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TMI Blog2020 (6) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... A. M/s. Ordnance Factory, Bhandara (hereinafter referred to as 'Appellant' or OFBa interchangeably) having its corporate head office at, Jawahar Nagar, Bhandara, Maharashtra - 441906 is a unit of Ordnance Factories Board (OFB) functioning under the Department of Defence Production and Supply of Ministry of Defence, Government of India. There are 41 Ordnance factories in India in total, each engaged in different activities like production of finished products and their parts relating to arms, ammunitions, explosives, military clothing, etc. Established in the year 1960, the main business of the Appellant is to manufacture propellants and commercial explosives for use by sister factories for production of finished products like arms and ammunitions, which are ultimately supplied to Indian defence and military forces. Thus, the Appellant acts as a feeder factory for goods such as explosives and propellants for its sister Ordnance Factories that use such goods for production of finished goods. However, some of the manufactured goods are also directly supplied to depots and units of defence and military forces, as per requirement. The Appellant also sells a small part of its manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r their stay on per day basis that are different for such different guest houses. G. The factory estate is huge and some portion of it has been let out on leasehold basis for commercial purposes like daily needs shops, banks, etc. Our organisation collects lease rentals from the tenants of such let out immovable property. H. Other ailied establishments like local accounts office & SQAE arc also functioning for the factory & within the factory. These organisations though a separate entity, they are units of the Central Government and function for OFBa. Local accounts office provides services related to accounting of transactions of OFBa. Payment of bills of OFBa etc. to OFBa & SQAE provides service related to quality control & checking of products of OFBa. The cost of salary & other expenses related to such allied establishments is included in the total cost of manufacturing of final products of OFBa &. thus, forms part of the value of taxable supply. Employees of such establishments are also provided residential quarter for accommodation and monthly license fees is collected from them in respect of such accommodation. The employee strength of such organisations is extremely small ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other activities relating to such hospital. d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. e) Expenditure related to purchase of LPG cylinders used within industrial canteen. 3) Whether the exemption to a 'defence formation' for preparation and generation of E-way bills is applicable to Ordnance factories & other Central Government & public sector Undertakings (PSU's) that function under the Ministry of Defencc, Government of India? 4) Whether exemption on payment of GST on transport of 'military or defence equipment through a goods transport agency applicable to goods transported by our organisation? 5) Whether Input Tax Credit is to be reversed on finished goods that are destroyed during testing? 6) Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues? 7) Being a part of the Ministry of Defence, Government of India, whether the following notifications are applicable to our organisation and what shall be the impact of such notifications: - a) Notification No. 2/2018-Central Tax (Rate), in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhandara in respect of all the matters raised from Sr. nos. a) to h) above except Sr. nos. c) & h). So, this appeal is against all Sr. nos. from a) to h) except Sr. nos. c) & h). 2. The reason of such ruling not being pronounced in favor of Ordnance Factory Bhandara for the aforementioned matters is that the AAR, Maharashtra has failed to recognize Ordnance Factory Bhandara as "Central Government". This failure is despite the fact that it was clearly mentioned in the application to AAR, Maharashtra, that Ordnance Factory Bhandara is "Central Government" on the following grounds: - "As per section 2(53) of the CGST Act, 2017, 'Government' means the Central Government. As per clause (23) of section 3 of the General Clauses Act, 1897 the 'Government' includes both the Central Government and any State Government. As per clause (8) of section 3 of the said Act, the 'Central Government', in relation to anything done or to be done after the commencement of the Constitution, means the President. As per Article 53 of the Constitution, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or indirectly through officer subordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial nature of Ordnance Factory Bhandara & having an apex body in the Ordnance Factory Board, the legal opinion of the Department was that Ordnance Factory Bhandara cannot be treated as "Government" defined under section 2(53) of the CGST Act, 2017. Such opinion of the Department was accepted by the AAR, Maharashtra & it ruled that Ordnance Factory Bhandara cannot be treated as "Government" since Ordnance Factory Bhandara is not created by the constitution of India as a legislative, executive or judicial authority of the country. 6. It seems that the AAR, Maharashtra has not properly analyzed the meaning of "Government". It has contended that Ordnance Factory Bhandara is not "Government" since it is not created by Constitution of India as a "legislative, executive or judicial authority" of the country. However, AAR, Maharashtra did not take cognizance of the fact that the Constitution of India need not "create" the organisations intended for functioning of the country. The Constitution only lays down the framework demarcating fundamental political code, structure, procedures, powers, and duties of government institutions and sets out fundamental rights, directive principles, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97, the 'Central Government', in relation to anything done or to be done after the commencement of the Constitution, means the President. As per Article 53 of the Constitution, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or indirectly through officer's subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President." 10. Thus, from a joint reading of all the above, it becomes quite obvious that "Central Government" is one where the President exercises the executive powers by himself or the officers subordinate to the President exercise the executive powers of the Union vested in the President in the name of the President. 11. It is pertinent to note here that all the powers provided to Ordnance Factory Bhandara's officers and decisions taken in Ordnance Factory Bhand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter such definition & explanation of "Central Government" in detail whereas similar proofs that Ordnance Factory Bhandara is a "Central Government" were provided to AAR, Maharashtra during hearing proceedings. 14. Kindly also take note of the fact that the AAR, Maharashtra during hearing proceedings had orally agreed to on the basis of the facts of the case that Ordnance Factory Bhandara is "Central Government". However, it ruled to the contrary in its final order. 15. Also, AAR, Maharashtra should have clearly spelt out the status of Ordnance Factory Bhandara in its order, that is, if AAR, Maharashtra ruled that Ordnance Factory Bhandara is not "Government", then what should be the status of Ordnance Factory Bhandara as AAR, Maharashtra should have mentioned in its order which was not so done. 16. It is worth mentioning here that the PAN of Ordnance Factory Bhandara is also a proof of the legal status of Ordnance Factory Bhandara. The PAN of Ordnance Factory Bhandara is "AAAGG0001Q", that is, the 4th letter of the PAN is "G" which stands for "Government." Accordingly, the constitution of business as mentioned in GST registration of Ordnance Factory Bhandara is "Government De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. As per para 5(e) of Schedule Il to the CGST Act, 2017, "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" is an activity that shall be treated as a supply of service. However, Sr. No. 62 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate)(enclosed herewith) specifies that, "Services provided by the Central Government, State Government, Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union territory or local authority under such contract" shall attract NIL rate of tax. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government". However, as explained above, Ordnance Factory Bhandara is "Central Government" and hence the aforementioned exemption in respect of payment of GST to "Central Government" on services provided by it by way ot tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices related to supply of food and beverages. Thus, such supply of food and beverages by the factory to factory employees inside the industrial canteen falls within the category of 'services' as per the aforementioned clause 6 of Schedule II to the CGST Act, 2017. However, in terms of the aforementioned Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central Tax (Rate), supply of services by the Central Government to non-business entities attract 'NIL' rate of tax. Thus, since such supply of food and beverages is done to factory employees that are non-business entities, the charges recovered by the factory from such employees for such supply attracts 'NIL' rate of tax since Ordnance Factory Bhandara is "Central Government" as explained above. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government". e) Community hall provided on rental basis to employees of the factory: There is a community hall within the factory estate that is let to be used by the factory to its employees for their personal purposes like family gatherings, marriages, other social functions etc. Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. So, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate), such services of conducting examinations provided by Ordnance Factory Bhandara attract 'NIL' rate of tax since the provider of service (Ordnance Factory Bhandara) is "Central Government" and the recipient of services(candidates) are nonbusiness entities. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government". h) Rent recovered from residential quarters of employees: No appeal is preferred against the ruling prescribed in sub-question h) of Question No. 1. 20. Appeal against ruling pronounced for Question No. 2: -The Question No.2 that was asked for in Form ARA-01 is as follows: - Whether Input Tax Credit on expenditure on the goods and services consumed by our organisation in following activities shall be available: a) Maintenance of garden inside the factory premises. b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices or both used or intended to be used in the course or furtherance of business." Hence a clear intent to broad base the input tax credit is evident from the above. Also, the term "used or intended to be used in the course or furtherance of business" has been used to expand the scope of inputs & input services to those activities that have some direct or indirect nexus to business of the supplier. 23. So, it requested to the Hon. Appellate Authority for Advance Ruling to decide upon the admissibility of Input Tax Credit in relation to the following services keeping in view the aforementioned intention of the Hon. Finance Minister of broadening the Input Tax Credit base. Even in the erstwhile laws relating to Excise Duty & Service Tax, the essential requirement of a service to be considered as "Input Service" for availing CENVAT Credit of the same as per Rule 2(1) of the CENVAT Credit Rules, 2004, was that such service should be used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. There is a plethora of decisions by various High Courts &various benches of Tribunal (CESTAT) in which it was adjudged that CENVAT Credit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered to be "used or intended to be used in the course or furtherance of business" as per section 16(1) of the CGST Act, 2017 and Input Tax Credit should be available in respect of expenditure done on such services on the following counts:- i) Gardening is essential & mandated by Maharashtra Pollution Control Board to maintain quality of ambient air & prevent air& water pollution and also a condition precedent as laid down by the said Board, without which Ordnance Factory Bhandara cannot resort to its business activity of manufacturing. ii) Garden creates better atmosphere and environment which increases working efficiency and thus its maintenance is essential in the course of business for better running & furtherance of business. iii) Cost of such 'gardening expenses' forms part of the cost of the final products and thus forms part of the value of taxable supply. iv) Reliance is placed on the following judicial pronouncements of the Tribunal (CESTAT) & various High Courts, wherein it was adjudged that CENVAT Credit of Service Tax was allowable on expenditure related to maintenance & upkeep of gardens in the factory: - In M/s. Rane TRW Steering System Ltd. vs The Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of garden is not a supply that can be considered as a supply used or intended to be used in the course of furtherance of business of the applicant which is to manufacture Propellants and Explosives. Hence the applicant is not eligible to avail ITC of the tax paid by them on the same. The services availed in relation to plantation and gardening within the plant area will not qualify for Input Tax Credit. {n an appeal filed by the Commissioner of Commercial Taxes and GST, Odisha against an order of the AAR, Odisha, the Hon. AAAR, Odisha held that availing input tax credit for services in relation to plantation and gardening within the plant area, including mining area and the premises of other business establishments is allowed. Thus, it is our contention against the order of AAR, Maharashtra that availment of Input Tax Credit in relation to maintenance of garden inside the factory premises should be allowed. b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities! residential quarter buildings of employees roads, footpaths, street lightings and other parts of estate area that are locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory. The Ordnance Factory Board decided to develop such residential facilities within the factory estate since the factory is located at a remote area and employees from different parts of the country are recruited to work over here in Ordnance Factory Bhandara. The residential colony is an l industrial township' and the appellant is responsible to provide all types of municipal services in the colony. If the employees are not provided a proper residential colony with all the aforementioned facilities and establishments, there would be no availability of proper staff and labor required for continuous manufacturing activities. Thus, such services procured in relation to such establishments are necessary for furtherance of business of our organization since these services help in maintaining the basic living standard of the employees who in turn are responsible for running the day-to-day business of the factory. Cost of such services forms part of the cost of the final products and thus forms part of the value of taxable supply. Reliance is placed on the following judicial pronouncements of various High Courts & Tribunals wherein it was adjudged that CENVAT Credit of Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is away from the city. Unless the residential colony is constructed near the factory, the appellant will not be in a position to get the proper/adequate manpower for running its plant activities and thus set aside the order passed by the Id. Commissioner (Appeals) of denying CENVAT credit of service tax taken by the appellant on maintenance and repair work of their residential colony. In the case of CCE Meerut Vs. M/s. Bajaj Hindustan Ltd. = 2015 (9) TMI 1216 - CESTAT NEW DELHI, the dispute was in relation to allowance of CENVAT Credit of Service Tax paid on construction services to the respondent for construction of residential colony/dormitory located in the precinct of the factory. The Hon. New Delhi bench of the Tribunal held that construction of residential colony/dormitory adjacent to the factory premises was the necessity because of the location of the factory in a remote area, where if the accommodation is not provided to staff/workers, the continuous/round the clock manufacturing activity will hamper. Further, the cost towards such construction has also been considered as expenditure in the books of accounts of the respondent. Therefore, such construction activity w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistration building with various other establishments within the factory estate like residential quarters, market area and other establishments mentioned above. Thus, the Input Tax Credit related to expenses mentioned in "Annexure B" in relation to such interconnected roads should be admissible on the following grounds: a) The road ranging from the main entrance gate from where the factory estate begins up to the factory premises is used for inward and outward transportation of raw materials & finished goods and is thus used in the course or furtherance of business. b) The roads within the factory estate; that is the establishments like residential quarters, hospital, guest houses, market area and all other establishments as mentioned above are also used for the purpose of business of Ordnance Factory Bhandara since as argued above all such establishments are there for the benefit of employees of the factory& thus such roads are used in the course of business of Ordnance Factory Bhandara. c) The cost of such services forms part of the cost of the final products and thus forms part of the value of taxable supply. (iv) End that is currently not used for any purpose whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same are not available to them." We wish to appeal against such ruling of AAR, Maharashtra based on the aforementioned arguments and case laws and contend that availment of Input Tax Credit on maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate should be allowed. c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital: - The specific transactions in respect of which ruling on entitlement of input tax credit is required is specified in the enclosed "Annexure D". Hospital is run by Ordnance Factory Bhandara and is also located within the factory estate but outside the precincts of the area where factory & administrative building is there. The medicines and other facilities are provided to employees of the factory without any consideration. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide occupational health services through Factory Hospital. Thus, as per the amended section 17(5) (b) of the principal CGST Act, 2017, Input Tax Credit in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital should be allowed since such inputs and input services are used in respect of supply of health services to employees and their families that are mandatory to be provided under Ordnance Factory Medical Regulations. We wish to appeal against such ruling of AAR, Maharashtra based on the aforementioned arguments and case laws and contend that availment of Input Tax Credit on medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents and expenditure on maintenance, upkeep and other activities relating to such hospital should be allowed. d) Expenditure related to maintenance and upkeep of guest houses maintained by organization: - The specific transactions in respect of which ruling on entitlement of input tax credit is required is specified in the enclosed "Annexure E". Guest houses are run by Ordnance Factory Bhandara and is also located within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 704 (Tri. - Bang.)] = 2009 (4) TMI 129 - CESTAT, BANGALORE, it was held that Guest House is used for businessmen during visit to the company in connection with the business. It is indeed related to business activity. The appellants are rightly entitled for credit. All the aforementioned arguments and case laws were presented before the AAR, Maharashtra. However, the AAR, Maharashtra ruled that - "we find that provision of guest houses is a perquisite for their employees and therefore tax paid on maintenance and upkeep of guest houses cannot be allowed as ITC. Guest houses are generally used for temporary accommodation of employees as well as outsiders, such provision of guest house cannot be treated as an activity in course or furtherance of-its business and related to the applicant's business. Further, we' find that the goods, or services, or both pertaining to Guest House are used for personal consumption of the employees/guests and are not used or intended to be used in the course of furtherance of business. As such in view of provisions of section 17(5)(g), no ITC is available to the applicant. Hence, we hold that they are not eligible for ITC on taxes paid for maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employees have food and beverages by paying a nominal amount of money on no-profit-no-loss basis. Also, as per section 16(1) of the CGST Act, 2017, "Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person." Thus, Input Tax Credit in relation to LPG cylinders that are re-filled for use in industrial canteen should be allowed as per amended section 17(5) (b) & 16(1) of the CGST Act, 2017. 24. Appeal against ruling pronounced for question No. 6: -The Question No.6 that was asked for in Form ARA-Ol is as follows: - Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues? As per the provisions of GST law, Input Tax Credit on receipt of goods/services is available only when payment in respect of such receipts is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Ordnance Factory Bhandara is "Government" and hence it is eligible to claim exemption in respect of payment of GST to 'Central Government" on services provided by it by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government as stated in aforementioned sub-question a) of Question No. 1 of the application. Secondly, AAR, Maharashtra also stated that "ultimately Ordnance Factory Bhandara would be paying a lesser amount to their suppliers against supply of goods received, which would result in lesser payment being made by the supplier towards GST." This is contention of AAR Maharashtra is factually incorrect on following two grounds: a) Ordnance Factory Bhandara would be paving a lesser amount to its suppliers against supply of goods received: - Lesser payment in respect of L.D cases is made due to deduction of L.D from supplier's payment. Deduction of L.D is an act of tolerating non-performance of supplier on account of delay in delivery of goods or services and is as such a manner of compensating the supplier for his dues and not lesser payment against supply of goods/services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidated Damages from the payment to be made to the supplier. Enclosed herewith is a copy of voucher for such transaction. The code head 01/806/01 is used for recording the taxable amount, CGST amount and SGST amount and the code head 01/802/01 is used for recording the L.D amount in the enclosed copy of the transaction voucher. Thus, the accounting entries for both these transactions where L.D was deducted proves that full taxable amount and GST amounts were paid to the supplier by Ordnance Factory Bhandara and L.D is merely a deduction from suppliers' payments and a manner of penalizing the supplier for non-fulfillment of contractual obligations. b) such lesser payment to supplier made by the supplier towards GST: The taxable value of goods/services does not change due to L.D deduction. The supplier shall have to pay tax on the entire taxable amount and not just only on the amount after deduction of CD. In the two illustrations enumerated in a) above, both the invoices are appearing in GSTR-2A of Ordnance Factory Bhandara with filed status and no credit notes have been raised by the supplier in respect of these two invoices which means that even the supplier understands th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 3/2018- Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. c) Notification No. 36/2017 - Central Tax (Rate), in relation to payment of tax on reverse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. The AAR, Maharashtra answered in the negative for all the three aforementioned sub-questions of question no. 7 of the application by contending that the notifications are not applicable to Ordnance Factory Bhandara since it is not "Government". 30. We wish to appeal against such ruling of AAR, Maharashtra based on the facts and explanations given for Question No. 1 that Ordnance Factory Bhandara is indeed "Government" and hence all the three aforementioned notifications in Question No. 7 to the application should be applicable to Ordnance Factory Bhandara. Applicant's Supplementary Submissions dt.12.10.2019 31. Further proof that Ordnance Factor Bhandara is "Central Government" since it is established under Ministry of Defence by Government of India: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e organization is having Apex Body and industrial status. Hence, the contention of appellant that their organization is 'Government" is not legal and correct. As per Sr. No. 62 (heading 9991 or 9997) of Notification No. 12/2017-Central Tax(Rate) dated 28th June 2017 provide NIL rate of Tax in respect of services provided by the Central Government, State Government, Union Territory or Local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union Territory or local authority under such contract. Hence, the ordnance factory is not liable to get exemption under Notification No. 12/ 2017-Central Tax (rate) dated 28-06-2017. b. Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract condition. Submission by Department: - As per the provisions of section 15 (2) (d) of CGST Act, the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. Further, as per the Section 2(31) of CGST Act, "consideration" means any payment made or to be made, whether in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ready reference. e. Community hall (Multipurpose Hall) provided on rental basis to employees of our organization. Submission by Department: As per the schedule II (Section 7) of CGST Act 2017, renting of immovable property shall be treated as supply of service. In the appellant's own case, they have provided Community hall (Multipurpose Hall) on rental basis to their employees shall be covered under the definition of supply of services as defined in CGST Act 2017 and hence they are liable to pay GST on the amount charged by them from their employee towards the renting of their community hall. The appellant is not entitled for any exemption under Notification No. 12/2017-Central Tax(rate) dated 28-06-2017, since their organization is not defined under government since the organization is having Apex body and Industrial status. f. School bus facility provided to children of the employees. Submission by Department: - As per Sr. No. 66 (heading 9992) of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017-no GST liability on Transportation of students faculty and staff. Hence as per the said provisions, the appellant is not liable to pay GST on such taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty undertaken by the appellant. The said activities are neither relating to business nor relating to manufacture of final products and its supply. The said activity may be welfare activity undertaken while carrying on the business but to qualify as input service, the activity must have nexus with the business of appellant. The expression "in course or furtherance of business" appearing in section 16(1) of GST Act refers to activities which are integrally related to the business activity and not welfare activity. Hence, no ITC is available on such supplies of services. c. Medicines purchased by the hospital maintained by our organization and used for the treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. Legal Submission by Department: The hospital/ dispensary maintained by the appellant for its employees and their dependents come within the definition of "Clinical Establishment" and such supply of service is exempted under Sr. No. 74, heading 9993 of the Notification no. 12/2017-Central Tax (Rate) dated 28th June 2017. Consequently, the input tax credit on such exempted supply of services is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. Question: -6) Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues: Legal Submission by Department: As per the provisions of section 16 of CGST Act,2017, the ITC is available to recipient subject to actual payment equal to supply of goods made to such supplier. If the recipient makes lesser payment towards liquidated damages from supplier, the recipient is eligible to take ITC proportionally equal to actual made to such supplier. Hence, the appellant is required to reverse ITC to that extent. 37. Question: -7) a. Being a part of the Ministry of Defence, Government of India, what is the impact of the Notification No.2/2018 Central Tax (Rate), in relation to services by an arbitrator or an advocate to their organization. Legal Submission by Department: As per Sr.No.45 of the Notification No. 12/2017 Central Tax (Rate) dated 28th June,2017 as amended by Notification No. 02/2018-CT(rate) dated 25-01-2018, the services provided by an arbitral tribunal to (i) any person other than a business entity or (ii) a business entity with an aggregate turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhandara has not been treated as Govt. as defined under Section 2(53) of the CGST Act, 2017. Also, the Hon'ble Central Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi vide its final Order No. 50646/2017 dated 06.02.2017 in respect of Service Tax Appeal No. ST/ 50007/2014- [DB] in the matter of M/s. Mukesh Kalway v/s C.C.E, Bhopal = 2017 (3) TMI 615 - CESTAT NEW DELHI has held at Para 09 that: - "Regarding tax liability on cleaning activities under taken by the appellant in the premises of ordnance factory, we note that the definition covers industrial building and premises thereof. Ordnance factory premises are covered by industrial building. Even otherwise clause (ii) of the definition clearly mentions factory as one of the premises covered for tax liability. The factory in the present case is not in relation to agriculture, horticulture, animal husbandry or for dairying. As such in the absence of any exclusion from the statutory definition, we find the appellants are liable to service tax on this account." Even, another bench of Delhi Authority for Advanced Ruling, State Goods and Service Tax, Delhi vide Advanced Ruling No. 06/DAAR/2018 dated 23.04.2018 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution only lays down the framework demarcating fundamental political code, structure, procedures, powers, and duties of government institutions and sets out fundamental rights, directive principles, and the duties of citizens. They further argued that the responsibility & decision of formation of organisations like Ordnance Factory Board & the associated Ordnance Factories under the Board is of the Union Government of India and that the executive power of the Union Government is vested in the President in terms of Article 53 of the Constitution and the same shall be exercised by him either directly or indirectly through officers subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President. They further pointed out that AAR, Maharashtra had ruled that Ordnance Factory Bhandara is not "Government" since it is engaged in research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group A gazette officers are appointed through union public service commission on behalf of President of India. 46. The Appellant further stressed that Ordnance Factory Board Procurement Manual is a manual issued by the Ordnance Factory Board for procurement of stores for production in Ordnance Factories. This has been finalized by MoD in consu:tation with Integrated Detence Finance and has the approval of Hon'ble Raksha Mantri. Para 7.25 of the "Ordnance Factory Board Procurement Manual" states that- "All defence contracts are in the name, and on behalf of the President of India." They have also furnished a copy of a Supply Order placed to a vendor wherein the Supply Order has been placed on & signed on behalf of the President of India by the concerned officer of Ordnance Factory Bhandara. 47. The Appellant have also produced an appointment letter of an officer of Ordnance Factory Bhandara to manifest that the recruitments of the officers in the Ordnance Factory Bhandara are done on behalf of the President of India. 48. Thus, the Appellant contended that all the executive functions of Ordnance Factory Bhandara like recruitment, procurement etc. are done on behalf of the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and on behalf of the President of India only. Further, the signatures on the supply order placed to the Vendors, the Acceptance of the Tender, etc., clearly exhibits that all these executive works are being carried out in the name, and on behalf of the President of India. Thus, it is adequately evident that the Ordnance Factory Bhandara, the Appellant, is nothing but 'the Central Government' in accordance with the provision of section 2(53) of the CGST Act, 2017 read with clause (8) of section 3 of the General Clauses Act, 1897 read with Article 53 & Article 77 of the Constitution of India. We also agree with the Appellant's contention, wherein they averred that nowhere under law was it mentioned that "Government" cannot undertake activities relating to "research, development, production, testing, marketing and logistics of a comprehensive product range in the areas of air, land and sea systems"; and that "Having an industrial status" was the result of the nature of activities carried out by Ordnance Factory Bhandara, and "functioning under the Ministry of Defence and being controlled by an apex body (Ordnance Factory Board)" is a result of the organizational structure put in pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has not appealed against the ruling pronounced in respect of the question 1 (c) of the Advance Ruling Application filed by them, the same is not being considered here for the discussion and ruling thereupon. 56. Now, we will examine question 1(d) asked by the Appellant as to whether Food and beverages supplied at industrial canteen inside the factory premises will attract GST or not. In this regard, the Appellant has submitted as under: As per Clause G of Schedule II to the CGST Act, 2017, "supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration" shall be treated as a supply of services. There is an industrial canteen inside the factory premises that serves food and beverages to employees of the factory. Neither is alcoholic liquor served in the industrial canteen nor is the industrial canteen air conditioned. Nominal charges for such food and beverages are recovered from the employees on no profit basis in order to cover the day-to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by the factory from its employees in lieu of such use. As per clause (zz) of the definitions contained in notification no. 12/2017-Central tax (Rate), "Renting in relation to immovable property" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. Thus, the service provided by the factory to its employees for letting them use cultural hall for their personal purposes falls within the definition of "Renting in relation to immovable property". However, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate), such services provided by Ordnance Factory Bhandara attract 'NIL' rate of tax since the provider of service (Ordnance Factory Bhandara) is "Central Government" and the recipient of services(factory employees) are non-business entities. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch examinations. So, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate), such services of conducting examinations provided by Ordnance Factory Bhandara attract 'NIL' rate of tax since the provider of service (Ordnance Factory Bhandara) is "Central Government" and the recipient of services(candidates) are nonbusiness entities. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government". 63. As regards the above question raised by the Appellant, again we refer to the reasoning made in the above para 56 and conclude that the Appellant, being 'the Central Government' is providing services to the candidates, who are undoubtedly the non-business entities, by way of conducting exams for various vacancies in the factory, hence such services, rendered by the Appellant to such non-business entities, will not be subject to GST in accordance with the provisions of Sr. No. 6 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. 64. Since no appeal has been preferred against the ruling pronounced in respect of the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be falling within the scope of "used or intended to be used in the course or furtherance of business" as per section 16(1) of the CGST Act, 2017 so as to entitle Ordnance Factory Bhandara to avail Input Tax of the said goods/services. It is worthwhile to note here that Hon. Finance Minister of India stated at paragraph 5(b) of the Statement of Objects & Reasons while introducing the Central Goods & Services Tax ("CGST") Bill, 2017 in the Parliament as under: - "5. The Central Goods and Services Tax Bill, 2017, inter alia, provides for the following, namely: - (b) to broad base the input tax credit by making it available in respect of taxes paid on any supply of goods or services or both used or intended to be used in the course or furtherance of business. " 71. Hence a clear intent to broad base the input tax credit is evident from the above. Also, the term "used or intended to be used in the course or furtherance of business" has been used to expand the scope of inputs & input services to those activities that have some direct or indirect nexus to business of the supplier. 72. So, it requested to the Hon. Appellate Authority for Advance Ruling to decide upon the admissibilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Credit has been further widened under the GST regime to include all inputs and input services used in the course or furtherance of business vis-a-vis erstwhile CENVAT Credit Rules where admissibility of CENVAT Credit was restricted to input services used directly or indirectly, in or in relation to manufacture of final product. 78. Maintenance of garden inside the factory premises: 79. Here 'factory premises' means plant area where manufacturing activity is carried out and administrative building. The services of maintenance & upkeep of gardens that are located within the factory premises should be considered to be an "input service" as per section 2(60) of the CGST Act, 2017 and should also be considered to be "used or intended to be used in the course or furtherance of business" as per section 16(1) of the CGST Act, 2017 and Input Tax Credit should be available in respect of expenditure done on such services on the following counts:- 80. Gardening is essential & mandated by Maharashtra Pollution Control Board to maintain quality of ambient air & prevent air& water pollution and also a condition precedent as laid down by the said Board, without which Ordnance Factory Bhanda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as it is a pollution control requirement and improves the aesthetics and overall atmosphere and thus is an expenditure in or in relation to manufacture. 89. In Commissioner of Central Excise, Delhi III, Suzuki Motor Cycle India Private Limited {2017 (47) STR 85 (Tri-Chan) = 2016 (9) TMI 576 - CESTAT CHANDIGARH, it was held by the Hon. Tribunal that the assessee is entitled to avail the credit of gardening service. 90. All the aforementioned arguments and case laws were presented before the AAR, Maharashtra. Even the Department agreed to the admissibility of such Input Tax Credit on maintenance of garden inside the factory premises in its legal submission to AAR, Maharashtra. 91. However, AAR, Maharashtra ruled that "maintenance of garden is not a supply that can be considered as a supply used or intended to be used in the course of furtherance of business of the applicant which is to manufacture Propellants and Explosives. Hence the applicant is not eligible to avail ITC of the tax paid by them on the same. The services availed in relation to plantation and gardening within the plant area will not qualify for Input Tax Credit. 92. In an appeal filed by the Commissioner of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discuss the issue of admissibility of ITC, raised by the Appellant in question 2(b) of the advance ruling application, in respect of the various input services like Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. The Appellant's submissions in this regard is as under: As explained above, the term 'factory estate' has been used 'to describe the area that falis within the boundaries of Ordnance Factory Bhandara and are so controlled by Ordnance Factory Bhandara but such area is outside the precincts of the area where factory & administrative building is there. Such area comprises of establishments such as residential quarters of employees of Ordnance Factory Bhandara & allied organisations, market area, places for worship of God, shops that are given on [ease renta! basis for commercial purposes, gardens, parks, playgrounds, swimming pool, factory school for children of employees, hall for recreat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are necessary for furtherance of business of our organisation since these services help in maintaining the basic living standard of the employees who in turn are responsible for running the day-to-day business of the factory. Cost of such services forms part of the cost of the final products and thus forms part of the value of taxable supply. Reliance is placed on the following judicial pronouncements of various High Courts & Tribunals wherein it was adjudged that CENVAT Credit of Service Tax was allowable on expenditure related to services procured in relation to residential colony for the employees: In the case of CCE vs ITC Ltd. in the year 2012 = 2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT, the Hon. Andhra Pradesh High Court held that CENVAT credit of service tax paid on the taxable services used in the residential complex shall be available to the manufacturer. The relevant paragraph of the said judgment is extracted herein below. "The Commissioner's Order-in-Appeal dated 27-5-2008 reflects that he accepted that the efficiency of the employees of an organization would be dependent on various factors, one such being the provision of a housing colony. He further conceded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. New Delhi bench of the Tribunal held that construction of residential colony/dormitory adjacent to the factory premises was the necessity because of the location of the factory in a remote area, where if the accommodation is not provided to staff/workers, the continuous/round the clock manufacturing activity will hamper. Further, the cost towards such construction has also been considered as expenditure in the books of accounts of the respondent. Therefore, such construction activity was held to be in relation to the business of the respondent and therefore CENVAT Credit was allowed in relation to such services. In the case of Reliance Industries Ltd. vs CCE & ST, Mumbai = 2015 (11) TMI 100 - CESTAT MUMBAI, the dispute was in relation to allowance of CENVAT Credit of Service Tax in respect of services like construction services, repairs and maintenance services, security service, manpower recruitment and supply services, works contract services etc. It was noticed by the lower authorities that these services on which credit was availed of service tax paid were received in their residential township constructed for the employees. It was held by the Mumbai Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ITC in accordance with the provision of Section 17(2) of the CGST Act, 2017. (ii) Shops that are given on rental basis for commercial purposes: - In general, services related to establishment, repair and maintenance of such shops is procured. Such shops are used for commercial purposes & commercial lease rent is recovered from the tenants of such shops on which GST is collected by Ordnance Factory Bhandara. Thus, the Input Tax Credit related to such services in relation to such shops should be admissible as such expenditure is directly related to the business of renting of immovable property unless otherwise blocked under any other provisions of the CGST Act, 2017, 96.2 On perusal of the above submissions made by the Appellant, it is opined that as per the provision of section 16(1) of the CGST Act, 2017, the Appellant is entitled to avail ITC in respect of expenditures incurred on the input services used in the taxable supply of the renting of immovable property for commercial purposes. (iii) Inter-connected roads between various establishments and facto premises: - The specific transactions in respect of which ruling on entitlement of input tax credit is required is speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, therefore, ITC in respect of such expenditures on the construction and maintenance of road inside the residential colony will not be available to the Appellant in accordance with the provision of section 17(2) of the CGST Act, 2017. (iv) Land that is currently not used for any purpose whatsoever: - The specific transactions in respect of which ruling on entitlement of input tax credit is required is specified in the enclosed "Annexure C". In general, services related to maintenance of such land are procured. Such land is located within the factory estate and consists of mainly wild grass, trees & other vegetation. It is adjacent to the roads that are used for commutation. Input Tax Credit related to expenses mentioned in "Annexure C" in relation to such land should be admissible on the following grounds: e) It is necessary to cut wild grass & other vegetation that grows in such area on regular basis in order to maintain the factory estate area neat & clean and ensure that such vegetation does not spill over to and obstruct the roads used for commutation within the factory. f) Another reason is that such wild grass & other vegetation increases the bacteria count in the envi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any consideration. The Appellant further submitted that Input Tax Credit on the inputs iike medicines and others mentioned in "Annexure D" purchased by the factory for the hospital and other expenditures incurred on maintenance, upkeep and other activities also mentioned in "Annexure D" relating to such hospital should be admissible on the following grounds: - (a) Hospital helps in keeping the employees fit and healthy, so that they can contribute for furtherance of business of Ordnance Factory Bhandara. (b) As a part of welfare measure, it is necessary to provide the employees basic medicinal facilities within the factory estate itself since the factory is located at a remote location. (c) Cost of such medicines and expenditure on maintenance, upkeep and other activities relating to such hospital forms part of the cost of the final products and thus forms part of the value of taxable supply. (d) Reference to the judicial pronouncements mentioned in above questions can be drawn in so much so that hospital has been set up for the benefit of the employees and it too forms a part of residential colony of Ordnance Factory Bhandara. (e) Reference may also be drawn to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Act, 2018 w.e.f. 01.02.2019, which provides that input tax credit shall not be available in respect of supply of health services except where the same is obligatory for an employer to provide to its employees under any law for the time being in force. 98. Here, we intend to agree with the Appellant's submissions in light of section 9 of the CGST Amendment Act, 2018, which amends section 17(5)(b) of the CGST Act, 2017 as stated above. Hence, we are of the opinion that Appellant are rightfully entitled to avail the ITC in respect of al! the inputs like medicines, equipment, furniture, etc. consumed in the hospitals and input services like maintenance and upkeep of the hospitals, etc., to provide the health services to its employees and their dependents as per the terms of the Ordnance Factory Medical Regulation, which may be construed as the law for the time being in force as mentioned in the amended in section 17(5)(b) of the CGST Act, 2017. Section 9 of the CGST Amendment Act, 2018, which is in effect from 01.02.2019, has inserted this condition, wherein the ITC in respect of health services will be available to the employer provided such health services are obligatory for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (16) S.T.R. 704 (Tri. - Bang.)] = 2009 (4) TMI 129 - CESTAT, BANGALORE 101. We have carefully considered the above cited judgments, which have been relied upon by the Appellant to substantiate their submissions regarding the admissibility of ITC in respect of the inputs and input services pertaining to the maintenance and upkeep of the guest houses. The Hon'ble CESTAT, Mumbai in the case of L'Oréal India Pvt. Ltd. Vs. Commissioner of C. Ex. (Supra) inter alia held that the appellants are entitled for input service credit on outdoor catering service/housekeeping service except for the portion of their service for which they have recovered some amount from the persons staying in guest house. 102. Thus, it is clearly revealed from the above tribunal judgment that ITC in respect of the portion of input/input services pertaining to the guest houses, for which some consideration has been received from the persons availing the guest house facility, are not available. In the present case, it has been submitted by the Appellant that they are recovering the room charges from the guests occupying the guest house. Hence, by applying the ratio of the above discussed CESTAT Judgment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 that is in force from 01/02/2019, an amendment in section 17(5) (b) of the principal CGST Act, 2017 has been brought about where input tax credit shall not be available in respect of supply of food and beverages except where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force. Now, as per section 46 of the Factories Act, 1948, the State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. In this connection, it is submitted here that more than 2500 persons have been employed by Ordnance Factory Bhandara and thus the aforementioned provision relating to maintenance of canteen is obligatory for Ordnance Factory Bhandara to provide to its employees under the Factories Act, 1948. So, an industrial canteen has been provided by Ordnance Factory Bhandara for its employees within the factory where the employees have food and beverages by paying a nominal amount of money on no-profit-no-loss basis. 106. Also, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (Rate) dated 28.06.2017. They further submitted that the impugned ruling under question, wherein the AAR has held that ultimately Ordnance Factory Bhandara would be paying a lesser amount to their suppliers against supply of goods received, which would result in lesser payment being made by the supplier towards GST, is factually incorrect attributable to the following reasons: (i) Lesser payment in respect of L.D cases is made due to deduction of L.D from supplier's payment. Deduction of L.D is an act of tolerating nonperformance of supplier on account of delay in delivery of goods or services and is as such a manner of compensating the supplier for his dues and not lesser payment against supply of goods/services received. (ii) It was submitted that Ordnance Factory Bhandara does not make lesser payment of taxable amount and GST amount to the supplier in L.D cases. They have substantiated this claim with the illustration by two sample invoices and the corresponding entries in their books of account. By the said illustration of these sample invoices, and the corresponding transaction vouchers exhibiting the actual taxable value of the goods equal to that recorded in the corres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s having its value equal to those mentioned in the tax invoices raised by the suppliers of the Appellant. The transaction related to L.D. is being recorded in separate accounting code. Maintenance of such accounting codes by the Appellant clearly shows that the Appellant is paying the actual taxable amount and GST thereon to its suppliers, as mentioned in the tax invoices raised by its suppliers. Further, the reflection of the illustrated sample invoices in the GSTR -2A of the Appellant further substantiates the Appellant's claim that the suppliers are also aware of their liability to pay the actual GST and not the lesser amount of GST are being paid by the suppliers, even in the cases where there is deduction of liquidation damages from the payment made to such suppliers. 112. Thus, in view of the above, it is observed that the Appellant was rightful in challenging the ruling pronounced by AAR in this regard, and accordingly, they are not required to reverse the ITC on account of the deduction of L.D. from the payment made to the suppliers. 113. Now let us examine the final issue of the appeal, which had been raised in question 7 of the advance ruling application, wherein the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en inside the factory premises. (e) Community hall (Multipurpose Hall) provided on rental basis to employees of our organization. (f) School bus facility provided to children of the employees. (g)Conducting exams for various vacancies. On perusal of the submissions made by the Appellant, it is observed that they are fulfilling all the conditions stipulated for the Central Government, provided under clause (8) of section 3 of the General Clauses Act, 1897 read with Article 53 & Article 77 of the Constitution of India. Since, the Appellant is functioning under the Department of the Defence Production, Ministry of Defence, Government of India, and all its activities including administrative, executive, etc. are carried out for and on behalf of the President of India, the facts which have been established by the various documents like the Appointment letter of the Group A Gazetted Officer of the Ordnance Factory, OFB Procurement Manual. OFB Procurement Manual clearly shows that all defence contracts are in the name and on behalf of the President of India only. Further, the signatures on the supply order placed to the Vendors, the Acceptance of the Tender, etc., clearly exhibits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the definition of the Input services provided under section 2(60) of the CGST Act, 2017 is comparatively wider than the earlier definition of input services; which were provided under Rule 20) of the erstwhile Cenvat Credit Rules, 2004, owing to the presence of the phrase "used or intended to be used in the course or furtherance of business" under the present GST Law. Further, the Department, in this case the respondent, has also not opposed to the admissibility of the ITC in respect of the input services used by the Appellant in the maintenance of the gardens inside the factory premises. Appellant is eligible to avail the ITC in respect of the input services used to maintain the gardens inside the factory premises. (b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. Findings in respect of Q. 2(b): On careful consideration the above submissions made by the Appellant, which also included the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e health services to its employees and their dependents as per the terms of the Ordnance Factory Medical Regulation, which may be construed as the law for the time being in force as mentioned in the amended section 17(5)(b) of the CGST Act, 2017. Section 9 of the CGST Amendment Act, 2018, which is in effect from 01.02.2019, has inserted this condition, wherein the ITC in respect of health services will be available to the employer provided such health services are obligatory for the employer to provide to its employees under any law for the time being in force, which, prior to this amendment act, was not available to any registered person under section of the CGST Act, 2017. In view of this deliberation, the Appellant are rightfully entitled to avail the ITC in respect of all the inputs like medicines, equipment, furniture, etc. consumed in the hospitals and input services like maintenance and upkeep of the hospitals, etc., to provide the health services to its employees and their dependents as per the terms of the Ordnance Factory Medical Regulation. (d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. Findings in Q. 2(d): - As the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the reflection of the illustrated sample invoices in the GSTR -2A of the Appellant further substantiates the Appellant's claim that the suppliers are also aware of their liability to pay the actual GST and not the lesser amount of GST are being paid by the suppliers, even in the cases where there is deduction of liquidation damages from tne payment made towards such suppliers. In view of this discussions, it is observed that the Appellant was rightful in challenging the ruling pronounced by AAR in this regard, and accordingly, they are not required to reverse the ITC on account of the deduction of L.D. from the payment made to the suppliers. Question: 7) Being a part of the Ministry of Defence, Government of India, whether the following notifications are applicable to our organisation and what shall be the impact of such notifications: - a) Notification No. 2/2018Central Tax (Rate), in relation to services by an arbitrator or an advocate to our organisation. b) Notification No. 3/2018Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture on maintenance, upkeep and other activities relating to such hospital. d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. e) Expenditure related to purchase of LPG cylinders used within industrial canteen. Answer: ITC in respect of the following input services are available to the Appellant: (a) Maintenance of garden inside the factory premises; (c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. ITC in respect of the following input services are not available to the Appellant: (b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for ,-recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. (d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. (e) Expenditure related to purchase of LPG cylin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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