TMI Blog2019 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... Like in the case of rule 3 of Cenvat Credit Rules, 2004 which refers to credit of duty paid by the inputs manufacturer and not duty payable , section 16 of the Act refers to the credit of input tax charged and not chargeable . The appellant M/S MRF Ltd can avail the Input Tax Credit of the full GST charged on the undiscounted supply invoice of goods/ services by their suppliers. A proportionate reversal of the credit is not required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform, in the circumstances mentioned by them and discussed above. This is subject to their fulfilling the other conditions stipulated by law and that the GST paid by them for the said goods/ service is not reversed or reimbursed/ re-credited etc to them in any manner by the supplier or on his behalf, after the credit has been availed by M/s. MRP. - AAAR/04/2019 (AR) - - - Dated:- 24-6-2019 - THIRU M. AJIT KUMAR AND DR. T.V. SOMANATHAN, MEMBER At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M) on key trigger points such as supplier activity on the portal to engage with suppliers at the opportune moment. Client Finance team provide guidance on desired APR, minimum APR and cash pool. C2FO algorithms will use these settings to take a decision on which invoices are awarded for early payment by client. By accepting C2FO s Terms and Conditions, the Supplier will be agreeable to offer certain discount in return for an early payment of an Invoice from the recipient of goods or services (i.e., the appellant). On the online platform C2FO, where post sale, post supply and post issue of invoice depending on the early payment schedule offered by the supplier, the buyer (appellant) can accept discount and make payment. Then a commercial credit note would be issued. The payment would be made one time for each invoice at the discounted price along with the GST paid by the Supplier on the undiscounted value. They state that they do not fall under Section 15(3) (a) or (b) of CGST Act, 2017, hence the value of supply should be full undiscounted value. In the light of the above, they wanted to know whether, when GST is paid on full value by supplier and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the case, the provisions of Section 16 of the CGST/TNGST Act have no applicability, as there is no failure on their part to pay the commercial price to the supplier The interpretation adopted by the AAR is wholly erroneous as it seeks to categorize persons who have paid the full commercial price to the supplier and persons who have not paid the full commercial price to the supplier together and deny Input tax credit in both cases, which is both against the letter as well as the spirit of Section 16 The impugned AAR ruling is wholly contrary to the position set out in clarification of CBEC vide Circular No. 122/3/2010-S.T. dated 30.04.2010 in the context of Rule 4(7) of the CENVAT Credit Rules 2004, wherein it is clarified that In the cases where the receiver of service reduces the amount mentioned in the invoice/ bill/ challan and makes discounted payment, then it should be taken as final payment towards the provision of service. In the case under consideration, there is no non-payment of GST on the correct taxable value and also no non-payment of the commercially agreed upon price by them to the supplier. Therefore, in the said fact p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Hence, when the fundamental requirements are satisfied, denial of the just input tax credit on the narrow interpretation of the proviso to Section 16 is not maintainable and deserves to be set aside. Proviso to Section 16 has to be read in harmony with the main provision of Section 16 which stipulates the conditions for entitlement of ITC. The proviso cannot be read to defeat the main purpose of Section 16 which makes the recipient eligible for credit Proviso is applicable to a case where a recipient fails to pay to the supplier the amount towards the value of supply along with tax payable thereon. In their submissions, the intention of the Proviso is to exercise control of genuine supplies which are not backed by payment by the recipient within the generally accepted terms of payment period from the date of invoice(i.e., maximum of 180 days). This Proviso is inserted in the Law to ensure that the Purchases accounted by recipient are genuine. The Proviso read with Rule 37 of the CGST Rules, 2017 apply to cases of failure to pay the value and tax to the supplier and not cases where value paid to the supplier is reduced as a result of mutual settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority on 30 th May 2019. The Authorized representative of the Appellant Shri. S.Karthik, Advocate and S/ Shri. Nagaraja GM-IDT, S.K.Patnaik, GM-Taxation and Subhajit Das, DGM- Taxation of the Appellant Company appeared for hearing. They handed out a compilation of Statutory Provisions Circulars and Case Laws. The learned representatives reiterated the written submissions submitted along with the Appeal Application filed by them. DISCUSSION : 6. We have carefully considered the various submissions made by the Appellant and the applicable statutory provisions. The issue before us for determination is whether, the appellant i.e. M/S MRP, the buyer of the goods and/or services, can avail the ITC of the full GST charged on the undiscounted supply invoice or a proportionate reversal of the same is required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform. 7. From the submissions we find that the appellant intends to enter into an arrangement with C2FO for setting up an interactive automated data exchange which can be installed for data interaction relating to sale purchase of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation .-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed : it cannot imply anything which is not expressed : it cannot import provisions in the statute so as to supply any deficiency : (ii) Before taxing any person, it must be shown that he fills within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature s failure to express itself clearly . Taking guidance from the Principles set out above, it would be fruitful to examine the provisions of sections 9, 15 and 16 to understand the legal issues clearly expressed and whether there is any ambiguity. Section 16 having being reproduced earlier, relevant portions of sections 9 and 15 of the Act are reproduced below. Section 9 of CGST Act 9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. It is observed that none of these conditions are satisfied in the matter under reference as per averments made by them, since the proposed discount would not be recorded in the invoice issued in respect of such supply and in case of the discount given after the supply has been effected, it is not established in terms of an agreement entered into at or before the time of such supply nor is the input tax credit as is attributable to the discount proposed to be reversed by the appellant who is the recipient of the supply. Hence the value would continue to be the value as determined under section 15(1), on which GST has been charged. There appears to be no ambiguity in law when applied to the scheme as mentioned in their application for advance ruling. A conjoint reading of Sections 15 and 16 leads to the conclusion that a registered person is entitled to take full credit of the input tax charged on the supply of goods or services or both. The provisions of the second proviso to section 16(2) would come into play only where the buyer/ recipient fails to pay the supplier of goods the amount towards the value of the supply. This is not the situation here. The buyer has discharged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representations have been received from trade and industry seeking clarification on the issue whether proportionate credit should be reversed in cases where a manufacturer avails credit of the amount of duty paid by supplier as reflected in the excise invoice, but subsequently the supplier allows some trade discount or reduces the price, without reducing the duty paid by him. 2. The issue has been examined. Since, the discount in such cases are given in respect of the value of inputs and not in respect of the duty paid by the supplier, the effect of reduction of value of inputs may be that the duty required to be paid on the inputs was less than what has been actually paid by the inputs manufacturer. However, the fact remains that the inputs manufacturer had paid the higher duty. Rule 3 of Cenvat Credit Rules, 2004 allows credit of duty paid by the inputs manufacturer and not duty payable by the said manufacturer. There are many judgements of Hon ble Tribunal in this regard which have confirmed this view. 3. In view of above, it is clarified that in such cases, the entire amount of duty paid by the manufacturer, as shown in the invoice would be a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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