9911796707
TMI Blog2021 (5) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... vance ruling on the following question: Question No. 1: Whether the water and electricity charges as well as the notional rent of the land, provided free of charge by BHEL CFFP to the applicant, shall form part of the value of supply of oxygen gas by the applicant. 2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of Section 97 or sub section (1) of Section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 3. As per the said subsection (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of:- (a) Classification of any goods or services or both (b) Applicability of a notification issued under the provisions of this Act, (c) Determination of time and value of supply of goods or services or both, (d) Admissibility of input tax credit of tax paid or deemed to have been paid (e) Determination of the liability to pay tax on any goods or services or both (f) Whether the applicant is required to be registered (g) Whether any particular thing done by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all three shifts) 4) The Tender Document also enshrines the scope of activities agreed to be undertaken by BHEL which inter-alia are as follows * BHEL will provide power supply, untreated water at one point and Shaded space. * The plinth area of shaded space is 15X28m2, height 7.60 meter and adjacent shaded area of 11.60X9 m2, height 3.50 meter. Beyond this no shaded space shall be provided. * Adjacent open space, if required can also be used with prior CFFP's permission. * If supplier wants to increase height of building, then that will be under supplier's scope at their cost but after taking permission & clearance by CFFP BHEL. 5) The ownership of the free of charge water and electricity provided by BHEL CFFP under the said Tender remains the property of BHEL CFFP at all times and the property/ ownership in the same is never transferred to the vendor at any stage. 6) Further, since the said contract is for supply of oxygen on BOOM basis, the ownership of the plant to be setup in the premises of BHEL CFFFP shall rest with the vendor and shall not be transferred to BHEL CFFP during the course of this contract. In this context, Clause 10 of the Tender specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt submits that the questions raised in the instant advance ruling application qualify as questions in respect of which an advance ruling application can be sought by the Applicant in terms of section 97(2) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). Further, the Applicant, having a registered office in India is eligible to approach this Hon'ble Authority for an advance ruling and qualifies as an applicant under section 95(c) of the CGST Act. 11) The Applicant submits that there are no pending proceedings under the GST law against the Applicant or initiated by the Applicant in relation to the question raised herein before any authority, Tribunal or Court. Exhibit III - Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant's view point and submission on issues on which the advance ruling is sought):- 1) It is important to note various statutory provisions which have a bearing on the questions raised for the Advance Ruling in the present Application. The relevant statutory provisions under the "CGST Act" and Integrated Goods and Services Tax Act, 2017 (h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such deposit as consideration for the said supply;" 5) Section 2(72) of the CGST Act defines the term 'manufacture' to mean: - processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufacturer" shall be construed accordingly {Emphasis Supplied} 6) Section 15 of the CGST Act lays down the mechanism to determine the value of any supply for the purposes of levy of GST under the GST Law. Section 15 is reproduced herein for your ready reference:- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. In the present case, BHEL CFFP requires regular supply of oxygen in its plant to carry out its operations. For this purpose, it has appointed the applicant to set up an oxygen manufacturing plant within its premises. The applicant is provided rent free space for setting up the said oxygen manufacturing plant and also provided electricity and water free of cost. The applicant shall further procure the air from the atmosphere and process the same using electricity and water and other requisite catalysts for extraction of oxygen from the atmospheric air. The ownership of the rent-free land, water and electricity always remains that of BHEL CFFP while the plant so setup shall always be of the property of the applicant (since the contract is on BOOM basis). * A brief on the process undertaken by the applicant to obtain oxygen from atmospheric air is outlaid below for ready reference: - Atmospheric Air mainly consists of Oxygen and Nitrogen gases along with small quantities of water-vapor, Carbon Dioxide, Argon, Helium, etc. Oxygen and Nitrogen from the Air are separated due to difference in boiling points by distillation through a fractional column. To start with, atm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing having a distinct name, character and use. * The term 'input' has been defined under Section 2(59) of the CGST Act as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, the processing should be undertaken on raw materials/ inputs that qualify to be goods'. The term 'Goods' has further been explained under Section 2(52) of the CGST Act as every kind of movable property while some specific items have been specifically excluded from the definition of goods, Water, atmospheric air and electricity are not amongst the list of items excluded from the said definition. * In this context, let us first delve into the question of whether the water, atmospheric air and electricity on which processing is done qualify to be 'goods' within the broad meaning of the term under the GST Law. * For this purpose, attention is invited to the decision of Hon'ble Supreme Court in the case of Commissioner of Sales Tax, M.P., Indore Vs. M.P. Electricity Board, Jabalpur reported at 1970 (25) STC 188 wherein the question before the Hon'ble Supreme Court was whether electricity qualify to be g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further stated that it is not necessary that in the processing of an article within the meaning of this section, there must be use of mechanical force in particular cases. * From the above discussion, it can be understood that the term 'processing' has a wider connotation which includes any activity carried out for the purpose of a particular result wherein as a result of such activity the articles lose their independent identity and a new product comes into existence. * Applying the said meaning to the facts of the case at hand, the applicant is procuring atmospheric air and is separating oxygen from it by subjecting the said atmospheric air to the process as discussed above. As a result of the said process, the various constituents of the atmospheric air being nitrogen, oxygen, water vapor and other gases are separated and the requisite product being oxygen is obtained. In our view, such activities carried out to separate oxygen from atmospheric air would qualify to be 'processing' in the meaning of the term and therefore, the condition (ii) would also duly stand satisfied. * Furthermore, the product so obtained i.e. oxygen is a product different from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be included in the value of supply. On the other hand, under the erstwhile Excise Law, the activity carried out by the applicant was held to be 'manufacture1 in terms of Section 2(f) of the Central Excise Act, 1944 and the value of rent-free space and other free of cost materials was specifically included in the value of the manufactured oxygen in terms of Rule 6 of the Central Excises Valuation (Determination of Price of Excisable Goods) Rules, 2000. * At the outset in this direction, it is vital to determine whether the said costs can be said to be a 'consideration' for the applicant in accordance with the meaning of the term under Section 2(31) of the ST Act. In our view, the ownership of land, water and electricity remains with BHEL CFFP during all stages of the process till receipt of manufactured oxygen by it. In no circumstances, would the ownership of the said rent free space or water or electricity would pass on to the applicant. In such a case, in our view, all the said cannot be said to be a consideration for the applicant and thus, would not form part of the value of manufactured oxygen within the boundaries of Section 15(1) of the CGST Act. * Having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final component could not have been manufactured and therefore, by application of Section 15(2)(b) of the CGST Act, the value of tools provided free of charge by the recipient would be included in the value of manufactured component, * It is a known legal position that the Advance Rulings arc not binding on any person apart from the respective applicant of the said Advance Ruling as well as the concerned jurisdictional officer. However, inference can be drawn from the said Advance Ruling, whereby, in our view, the notional rent of the free space along with the cost of water and electricity would form part of the value of supply of oxygen gas for the purposes of levy of GST, * The aforesaid stand is further supported by the fact that the applicant is supplying such manufactured oxygen to BHEL at its Bhopal unit as well since the inception of GST wherein the notional rent of land and the cost of water and electricity are duly included in the value of manufactured oxygen for the purposes of levy of GST. * Lastly, the Applicant submits that in the interest of justice, additional submissions be taken into consideration at any or all stages during the conduct of the proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier, (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services: (d) interest or late fee or penalty for delayed payment of any consideration for any supply: and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. {Emphasis Supplied} Explanation- For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given :- (a) before or at the time of the supply if such discount has been duly recorded in the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" As per above provisions we find that consideration includes any payment whether in money or otherwise made or to be made or monetary value of any act or forbearance for the inducement of the supply of goods. 5. In a combined reading of the above provisions, it is very much clear that value of supply is the price actually paid/payable and price is the sole consideration and consideration includes monetary value of any act or forbearance. In the instant case BHEL CFFP are providing rent free land and free electricity & water to the applicant and thus tolerating all the expenditure incurred on these free of cost items. Therefore, inputs provided free of cost by the recipient of resultant goods shall also form part of value of supply in view of Section 15(1) and Section 15(2)(b) of the Act as the cost of these inputs has to be paid by the supplier of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
