RULING ON INPUT TAX CREDIT ON CASH CARRY VANS: JOURNEY FROM AAR TO HIGH COURT AND AGAIN AAAR

[Dr. Sanjiv Agarwal]

The Advance ruling on whether input tax credit shall be allowed on cash carry vans under GST law was taken to Advance Ruling Authority, Maharashtra by M/s CMS Info Systems Ltd. which travelled upto High Court and then back to Appellate Advance Ruling Authority.

Before Advance Ruling Authority

On the issue of whether input tax credit will be available on motor vehicles being cash carrying vans used for cash management business and on which there was difference of opinion between the members of AAR, the matter was referred to AAAR for giving appropriate ruling. IN RE : CMS INFO SYSTEM LIMITED [2018 (5) TMI 649 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA ].

Before Appellate Advance Ruling Authority

The applicant filed application for advance ruling seeking ruling on allowability of input tax credit on cash carry vans. Since the two members of AAR differed in opinion, the matter was referred to AAAR.

Transportation of cash is done through security vans, popularly known as cash carry vans. The applicant purchases raw motor vehicles and with the requisite fabrications, gets it converted to cash carry vans. The applicant also pays GST on fabrication. For this purpose, the applicant purchases motor vehicles and pays Goods and Services Tax. Credit of such GST is not availed by the Applicant presently. While purchasing cash carry vans under pre-GST era, the applicant had paid Central Excise Duty as well as Value Added tax. When these vans cannot be used further, the applicant sells these motor vehicles as scrap. In certain cases, instead of purchasing motor vehicles, the applicant prefers to hire these motor vehicles.

It was argued that what may be cash or money in general perception is nothing but goods for them as they are into business of its transportation which cannot be accepted because definition of goods/money under Central Goods and Services Tax Act, 2017 is common to all.

As per section 2 (52) of CGST Act, 2017, 'goods' means every kind of movable property other than money, clearly excludes money from the purview of goods under the GST law. While ‘money’ means the Indian legal tender……., but shall not include any currency that is held for its numismatic value. Since the cash carry vehicles are deployed to carry cash and bullion for other than for numismatic purposes, the cash carried by them is to be construed as money and not goods. If 'Money' is not covered as 'Goods' in the definition of 'Goods' under CGST Act, then it is not 'goods' for everyone and it cannot be said that it is not 'goods' for general perception and it is 'goods' for the Appellant.

It was therefore, ruled that Input Tax Credit is not available to CMS Info Systems Limited on purchase of motor vehicles i.e. cash carry vans, which are purchased and used for cash management business and supplied post usage as scrap.

AAAR has ruled that Input Tax Credit will not be available to CMS Info Systems Limited on purchase of motor vehicles i.e. cash carry vans, which are purchased and used for cash management business and supplied post usage as scrap.

The Appellate Authority for Advance Ruling has given this ruling vide Order dated 06.08.2018 and reported in IN RE: CMS INFO SYSTEMS LTD. [2018 (8) TMI 977 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA]

Before High Court

The company challenged the impugned AAAR, Maharashtra Order before Bombay High Court.

In the petition, challenge was to a ruling pronounced by the AAAR, Maharashtra dated 06.08.2018, which said that input tax credit is not available on purchase of motor vehicles (Van) to carry cash on the ground that money is excluded from the definition of goods as provided under the GST Act, 2017. Thus, the petitioner was not entitled to input tax credit in view of Section 17(5) of the GST Act.

The AAAR order was challenged for the flaw in the decision making process i.e. not dealing with the principal submissions of the petitioners (after recording the same in the impugned order) viz. input tax credit would be available in respect of motor vehicles used for transport of money, in view of the definition of 'goods' and 'money' in the GST Act.

The court relied upon JSW Energy Ltd. v Union of India 2019 (6) TMI 717 - BOMBAY HIGH COURT, for setting out parameters for exercising writ jurisdiction in respect of order passed by the AAAR under the GST law. Accordingly, the court confirmed itself to the principles of judicial review, which, inter alia, will include the issue as to whether there has been a failure of natural justice at the appeal stage, thereby vitiating the decision making process leading to making of the impugned order.

The court observed that the fundamental submission of the petitioner before the AARA was the fact that money would stand covered by the definition of 'goods' under section 2(52) of the GST Act so long as the same is not used as legal tender. This was on the basis of the definition of money provided in Section 2(75) of the GST Act. The aforesaid principal submission though recorded, had not been dealt with at all in the impugned order. Reliance placed in the impugned order upon the press note issued subsequent to a GST Council recommending to allow of input tax credit in respect of the motor vehicles used for transportation of money, would not by itself lead to the conclusion that prior thereto, money was not included within the definition of goods. This has to examined in terms of the definition of 'goods' and 'money' found in GST Act. The entire issue before the AAAR as raised by the petitioner was whether the vans/motor vehicles in which the petitioners were transporting cash, would be money for the purpose of section 2(52) of the GST Act. This aspect has not been dealt with in the impugned order dated 6th August, 2018 of the AAAR.

It was therefore, held that the decision making process has not been complied with by the Authority. It is necessary for the Authority to consider the submissions made by the parties before it and give its findings in the context of the submissions made. Ignoring a submission would render the order vulnerable to judicial review by the Court. The AAAR Order was therefore, set aside and restored to AAAR for fresh disposal after considering the submissions made by the appellate and give reasoned conclusions.

Before Appellate Advance Ruling Authority (on High Court remand)

On being remanded back to AAAR, Maharashtra, CMS Info System Ltd. once again was  at the doors of AAAR who has now ruled that input tax credit in respect of cash carry vans used to transport cash shall be allowed.

After HC’s order to hear and decide on the matter, the AAAR concurred with the company’s submission that what is being transported is not the ‘money’ but ‘goods’, as they cannot use it for any purpose and hence, the same cannot be used as legal tender at any stage of the performance of the services rendered by them. Therefore, it inferred that the subject money transported in cash carry vans by them, ceases to be anything except goods under the facts.

The AAAR thus concurred with asseesee’s contentions and allowed input tax credit on purchase and fabrication of cash carry vans, a specially designed vehicle for transportation of cash / currency in terms of RBI guidelines. The AAAR considered money as goods and not legal tender (other goods) for purpose of transportation and its nature being goods while being transported. Department’s contention that money be treated differently from other goods was held to be devoid of any merit and hence not tenable, being erroneous and absurd.