TMI Blog2019 (3) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is the price paid or payable by the recipient provided the supplier and recipient are unrelated parties and price is the sole consideration for the supply. Further Section of the said Act specifically states that where any amount which the supplier is liable to pay in relation to a supply but the same has been incurred by the recipient on behalf of the supplier, then such amount is required to be added while determining the transaction value. On going through the terms and conditions of the contract between the Appellant and DICV, it is evident that the Appellant is required to use DICV Owned Tools concerning the part to be manufactured with the tool. The tool shall be used only for the purpose of fulfilling its manufacturing obligations under the supply contract - in this case, the customer, DICV, has assumed the responsibility to provide the tools to the Appellant in the interest of ensuring that there is uninterrupted supply of their parts. While the first priority is that the supplier should use the DICV Owned Tools for the manufacture of the component parts, there is also the possibility that Non-DICV Owned Tools can also be used for the manufacture of parts for the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F THE CASE 1. M/s. Nash Industries (I) Private Limited is registered under GST with GSTIN No. 29AADCN9558Q1ZC and is a manufacturer of sheet metal pressed components and supplies to industrial customers like Automotive, Banking Hardware, Power Protection, Alternate Energy etc. The tools required to manufacture these components were designed and manufactured by the Appellant. Such manufactured tools are billed to the customer and the payment is received for the same but the tools are retained by the Appellant for the manufacture of components. 2. The Appellant had filed an application for Advance Ruling under section 98 of the CGST Act, 2017 and KGST Act, 2017 on the following question: a. Whether the amortized cost of the tools is to be added to arrive at the value of the goods supplied for the purpose Of GST under Section 15 of the CGST Act read with Rule 27 of CGST Rules. 3. The Karnataka Authority for Advance Ruling, vide Advance Ruling No. NO. KAR ADRG 24/2018 dated 25th October 2018 = 2018 (11) TMI 607 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA . (hereinafter referred to as Impugned Order) gave the following ruling: The amortised cost of tools w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies belonging to the Component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis; the amortised cost of such moulds/dies shall be added to the value of the components. In such cases, the OEM will be required to reverse the credit availed on such moulds/dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former s business 4.3. They submitted that the above circular covers two situations, which are as follows: a. The value of the moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a 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. b. 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 the component manufacturer on FOC basis-the amortised cost of such moulds/dies shall be added to the value of the components. 4.4 They submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above submissions, the Appellant pleaded that the ruling of the Authority for Advance Ruling is required to be modified. Personal Hearing: 5. The Appellant was called for a personal hearing on 19.02.2019 and were represented by Shri. Rajesh Kumar T.R, Chartered Accountant. He reiterated the submissions made in the grounds of appeal. The representative also filed additional submissions before this Authority wherein they stated that the Maharashtra Authority for Advance Ruling in the case of Lear Automotive India Private Ltd had passed a ruling GST-ARA-19/2018-19/B-80 dated 31.07.2018 = 2018 (12) TMI 766 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA on the same issue i.e. 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. The Maharashtra AAR had based on the facts and circumstances of the case before them, held in the negative. Relying on the above said order they submitted that the same is also applicable in their case. During the personal hearing, this Authority asked for the details of the terms of the contract betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope of what constitutes supply is stated in Section 7 of the CGST Act which reads as under: 7. (1) For the purposes of this Act, the expression supply includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration ; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. In so far as the valuation of the supply is concerned, Section 15 of the CGST Act provides that the value of taxable supply shall be the transaction value which is the price paid or payable by the recipient provided the supplier and recipient are unrelated parties and price is the sole consideration for the supply. Further Section of the said Act specifically states that where any amount which the supplier is liable to pay in relation to a supply but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are not the property of DICV (hereinafter Non-DICV Owned Tools ) To ensure the aforementioned distinction is made appropriately, DICV Asset Accounting team will provide Asset Identification Tags to the supplier, which should be affixed in the most appropriate place of DICV Owned Tools. Regardless of ownership, the supplier must handle all tools and other equipments with the degree of care necessary to guarantee that DICV is properly supplied without any interruption. 2.1 The supplier is hereby authorized and required to use DICV Owned Tools within the framework of the supply Contract concluded with DICV concerning the parts to be manufactured with the tools. The supplier shall use the tools only for the purpose of fulfilling its manufacturing obligations under the supply contract. Hence the supplier is prohibited front any deviating use of DICV Owned Tools in Particular the use of tools for production of parts to supply third parties or the transfer of usage to third parties or unauthorized handover of tools to third parties, without the prior written consent of DIC.V. 2.2 The supplier shall retain DICV Owned Tools at the location as originally ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using the tool. During the course of temporary possession of the tools owned by DICV, the Appellant is required to affix Asset Identification Tags on the DICV Owned Tools in order to identity the DICV owned tool. On completion of the contractual relationship, the Appellant is required to return the tools to DICV. In so far as Non-DICV Owned Tools are concerned, the terms of the contract state that in order to ensure uninterrupted supply of parts, DICV obtain ownership of the existing and subsequent tools by way of security. Thus it is evident that, in this case, the customer, DICV, has assumed the responsibility to provide the tools to the Appellant in the interest of ensuring that there is uninterrupted supply of their parts. While the first priority is that the supplier should use the DICV Owned Tools for the manufacture of the component parts, there is also the possibility that Non-DICV Owned Tools can also be used for the manufacture of parts for the customer. In the event of the second possibility, the customer, DICV takes ownership of the Non-DICV Owned Tools by way of a security only with the objective of ensuring that the supply of their parts by the Appellant is uninterru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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