word ‘vessel’ in the specific context of and with a specific connotation vis-a-vis ‘Transport by water’ only and none else. In other words, the Notification has employed an unambiguous and distinct usage of the word “vessel” in relation to “water transport services only”, while using the words “vehicles/trucks” in relation to Land transport services. Hence, the ratio of the principle laid down in the above-cited case laws squarely applies in this context to arrive at the conclusion that the word ‘vessel’ as used in the Notification would not cover the trucks or lorries or tractors/tippers used by the applicant in the impugned services.
The applicant’s contention in this regard is that the definition/meaning of ‘vessel’ as per General Clauses Act and Law Lexicon as also that of ‘conveyance’ in the Act is an inclusive definition and hence as also by considering a general meaning, the word ‘vessel’ in the impugned entry would also cover their vehicles -trucks/lorries. We find no merit in the above contentions on various counts, as detailed below:
(i) Firstly, as detailed above, the Notification uses the word ‘vessel’ specifically
and distinctly only in relation to ‘water transport’. Hence, there is no scope for treating ‘vessel’ as covering means of land transport also, merely because of usage of ‘includes’ in the cited definition / meanings.
(ii) The mention of the word ‘includes’ in a statutory definition does not envisage that the definition can be expanded beyond any limit to cover all or any items which have no relation whatsoever to the defined word in the given context.
(iii) The reference to external aids of interpretation such as General Clauses Act or Law Lexicon is not at all necessitated, rather obviated in view of the clear and unambiguous meaning for the word ‘vessel’ as evident within the Act/Notification. It is also a settled legal principle of interpretation that recourse to external aids for ascertaining meanings of words used in statute arises only in situations of doubt or ambiguity, which is not the case here.
(iv) The applicant’s endeavour to refer to General Clauses Act also stands negated by their own argument vis-à-vis Central Member’s reference to the definition of ‘vessel’ in MPTA, 1963 i.e, such a reference is not mandated by the GST Act. And in any case, the definition in the General Clause Act or the meaning in the Law Lexicon also show that the term ‘vessel’ has been defined/explained with reference to water transport only.
(v) Furthermore, in the same Law Lexicon relied upon by the applicant and extracts thereof referred by this Authority during the personal hearing, the word “vehicle” is separately mentioned with the meaning given as “Carriage, conveyance or “includes bicycles, tricycles, automotor cars and wheeled conveyances used or capable of being used on public street” which relates to road transport. On the other hand, the meanings given to “vessel” in the Law Lexicon, as reproduced earlier, are seen to be invariably with a specific reference to water transport only. It is pertinent to also mention that one of the meanings given in the Lexicon against ‘vehicle’ reads as “Vehicle could be read to include a boat” (as per a cited case law w.r.t. West Bengal ZillaParishads Act, 1935). Whereas, in respect of the word “vessel”, there is no meaning or citation given to show the converse i.e, that a vessel would include any vehicle/truck/lorry etc.
(vi)Further, it would be pertinent to mention that during the hearing, the applicant’s advocate, in response to our query vis-à-vis the definition of ‘conveyance’ in the Act, had fairly stated that among the three categories viz., a vessel or an aircraft or a vehicle in the definition, they would fall under ‘a vehicle’.
The State Member’s opinion that ‘vessel’ used in the impugned entry would cover all / any types of containers containing other goods – basing on a deductive inference from the words appearing in the proviso to the said entry, is thus found to be incorrect. The proviso only specifies a ‘condition’ for fulfilment in respect of the particular service ‘transport of goods in a vessel’. The wording used in such a ‘condition’ can by no means be interpreted in a manner negating and distorting the meaning assigned in the Act/Notification to the word ‘vessel’ as detailed earlier. The reference in the proviso to ‘goods’ or the exclusion clause ‘ships, vessels including bulk carriers and tankers’ also has to be construed harmoniously vis-a-vis the scope of the service-description wherein the word ‘vessel’ appears and which as detailed above, is denoted to be that pertaining to water transport only.
The Central Member’s opinion that ‘vessel’ would not cover the trucks/lorries in this case is therefore found to be correct in view of what has been discussed above; though the analysis and reasoning given for the same is seen to be rather cryptic and not comprehensive and further the reference to external aid of another Act i.e, MPTA being not at all warranted, in view of our above discussions.
In view of the above, we therefore hold that the vehicles used by applicant for transport of sand i.e, lorries/trucks (or tractors / tippers, as mentioned in the application) are not covered by the term ‘vessel’ appearing in the Notification-entry as held by the Central Member; the contrary opinion expressed by the State Member is found to be not legally correct.
Entry SI.No. 9 in the Table to Notification No.11/2017-Central Tax (Rate) dated 28-6-2017– the rates of tax applicable to Goods Transport services (Heading 9965) is given.
Out of the above, item No.s (i), (iii) and (iv) are not applicable to the impugned services, since these are not for transport by rail, nor services of a GTA nor that of transport in containers by rail; respectively. Item No.(ii) which pertains to transport by ‘vessel’ is not applicable in view of our discussion and findings in the preceding paragraphs. Hence, the applicable entry in respect of the impugned services would be the entry item SI.No. (v) above viz., “Goods transport services other than (i), (ii), (iii) and (iv) above” for which the applicable rate of tax is prescribed as 9% CGST (and correspondingly 9 % SGST). Hence, the applicable rate of tax on the impugned services is 9 % CGST + 9 % SGST (aggregating to 18%).

Decision: In the said services held by lower Authority as ‘composite supply’, the principal supplyis ‘Transport of goods by road’ and hence, these are classifiable under Service Code 996511 of the Scheme of Classification of Services vide Annexure to Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.In terms of Section 8 of the Act, the rate of tax on the said services is 9% CGST plus 9 % SGST.
Comment:The kernel of the case is that principle supply over here is the principal supply is the basic intent and purpose of the Contractis to move the mineral sand from one place to another, by means of transport by roads/ramps. This only constitutes the predominant element and therefore is considered to be the principal supply. Other excavation activities are ancillary to it. Hence, it will be classified as transport of goods by road service. This service of road transport of goods fall under Service Code (Tariff) 996511 which covers the specific description as “Road transport services of Goods by refrigerator vehicles, trucks, trailers, man or animal drawn vehicles or any other vehicles.”
Further the vehicles used by applicant for transport of sand i.e, lorries/trucks are not covered by the term ‘vessel’. Hence, the applicable rate of tax is 9% CGST and 9% SGST.
This is very good decision to decide the principal supply in composite supply contract. Rules have also been laid down to decide the same. It is detailed and well reasoned order.
Prepared by:ArundhatiBajpai

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PJ/Case Law/2018-2019/3492

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