TMI Blog2018 (12) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... per the definition of supply of services. In the GST Law, the taxable event would be SUPPLY. Hence it is the most important part of the GST law, as it will determine the taxability or otherwise under the GST law. The definition of Supply in the CGST Act, is an inclusive one. It is contained in Section 7 of the CGST Act. Apart from Section 7, Schedules I to Ill are provided which explain various provisions related to supply. From the transaction between the applicant and PIL, it is clear that in respect of the costs paid and received there is no supply of goods/ services in the form of sale, transfer, barter, exchange, etc. and therefore there is no requirement to pay GST on such costs paid by the applicant to PIL However in respect of the fixed costs paid by the applicant to PIL, it is very clear that the said fixed costs are paid to PIL because they are providing job work services to the applicant - For these services rendered there is a consideration which flows from the applicant to PIL in the form of fixed costs . The entire services rendered by PIL and the consideration paid by the applicant for receiving such services is in the course of furtherance on business of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of alcoholic liquor for human consumption? ii. Without prejudice to the submissions made elsewhere, if the supply of Beer is held to be a service by way of job work in relation to Beer, what shall be the rate of CGST/UTGST/IGST that shall be levied on the said taxable supply ? 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 provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02 FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS: 1. Crown Beers India Private Limited ( Applicant ) is a company incorporated under the provisions of the Companies Act, 1956. The applicant has entered into a Tie-up Agreement ( Agreement) with P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Affixation of labels, marks and trademarks to the Products, the manner of production and Quality control procedures to be maintained in the manufacture of Products by the PIL (Clause 5.2 of the Agreement). d. The PIL shall maintain in force, at all times during the term of the Agreement, full and complete insurance cover for Products, raw materials and ingredients used in the Manufacture of Products and work in process in relation thereto by nominating Crown as the beneficiary. Cost of aforesaid insurance shall be to the Account of Crown (Clause 4.11 of the agreement). e. In consideration for fulfilment of the above mentioned obligations by the PIL to manufacture the Products in terms of the agreement, the PIL shall be entitled to a fixed fee for the Products so manufactured, calculated and payable in accordance with this Agreement (Clause 2.3 of the Agreement). The aforesaid fixed fee is calculated after considering the following costs / incurred by PIL: i. Cost of all raw materials and ingredients used to manufacture the Products, based upon parameters agreed under the Agreement on actual price basis; ii. Labor and manpower cost upon actual cost, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant application for advance ruling under Section 97 (1) of the Maharashtra Goods and Services Tax Act (hereinafter referred to as the MGST Act) Read with Section 96 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) and Section 20 (xviii) of the Integrated Goods and Service Tax Act, 2017 (hereinafter referred to as the IGST Act). In accordance with the above mentioned Provisions, the Applicant is desirous of obtaining an advance ruling on certain questions Arising out of the Agreement. The said questions have been detailed in S. No. 14 of this Application. The Applicant s submissions in relation to the said questions are enumerated below in response to S. No. 16 of this application for advance ruling. STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE QUESTIONS RAISED The Applicant pays to PIL a fixed fee (calculated by including all the cost incurred as specified in Schedule II to the Agreement by PIL and its profit margin) as a consideration for brewing/ Manufacturing, packing and supply of Products. Supply of Products, being in the nature of Alcoholic liquor for human consumption, is excluded from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods and services or both by the Central Government. Under the CGST Act, Section 9 (1) specifically provides for the levy of CGST on all intra- State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption . Similarly, the MGST Act provides for provisions for levy and collection of GST on intra-State supply of goods or services or both by the State Government of Maharashtra. Under the MGST Act, Section 9 (1) specifically provides for the levy of MGST on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption . As far as the IGST Act is concerned, the same provides for provisions for levy and collection of tax on inter-State supply of goods and services or both by the Central Government. Under the IGST Act, Section 5 (1) specifically provides for the levy of IGST on all inter- State supplies of goods or services or both, except on the supply of alcoholic liquor of human consumption 4. Based on a plain reading of Article 366 (12A) of the Constitution of India, Section 9 (1) of the CGST Act / MGST Act and Section 5 (1) of the IGST Act, it is respectfully submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd part of the consideration is the amount representing the costs specified in Schedule Il to the Agreement, which includes, inter alia, the cost of procuring raw materials and ingredients, power cost and manpower cost, required for brewing/ manufacturing, packing and supplying Products. The said costs are essentially a consideration charged by the PIL on Applicant for supplying Products i.e. alcoholic liquor for human consumption. 8. Based on a conjoint reading of the provisions relating to levy of CGST/MGST/IGST and the provisions relating to scope of supply under the CGST Act/MGST Act / IGST Act, it is humbly reiterated by the Applicant that supply of alcoholic liquor for human consumption is excluded from the very purview of taxability at the threshold itself. Furthermore, it is submitted that there is no Constitutional authority at all to levy GST on any form of supply of alcoholic liquor for human consumption in terms of Article 366 (12A) of the Constitution of India. 9. In addition to the above mentioned submissions, the Applicant would like to point out that prior to the Constitution (One Hundred and First Amendment) Act, 2016. Entry 84 to List I (Union List) of Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Applicant s contention that there shall be no levy of CGST/MGST /IGST on the fixed fee and costs specified in Schedule Il to the Agreement paid by the Applicant to PIL as the same are in relation to supply of alcoholic liquor for human consumption 12. Without prejudice to the submissions made above, the Applicant pre-empts that the Revenue may contend that S.No. 3 of Schedule II to the CGST Act/ MGST Act provides that any treatment or process which is applied to another person s goods is deemed to be a supply of services and, therefore, the activities carried out by PIL on goods obtained from suppliers nominated by the Applicant shall be leviable to CGST/MGST/IGST as a supply of service . In this regard, it is firstly submitted that in the instant facts, the PIL is not working on another person s goods. This is a case where the PIL purchases the required materials on their own and then manufactures and packs Products out of such goods. Therefore, it cannot be said to be any treatment or process which is applied to another person s goods . In any case, it is humbly submitted by the Applicant that merely because any treatment/process applied to another person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act. Once that is the case, the Revenue cannot place reliance on the scope of supply provided within the CGST Act/ MGST Act / IGST Act to argue that GST can be levied on supply of alcoholic liquor for human consumption if the same amounts to a treatment/ process on another person s goods. To substantiate this contention, reference may be made to the judgment of the 7-judge Bench of the Hon ble Supreme Court in Re Kerala Education Bill, 1957 Reference under Article 143 (1) of the Constitution of India, AIR 1958 SC 956 = 1958 (5) TMI 47 - SUPREME COURT OF INDIA wherein it was held that Even the legislature cannot do indirectly what it certainly cannot do directly . Similarly, a Constitution Bench of the Hon ble Supreme Court in State of Punjab v. Devans Modern Breweries Ltd, (2004) 11 SCC 26 = 2003 (11) TMI 628 - SUPREME COURT OF INDIA held that It is a well-settled principle of law that a thing which cannot be done directly cannot be done indirectly . Relying on these judgments, it is humbly contended by the Applicant that once the supply of alcoholic liquor is excluded from the very definition of GST under the Constitution of India as well as from the charging p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Tax (Rate) dated 28.06.2017, as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017 i.e. Services by way of job work in relation to all food and food products falling under Chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 1975', Accordingly, if brewing, bottling and supplying Beer i.e. alcoholic liquor for human consumption is considered to be a taxable supply, the same shall be levied CGST at the rate of 2.5% in terms of Notification No. 11/2017-CentraI Tax (Rate) dated as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017. Similarly, there shall be a levy of UTGST at a rate of 2.5% on the said taxable supply in terms of Notification No. 11/2017-State Tax (Rate) dated 29.06.2017, as amended by Notification No. 31/2017- State Tax (Rate) dated Also, there shall be a levy of IGST at the rate of 5% on the said taxable supply in terms of Notification No. 8/2017-lntegrated Tax (Rate) dated as amended by Notification No. 39/2017-lntegrated Tax (Rate) dated 13.10.2017. Additional submissions of applicant WRITTEN SUBMISSIONS ON BEHALF OF CROWN BEERS INDIA PRIVATE LIMITED 1. Crown Beers India Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat PIL is a manufacturer of alcoholic liquor for human consumption and holds the requisite licences under the State excise laws (Recital (b), Clause 1.3.1(a) and (d) of the Agreement). ii. That the Products which are the subject matter of supply are alcoholic liquor for human consumption as is clear from the definition of Products under Clause 1 (u) of the Agreement which defines Product (S) iii. The raw materials for the manufacture of alcoholic liquor for human consumption are purchased by PIL and it shall arrange for labour and all other facilities for inputs for manufacturing alcoholic liquor for human consumption (Clause 2.1.1 of the Agreement). iv. The Applicant is the risk taker and is entitled to profits from the sale of alcoholic liquor for human consumption (Clause 3.1 and 3.5 of the Agreement). v. PIL is entitled to a fixed fee for manufacture and supply of alcoholic liquor for human consumption (Clause 2.3 and 7.3 of the Agreement). vi. Sales invoices are raised by PIL for delivery of alcoholic liquor for human consumption in favour of buyers/ distributors identified by the Applicant. vii. That the manufactured alcoholic liquor for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MGST Act, Section 9 (1) specifically provides for the levy of MGST on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption . As far as the IGST Act is concerned, the same provides for provisions for levy and collection of tax on inter-State supply of goods and services or both by the Central Government. Under the IGST Act, Section 5 (1) specifically provides for the levy of IGST on all inter- State supplies of goods or services or both, except on the supply of alcoholic liquor of human consumption . Furthermore, Article 366 (12A) was inserted in the Constitution of India which defined goods and services tax to mean any tax on supply of goods, or services or both except taxes on the Supply of the alcoholic liquor for human consumption . Based on a plain reading of Article 366 (12A) of the Constitution of India, Section 9 (1) of the CGST Act / MGST Act and Section 5 (1) of the IGST Act, it is respectfully submitted that supply of alcoholic liquor for human consumption has been expressly excluded from the ambit of levy of CGST/MGST/IGST. 8. It is humbly submitted that with the passing of the above mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any tax not mentioned in either of those Lists. Under the GST regime, however, the Parliament and the State Legislatures have been specifically empowered under the Constitution to make laws with respect to GST. Further, Constitution itself defined goods and services tax under Article 366 (12A) to specifically exclude taxes on the entire scope of supply of alcoholic liquor for human consumption, whether such supply is that of supply of goods or supply of services. Accordingly, it is submitted that no taxes in the nature of GST can be levied on the supply of alcoholic liquor for human consumption. 11. In this regard, reference may also be made to GST Council s Minutes of the 26th Meeting dated 10.03-2018 on GST on liquor license fee wherein the GST Council approved that GST was not leviable on licence fee and application fee, by whatever name it is called, for alcoholic liquor for human consumption and that this would also apply mutatis mutandis to the demand raised by Service Tax/Excise authorities on licence fee for alcoholic liquor for human consumption in the pre-GST period. The Central Government has subsequently accepted this decision of the GST Council. Reference may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from the levy of CGST / MGST / IGST. Therefore, it is the Applicant s contention that there shall be no levy of CGST / MGST / IGST on the consideration paid by the Applicant as the Same are in relation to supply of alcoholic liquor for human consumption . Accordingly, insofar as the above mentioned contention in the Revenue Submissions is concerned, it is humbly submitted that the same is an incorrect interpretation of the statutory provisions and liable to be rejected. Advance Ruling No. KAR ADRG 9/2018 29.06.2018 = 2018 (7) TMI 835 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA referred to in the Revenue Submissions supports the Applicant s contention that the manufacturing activity undertaken by PIL is not in the nature of supply of services and. therefore, no GST is liable to be paid on the same 14. In the Revenue Submissions, reliance has been placed on the Advance Ruling No. KAR ADRG 9/2018 29.06.2018 = 2018 (7) TMI 835 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA given by the Authority for Advance Ruling, Karnataka (Karnataka Advance Ruling ) in the case of M/s. United Breweries Limited ( UBC). The facts of the Karnataka Advance Ruling are similar to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job work is provided under Section 2 (68) of the MGST Act. In terms of Section 2 (24) of the IGST Act, the above mentioned definition of job work under the CGST Act shall also apply to the IGST Act. In this regard, it is humbly submitted in terms of the above mentioned definition of job work, an activity can be said to be job work only if such treatment or process is undertaken by a person on goods belonging to another registered person . 18. Further, S. No. 3 Of Schedule II to the CGST Act / MGST Act provides that any treatment or process which is applied to another person s goods is deemed to be a supply of services , Therefore, an activity can be said to be supply of service in terms of S. No. 3 of Schedule Il of the CGST Act / MGST Act only if such treatment or process is applied to another person s goods. 19. In the present case, PIL is undertaking the manufacturing activity on its goods procured and paid for on its own. In this regard, sample invoices have already been filed to demonstrate that PIL is purchasing the raw materials by itself and is the owner of the raw materials. The said invoices are enclosed herewith and marked as Annexure-4. Therefore, it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule Il of the Agreement), it is humbly submitted that if brewing, bottling and supplying Products is considered to be a taxable supply, it could potentially fall within the ambit of manufacturing services on physical inputs owned by others. In the present case, all the activities under consideration i.e. brewing, bottling and supplying Products are in relation to beer which is classifiable as Customs Tariff Item 2203 00 00 of the First Schedule to the Customs Tariff Act, 1975. Accordingly, the said taxable supply will specifically fall within the scope of S. No. 26 (1) (f) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.102017 (Services by way of job work in relation to all food and food products falling under Chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 1975 ). 23. It is humbly submitted that under the notifications prescribing rate of CGST /MGST/IGST on prescribed services, it has been specified that the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, the Section and Chapter Notes and the General Explanatory Notes of the First Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 9(1) of the MGST Act / Integrated Goods and Services Tax (hereinafter referred as IGST) under section 5(1) of the IGST Act can be levied on the above mentioned consideration paid for supply of alcoholic liquor for human consumption? 2) Without prejudice to the submissions made elsewhere, if the supply of Beer is held to be a service by way of job work in relation to Beer, what shall be the rate of CGST/UTGST/IGST that shall be levied on the said taxable supply? In this connection, I am submitting my submission as under: M/s. Crown Beer India Pvt Ltd has entered into a Tie-up Agreement with M/s. Privilege Industries Limited (PIL) whereby PIL undertakes to manufacture the products at its Bottling unit and perform certain allied activities like. 1) Purchasing the required raw materials, arranging labour and all other facilities and inputs, in compliance with the standards prescribed under the agreement, for the purpose or manufacturing the product i.e. Beer. 2) Maintaining physical stock of products in the bottling unit or in bonded or other warehouses and 3) Preparation of sales invoices, ensuring timely dispatches and delivery of the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant is as follows:- The applicant incurs to the PIL a fixed fee and costs specified in Schedule II to the Agreement as a consideration for supply Of Products. Supply of Products, being in the nature of aIcoholic liquor for human consumption, is excluded from the ambit of Central Goods and Services Tax Act, 2017 ( CGST Act) / Maharashtra Goods and Service Tax Act, 2017 (MGST Act )/ Integrated Goods and Service Tax Act, 2017 ( IGST Act ). Whether Central Goods and Services Tax (hereinafter referred to as the CGST ) under Section 9(1) of the CGST Act/ Maharashtra Goods and Service Tax (hereinafter referred to as the MGST ) under Section 9(1) of the MGST Act/ Integrated Goods and Service Tax (hereinafter referred to as the IGST ) under Section 5 (1) of the IGST Act can be levied on the above mentioned consideration paid for supply of alcoholic liquor for human consumption? With respect to the costs incurred by the applicant, we find that the costs are paid by the applicant to PIL as a consideration for purchasing the required materials, arranging labour and all other facilities and inputs by PIL on behalf of the applicant, so that as per the agreement entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed costs . The entire services rendered by PIL and the consideration paid by the applicant for receiving such services is in the course of furtherance on business of both, the applicant and PIL. Hence this amount is liable to tax under the GST Laws and such tax is payable by the supplier of service i.e. PIL. Now We examine the second question raised by the applicant which is as follows:- Without prejudice to the submissions made elsewhere, if the supply of Beer is held to be a service by way of job work in relation to Beer, what shall be the rate of CGST/UTGST/IGST that shall be levied on the said taxable supply? With regard to this question we may mention that supply of beer as such is not a service. What is service in this case the entire gamut of brewing/ manufacturing, packaging and supplying beer by PIL to the applicant, for which they are receiving fixed costs for job work as discussed above. If the applicant had brew/manufactured, packaged and supplied beer on their own account then their activity would not have been liable to tax under the GST laws since the supply of alcoholic liquor for human consumption is not taxable under the GST laws. In the discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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