TMI Blog2018 (12) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... ant but provision for the same is made by the OEM on FOC basis. Ruling:- The amortized value of the tool received on FOC basis from the customer is not required to be included in the value of finished goods manufactured and supplied by the applicant to the customer. - GST-ARA-19/2018-19/B-80 - - - Dated:- 31-7-2018 - SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Lear Automotive India Private Limited , the applicant, seeking an advance ruling in respect of the following questions: Whether amortized value of the tool received on FOC basis from the customer is required to be included in the value of finished goods manufactured and supplied by the applicant to the customer? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactures parts by using above tools and supplies the said parts to the Applicant. The Applicant makes the payment to third party manufacturer for components supplied. In above scenario, the third-party manufacturer may include Tool amortization value in components supplied to the Applicant. 6. There is a further possibility that the customers provide the tools to the Applicant on FOC basis to manufacture the products as per its requirement. 7. Similarly, the Applicant also engages another component manufacturer to manufacture the products for the Applicant which are used by the Applicant for its final products and in this regard, the tooling cost is first absorbed by the Applicant and then recharged to the OEM. In such cases, the possession of the tool would remain with another component manufacturer. 8. The present application seeks to understand whether the amortized value of the tool cost needs to be added to the value of the final goods supplied to the customers under the GST laws. 9. Under the erstwhile regime of Central Excise, Rule 6 of the Central Excise Valuation Rules, 2000 required an assessee to calculate the intrinsic value of the excisable goods by inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse or furtherance of business. 3.4. In so far as the valuation of the supply of final goods is concerned, the erstwhile Central Excise regime under Rule 6 of Central Excise Valuation Rules, 2000 required adoption of intrinsic value as the excise duty was levied on the activity of manufacture and whatsoever activity was contributing to the said manufacturing activity was included in the assessable value irrespective of the fact as to who owned the inputs and capital goods. 3.5. However, under CGST Act, Section 15 governs valuation of the supply, which in pertinent part provides as under: 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; Emph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence, once the arrangement is clear from the beginning as to what is in the domain of the supplier and the receiver and both the parties are fulfilling their own obligations, then there should not be any notional addition in the transaction value for the purposes of GST 3.13. In the present case, the Applicant and its customers are not related parties. The only question which requires examination is whether price paid by the customers is the sole consideration for the supply of parts made by the Applicant. In this regard, providing of the tool which is in the domain of the receiver of the supply as per the contractual terms cannot said to be non-monetary consideration provided by the receiver of the supply to the provider of the supply since upon paying the tool development charges, the customers are not incurring any expenses, which the Applicant was liable to incur. Further, the ownership in the tool remains with the customers and the development of tool was always meant to be borne by the customers. Thus, Section 15(2)(b) of the CGST Act 2017 will not be applicable in the facts of the present case and the value of the supply of final goods should be based on transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and aggregated accordingly . For levy of excise duty, value is to be determined per unit of excisable goods. Tools, dies, moulds etc. have their own life span and will be used for estimated production during their useful life. Consequently, depending upon the expected useful life and/or expected number of units likely to be produced, value of tools, dies, moulds etc. supplied by the buyer/customer free of charge to the appellant is to be appropriately apportioned per unit of production. This is where the concept of amortisation comes in specifically in Rule 6. The amount so apportioned is required to be added to the price/transaction value as per clause (ii) of Explanation 1 to Rule 6 read with Section 4(1)(b). The important thing to be noted is that this entire exercise of loading/adding to the transaction value is exclusively for determination of assessable value for central excise purposes and to fulfill the requirement of Section 4 which provides for measure for levy of excise duty. To the same effect is our judgment in the case of CoC v. Ferodo India Pvt. Ltd. vide Civil Appeal No. 8426/02 = 2008 (2) TMI 12 - SUPREME COURT under Rule 9(1)(c) of Customs Valuation (Det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the tool should not be added to the value of the final goods as there is no specific provision under the CGST Act or rules made thereunder to that effect. Conclusion 3.18. In view of the above discussion, it is clear that in the present case, there should not be any notional addition of the amortized value of the tool in the taxable value of the supply of final goods to the customers by the Applicant and also by its vendor to the Applicant as well. Additional Submissions made on 18.07.2018 by the Applicant- A. Under the GST regime, goods which are supplied free of cost would not form a part of the value of the supply under Section 15 of the CGST Act. A.1 The Applicant submits that goods which are supplied free of cost (FOC) would not form a part of value of the taxable supply under the GST regime. Hence, the tools that are provided FOC to the Applicant by its customer would also not be included in the value of the supply. In this regard, reference is made to the Section 15(1) of the Central Goods Services Tax Act, 2017 (hereinafter referred to as CGST Act ) which defines the value of supply as under: The value of a supply of goods or ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay in relation to the supply but if the same is incurred by the recipient of the supply then such amount will be includable in the value of the supply. It is pertinent to note here that the amount to be included in the value of the supply is only such an amount which the supplier was liable to pay but the same was incurred by the recipient of the supply. A.5 To substantiate the position of the Applicant, reliance is placed upon a sample agreement (Agreement dated 01.08.2015 between Mahindra Mahindra and Applicant) (attached herewith as Annexure-I) entered into between the Applicant and its customer. The said agreement clearly states that it is the responsibility of the customer i.e. M M to bear the cost of the tools or give the Applicant its own tools for the purpose of manufacturing products for M M. The relevant portion of the said agreement reads as under: 1. PROVISION OF EOUIPMENT M M hereby agrees to (pay the Toolcost for development manufacture of toolings/ give the vendor its own (Dies, tools, jigs, fixtures, SPMS, etc.) more particularly described in Annexure I attached hereto (hereinafter referred to as the Equipment ), for use by the Vendor, imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uture use. In any case, the Applicant submits that even if it bears the cost of the tools at the start of the assignment the same is charged back to the customer only. Therefore, the tools that are provided by the customer on FOC basis to the Applicant are not includible in the value of the goods supplied by the Applicant. A.10 The above view of the Applicant is further supported by the recent Circular No.47/21/2018-GST dated 08.06.2018 issued by the CBIC. The relevant extract of the circular is reproduced below: Sl.No. Issue Clarification 1 Whether moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manufacturer is leviable to tax and whether OEMs are required to reverse input tax credit in this case? 1.1 Moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there is no consideration involved. Further, since the moulds and dies are pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that there may be scenarios wherein the customer has raised the PO on the Applicant for supply of goods however, the said PO or the terms of agreement between the parties do not expressly state the conditions or responsibility in respect of the provision of tools. In this regard, it is submitted that as a general principle of the principle of business efficacy a slight deviation from the plain meaning of the language of contract would be justified so as to the intention of the parties could be justified. In the case Satya Jain v. Anish Ahmed Rushdie reported at AIR 2013 SC 434 = 2012 (12) TMI 1170 - SUPREME COURT OF INDIA t he concept of business efficacy was explained as under: The principle of business efficacy is normally invoked to read a term in an agreement or contract so as to achieve the result or the consequence intended by the parties acting as prudent businessmen. Business efficacy means the power to produce intended results. The classic test of business efficacy was proposed by Lord Justice Bowen in The Moorcock (1889) 14 PD 64. This test requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exclude the value of goods which have been supplied FOC by the recipient of the supply A.18 The Applicant further submits that the contention made by the Applicant in the above submissions is further supported by the legislative history of Section 15(2)(b) of the CGST Act. In this regard, reference may be taken from the Model GST Law, 2016 (hereinafter referred as Model GST ). Section 15(2)(b) of the Model CST was specifically worded to include the goods supplied on FOC basis in the value of supply under CST. The relevant provision under the Model GST is reproduced herein-under: 15(2) The transaction value under sub section (1) shall include: b) the value apportioned as appropriate of such goods and/or services as are supplied directly or indirectly by the recipient of supply free of charge or at reduced cost for use in connection with supply of goods and/or services being valued to the extent tltat such value has not been included in the price actually paid or payable. A.19 The Applicant submits that the above provision proposed to include the value of goods which had been supplied FOC in the value of supply under the GST laws. However, the above provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of clear necessity and when reason for it found in the four corners of the statute itself. A.23 Therefore, it is submitted that since the requirement for inclusion of goods supplied on FOC basis in the value of supply has been expressly omitted by the legislature itself DI therefore, the same cannot be inferred into the statute unless an arbitrary position is created within the statute. In light of the above, the Applicant submits that the value of tools supplied by the customer to the Applicant are not includable in the value of the goods supplied by the Applicant. Difference between Central Excise and GST regime A.24 Under the Rule 6 of the erstwhile Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (hereinafter the referred to as erstwhile Valuation Rules ), wherein, the price was not the sole consideration for sale, the value of such goods was deemed to be aggregate of such transaction value plus amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. A.25 As per the pre-GST regime where the customer supplied certain material (tools, moulds, designs, etc.) to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant was called upon to show cause why amortization cost in respect of toolings and moulds should not be taxed under Section 3 of the UP Trade Tax Act, 1948. Subsequently, tax was imposed on the amortization cost on the ground that sale price of the auto components should be the same both for purposes of Central Excise Act, 1944 and for UP Trade Tax Act, 1948. The basic issue in the above case was whether Section 4 of the 1944 Act read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ( Excise Valuation Rules 2000 ) can be read into Section 3 of the UP Trade Tax Act, 1948. A.29 The Hon ble Supreme Court held that valuation is matter of principle. Under Section 4 of the 1944 Act, the basis for valuation is the transaction value for each removal. Section 4 lays down the method of arriving at the assessable value of for levying excise duty. The Hon ble Supreme Court further relied upon its own decision in the case of M/s. Chhotabhai Jethabhai Patel v. UOI, (AIR 1962 SC 1006 at p. 1018) = 1961 (12) TMI 1 - SUPREME COURT OF INDIA , wherein the court held that a duty of excise is a tax levy on home produced goods of a specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for inclusion of any amount which the supplier is liable to pay/ incur, however the same is paid by recipient. In this regard, the Applicant has already made a detailed submission in its application as to what constitutes consideration under the CGST Act. B.2 In this regard, the Applicant further invites attention to the case of Commissioner of Service Tax v. Bhayana Builders (P) Ltd. reported at 2018 (10) G.S.T.L 118 (SC) = 2018 (2) TMI 1325 - SUPREME COURT OF INDIA wherein the issue before the Apex Court was whether the goods and/or services supplied free by a service recipient and used for providing the taxable service of construction would be included in the computation of the gross amount, for valuation of taxable service. It was held that the value of the goods and the materials supplied free of cost by a service recipient to the provider of the taxable construction service would be outside the taxable value or gross amount charged as such amounts did not accrue to the benefit of the service provider, being neither monetary or non-monetary consideration paid or flowing from the service recipient. In paragraph 16 of the aforesaid judgment it was observed as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration for Eddie's supply.(Para 91 and 92) 19. GSTR 2001/6 goes on to explain that If Mountain agreed in addition to provide holiday accommodation for Eddie at the Gold Coast, this would constitute non-monetary consideration. It is not something required for Eddie to supply the services to Mountain and it provides Eddie with economic value in return for his supply. Further, had Eddie incurred the costs of the transport, accommodation and meals and on-charged those expenses to Mountain as part of the cost of his services, GST is payable on this on-charge as they represent additional costs for the supply of Eddie's services. (Para 93 and 94) W. Accordingly, it can be said that supplies made by recipient which are consumed within activities undertaken for making the output supply by the provider (which might be a condition to the contract and used in providing output supply), however, the same is not accrued to the benefit of supplier, would not amount to non-monetary consideration. However, supplies made by the recipient, consumed by the provider at its own will and accrued to the benefit of supplier, beyond providing supplies to the recipient, can amount to nonmonet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding goods on FOC basis to the Applicant for the production of seats which is to be used by the Customer, thereby making it non-includable in the value of supply since no consideration is paid for it. C. If goods supplied on FOC basis are included in the value of supply, it would lead to double taxation. C.1 Notwithstanding anything stated above, assuming without admitting if the value of goods supplied on FOC basis is included in the value of supply, then it would amount to double taxation and the same would be contrary to the very scheme of GST law. It is submitted that the very purpose of bringing the GST law into force was to avoid the malice of double taxation, In the present case, it is an established fact that the tools that are provided FOC by the customer have already suffered the incidence of tax. In this regard, the Applicant places on record the invoices raised in respect of tools wherein the applicable GST has been levied. The copy of such invoices are collectively attached herewith as Annexure-4. Therefore, once the tools have already suffered tax and there is no further value addition to the said tools, the inclusion of the value of such tools in the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the submissions already made: 3. At the outset, the Applicant submits that the present additional submissions are being made in light of the specific queries/ points raised by the Hon ble Advance Ruling Authority during the course of the Personal hearing held on 1807.2018. The said queries/ points are reproduced below for reference: I. Who produced the tools as per the Annexure-I of the tooling agreement dated 10.02.2016 and also requested to produce a copy of the Agreement dated 26.05.2015 as mentioned in the above tooling agreement, II. Clarifications with respect to the ownership of the tools in light of the Circular No. 47/21/2018-GST dated 08.06.2018 issued by the CBIC. III. Whether the price of the final products is affected in case where the tools are provided by the customer or in case where the tools are procured by the Applicant and the cost is recovered from customer. 4. Therefore, in light of the above queries, the Applicant submits as follows: SUBMISSIONS A. At the outset, the Applicant submits that goods which are supplied free of cost (FOC) would not form a part of the value of supply under Section 15 of the CGST Act. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring into formal agreements at all the times. B.5 In the Applicant s case, similar to the above pattern, the Applicant approached Mahindra Mahindra Ltd. (hereinafter referred to as for production and improvement of their seats for the Bolero model. The Applicant s offer was accepted and confirmed by M M vide their e-mail dated 26.05.2015 (A copy of the same is attached herewith as Annexure-2) (Please note that since the said email contains the actual agreed price between the Applicant and its customer and the same is a market sensitive information, the Applicant has blacked out the figures which denote the price to maintain confidentiality. Rest of the material details have been kept intact and only the figures have been hidden). B.6 In the above e-mail dated there are 8 types of tools that were ordered by M M. In this scenario, while the Serial nos. I to 6 are crucial for the productions process and highly costly, therefore, the costs associated with the same is borne by M M. The Applicant procures the tools from third-party vendors and uses the same in the production process and simultaneously charges the cost to the customer i.e. M M. The relevant PO raised by the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods, since the said situation is not covered by Section 15(2)(b) of the CGST Act. C.3 It is submitted that the case of Applicant is covered by para 1.2 of the Circular referred above and not in Para 1.3. In this regard, we draw your attention to the agreement dated 10.02.2016 between M M and the Applicant. C.4 The above agreement between M M and the Applicant was executed between the parties for the procurement and use of tools. This agreement dated 10.02.2016 clearly states that it is the responsibility of the customer i.e. M M to bear the cost of the tools or give the Applicant its own tools for the purpose of manufacturing products for M M. The relevant portion of the said agreement reads as under: 1. PROVISION OF EQUIPMENT M M hereby agrees to (pay the Toolcost for development manufacture of toolings/ give the vendor its own _ (Dies, tools, jigs, fixtures, SPMs, etc.)] more particularly described in Annexure I attached hereto (hereinafter referred to as the Equipment ), for use by the Vendor, immediately upon the execution of this Agreement, and the Vendor hereby agrees to use the money for the Equipment for the said use. C.5 Thus, the custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the agreement are mentioned. Further, the said Annexure-1 of the aforesaid agreement also contains the Purchase order no. A003/A6V3200094768 (attached herewith as Annexure-6). Page 2 of the above referred purchase order lays down the terms and conditions as follows: TERMS CONDITIONS 1. The above toolings will be the property of Mahindra Mahindra Ltd. In case of any unforeseen circumstances MS Mahindra Mahindra has the right to lift the toolings from your premises. 2. In the above event, excise duty will be paid by you at the time of physical dispatch of the toolings. 3. Toolings should bear the following words inscribed on them - Property of Mahindra Mahindra Limited . 4. You shall not hypothecate or charge or pledge or create any incumbent whatsoever on the tooling. 5. All the expenses incurred in maintaining above toolings in good running condition will be borne by you, 6. You will be responsible for maintaining the required quality of the components produced from the above toolings. 7. The components produced from the above toolings will be sold to Mahindra Mahindra Ltd. only. 8. You will ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the customer and the supply of such tools is not covered in the scope of the supplier. C.13 Further, the ownership of the said tools involved in the manufacturing process lies with the Original Equipment Manufacturers (OEM). The underlying intention behind assuming the ownership of the tools is two-fold. Firstly, the OEM s interest and the huge cost involved in the tools are safeguarded in the event of any breach/ termination of contract with the component manufacturer like the Applicant. Secondly, since the tools are customized to the OEM s needs, the component manufacturers do not prefer to undertake the expenses and risks associated with the development and procurement of the same as it increases its manufacturing cost significantly and the tools cannot be used for any other process/ products other than that of the respective customer. And, the risk is also associated if the said OEM stops procuring the components manufactured by the component manufacturers due to change in design and any other reasons. Therefore, the ownership of the tools would remain with the OEMs/ customer as that is the only viable business practice in the present transactions. C.14 The Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction in light of the clause 10. C.18 The Applicant submits that in the present case is not the case where the customer of the Applicant i.e. M M has deducted any amount from the Applicant while making supply of the tool rather there exists a specific contract for the supply of tools and the same categorically states that the tools shall remain the property of the Customer. It is important to note that such an understanding is agreed from the very beginning. Further, the supply of tools does not in any way affect the price of the final goods, thus the same would not form a part of the value of taxable supply of goods in the present case. C.19 In light of the above, the Applicant submits that the present transactions are squarely covered by Serial No. (ii) of the Circular No. 47/21/2018-GST dated 08.062018 and cannot said to be covered by Sr. No. (iii) of the said Circular. Accordingly, the value of the tools should not be included in the value of supply. D. Response to Query 3. Whether the price of the final products is affected in case where the tools are provided by the customer or in case where the tools are procured by the Applicant and the cost is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Clarification 1 Whether moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manufacturer is leviable to tax and whether OEMs are required to reverse input tax credit in this case? 1.1 Moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed on such moulds and dies by the OEM. 1.2 It is further clarified that while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer on FOC basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured or and arranged by components manufacturer. Jurisdictional Officer Sh. A.Y. Jadhav, Suptt. Pune I Commissionerate appeared and stated that they have already made their submissions. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. We find that:- Lear Automotive India Pvt. Ltd. (hereinafter referred to as Applicant) is registered person under the GST ACT. The Applicant is engaged in the manufacture of automotive seats which are manufactured in its various plants located in the state of Maharashtra and for various customers such as Ford Motor Private Limited Volkswagen India Private Limited, M/s. Mahindra Mahindra Ltd, General Motors, etc. (hereinafter referred to as customers by using tools/moulds either provided by them or owned by them. 1. The Applicant submitted that it undertakes the design, development and the manufacture of such seats at its own manufacturing facilities. Since the seats and other related products manufactured by the Applicant are highly customized, the Applicant procures certain tools, moulds, dies, fixtures, jigs etc. on its own whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed on such moulds and dies by the OEM. 1.2 It is further clarified that while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer on FOC basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act for short). 1.3 However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the said use. 2. Vendor s Warranties The Vendor warrants that till the Equipment is returned to Mahindra and Mahindra Ltd., it shall: i) Retain and maintain the Equipment, at all times, in its possession and control at its plant (disclosed and approved sub suppliers location) and not remove the same therefrom without prior written permission Of Mahindra and Mahindra Ltd. iii) Paint the Equipment with blue colour on all the edges of the top and bottom plates, for clear identification. The die number and supplier (Equipment manufacturer name) will be indicated in white/ yellow colour on the top plate from face. iii) Affix a nameplate or other mark on the Equipment identifying the sole and exclusive ownership of Mahindra and Mahindra Ltd. And not allow or permit the same to be removed or defaced; iv) Hold the Equipment as the agent of Mahindra and Mahindra Ltd. And not claim any right, title or interest in the Equipment to the detriment or prejudice of Mahindra and Mahindra Ltd.; v) Use the equipment exclusively for the manufacturer of the Products for Mahindra and Mahindra Ltd. vi) Inform Mahindra and Mahindra Ltd. in writing if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The Vendor shall in any event ensure by giving such notice to any third party about the ownership of Equipment belonging to M M as may be necessary, that any such sale, mortgage, charge, demise, or other disposition as the case may be is subject to the rights of M M, as the sole and exclusive owner of the Equipment, to repossess the Equipment at any time (whether or not the same or any part thereof shall have become affixed to the said land or building) and for that purpose, to enter upon such land or building and reclaim and repossess the equipment lying there at. 5. Taxes and Statements It is agreed between the parties that the transaction covered by this Agreement is not a sale liable to tax under the existing sales tax laws. If, however, by reason of any amendment of Central or State law or any interpretation of the transaction by the sales tax authorities, this transaction or any Input or material or the Equipment used or supplied in execution of or in connection with this Agreement is held to be liable to tax, the Vendor shall pay such tax immediately upon the same becoming payable and further indemnify and keep M M indemnified in connection with all liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re supplied to customer like M M and GM for which tax invoices are raised in respect of said supply of tools along with levy of applicable GST. In view of the details as above, it is clearly indicated that the tools procured by the applicant from third party vendor, are ultimately supplied to customer for which tax invoice is raised and applicable GST has been charged. Thus the absolute ownership of the tools get transferred to the OEM. However the physical possession of the tool remains with the applicant during the manufacturing process or till the time they are removed by the customer from the premises of the applicant. The tools which are supplied to M M and GM by the applicant in this case are on payment of GST and are further supplied by the customer to the applicant for use in the process of the manufacture clearly indicate that the supply of tool is of goods owned by M M and GM to appellant which is on FOC basis. And thus the transaction is not covered by the scope of section 15(2) which reads as under :- 15. Value of taxable supply. (1) ------------- (2) The value of supply shall include ----- (a) ------ (b) any amount that the supplier i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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