STERLING AND WILSON PRIVATE LIMITED
V.
THE JOINT COMMISSIONER & ORS.
WRIT PETITION NO. 20096/2020 DATED 10.01.2025
HIGH COURT: ANDRA PRADESH
Facts: The petitioner is engaged in setting up Solar Power Plants, had been paying GST at 5% on turnover. The assessing authority issued a show cause notice on September 17, 2019, proposing to tax the petitioner at 18% GST, claiming that their activities were Works Contracts. The petitioner disagreed, asserting their activities should be treated as composite supply under Section 2(30) of the GST Act, with a 5% GST rate.
A tax demand of 63,00,19,512 along with an equal amount as a penalty was raised, the petitioner’s appeal to the Appellate Authority reduced the penalty to ₹6,30,01,952 but upheld the tax assessment. The petitioner approached the Court, arguing that the remedy of appeal was unavailable as the GST Tribunal had not been constituted.
Issue: Whether the machinery in question, specifically the solar power generating system, qualifies as immovable property based on its attachment to the earth? whether the petitioner’s supply of solar power plants should be treated as a composite supply, taxable at 5%, or as a works contract, taxable at 18%, under the GST Act?
Held that: The solar power generating system should be treated as immovable property, and the contract would fall under the definition of a works contract, subject to the appropriate tax rate under the CGST Act, 2017. The attachment to the earth for operational stability did not alter its classification as movable property for tax purposes.
Noted that, a works contract involves the construction of immovable property. The Court differentiated between composite supply and works contract, stating that the supply of solar power plants, if considered movable property, would be taxed at 5%. However, if treated as a works contract (involving immovable property), it would attract 18% GST.
The Court referenced the Sirpur Paper Mills Limited v. The Collector of Central Excise judgment, reinforcing the view that machinery fixed to the earth temporarily for operational reasons does not become immovable property.
The case of Duncan Industries Limited vs. State of Uttar Pradesh and Ors. was also cited, where the machinery in question was held to be immovable based on the facts, as it was permanently embedded in the earth for the purpose of running a fertilizer factory.
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