ODISHA APPELLATE AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICE TAX

Central Revenue Building (GST Bhawan), Rajaswa Vihar,

Near Vani Vihar , Bhubaneswar - 751 010, Odisha

Ph: 0674-258 9935.2588672. Fax: 0674-258 9938,

(CONSTITUTED UNDER SECTION 99 OF THE ODISHA GOODS AND SERVICES TAX ACT, 2017)

BEFORE THE BENCH OF

1) Shri R Manga Babu, Member (Chief Commissioner, GST, CX and Customs, Bhubaneswar Zone)

2) Shri Sushil Kumar Lohani. Member (Commissioner, Commercial Taxes & GST, Odisha)

Present for the Applicant (P.H. attended through Video Conference)

Mr. Ankit Bhardwaj, Chartered Accountant,

BSR & Co LLP, KPMG, Building No.8th Floor, Tower-C, DLF Cyber City, Phase-II, Gurugram-122002 (India)].

BRIEF FACTS OF THE CASE

1.0. M/s.Tokyo Electric Power Company Service Limited ("TEPSCO"), a Japan based company, in association with M/s.Tokyo Electric Power Company, Holdings Inc., (hereinafter referred to as "Applicant"), a Japan based Company (collectively referred to as "Consultants") has entered into an agreement dated 13.04. 2018 (hereinafter referred to as "Agreement") with an Indian entity M/s.Odisha Power Transmission Corporation Limited (hereinafter referred as "OPTCL"), whereby consultants have agreed to provide consultancy services relating to Odisha Transmission System Improvement Project (hereinafter referred to as "Project"), Odisha, India.

1.1. The expected time schedule for the project shall be 46 months followed by 6 months of defects liability period. M/s.Tokyo Electric Power Company, Holdings Inc.(TEPCO) has agreed to provide consultancy services in relation to M/s.Odisha Power Transmission Corporation Limited("OPTCL") in pursuance of the agreement dt 13.04.2018.

1.2. M/s.TEPCO will perform following activities as enumerated in the agreement;-

(a) Technology transfer for the outdoor GIS Operation and Maintenance,

(b) GIS Operation and Maintenance manual operation from the point of power utility company's view.

1.3. M/s.TEPCO will perform all the activities enumerated in the Agreement from Japan(i.e. non-taxable territory) except the physical inspection/review of the project facility & demonstration of O&M procedures.

2.0. M/s.Tokyo Electric Power Company, Holding Inc., the Applicant have filed an application on dt.03.07.2020 for Advance Ruling under Section 97(1) of CGST Act, 2017 and Section 97 of the OGST Act, 2017 sought for a ruling as to whether the Applicant is required to be registered under Odisha Goods and Services Act, 2017 and Central Goods and Services Act, 2017 for the consultancy services to be provided to M/s.Odisha Power Transmission Corporation Limited.

2.1. After thoroughly examining the contract details, grounds of appeal & the submission made by the Applicant during personal hearing, the Authority for Advance Ruling, Odisha passed the ruling as under:-

"(i) Supply of service to M/s.OPTCL is not import of service in terms section 2 (11) of the IGST Act. The recipient is not, therefore, liable to pay GST on reverse charge basis in terms of Notification No. 10/2017 -Integrated Tax (Rate) dated 28.06.2017. The Applicant, being the supplied of service in India, is liable to pay tax and therefore, required to take GST registration under Odisha Goods and Services Act, 2017 and Central Goods and Services Act, 2017 for the consultancy services provided to Odisha Power Transmission Corporation Limited .

(ii) This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the GST Act.

(iii) The Applicant, if aggrieved by the ruling given above, may appeal to the Odisha State Appellate Authority for advance ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of*the advance ruling."

3.0. Aggrieved by the above mentioned ruling of the Advance Ruling Authority of Odisha, the Applicant, M/s.Tokyo Electric Power Company filed an appeal on dt. 11.01.2021 before the Odisha Appellate Authority for Advance Ruling. The Applicant has paid the requisite fees Rs.20,000/-(Rs.10000/-CGST+Rs.10000/-SGST) through e payment in HDFC Bank CPIN No.21012100029758 dt.13.01.2021. The Applicant has filed the application beyond due date and prayed for condonation of delay under proviso to sub-section 2 of Section 100 of CGST/SGST Act read with Section 5 of the Indian Limitation Act. Accordingly, the appeal is admitted before Hon'ble Odisha Appellate Authority for Advance Ruling.

3.1. The Applicant put forth the main grounds of appeal that, the services supplied by the Applicant to M/s.OPTCL would be covered under the ambit of Entry No. 1 of Notification No. 10/2017- Integrated Tax (Rate) dated 28th June, 2017 and tax liability will be discharged under Reverse Charge Mechanism(RCM). Since, the said services are liable to be taxed under reverse charge in the hand of M/s.OPTCL, therefore, the Applicant is exempted from obtaining registration. Based upon the above submitted grounds, the Applicant prayed before the Hon'ble Appellate Authority for Advance Ruling, Odisha to consider for,-

(i) set aside the impugned order;

(ii) modify the impugned order in the light of given facts;

(iii) grant personal hearing(s);

(iv) grant an opportunity to confront with all the findings / objections and be given reasonable opportunity of being heard in regard to the same before deciding this appeal; and

(v) pass any such further or other order (s) as may be deemed fit and proper in facts and circumstances of the case.

PERSONAL HEARING:

4.0. The Applicant was offered Personal Hearing on dt. 19.02.2021 at 12.00 hrs. Mr. Ankit Bhardwaj, C.A., authorized representative of M/s.TEPCO has attended the personal hearing through Video Conference. During the personal hearing, the Chartered Accountant has reiterated the submission already made in their appeal application dt.06.01.2021 and their rejoinder on dt.08.02.2021. Mr. Ankit Bhardwaj prayed the Appellate Authority during personal hearing to consider their grounds of appeal & decide the case favourably.

DISCUSSSION AND FINDINGS:

5.0. The Applicant M/s.Tokyo Electric Power Company(TEPCO) has forwarded the application duly filled in Form GST ARA-02 on dated 06.01.2021, which was received by the Appellate Authority for Advance Ruling, Odisha on dt. 11.01.2021. Subsequently, the Applicant has submitted additional grounds of appeal which was received on dt.l2.02.2021. During the Personal Hearing held on 19.02.2021, the authorized representative Mr. Ankit Bhardwaj, C.A., BSR & Co LLP, KPMG, Building No.8th Floor, Tower-C, DLF Cyber City, Phase-II, Gurugram-122002 (India) has prayed before the Appellate Authority for Advance Ruling, Odisha to consider the condonation of delay & to set aside the ruling of Authority for Advance Ruling, Odisha as the contract between the Applicant & OPTCL will be terminated on dt.04.03.2021 instead of August, 2022. Accordingly, the question raised before us on two issues as mentioned below:-

(i) Whether the condonation of delay can be allowed, based on the reasons/difficulties submitted by the Applicant?

(ii) Whether the ruling of Authority for Advance Ruling, Odisha can be set aside or modified based on changed facts/circumstances as the contract is terminated on dt.04.03.2021?

6.0. The appeal before the Appellate Authority for Advance Ruling, Odisha has to be filed within thirty days from the date on which the ruling sought to be appealed against is communicated in terms of sub-section 2 of Section 100 of CGST Act/SGST Act. On going through the evidence submitted by the Applicant, it is observed that the Applicant has received Advance Ruling order on dt.07.12.2020 through e-mail. The Applicant filed the appeal on dt. 11.01.2021 before the Appellate Authority for Advance Ruling, Odisha, which is six days after prescribed time limit under Section 100(2) of CGST Act,2017/SGST Act,2017. The Applicant has put the reasons for delay which are mentioned below:-

(i) The Applicant is based out of Tokyo, Japan and consultants/authorised representatives are based out of Gurugram, Haryana. Owing to difficulties and restrictions on account of outbreak of COVID-19 pandemic, the Applicant as well as the consultants are working with limited staff,

(ii) The Applicant has to attest appeal papers in physical form and send it by international courier from Tokyo to consultant in Haryana, who in turn, are submitting the appeal documents before the Appellate Authority for Advance Ruling, Odisha,

(iii) The Applicant have account only with Japanese banks, whereas, the application fees for filing this appeal can be paid only through Indian banks. Accordingly, the Applicant has to arrange the payment of the application fees by complying with various bank formalities,

(iv) On account of aforesaid reasons(i.e. COVID-19 pandemic relates difficulties, geographical complexities and banking formalities), the Applicant is filing this appeal with delay of not exceeding thirty days and within the extended time limit prescribed under proviso to sub-section 2 of Section 100 of CGST/SGST Act.

6.1. On going through the reasons submitted by the Applicant, we are satisfied that the delay happened due to the practical difficulties faced by the Applicant on account of restrictions prevailed during that time and outbreak of COVID-19 pandemic. Therefore, we condoned the delay of six days as empowered under proviso to sub-section 2 of Section 100 of CGST/SGST Act, 2017.

7.0. On going through the contract dt. 13.04.2018 and other supporting documents, it is observed that the Applicant M/s.Tokyo Electric Power Company(TEPCO) will perform the following activities as enumerated in contract agreement;-

(i)

> Technology transfer for the outdoor GIS Operation and Maintenance

> GIS Operation and Maintenance manual preparation from the point of power utility company's view

(ii) M/s. TEPCO would undertake GIS O&M training for four OPTCL engineers for one week in Japan during the construction stage of the project. Also, during the construction stage and before the start of operation, TEPCO will demonstrate the O&M procedures using the installed GIS.

(iii) For the purpose of inspection/review of project facility & demonstration of O&M procedures, M/s.TEPCO would send Mr.Osamu Matsuzaki(employee of TEPCO) to India for 4 months starting from October, 2021 (out of 52 months period as mentioned in the original agreement).

7.1. During the personal hearing, the authorized representative Mr.Ankit Bhardwaj, C.A., has argued that the project which was scheduled from 13.04.2018 to 12.08.2022, was terminated from dt.04.03.2021. We have gone through the documents submitted by the Applicant to check the veracity of such termination. The condition for termination is mentioned under Para 2.9.1 .(f) of the general condition of contract which is reproduced below:-

"The Client may terminate this contract in case of the occurrence of any of the events specified in paragraphs (a) through (f) of this Clause GCC 2.9.1. In such an occurrence the Client shall give at least twenty-eight(28) days' written notice of termination to the Consultant in case of the events referred to in (a) through (e); and at least fifty-six(56) days' written notice in case of the event referred to in (f);

(f) If the Client, in its sole discretion and for any reason whatsoever, decides to terminate this Contract".

To substantiate the termination of the contract, the Applicant has submitted contract termination letter issued by M/s.Odisha Power Transmission Corporation Limited vide F.No.CGM(c)/JICA/7(part-II)/2018/39(6) dated 07.01.2021. In pursuance of provision of Clause 2.9.1(f) of general condition of the contract, after 56 days of the notice issued by the Client, the contract will be treated as terminated. Accordingly, we are accepting the Applicant's claim that the contract is treated as terminated on dt.04.03.2021.

7.2. In the event of contract terminated on dt.04.03.2021, the further consultant service to be rendered by the Applicant is suspended. Accordingly, deputing Mr.Osamu Matsuzaki to India for four months also does not arise. But practically four OPTCL engineer have taken training for one week in Japan under M/s. Tokyo Electric Power Company(TEPCO) and other services as mentioned in contract upto march, 2021.The services which are rendered by M/s.TEPCO, was carried out in Japan.

7.3. The Applicant in his grounds of appeal has submitted that in terms of sub-section 2 of Section 103 of the CGST Act/SGST Act, where the facts or circumstances supporting the original ruling of Authority for Advance Ruling have changed the said Advance Ruling shall be ceased to be binding. In this regard, the provision of sub-section 2 of Section 103 of the CGST Act/SGST Act is reproduced below:-

"The advance ruling referred to in sub-section (1) shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed".

7.4. The Advance Ruling Authority has made the advance ruling based on the facts that the Applicant will use the office premises of OPTCL for rendering the consultancy service in India. This situation does not arise as the contract has been terminated. Whatever service has been rendered by M/s. Tokyo Electric Power Company(TEPCO) are executed from Japan. Now it is clear that the fact and circumstances based upon which the advance ruling has been made now changed. In such situation, we hold that ruling passed by the Authority for Advance Ruling, Odisha is not legal & proper as per law.

8.0. Now the issue boils down to the question of taxability of consultancy service rendered(training conducted in Japan) by the Applicant in Japan. In such situation, the place of supply of service is more important. It is already enumerated under sub-section 2 of Section 13 of the IGST Act, 2017 that under such situation place of supply will be location of the recipient of the services. As the recipient of service is M/s.OPTCL in India, then the place of supplied service by M/s. Tokyo Electric Power Company(TEPCO) will be treated as in India.

8.1. The Applicant in his grounds of appeal submitted on dt.06.01.2021 under Para A. 13 has mentioned that the tax liability lies with the recipient of service as per the provision of entry Sl.No.l of Notification No. 10/2017-Integrated Tax(Rate) dated 28.06.2017. The said Notification is reproduced below:-

As discussed under para 8.0 above, the supplier of service M/s. Tokyo Electric Power Company(TEPCO) is located in Japan, which is non-taxable territory. The recipient of service M/s.Odisha Power Transmission Corporation Limited is located in India, which is the taxable territory and place of supply of service will be in India. Therefore, in our view, the consultancy service rendered by M/s. Tokyo Electric Power Company(TEPCO) to M/s.Odisha Power Transmission Corporation Limited upto dt.04.03.2021 covered under Entry Sl.No.l of Notification No. 10/2017-Integrated Tax(Rate) dated 28.06.2017. Accordingly, the tax liability rest upon the recipient of the service i.e. M/s.Odisha Power Transmission Corporation Limited, on reverse charge basis.

8.2. Further, the recipient of service, M/s.OPTCL has agreed to pay,the applicable GST under reverse charge basis, as evident from para 6.3(b) of the Special Conditions of Contract. The same is produced below:-

"The Client shall reimburse the Consultant, the Sub-consultants and the Experts the Goods and Service Tax(GST) and other impositions, if any, under the applicable law in the Client's country. Further, the client shall deduct withholding tax, if any, under the applicable Law of India and deposit the same with the local tax authorities. The client will issue necessary Tax Deducted at Source(TDS) certificate against the withholding tax so deducted.

In case the Client makes payment directly to TEPCO(Non-Resident Company in India) against their part of services rendered in India, Goods and Service Tax(GST) as applicable shall be applied under Reverse Charge Mechanism of GST Law in India".

ORDER

As the facts and circumstances changed as discussed under para 7 above, we are in view that the ruling made by the Authority for Advance Ruling , Odisha vide order No.02/Odisha-AAR/2020-21 dated 01.10.2020, is not legal & proper as per law. The Applicant M/s.TEPCO is not required to take registration. The tax liability of the services already rendered by M/s. TEPCO lies on the recipient of service(M/s.OPTCL) on reverse charge basis in terms of Entry Sl.No.l of Notification No. 10/2017-Integrated Tax(Rate) dated 28.06.2017.