TMI Blog2021 (7) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the transaction / activity is in the course or furtherance of business? - HELD THAT:- The definition of business is inclusive and wide in its scope and amplitude and the transaction / activity of the applicant is undoubtedly in the course or furtherance of business. Whether the transaction / activity is made for a consideration? - HELD THAT:- The consideration can be in monetary or non-monetary form or partly in monetary form and partly in non-monetary form. Clause (a) and (b) of the definition of consideration are independent clauses and not dependant on each other. Therefore, consideration can be payment in money or the monetary value of any act or forbearance. Monetary consideration includes payment by cash, cheque or credit card, bank transfer and deduction from bank account - On a plain reading of the preamble of the Agreement itself it is evident that the primary motivation for the applicant to enter into the Agreement to place the instrument at the premises of the customer is the agreement of the customer to purchase Products as defined in the Annexure B of the Agreement in accordance with the terms and conditions specified in the Agreement. It is settled posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as Agreement ) with various hospitals, labs etc. The copy of the sample agreement is produced as Annexure - 2 to the application. The Applicant by application dated 28.05.2018 sought for advance ruling on following; Whether the placement of specified medical instruments to unrelated customers like hospitals, labs etc for their use without any consideration for a specific period constitute a supply or whether it constitutes movement of goods otherwise than by way of supply as per provisions of the CGST / SGST Act? 4. The Authority for Advance Ruling by Ruling No. KER/15/2018 dated 26.09.2018 ruled as follows; The placement of specified medical instruments to unrelated customers like hospitals, labs, etc. for their use without any consideration, against an agreement containing minimum purchase obligation of products like reagents, calibrators, disposals etc for a specified period constitute 'Composite Supply'. The principal supply is transfer of right to use of any goods for any purpose and is liable to GST under Sl.No.17 (iii) - Heading 9973 of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017. 5. Aggrieved by the above ruling the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner and its customer hospitals / laboratories militate against viewing them as a composite supply as defined above. Firstly, the supplies are made by two different taxable persons; the supply of instrument being by the petitioner and the supply of the reagents, calibrators and disposables being by his distributor, who purchases it from him on principal to principal basis. Although it could be argued that there is a relationship between the said persons that influences the valuation of the supply, the same does not take away from the fact that the supplies are, in reality, made by Two different taxable persons. Secondly, the two supplies do not answer to the description of being naturally bundled and supplied in conjunction with each other in the ordinary course of business . While they were not bundled together as a matter of fact, in the instant case, there is also no material to suggest that they are so bundled and supplied in conjunction with each other in the ordinary course of business . In fact, the business model followed by the petitioner appears to have held the field for a considerable period of time and would show that in the ordinary course of business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d all rights, title and interest in the instruments are owned and vested in them at all times during the period of use. The hospital only possesses a non-transferable right to use the said instruments without any consideration. The said instruments are provided to the hospitals for a specified period and are returnable at the end of the specified period or on earlier termination of the Agreement. The instruments are centrally stocked by them at their warehouse located in Ahmedabad, Gujarat. As and when required the instruments are transported to the identified unrelated hospitals, labs etc located in Kerala or other States under the cover of a delivery challan in accordance with the provisions of the CGST Act. The photocopy of sample delivery challan dated 25.01.2018 is produced as Annexure - 3. ii. Supply of products (reagents, calibrators, disposables etc) as provided in the Agreement. As per the agreement the hospitals/ labs are required to purchase specified quantities of reagents, calibrators, disposables etc at the prices specified in the Agreement. The products are supplied by them to their distributors on payment of applicable GST. The distributor in turn supplies the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o commercial and business expediencies. A copy of the Order dated 02.05.2017 of Deputy Commissioner (Intelligence), Dept, of Commercial Taxes, Emakulam is produced as Annexure - 7. 8.4. On the basis of the Judgment dated 07.01.2020 of the Hon'ble High Court of Kerala, the only question that arises for determination in the present proceeding is whether the placement of the instrument at the premises of the hospitals/ labs is a supply in terms of the CGST Act. The further questions as to valuation, classification, nature of supply, rate of tax etc are outside the scope of the present proceeding. In other words, the only issue involved in the present proceeding is whether present transaction is leviable to GST or not. 9. Section 9 of the CGST Act levies tax on all intra-State supplies of goods or services. Thus, the taxable event for levy of Goods and Services Tax is 'supply of goods or services or both'. The meaning and scope of the term 'supply' is specified under sub-section (1) of Section 7 of the CGST Act. 9.1. Section 7(l)(a) of the CGST Act defines the term supply as all forms of supply made for a consideration by a person in the course of furtheran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be received in more ways than one, for example, by the transfer of a coin or a negotiable instrument or the acceptance of a cheque or other document which represents and produces money: what amongst businessmen might be equivalent to receipt of a sum of money would be receipt within the meaning of the statute. Adjustment of cross-claims, a settlement of account, an exchange effected by a book entry, or a set-off would be equivalent to actual receipt of a sum of money although no money may pass. Further, the word 'otherwise' in the definition of consideration will take colour from the preceding word 'money'. Thus, payment will mean a payment in money or through cheque, credit card, bank transfer, account settlement which is equivalent of money. 9.4. Clause (b) of definition of consideration includes monetary value of any act of forbearance. This will include barter transactions where the payment is made by supplying some goods or services. Further, the act or forbearance to be treated as consideration should be capable of expressed in monetary terms. If no monetary value can be attached to any act or forbearance, it will not amount to consideration under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration is a vital element of the contract. An agreement made without consideration is void and unenforceable. This is to ensure that the parties are serious while entering into contract and that they have taken active part in the bargain. However, to ensure that frivolous contentions, that the contract is without consideration, are not raised even in genuine contracts, the definition of the term 'consideration' has been widely defined. The above definition under the Contract Act can be contrasted with the definition of the term 'consideration' in the CGST Act. The definition 'consideration' in the CGST Act includes payment, whether in money or otherwise, and monetary value of any act or forbearance. Thus, the consideration requires passing of either money or money's worth from the recipient of the supply to the supplier. In other words, any act or forbearance which does not have any monetary value is not 'consideration' under the CGST Act. Reliance is placed on the decision of the Hon'ble High Court of Bombay in the case of Keshub Mahindra Vs Commissioner of Gift Tax [1968 70 ITR 1 Bom]. The issue arose under the Gift Tax Act, 1958. Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate value, but for something which the law can deem of some value, and the parties treat as such by making it a subject of bargain. The value so received in exchange for the promise may consist in present performance, for example, the delivery of goods, or it may itself be the promise of a performance to come. These elements are embodied in the definition of consideration by clause (d) of our section. Now, it is undoubtedly the intention of the Gift-tax Act by the use of the words consideration in money or money's worth in section 2(xii) to limit the meaning of consideration to something which can be reckoned in terms of money and not to any and every obligation, e.g., a promise to marry, which would be a valid consideration under the ordinary law of contracts. It is a moot question whether consideration in money or money's worth is the same things as valuable consideration or something which the law deems of value or whether it was intended by the definition to narrow down the concept of consideration. We have adverted to this distinction in order to emphasize the extent of the narrowness of the concept of consideration in the Gift-tax Act. The distinction, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine whether it forms part of the consideration received by the supplier for making the supply. 83. Many transactions involve exchanging various rights and obligations between the parties to the transaction. In particular, the true character of the transaction may characterise the payment as a condition of the contract rather than the provision of non-monetary consideration. For example, in many cases, agreeing to enter into a contract to receive a supply (or a specific period of time is not non-monetary consideration (or that supply. 84. Also, subject to the terms of the agreement, transactions will often involve a supply made only for monetary consideration. In these circumstances, obligations entered into as part of the transaction by the entity that is liable to provide the money will not be separate parts of the consideration for the supply. Similarly, where the transaction in substance involves a supply made for a thing that is non-monetary consideration, the obligations to provide that thing will not constitute separate parts of the consideration. 85. Non-monetary consideration needs to have a clearly independent identity. Obligations that are essentially an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing; and (b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything. (2) It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply. 10.4. In view of the above, the obligation of the hospitals/labs to purchase minimum quantity of products is not a consideration for the purposes of the CGST Act. Further, there must be a link or nexus between the supply of goods or services by a person and the consideration paid by another person. This is clear from the words 'in respect of, in response to, or for the inducement of. In their case, the hospitals/ labs places order for the purchase of reagents and make payment for the same. This is performance of the agreement to purchase reagent. Appropriate GST is being discharged on such supply by their distributor. Thus, the consideration paid by the hospital I labs is for supply of reagents. There is no nexus between the placement of instrument by them and the consideration paid (or obligation undertaken) by the hospitals/labs. Therefore, the transaction of placement of instrument at the premises of the hospitals/labs i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid term is provided under Sub section (4) and (5) of Section 25 of the CGST Act. The Applicant and the hospitals / labs are independent and distinct legal entities and do not fall under the ambit of 'distinct persons' as provided under Section 25. Consequently, the Clause (b) of Schedule I is not applicable to the facts of their case. 10.9. Clause (c) of Schedule I deals with transactions between a principal and his agent. There is no principal-agent relationship between the Applicant and the hospitals/labs. Consequently, the transaction is not covered under Clause (c) of Schedule I of the CGST Act. Clause (d) of Schedule I deals with services imported from a related person. Their case does not involve any import of services. Consequently, the transaction cannot be held liable to GST in terms of Clause (d) of Schedule I of the CGST Act. Thus, the transaction is also not covered by clause (c) of Section 7(1) of the CGST Act. 11. Since, the transaction is not a supply movement of instrument can be made through delivery challan as Rule 55 of the CGST Rules provides that where the transportation of goods is for reasons other than by way of supply, a delivery challan may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. 13.1. A plain reading of the definition of the term, supply as above would indicate that the meaning attributed to the term is that of wide amplitude, but, yet is an inclusive one. On a perusal of the definition it can be seen that the essential ingredients required for an activity / transaction to come within the meaning and scope of supply as defined above are;- 1. The activity I transaction shall involve goods or services; 2. The activity I transaction should be in the course or furtherance of business; 3. The activity I transaction is made for a consideration. 13.2. Therefore, the first issue to be decided is whether the transaction / activity involve goods or services. If the transaction / activity do not involve goods or services or is of anything other than goods or services then the transaction I activity will not come within the scope of supply as defined above. In the instant case it is stated that the applicant is placing its own specified medical equipments to identified hospitals or laboratories by executing an agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course or furtherance of his trade, profession or vocation; (h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. The definition of business is inclusive and wide in its scope and amplitude and the transaction / activity of the applicant is undoubtedly in the course or furtherance of business. 13.5. The net issue to be determined is whether the transaction / activity is made for a consideration. The term consideration is defined in Section 2 (31) of the CGST Act, 2017 as follows; (31) consideration in relation to the supply of goods or services or both includes,- (a) 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 Government or a State Government; (b) the monetary value of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thcare hereby grants, subject to the terms and conditions specified in this Agreement, to the Customer a non-transferable right to use the Instruments without any consideration for the use per se during the term of this Agreement. 2.2. Title to Instruments. The Customer acknowledges and confirms that Abbott Healthcare owns all rights, title and interest in the Instruments and that the Customer has no right, title or interest in the Instruments other than the right to use the Instruments specifically granted pursuant to this Agreement. 2.4. Customer Covenants. (v) The customer shall use only such reagents, calibrators and disposables on the instruments as specified or approved in writing by Abbott Healthcare from time to time and shall ensure that only Abbott Healthcare personnel will have the authority to repair, upgrade or replace any parts necessary to keep the instruments in good working order; 3. Purchase of Products, Minimum Purchase Obligations. 3.1. Purchase of Products. Every month the customer shall purchase its entire requirement of the Products from Abbott Healthcare (such exclusive purchase obligation, the Exclusive Purchase Obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or both. Hence the agreement of the customer to purchase the reagents, calibrators and disposables for use in the instrument exclusively from the applicant for a minimum value every month with obligation to pay the deficit amount in case the purchase in a month falls short of the minimum agreed value constitutes a valid consideration as defined under Section 2 (31) of the CGST Act, 2017. Therefore, there is no doubt that the transaction I activity is made for a consideration. In the light of the discussion above, it is evident that the transaction / activity satisfies all the essential ingredients of supply as defined under Section 7 of the CGST Act, 2017. 14. The applicant has strongly contended in the written submission as well during personal hearing that the obligation to purchase minimum quantity of products is not a 'consideration' for the purpose of the CGST Act. It was also contended by the applicant that the definition of consideration in Section 2 (31) of the CGST Act can be contrasted with the definition of consideration in Section 2 (d) of the Contract Act and it can be seen that the consideration as defined in GST is narrower in scope than the considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to prevent the provision becoming unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute. In the case of Dayal Singh Vs Union of India reported in AIR 2003 SC 1140 ; the Hon'ble Supreme Court held that; where the language of the statute is clear and unambiguous, nothing can be read into it by implication and the intention of the legislature has to be gathered from the language used. The Hon'ble Supreme Court in the case of Union of India Vs Dharamendra Textile Processors reported in 2008 (231) ELT 3 (SC) held that; It is a well settled principle in law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. It is well settled by a catena of decisions of the Apex Court that a taxing statute must be interpreted in the light of what is clearly expressed; it cannot imply anything, which is not expressed, it cannot import provisions in the statute so as to supply any assumed deficiency. 16. The applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law. The Hon'ble High Court of Bombay in the case considered the scope of the term consideration as defined in Section 2 (d) of the Contract Act vis - a - vis the scope of the word consideration as used in the definition of gift in Section 2 (xii) of the Gift Tax Act and came to the conclusion that the word consideration in the definition of gift is qualified by the words in money or money's worth and hence it limits the meaning of consideration to something which can be reckoned in terms of money and not to any and every obligation which could be valid consideration under the law of contracts and accordingly held that the word consideration as used in the definition of gift in the Gift Tax Act is narrower in scope than the term consideration as defined in the Contract Act. The judgment is not relevant to the instant case not only because the facts and circumstances are distinguishable but also due to the fact that the statutory provisions dealt with are not pari materia as the issue in the case was the meaning and scope ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
