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2023 (1) TMI 1093 - AAAR - GSTClassification of supply of service - composite supply or not - activity of design and development of patterns used for manufacturing of camshaft for a customer - intermediary service or not - non-speaking order - violation of principles of natural justice. Whether activity of appellant is an intermediary service as held by the MAAR or as contended by the appellant, an activity of design and development of patterns/tools used for manufacturing of camshafts, for a overseas customer is a composite supply where the principal supply is supply of services? HELD THAT:- It is appellant who prepares the drawing and designs of tool / pattern and also check feasibility of its manufacturing. The techno commercial offer is being made by the appellant to overseas OEM / Machinist. Overseas OEM / Machinist releases the purchase order, for specific number of units of tools, after approval of techno commercial offer. The appellant undertakes in-house drawing, design, modelling, simulation and documentation for manufacture of the tools. Whereas, it hires third party vendor for machining (manufacturing) the tool as per specification provided by the appellant. The third party vendors charge for the manufacture of tools, which is paid by the appellant. The third party vendor delivers the tool to appellant, of which appellant further raises supply invoice to overseas OEMs / Machinist specifying therein the description of goods (tools), quantity, rate per unit, etc. However, as industry practice in this sector appellant keeps such tools with it for further use in manufacture of camshaft. The invoice raised by the appellant also exhibits that the tools of specific designs as per the specifications of overseas customer are supplied to them. Thus, from perusal of the purchase order placed by the overseas customers and supply invoice raised by appellant, it is clear that dominant intention of overseas customer is to get the supply of manufactured pattern/tools from the appellant as per specification provided by them. Thus, it is clear that the appellant is making such supply of tools on his own against the consideration which is price for tools and hence, there is no issue of receiving commission from overseas customers. Appellant is not facilitating any supply between overseas entity and third party vendor. The impugned transaction is supply of goods i.e. tools from appellant to customer on principal to principal basis. Considering these facts of and definition of “intermediary” provided under section 2(13) of the IGST Act, 2017, it is very much clear that appellant is not an “intermediary”. Hence, the findings of the MAAR that the impugned activity is an intermediary service is erroneous and not acceptable. On careful perusal of the definition of the term “composite supply” and the essential conditions enumerated in the definition, it is seen that the composite supply comprising two or more taxable supplies of goods or services or both, or any combination thereof should be made by a taxable person to a recipient - However, in the instant case, considering the facts of the case, it is amply clear that impugned transaction between appellant and overseas customer is of supply of goods i.e. pattern/tool of specified specifications. Hence, contentions of the appellant that impugned transaction is composite supply where the principal supply is supply of services is not valid. In view of the above discussion, we hold that the impugned transaction is supply of goods i.e. pattern/tool of specified specifications. Thus, the impugned transaction between appellant and overseas customer is supply of goods.
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