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TMI Blog2022 (3) TMI 1368X X X X Extracts X X X X X X X X Extracts X X X X ..... XVII of the Act shall be binding only (a). On the appellant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b). On the concerned officer or the jurisdictional officer in respect of the appellant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in purchase of products by them from sub-stockiest. The retail outlets have an obligation to increase the sales of the products covered by the scheme as much as possible and once the purchase of products by retail outlets exceeds the specified limit under the scheme they automatically become eligible to the rewards/product. Broadly the obligations of the retail outlets under the 'Buy n Fly scheme are as follows: 1. To promote the sales of appellants products which in turn leads to more purchase of products by retail outlets from sub-stockiest. 2. The retail outlet is required to maintain proper accounts/documents which indicates the purchases made by them and also sales effected by them under the scheme. 3. The rewards/product specified under the scheme do not accrue to the retailers automatically and/or they cannot claim the same as a matter of right under the scheme. 4. They cannot participate in any other sales promotion scheme(s)/marketing scheme(s) of any other third party/vendor during the tenure of the 'Buy n Fly scheme i.e. 8th April to 8th July 2019. The terms and conditions of the 'Buy n Fly scheme as contained in the brochure are as follows: * The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptance to participants. ¯ GRB shall procure reward article (input/input services) from vendors which will be handed over to eligible retailers later. ¯ Submission of claim by the retail outlets through sales network ¯ Scrutinize the claim made by retail outlets, identify the eligible outlets and communicate the eligible reward articles. ¯ Handing over reward to eligible customer outlets. 2.3 On interpretation of law, the appellant has stated that they procured these goods and services in the course of business and it has direct nexus with the business carried on by the company/appellant; that marketing and business expansion is an indispensable activity of every company's operations and 'Buy n Fly scheme is a sales promotion scheme which was launched to promote the sales of GRB brand Instant mix, Masalas, ready to eat sweets and snacks; They have stated that the Trip to Dubai voucher, Gold voucher, Television and Air-cooler procured by the company will be used in its business or in the course of business by way of handing over them as rewards to the eligible retail outlets who participated in the scheme. 3. The Appellant had sought Advance R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim input tax credit charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business. Further, the conditions specified u/s 16 (2) that the registered person should possess the tax invoice issued by the supplier; registered person must have received the goods; Tax charged in respect of such supply has been actually paid to Government; registered person has furnished the return u/s 39 of CGST Act, 2017 are fulfilled by them and hence they are eligible to take Input Tax credit of inputs and input services, being Trip to Dubai voucher, Gold voucher, Television and Air-cooler; that these are procured with an intent to implement the 'Buy n Fly' scheme which is part of business of the appellant; the expenditures incurred by the appellant in respect of Buy n Fly' scheme are in the nature of sales promotion expenditure with the sole objective to increase its sales; that once the conditions prescribed u/s 16 are satisfied, the ITC can be claimed. * GST is in a very nascent stage in terms of litigation or advance rulings on certain aspects are concerned; so, they can rely on the erstwhile law for taking the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Associates Development Centre Pvt. Ltd. Vs Corn. Of ST B'lore - (2015 (11) TMI 344 - CESTAT BANGALORE), it was held that sub-clause under Rule 2 (1) of CENVAT Credit Rules 2004 clearly says that the input service which are used directly or indirectly, in or in relation to the final products and clearance of final products up to the place of removal of the manufacturer/ service provider would be covered within the definition of 'Input Service'. Further, reference was made to CESTAT, Ahmedabad's decision in the case of Ultratech Cement Ltd.Vs. CCE, Bhavnagar [2011(22) STR 578 (Tri. Ahmd.)], which has quoted Hon'ble Supreme Court's decision in the case of Maruti Suzuki Ltd. Vs. Commissioner [2009(240) ELT 641 (SC)} and Hon'ble Bombay High Court's decision in the case of Coca-Cola India Pvt. Ltd. Vs. Commissioner [2009 (15) STR 657 (Bom.)] saying that input services/activities in relation to business can cover all activities/services relating to the functioning of the business and the expression of business is wide. Accordingly, the bench was of the view that the definition of input service is wide and the input services in question would be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 'rewards'. The term 'Gift' has not been defined under the CGST Act, 2017 and therefore it would be appropriate to refer to other enactments and judicial pronouncements in order to ascertain the meaning of the term 'gift'. * The term 'Gift' under Gift Tax Act, 1958 was defined as '(xii) -gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section' * As per Black's Laws Dictionary (Fourth edition): A voluntary transfer of personal property without consideration. A voluntary conveyance of land, or transfer of goods, from one person to another, made gratuitously, and not upon any consideration of blood or money. * As per Transfer of Property Act, 1882: "Gift" is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. * In the case of Sonia Bhat vs S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority * The entire expenditure related to the scheme was incurred by them in the course or furtherance of their business, this is the primary condition for availment of Input Tax Credit and has been satisfied by them in line with sec. 16 (1) of the CGST Act, 2017. The term "input" is NOT to be equated with the term 'goods'. The phrase 'in the course or furtherance of business' encompasses a wide range of functions within the business. The term. "business" as defined under the GST law includes any activity or transaction which may be connected, or incidental or ancillary to the trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity; there is neither a requirement of continuity nor frequency of such activities or transactions for them to be regarded as 'business'. The law poses no restriction that the goods must be used on the shop floor, or that they must be supplied as such/ as part of other goods/ services; it would be sufficient if the goods are used in the course of business, of for furthering the business. The term 'course of business' is one that can be stretched beyond the boundaries consoli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstwhile CENVAT Credit Rules, 2004 ('CCR') wherein similar term was used in definition of "input" and ''input service". As per the CCR, tax paid on input and input service shall be available as credit which can be utilised for discharging output tax. However, following two important point must be noted- * Definition of "input" excludes any goods, such as food items, goods used in guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee. * Definition of "input service" excludes services such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of club, health and fitness centre, life insurance, health insurance and travel benefits extended to employee on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee. As can be observed from the above, the main distinctions from the erstwhile Service Tax regime and the GST regime in this regard are as follows: * * Under CCR, the terms personal use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." * This is analysed in the context of 'Production' and 'Consumption' i.e., creation and then its utilisation. The judgment is conveyed in the context of levying tax in the state of consumption. Thus, it is bound to have a wider sense than the usual understanding of eating. The language of Entry 52 in schedule II of the Indian Constitution has both the terms 'consumption' and 'use' disjunctively. But Entry 53 speaks of taxes on the consumption or sale of electricity; and obviously consumption here can mean only use and not the general sense of eating. Given the above differentiation, this analogy cannot be made squarely applicable while analysing the term 'Personal Consumption' as mentioned in the GST law. * For a moment, agreeing but not admitting to the analysis of the Authority for Advance Ruling (AAR) of the term 'Consumption', the Appellant believes that this is erroneous and wishes to bring the following scenario to the Learned Appellate Authority's attention. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les volume at the expense of the Competitors by encouraging dealers to move the products * Giving Customers a taste of Products which helps to sustain or increase Sales Volumes and Values. * Sales, Promotion Expenses incurred are pursuant to a contractual obligation which is supported by signed copies of the acknowledgements by the Dealers before implementation of the Scheme. In other words, the promotional materials which was provided to the Dealers there was quid pro quo. Based on what has been stated supra, it is evident that the Costing of the products are inclusive of the Advertisement and Sales Promotion component. The consideration which is paid for the product includes the element of the Sales Promotion campaign costs and therefore the contractual obligation arising from running such campaigns has the element of consideration on which GST is being discharged. The AAR authorities have not disputed these facts and therefore the price at which the product has been sold to the Dealers, Stockiest, Retailers covers a part of the Advertising and Sales Promotion Cost and therefore the consideration is embedded. * It is therefore in light of this, they submitted that, the rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ruling Authority in the case of M/s Biostadt India Limited, [2019 (3) TMI 540] is not squarely applicable in the instant case as the facts of case differ wherein it also been observed by the learned advance ruling authority that the gold coins are not given "to their customers under any contractual obligation and are voluntarily given on certain conditions achieved by their customers. In appellant case, the products are accorded through a pre contractual obligation and there is consideration paid for and only upon fulfilment of conditions that products are given as reward and this will not take color of gift. Hence the Appellant stated that facts of the case on which the ruling was rendered are significantly different from the judgement of the Maharashtra Advance Ruling Authorities and the ratio decidendi of the above judgement cannot be applied to the facts on record which have been established before the Advance Ruling authorities by the Appellant The yardstick to be applied are to be examined based on the facts of the case to decide on the applicability & admissibility. Personal Hearing 6.1 The Appellant was granted personal hearing as required under law before this Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a scheme which was circulated to the trade in advance, sample copies of the Acceptance of the scheme by members of the trade has been furnished. iii. Once a Contractual Obligation comes into play the giving of the promotional materials cannot be construed as a Gift. iv. That there was consideration which was inbuilt in the pricing of the product which fact has not been denied by AAR. After accepting this position it is stated that the observation of the State Jurisdictional Authority order that the gifts /free samples was distributed without any consideration is not appropriate. Further in the same the State Jurisdictional Authority have come to a wrong conclusion that the gift was voluntary is also wrong as they have themselves stated "Since the offers are given voluntarily by the appellant on fulfillment of certain conditions these are to be treated as gifts/ rewards" v. The reliance placed by the AAR on the Maharashtra Advance Ruling in the Matter of Biostadt India Limited has no bearing on the facts of the case before the Learned members as there is consideration on which incremental output tax has been paid and there is acceptance of the scheme by the members of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further stated that these goods/services were purchased for furtherance of business and there was a 24% increase in sales of their products due to the scheme. Therefore the appellant pleaded that their reward scheme would not fall under gift and thereby provisions of section 17 (5) (h) would not apply to them. The appellants further contended that provisions of section 17(5)(g) of the CGST Act,2017 do not apply to them as the usage test is to be applied at the stage of procurement and not at the consumer end. 8.2 Section 16 of the CGST Act, 2017 empowers the taxpayer for entitlement of taking the tax charged on the Inputs as input tax credit on the goods or services or both supplied to him which are used or intended to be used in the course or furtherance of his business and such unbridled flow of input tax credit got restriction in section 17 of the Act. The sub-section (5) of the section 17 begin with Non-obstante clause that Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18 and hence the sub-section (5) of section 17 would independently apply and the Parliament consciously restricts the input tax credit which is a conces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ichi Karkaria [1999 (112) ELT 353 (SC)] and M/s. Coca Cola India Pvt Ltd Vs. CCE Pune [2009 (8) TMI 50 (Bom- HC)] are that rendered by various Tribunals whose decisions are based on the verification of facts of the case and do not hold substantial guidance value on law. In the decisions of the Hon'ble Supreme Court and the High Court the eligibility to credit is spoken in the context of the expenditure being a part of the cost of the final product, which is assessed. In the case at hand, the actual costing which is assessed has not been substantiated to hold the expenses at hand tor which credit is claimed. It is pertinent to note that the appellant has stated that the M.R.P. remained the same both Pre and Post Campaign, which points that the goods and services distributed under the scheme were without valuable consideration. 8.4 It is interesting to note that the appellant provided rewards by way of goods and also foreign tours by providing valid air tickets and that's why they coined the reward scheme as "Buy n Fly". Thus what they provided in the scheme was goods and services. The provisions of the clause (h) stipulates that input tax credit would not be available for g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availability of input tax credit itself as such situations were obviously found in the reward scheme of the appellant. 8.6 The appellant has referred to the Circular No.92/11/2019 dated 7.3.2019 issued under Section 168 (1) of the Act, and claimed that their situation falls under 'C. Discounts including 'Buy more, save more offers'. Para: 'C' provides clarification in cases when staggered discount is offered to customers; periodic/year ending discounts to stockiest, etc based on the criteria spelt in, whereas in the case at hand, the retailers/stockiest are extended rewards which are definitely not' 'Discounts' discussed in Para C of the circular. The appellants case more aptly falls under Para A of the Circular. It has been established that the giving away of goods/services under the scheme is not a 'Supply' and therefore ITC of the GST paid on the goods/services procured for the 'Buy n Fly Scheme' is not available to the appellant. Further, the various other Case laws relied upon by the appellant and Advance Ruling Authority pertain to the issues dealt with under the legacy Acts viz., Central Excise, Service Tax Act, TNGST Act 1959, In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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