TMI Blog2020 (6) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... viz. maintenance, upkeep, repair, providing security, garbage collection, sewage treatment, civil construction, sweeping cleaning, etc., pertaining to the residential quarters of employees of Ordnance Factory Bhandara other allied organisations, market area, places for worship of God, gardens, parks, playgrounds, swimming pool, footpaths, street lightings, which are used inside the residential colony will not be available to the Appellant for ITC in accordance with the provision of Section 17(2) of the CGST Act, 2017. Shops that are given on rental basis for commercial purposes - HELD 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. Inter-connected roads between various establishments and facto premises - HELD THAT:- It is observed that the construction and maintenance of the roads in the factory estate is mandatory for the Appellant to carry out their business operation. Without the proper road, the transportation of inputs, capital goods, and the finished products of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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? - HELD THAT:- 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 - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch Development Laboratory are also there. B. The manufacturing process involves procurement of various raw materials from sister Ordnance factories and private entities. Majority of the purchase is from private entities. The output is then transferred to sister Ordnance factories/units of armed forces as per order. The consideration for transfer is fixed by OFB and is booked in the financial accounts of our organisation and the adjustment is done through book transfer. Money consideration is involved only for a small portion of the produce, where the goods are sold to units under Ministry of Home affairs. paramilitary forces like BSF, units of state police, defence PSU s and private entities. C. The goods are sent in finished condition to proof establishments (such as PXE Balasore, CPF [tarsi] for testing purpose. Such proof establishments are located outside the factory premises across the country and they also function under the Ministry of Defence, Government of India. Such sample goods are destroyed during testing process. The value of the raw materials used in the supply goods are destroyed is included in the value of the finished goods that are manufactured t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It consists of the factory where manufacturing activity is carried out the administration building. b) Estate area: It consists or the area other than factory premises. Residential quarters of employees of OFBa and allied establishments, gardens, parks, playground, factory school for children of employees, hall for recreational activities, places of worship of God, market area, guest houses, school for children of employees, factory hospital open land is included is included in such estate area J. Ordnance Factory Bhandara had sought Advance Ruling on eight questions mentioned below before the AAR, Maharashtra. Question no. 8 was withdrawn later on by Ordnance Factory Bhandara. 1) Being a part of the Ministry of Defence, Government of India, whether our organization Ordnance Factory Bhandara is liable to pay GST on the following supply of services: - a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions. c) Security deposit left unclaimed by the suppliers and recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to our organisation. b) Notification 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. 8) Whether Input Tax Credit on services of passenger vehicles hired by our organisation is available? Advance Ruling dated 24.12.2018 passed by AAR, Maharashtra K. The AAR passed the Advance Ruling No. GST-ARA-79/2018-19/B-168 dated 24.12.2018 = 2019 (6) TMI 1236 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA in respect of the seven questions enumerated above, except the question no, 8, which was withdrawn by the Appellant later on from their advance ruling application itself. L. Aggrieved by the above rulings passed by the AAR, the appellant has preferred appeal in respect of questions 1,2,6 7 only on the basis of the grounds mentioned hereinunder: Grounds of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly or indirectly through officer 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. 3. The aforementioned definition explanation of Central Government has been extracted from FAQ s on Government Services issued by the CBIC under the sectoral series on GST. Question No. 3 of such FAQ s issued by CBIC deals with the question - What is the meaning of Government and the aforementioned Para has been provided as an answer to such question. 4. It is pertinent to note here that Ordnance Factory Bhandara is an organisation under the Ordnance Factories Board(OFB) functioning under the Department of Defence Production and supply, Ministry of Defence, Government of India. Ordnance Factory Board (OFB) consisting of the Indian Ordnance Factories , is an industrial organisation, functioning under the Department of Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sets out fundamental rights, directive principles, and the duties of citizens. 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. The executive power of the Union Government is vested in the President. Thus, it becomes necessary to re-iterate the following: - 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 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. 7. AAR, Maharashtra has ruled that Ordnance Factory Bhandara is not Government since it is engaged in research, development, production, testing, marketing and logistics of a comprehensive produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Ordnance Factory Bhandara s officers and decisions taken in Ordnance Factory Bhandara are on behalf of the President of India. Even the recruitments in the Indian Ordnance Factories as a Group A gazetted officers are made through union public service commission on behalf of President of India . 12. 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 consultation with Integrated Defence Finance and has the approval of Hon ble Raksha Mantri. Para 7.12 of the Ordnance Factory Board Procurement Manual states that- The parties to the contracts into by ordnance factories are the President of India as the purchaser , acting through the authority signing the contract/ agreement/ purchase order etc., and the supplier named in the contract. 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. Para 14 of Annexure-2 of the Ordnance Factory Board Procurement Manual defines the term purchaser as follows- 14. Purchaser: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment. Accordingly, the constitution of business as mentioned in GST registration of Ordnance Factory Bhandara is Government Department. 17. Also, worth mentioning here is an appeal filed in the office of the Hon. Commissioner (Appeals), Customs, Central Excise GST, Nagpur by Ordnance Factory Bhandara against the order-in-original of Assistant Commissioner, CGST and Central Excise, Division - Bhandara reiating to erstwhile law of Service Tax. Para no. 19 of the order-in-appeal (that is enclosed herewith) of the Hon. Commissioner (Appeals), Customs, Central Excise GST, Nagpur bearing order no. NGP/EXCUS/000/APPL/367/18-19/2544 dtd. 28/12/2018, relying upon the facts of the case stated that- As regards the imposition of penalty, I find that the appellant is a Govt. of India organization working under the Ministry of Defence. As per the various judgments of the judicial forums, mens rea cannot be attributed to a Govt. body and hence I feel that no penalty is imposable on the appellant. Thus, the order-in-appeal of the Hon. Commissioner (Appeals) treats Ordnance Factory Bhandara to be a Govt. body, which is a further proof in our claim that Ordnance Factory Bhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payable to the Central Government should be applitable to Ordnance Factory Bhandara and hence Ordnance Factory Bhandara need not pay GST on the Liquidated Damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions: - Ordnance Factory Bhandara also forfeits security deposit of its suppliers due to non-fulfillment of certain contract conditions. Such forfeiture though not in the form of L.D, it can be considered as a form of fine that is recovered from suppliers dues in the form of forfeiture of their deposit. Thus, exemption as per aforementioned Sr. No. 62 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate) should be applicable on such forfeiture of deposit and hence Ordnance Factory Bhandara need not pay GST on the Liquidated Damages deducted from the payments to be made to suppliers in case of delayed delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Charges in terms of monetary consideration are recovered by the factory from its employees in lieu of such use. As per clause (zz) of the definitions contained in notification no. 12/2017Central 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 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 of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. 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. 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. The AAR, Maharashtra ruled that Input Tax Credit on all of the above shall not be available to Ordnance Factory Bhandara except sub-question e), that is, expenditure related to purchase of LPG cylinders used within industrial canteen. The explanation that AAR, Maharashtra gave for denying such credit was that the goods/services used in such activities are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, 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 of Service Tax in relation to the following services was allowable on the pretext that such services were used by the manufacturer, whether directly or indirectly, in or in relation to the business of manufacture of final products. In the case of Coca Cola India Pvt. Ltd. vs. CCE reported in 2009 = 2009 (8) TMI 50 - BOMBAY HIGH COURT , a Division Bench of the Hon. Bombay High Court held that the expression activities in relation to business in the inclusive part of the definition of input service further widens the scope of input service so as to cover all services used in the business of manufacturing the final products and that any service used in relation to the business of manufacturing the final product would be an eligible input service for availing CENVAT Credit. It was also held that the cost of any input service that forms part of value of final products would be eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner of Central Excise and Central Tax (2018), the Hon. Madras High Court = 2018 (2) TMI 1745 - MADRAS HIGH COURT held that garden maintenance service would fall within the definition of input service, in terms of Rule 2 (l) of the Cenvat Credit Rules, 2004. In Mukand Ltd s case Vs. Commissioner of Central Excise, Belapur {2016 (42) STR 88 (Tri-Mumbai)} = 2015 (9) TMI 944 - CESTAT MUMBAI , it was held by the Hon. Tribunal that the credit on gardening expenses is fully allowable as the same is required for maintaining the good atmosphere in the manufacturing area and also a condition precedent as laid down by the State Pollution Control Board, without which the appellant cannot resort to manufacturing Activity. In HCL Technologies Ltd., Vs. Commissioner of Central Excise, Noida {2015 (4) STR 369 (Tri-Del) = 2015 (8) TMI 595 - CESTAT NEW DELH I, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x 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 located outside the factory premises but within the factory estate: - As explained above, the term factory estate has been used to describe the area that falls 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 quajters of employees of Ordnance Factory Bhandara allied organisations, market area, places for worship of God, shops that are given on lease rental basis for commercial purposes, gardens, parks, playgrounds, swimming pool, factory school for children of employees, hall for recreational activities, footpaths, street lightings, inter-connected roads between all such establishments and factory premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that these facilities would contribute to the enhancement of the productivity of the organization. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y/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 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 that the expenses which were incurred by the appellant for the setting up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove 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: - 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: a) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance, 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. Input Tax Credit on the inputs like medicines and others mentioned in Annexure D purchased by the factory for the hospital and expenditure on maintenance, upkeep and other activities also mentioned in Annexure D relating to such hospital should be admissible on the following grounds: - i) Hospital helps in keeping the employees fit and healthy, so that they can contribute for furtherance of business of Ordnance Factory Bhandara. ii) 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. iii) Cost of such medicines and expenditure on maintenance, upkeep a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 the factory estate but outside the precincts of the area where factory administrative building is there. Guest houses are used to provide accommodation services to various guests including employees on duty/deputation. Room charges are recovered from such guests for their stay on per day basis that are different for such different guest houses. So, inward supply of inputs and input services that are used for maintenance and upkeep of such guest houses should also be considered to be for the purpose of furtherance of business of Ordnance Factory Bhandara and Input Tax Credit should be admissible on the following grounds: i) Such guests visit Ordnance Factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees 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 and upkeep of guest houses. We wish to appeal against such ruling of AAR, Maharashtra based on the aforementioned arguments and case laws and contends that availment of Input Tax Credit on expenditure related to maintenance and upkeep of guest houses maintained by Ordnance Factory Bhandara should be allowed. e) Expenditure related to purchase of LPG cylinders used within , industrial canteen: - The AAR, Maharashtra ruled that - we have to state that we have already held that their canteen is providing services related to supply of food and. beverages to their employees and also charging consideration for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders 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 made to the suppliers of such goods/services. When lesser amount is paid to the suppliers, then proportionate credit is available. This matter had been raised before the AAR, Maharashtra to check whether lesser amount paid to suppliers due to deduction of liquidated damages from payment to be made to such suppliers shall also get covered under the aforementioned circumstances of lesser payrnent made to suppliers. Ordnance Factory Bhandara had put forth in its submission that deduction of L.D is a manner of compensating the supplier for his dues and hence such deduction should not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 received. We wish to confirm that Ordnance Factory Bhandara does not make lesser payment of taxable amount and GST amount to the supplier in L.D cases with the following two illustrations: - 1) Ordnance Factory Bhandara procured certain raw material from a supplier by the name of Lakshmi Ishwar Industries vide Tax Invoice no. 1 dated 09/04/2018 of the supplier. The taxable amount of the Tax Invoice was ₹ 5,50,200/-, IGST amount levied evas ₹ 99,036/- and thus the total invoice amount was ₹ 6,49,236/-. Due to non-fulfillment of cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the taxable amount does not decrease due to deduction of L.D and the supplier does not intend to pay lesser amount to the GST Department by issuing credit notes in respect of deduction of L.D from such invoices. Another matter that should be thought about is that if such supplier of Ordnance Factory Bhandara is being audited by the Department under GST regime, then would the. Department be okay with the fact that the supplier has made lesser payment of GST to the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: Enclosed herewith for your kind reference is a press release by Ministry of Defence, Government of India dated 15/07/2019 regarding Establishment of Ordnance Factories in India in which it is seen that Ordnance Factory Bhandara was established under Ministry of Defence by Government of India in the year 1964. This serves as a further proof that Ordnance Factory Bhandara is Central Government department. 32. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the central Govt. or state Govt. It is noticed that the appellant has forfeited Security deposited of suppliers due to non-fulfillment of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 taxable services. g. Conducting of exams for various vacancies. Submission by Department: - For conducting any examination by the organization, no exemption available from payment of GST on examination fee charged from candidates. h. Rent recovered from residential quarters of emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 available to appellant under sub section (2) of Section 17 of the CGST Act,2017. d. Expenditure related to maintenance and upkeep of guest houses maintained by organization. Submission by Department: - As per the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year, will be NIL in respect of intra- State Supply of Service. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice 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 case of VPSSR Facilities = 2018 (5) TMI 904 - AUTHORITY FOR ADVANCE RULING - DELHI , 124, 1st Floor, Jaina Tower-I, Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, development, production, testing, marketing and logistics of a comprehensive product rang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 and in the name of the President of India while exercising the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 place to govern the functioning of Ordnance Factories. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-day expenditure of the canteen. Such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees 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 Factory Bhandara since it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 I(h) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered to 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77. In fact, the scope of availing Input 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon. Tribunal that so far as garden maintenance is concerned, the same is input service 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 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vail the ITC in respect of the input services used to maintain the gardens inside the factory premises. 96. Now, we will 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 efficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 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 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for worship of God, gardens, parks, playgrounds, swimming pool, footpaths, street lightings, which are used inside the residential colony will not be available to the Appellant for 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complex of the factory estate are in relation to the supply of the accommodation facility to the employees in the residential colony maintained by the Appellant, which are an exempt supply as discussed above, 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andara and is also located within the factory estate but outside the precincts of the area where factory administrative building is located; and that the medicines and other facilities are provided to employees of the factory without 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 pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide the medical facility to the employees and their dependents free of cost. Thus, it was submitted by the Appellant that they are falling under the exception clause inserted in section 17(5)(b) of the CGST Act, 2017 vide section 9 of the CGST Amendment 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 CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai)) = 2015 (10) TMI 1540 - CESTAT MUMBAI (b) L Or al India Pvt. Ltd. Vs- Commissioner of C. Ex., Pune-l[2011 (22) S.T.R. 89 (Tri.- Mumbai)) = 2010 (11) TMI 143 - CESTAT, MUMBAI (c) Commissioner of C. Ex., Visakhapatnam Vs. Hindustan Zinc Ltd. [2009 (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 Or al 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for NIL rate of tax on such supply of food and beverages made to the factory employees that are non-business entities in terms of Sr. 6 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. They, further, submitted that as per section 9 of the CGST Amendment Act, 2018 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e they are central government as have been contended by them throughout the submissions made in the subject appeal, they are not liable to pay GST on the liquidated damages deducted from the payment made to the suppliers in terms of the provision of Sr. No. 62 of the Notification No. 12/2017-C.T. (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 subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods or services. It is manifest from the two separate accounting codes, maintained by the Appellant, one for the receipt of goods and another for deduction of L.D. from the suppliers due, that taxable value of the goods or services even in CD. cases are being recorded in their respective accounts 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganization Ordnance Factory Bhandara is liable to pay GST on the following supply of services: - (a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. (b) Amount of Security deposit forfeited of suppliers due to non-fulfilment of certain contract conditions. (d) Food and beverages supplied at industrial canteen 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs The Commissioner of Central Excise and Central Tax (2018) = 2018 (2) TMI 1745 - MADRAS HIGH COURT , wherein the Appellant had contended on the ground that the maintenance of the garden inside the factory premises is a mandatory condition imposed by the Tamil Nadu Pollution Control Board for the setting up and operation of the factory. In the present case also, it is mandated by the Maharashtra Pollution Control Board to maintain the garden in the factory premises of the Appellant. Further, 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 gard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. Findings in Q. 2(c) 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. Hence, we are of the opinion that 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, 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the transaction of the receipt of the goods or services. It is manifest from the two separate accounting codes, maintained by the Appellant, one for the receipt of goods and another for deduction of L.D. from the suppliers due, that taxable value of the goods or services even in L.D. cases are being recorded in their respective accounts 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 tne payment made towards such suppliers. In view of this discussions, it is observed that the Appellant was ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exams for various vacancies. Answer: The Appellant is not liable to pay GST in any of these abovementioned activities/transactions carried out by them. Question: 2) 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 of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. 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. 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 availab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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