TMI Blog2019 (10) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, it is clearly revealed that the said Shubh Labh Trade Loyalty Program module floated by the Appellant is primarily designed for increase in the sale of pharmaceutical products manufactured by them by floating this lucrative schemes for their wholesalers, so that they put in extra effort in selling the Sanofi Pharmaceutical products for achieving the sales target and getting the proportionate reward points, which, in turn, would fetch them their desired goods and services, specified in the catalogue floated under Shubh Labh Trade Loyalty Program - it is established beyond doubt that this entire model of the promotional scheme, namely Shubh Labh Trade Loyalty Program floated by the Appellant, is designed with the sole purpose of the furtherance of their business and is thus purely driven by the commercia intentions. In other words, the goods and services procured by the Appellant from the third party under the Shubh Labh Trade Loyalty Program are clearly being used or intended to be used by the Appellant in the course or furtherance of their business. Thus, the conditions stipulated for input and input services under section 2(59) and section 2(60) ibid. respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Shubh Iabh Trade Loyalty Program , being in the nature of exempt supply provided under section 2(47) or even non-taxable supply provided under section 2(78) of the CGST Act, 2017, or otherwise do not arise. Whether the promotional goods e,g. pen, notepad, key chain, etc., embossed with the brand Sanofi , which are given free of cost by the Appellant to its distributors or doctors as brand reminders can be construed as exempt supply under the provision of section 2(47) read with section 2(78) of the CGST Act, 2017? - HELD THAT:- Since, it has been established that the subject goods being provided free of cost by the Appellant to its distributors or doctors as brand reminders are nothing but inputs. Hence, the same cannot be termed as output supply at the same time - the question of the provision of these subject goods embossed with the brand Sanofi , being in the nature of exempt supply under section 2(47) or even non-taxable supply provided under section 2(78) of the CGST Act, 2017, or otherwise do not arise. Whether the above said supply of the promotional schemes goods, or services to the eligible wholesalers under the Appellant s scheme of the Shubh Labh Trade Loy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributors or doctors with a purpose or motive, which is clearly commercial in nature i.e. The appellant is providing these goods to the distributors or doctors with an implicit commercial motive related to the growth in the sale of their products with the aid of their distributors and doctors. Thus, it can be deduced that the act of the Appellant, wherein they supply the subject goods to their distributors or doctors, is anything but generous, and there is certainly an element of the commercial consideration involved into this - the provision of the section 17(5)(h) of the CGST Act, 2017, which proposes to disallow the ITC on the goods disposed by way of gift, will not be applicable in the transaction under question. - MAH/AAAR/SS-RJ/10/2019-20 - - - Dated:- 22-10-2019 - SMT. SUNGITA SHARMA, AND SHRI RAJIV JALOTA, MEMBER PROCEEDINGS (Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be eligible for Singapore Trip For 2 Persons; 6 Days/5 Nights, the wholesalers who have earned 24000 points will be eligible for claiming Raymond Weil 2760-St3-50001 Watch -For Men, etc. E. In the above example, when the wholesaler opts for Raymond watch, the watch is purchased by the Appellant and provided to the wholesaler as per the agreed terms of the promotional scheme. The invoice for the said watch is raised in the name of the Appellant and accordingly, input tax credit ( ITC ) of the GST paid on the watch is claimed by the Appellant. F. In light of the aforesaid business model, the Appellant preferred an application No, GST-ARA, Application No. 115 dated 28.01.2019 for Advance Ruling under Section 97 of Central Goods and services Tax Act, 2017 ( CGST Act ) and Maharashtra Goods and Services Tax Act, 2017 ( SGST Act ) before the Maharashtra Authority of Advance Ruling (hereinafter referred to as the Authority ) on the question of law as to whether input tax credit is available of the GST paid on expenses incurred towards promotional schemes of Shubh Labh Loyalty Program or goods given as brand reminders. G. However, brushing aside the submissions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly: goods lost, Stolen, destroyed, written off or disposed of by way of gift of free samples. As per the above provision, credit is not available of goods which are given as gift and free samples. 2.4 As mentioned above, in case of brand reminders, products like pens, notepad, key chains etc. are distributed to the distributors and dealers. The said products are embossed with Sanofi brand. The brand embossed on these product serves as an advertisement tool and is a brand reminder. Such goods act as reminder of the association with the brand Sanofi so as to promote sales. 2.5 It is submitted that as per the provisions of the CGST Act as highlighted above, every registered person is 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. 2.6 It is submitted that in the instant case of the Appellant, the brand reminders are provided to the wholesalers in furtherance of business so as to promote brand Sanofi and its products, Thus, ITC should be allowed of the GST paid on procurement of such products which are given to wholesalers as brand remin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In fact, the Applicants would like to submit that in light of the terms and conditions which the distributor/wholesaler accept and a contractual obligation is created between the Applicants and the distributor/wholesaler which would enable either party to a take recourse to a civil suit or action for specific performance of contract on failure to adhere to the terms and conditions. A copy Of the Power Point presentation explaining the functioning of the Application is attached herewith. 3.5 It is submitted that the recent decision of the Maharashtra Authority for Advance Ruling in the case of Biostadt India Limited dated 20 December 2018 = 2019 (3) TMI 540 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA would not have any bearings in the present application for the following reasons: - 3.5.1 In the Judgment of Biostadt India Limited, the AAR held that the Applicant therein failed to submit any documentation to prove that there was a Contractual obligation. (in the present facts, the Applicants have reproduced in their application the entire terms and conditions, which the distributor/wholesaler has to accept as a pre-requisite before redeeming their points) 3.52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reward points on the basis of the target achieved by them. 4.3 In the example provided above, the wholesaler who has earned 24000 points will be eligible for claiming Raymond Weil 2760-St3-50001 Watch -For Men. The said points are earned on the basis of quantity of the Sanofi products sold by the wholesaler. Thus, the rewards in the form of watch given to the wholesaler is on achieving a particular target as per the scheme and is not in the nature of gift. In fact, the wholesaler has earned the said watch on the basis of Buy more earn more which is similar to trade circular no. 92/11/2019-GST dated 7 March 2019. 4.4 Based on the above, it can be concluded that in case of the Shubh Labh Scheme , the watch given to the wholesaler is not a gift as the watch is given under the contractual obligation under the scheme. It is the consideration for achieving a particular sales target and hence, input tax credit on purchase of the said watch should be available to Sanofi. 5. THE INTENTION OF THE LEGISLATURE WAS NEVER FOR NON-GRANTING DENIAL OF SET OFF. 5.1 It is submitted that the Authority erred in holding that under the GST laws, the intention for non-granting/ denial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 6.2 It is submitted that the Circular bearing No. 92/11/2019-GST dated 7 March 2019 for clarifying various doubts related to treatment of sales promotion schemes under GST has been issued by the Principal Commissioner GST. 6.3 It is submitted that under the said Circular Part C deals with Buy more, save more offers. It has been clarified in the Circular that discounts offered by the Suppliers to Customers (including staggered discount under Buy more, save more scheme and post supply/volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in sub-section (3) of Section 15 of the said Act, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document(s) issued by supplier. 6.4 It is submitted that it is clarified in the Circular, that the supplier is entitled to avail the ITC for such input, input services and capital goods used in relation to the supply of goods or services or both on such discounts. 6.5 It is pertinent to note that the Appellant in the additional submissions dated 18.04.2019 elaboratel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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. 8.2 In the present case, the brand reminders are provided to the wholesalers in furtherance of business so as to promote Sanofi brand and its products. Thus, ITC should be allowed of the GST paid on procurement of such products which are given to wholesalers as brand reminders. However, section 17(5) of the CGST Act covers gifts for the purpose of ineligible credit, 9. TO CONSTITUTE A GIFT THE PROPERTY SHOULD BE TRANSFERRED VOLUNTARILY AND NOT AS A RESULT OF A CONTRACTUAL OBLIGATION: 9.1 It is submitted that on a Plain reading of the aforesaid provisions it can reasonably be concluded that ITC has to be reversed with respect to any goods disposed of by way of gift or free samples. However, it is important that the ambit and scope of gifts is understood properly. 9.2 It is submitted that Gift has not been defined under the CGST Act. Hence, reference will have to be made to other statutes and the jurisprudence available on the same. Gift, as per the Gift-Tax Act (18 of 1858) has been defined to mean transfer by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.4 The Australian High Court in the case of Commissioner of Taxation (Cth) Vs. McPhail [1968] 41 ALJR 346 held that to constitute a gift the property should be transferred voluntarily and not as a result of a contractual obligation. In this case a person agreed to give a donation to a school in return of school charging less fees for the education of the child of said person. Hence, the Court held that such donation cannot be termed as gift as it was made under a contractual obligation wherein school was required to charge lower fees against the donation made. 9.5 It is submitted that in light of the above, it is concluded that to constitute a gift following elements are required to be satisfied: - a. Supply must be made without any contractual obligation. If any supply is made under a contractual obligation it cannot be termed as a gift . b. Supply must be made without any consideration in money or money s worth. Hence, supplies made out of love and affection or such other nonlegal considerations can only be termed as gifts . 9.6 Thus, the Authority has failed to consider and differentiate, the judgments of Sonia Bhatia (supra) and McPhaiI (supra) rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch goods to the wholesalers. Albeit-indirectly, the exchequer will get GST even on the value of the free supplies and there is no revenue loss as such to the government as well. 9.12 If business promotion and advertisement expenses are not specifically excluded and are considered as in the course or furtherance of business then in view of the Appellant same treatment is available for free supplies. It is noteworthy that expenses, incurred for pamphlets, hoardings, banners, etc., are in the nature of the marketing and promotions and therefore in course or furtherance of business. Thus, the ITC of the GST paid on goods distributed as brand reminders should be available. 10. PRODUCTS GIVEN AS BRAND REMINDERS SHOULD BE TREATED AS INCURRING BUSINESS EXPENSES 10.1 The Authority has failed to deal with the contention of the Appellant that the products given as brand reminders should be treated as incurring business expenses and in no way is a permanent disposal or transfer of business assets. 10.2 It is submitted that entry (1) of Schedule I to the Central Goods and Services Tax Act, 2017 ( CGST Act ). The said entry in schedule I to the CGST Act reads the ACTIVITI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile regime, more specifically under Rule 52 of the MVAT Rules, 2005 and Rule 2(a), (k) (l) of the Cenvat Credit Rules, 2004, there was no restriction on VAT credit on purchases for promotion of business or inputs, capital goods or input services used for furtherance of business, In this regard, we wish to highlight relevant extracts of the Maharashtra VAT Rule, 2005 and Cenvat Credit Rules, 2004: (a) Rule 52. Claim and grant of set-off in respect of purchases made in the periods commencing on or after the appointed day (1) In assessing the amount of tax payable in respect of any period starting on or after the appointed day, by a registered dealer (hereinafter, in this rule, referred to as the claimant dealer ) the Commissioner shall subject to the provisions of rules 53, 54, 55 and 55B in respect of the purchases of goods made by the claimant dealer on or after the appointed day, grant him a set-off of the aggregate of the following sums, that is to say,- (a) the sum collected separately from the claimant dealer by the other registered dealer by way of tax on the purchases made by the claimant dealer from the said registered dealer of goods being capital assets and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, common y known as petrol and motor vehicles, used for providing any output service; Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods; (d) Rule 2 (l) input service means any service, (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or In relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured by the appellants by the activity of giving various items in the trade for brand recollection, as also incentivizing their dealers in promotion of the sales of the medicines by way of the shubh Labh scheme would be covered under the business , and hence under the expression in the course or furtherance of business 13.3 That the phrase in the course or furtherance of business has been interpreted by the Hon ble Gujarat High Court in the case of Cinemax India Ltd. V. Union of India reported at [2011 (24) STR 3] = 2011 (8) TMI 71 - GUJARAT HIGH COURT as follows, which squarely covers the aforesaid activities: - The meaning of furtherance , as per Black s Law Dictionary, 6th Edition, 11th reprint, 1997, is act of furthering, help forward, promotion, advancement or progress . Furtherance of business will, thus mean, act of furthering business, helping forward business, promotion of business, advancement of business or progress of business. Therefore, if a service provider is renting the property in the course of or for furtherance of business or commerce, it will amount to an activity in favor of service recipient for helping forward business, promotion of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantee period by the appellant s dealers anywhere in the country. Thus, though one dealer might hove to repair goods sold by another dealer and incur costs in that regard, he also had the benefit of having the goods he sold reparable throughout the country. The provision as to after sales service, therefore, benefited not only the appellant; it was a provision of mutual benefit to the appellant and the dealer. We think that in adjudicating matters such as this the Excise authorities would do well to keep in mind legitimate business considerations. 13.7 That the lower authority has reasoned that the rewards scheme/ shubh Labh scheme mentions the word gift and consequently would attract the exclusion clause for claiming credit under section 17 (5) (h). As demonstrated from the meaning of the word gift , the rewards scheme is not a gift simplicitor but the rewards are given only when the dealer is able to achieve certain volumes of sales as per the agreement between the dealer and the appellants. Hence the label given of gift in the agreement cannot be simply applied but the actual nature of transaction has to be considered, namely that the dealer has to increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quate organisation for sale and service of the mopeds, including show rooms, service stations, repair shops, spare parts, salesmen etc. and the mechanics were also to be trained at the cost of the dealers. The relationship between the appellants and the dealers was clearly on principal to principal basis and in the circumstances it is difficult to see how the amount of ₹ 110/-, 145/- and 165/- allowed to the dealers in respect of different varieties of mopeds could be regarded as anything other than trade discount. The appellants charged to the dealers the price of the mopeds sold to them less the amount of ₹ 110/-, ₹ 145/- and ₹ 165/-in respect of different varieties of mopeds. These amounts allowed to the dealers were clearly trade discount liable to be deducted from the price charged to the dealers for the purpose of arriving at the excisable value of the mopeds. 13.8 Reliance is placed on the decision of the Hon ble Supreme Court in the case of Collector of Customs V. K Mohan Co. Exports reported at 1989 (43) E.L.T 811 (S.C.) = 1989 (9) TMI 103 - SUPREME COURT wherein it has been clearly held that the onus of showing that an assessee falls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to make increased sales to 3rd parties, the circular deemed the additional discount as a consideration for the increased service of sales by the purchasing dealer with the requirement of payment of GST which the original supplier could take as credit, Further that such discount would be added to the ultimate price to the third-party purchaser, as the price of the supply made to him by the purchasing dealer, from the original supplier. The circular was withdrawn appreciating that there are no multiple transactions in the same transaction for which the discount is offered, and there are no further supplies as contemplated in the circular. Copy of the circular dated 28/6/2019 and its withdrawal are enclosed collectively as Annexure 1 to these submissions. Similarly, there is only one transaction of supply to the dealers by the appellants and in the same transaction the reward schemes operate to incentivize the dealers. In other words, there is no concept of there being a barter et cetera as sought to be made out by the lower authority s order. Reliance is placed on the decision of the Hon ble CESTAT in the case of Sharyu Motors V. Commissioner of Service Tax, Mumbai reported at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority dropped the demand. Hence, the appeal filed by the Revenue has no merit. 13.11 The humble submission of the appellants is that in the circular dated 7/3/2019 it had been clarified by the Central Board of Indirect Taxes and Customs that wherever there is Buy one get one free offer , it has to be treated as supplying two goods for the price of one. Similarly, in the appellants case the rewards scheme under the shubh-labh scheme has to be taken that the rewards are supply against the price already paid for the medicines sold to the dealers. Just like under buy one get one free offer, ITC is not to be denied, similarly the appellants should not be denied the ITC. Further, the very same circular clarifies in regard to Buy more, save more offers , that ITC should not be denied, even though in all these cases lesser consideration is being realized and certain portion of the supply can be thought of to be without consideration. Yet the clarification holds that such incentives to increase sales should not result in loss of ITC. In regard to secondary discount also which are not known prior to removal of the goods, the circular held that ITC should not be withheld even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration, 13.15 Appellants submit that the consideration already received from the dealers would cover the items given under the rewards scheme or the brand recall products. This is on the same reasoning as buy one get one free scheme et cetera for which full ITC was held to be eligible. 13.16 As per the Department there is no consideration for the brand recall items or the items under the rewards scheme, which is denied. Just like in the case of M and S decision reported at [2018 UKFTT 238 (TC), where the wine which was canvassed as being free by M and S, along with the meal of 3 courses for 10, the free supply of wine was rejected holding that 10 included in it the price of the wine canvassed as free; similarly in the appellant s case the consideration paid by the dealer includes that for the brand recall items as also the rewards scheme items. Hence the question of treating the brand recall items or the rewards scheme items as being non-taxable/exempt items to deny the ITC cannot arise at all. 13.17 Appellants submit that free supplies have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore Trip or Raymond Weil Watch as the case may be. Therefore, the said free supply is not taxable and chargeable to any GST in terms of Section 9 of the CGST Act, 2017. The said supply merit as exempt supply in terms of provisions of Section 2(47) read with Section 2(78) and therefore, any ITC is not available on the same in terms of inter-alia provisions of Section 17(2) of the CGST Act, 2017. Further provisions of Section 17(5)(h) specifically disallow availment and usage of any credit on goods disposed of by way of gift not withstanding anything whatsoever in sub section (I) of Section 16. Therefore, the question of availment of ITC, on the basis that subject gift were used in furtherance of their business, does not arise. 15.2 The applicant s reliance on provisions of Schedule-I is totally misplaced because it is not their case that subject gift are covered by Schedule-I of the CGST Act, 2017, It may be seen that Schedule-I is applicable to only specified suppliers and the subject gifts by the applicant are not covered by the provisions of Schedule-I. Therefore, the applicant has no occasion to take ITC on the basis of Schedule-I which is irrelevant in their case. Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that subject free supplies have been made in pursuance of their business. However, the fact remains that the same have been made free of cost and therefore, the same are non-taxable under Section 9 read with Section 2(78) and merits exempted supply under Section 2(47). Further, there is no provisions under Section 15 to include the cost of such free supplies in the value of taxable free samples in terms of Section 15. There cannot be any dispute that the said supplies are exempted, hence credit is not allowed in terms of Section 17(2). Further, gifts have to be disallowed in terms of Section 17(5)(h) notwithstanding the fact that the subject supply has been used in course of furtherance of business in terms of Section 16(1). The provisions of Section 17(5)(h) are applicable notwithstanding the provisions of Section 16(1). Therefore, the applicant is not eligible for the ITC. 15.8 Further, the applicant has not provided any enclosures to their application including Annexure-I containing a catalogue of Subh Labh Loyalty Program . Therefore, the department reserves the rights to be provided with all the documents and file additional reply. 15.9 Whether input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a gift is a gratuity and an act of generosity and does not require a consideration, if there is a consideration for one transaction, it is not gift. 15.13 The applicant is not signing any formal contract under promotional goods given as brand reminders, hence there is no contractual obligation under which goods are supplied 15.14 In the instant case under promotional goods given as brand reminders, products like pens, notepad, key chains etc. are distributed to the distributors and doctors. The said products are embossed with Sanofi brand are given as incentive and there is no extra commercial consideration and hence, since there is no commercial value assigned to the transaction, it is to be construed to be Gift. 15.15 Also, it is seen that there is no contractual obligation involved in this situation, as it is completely up to the distributors and doctors whether he will prescribe the medicines of the company or not. Doctors are not under any legal obligation to do so. As the consideration is not directly linked with the gift provided to doctor, it is to be considered as gift. 15.16 The applicant themselves have submitted that for anything to be considered as gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16(1). Therefore, the applicant is not eligible for the ITC. 15.20 Further, the applicant has not provided any enclosures to their application including Annexure-Ill containing the sample invoices for procurement of such products distributed as brand reminders. Therefore, the department reserves the rights to be provided with all the documents and file additional reply. PERSONAL HEARING 16. Personal Hearing in the instant matter, conducted on 04.10.2019, was attended by Shri A.R. Madhav Rao, Advocate, on behalf the Appellant. He reiterated the written submissions, filed earlier before us. They, also, filed one additional submission dated 14.10.2019 in the matter, which have been reproduced herein above. Shri Kartikeya Dubey, the jurisdictional officer in the present appeal matter, also attended the above said hearing, wherein he reiterated the earlier submissions, which were filed before the Advance Ruling Authority. The Submissions filed by the Jurisdictional Officer before the Advance Ruling Authority has also been reproduced herein above. Discussions and Findings 17. Heard both the sides. We have also perused the impugned Advance Ruling, wherein the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under the provision of section 2(47) read with section 2(78) of the CGST Act, 2017; (e) Whether the above said supply of the promotional schemes goods, or services to the eligible wholesalers under the Appellant s scheme of the Shubh Labh Trade Loyalty Program can be construed as gift for the determination of the applicability of section 17(5)(h) of the CGST Act, 2017; (f) Whether the promotional goods e.g. pen, notepad, key chain, etc., embossed with the brand Sanofi , which are given free of cost by the Appellant to its distributors or doctors as brand reminders can be construed as gift for the determination of the applicability of section 17(5)(h) of the CGST Act, 2017. 19. Now, we will examine the abovementioned issues in seriatim. The first moot issue is whether the promotional schemes goods, or services as specified in the catalogue floated by the Appellant, which are provided to the eligible wholesalers under the Appellant s scheme of the Shubh Labh Trade Loyalty Program, can be construed as inputs or input services, as envisaged under section 2(59) and section 2(60) of the CGST Act, 2017. 20. To decide upon this issue, we first refer to the above said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s e.g. pen, notepad, key chain, etc., embossed with the brand Sanofi , which are given free of cost by the Appellant to its distributors or doctors as brand reminders can be construed as inputs, as envisaged under section 2(59) of the CGST Act, 2017. 22. To decide this issue, we will first examine the nature and purpose of the above transactions undertaken by the Appellant, wherein they are providing to their distributors or doctors the promotional goods e.g. pens, note pads, key chains etc. which are embossed with the brand Sanofi as the brand reminders With the sole objective of using them as advertisement tools to promote their brands so as to increase their sales and business. On perusal of the submissions made by the Appellant in this regard, we agree with the Appellant s contention that these goods, provided free of cost to their distributors or doctors in their trade channels, are actually being used as an advertisement tools for the promotion of their brand Sanofi as all such goods i.e. pens, notepads, key chains, etc. are embossed with the brand Sanofi , thus making them as potential advertisement tools for their brand, which in turns would help in furtherance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(47) read with section 2(78) of the CGST Act, 2017. Since, it has been established in para 22 above that the subject goods being provided free of cost by the Appellant to its distributors or doctors as brand reminders are nothing but inputs. Hence, the same cannot be termed as output supply at the same time. Thus, in light of the above findings, the question of the provision of these subject goods embossed with the brand Sanofi , being in the nature of exempt supply under section 2(47) or even non-taxable supply provided under section 2(78) of the CGST Act, 2017, or otherwise do not arise. 25. Now, we will proceed to discuss the issue no. (e), which iS whether the above said supply of the promotional schemes goods, or services to the eligible wholesalers under the Appellant s scheme of the Shubh Labh Trade Loyalty Programme can be construed as gift for the determination of the applicability of section of the CGST Act, 2017. on this very issue, the AAR has ruled that the promotional schemes goods, or services to the eligible wholesalers under the Appellant s scheme of the Shubh Labh Trade Loyalty Programme are nothing but gifts, relying on the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract is not compulsory for effecting any transaction or deeds. Even the oral agreement can have the requisite legal validity and force if the same can be established adequately under the circumstances leading to the respective events. In the present case, however, there is a provision of digital agreement, being entered between the Appellant and the participating wholesalers, wherein the said participating wholesalers are allowed to be part of this subject scheme only after accepting the terms and conditions of the Shubh Labh Trade Loyalty Program, 27, Thus, from the above, it can be clearly made out that the promotional goods and services being given by the Appellant to the eligible participants are not voluntary, but the same is subject to the compliance of the terms and conditions of the scheme under question. Thus, the findings of the AAR to the extent that the subject goods and services given by the Appellant to the wholesalers under the Shubh Labh Trade Loyalty Program are voluntary is erroneous, and hence not tenable. 28. As regards the AAR findings that there is no consideration, whatsoever, involved in the transaction related to the supply of the promotional goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action under question. 30. Now, we will examine the final issue (f), which is whether the promotional goods e.g. pen, notepad, key chain, etc., embossed with the brand Sanofi , which are given free of cost by the Appellant to its distributors or doctors as brand reminders can be construed as gift for the determination of the applicability of section of the CGST Act, 2017. 31. The Advance Ruling Authority, on this above issue, has ruled that the goods e.g. pen, notepad, key chain, etc., embossed with the brand Sanofi , which are given free of cost by the Appellant to its distributors or doctors as brand reminders are in the nature of gifts, as these goods have been transferred in the absence any contractual obligation between the Appellant and its wholesalers, and without any commercial consideration, thereby satisfying the parameters of a gift, which have been laid out by the Hon ble Supreme Court in the case of the Sonia Bhatia vs. State of UP [1981 (3) TMI 250- Supreme Court) . 32. As regards the above AAR observation, it is stated that the AAR has completely ignored the advertising potential of the such goods given by the Appellant to its distributors or doctors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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