TMI Blog2021 (5) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... ance for the inducement of the supply of goods. The 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 goods but actually incurred by the recipient and this cost is also not include in the price actually paid/payable by the recipient - In the instant case also, BHEL CFFP are also providing rent free space alongwith free water free electricity to the applicant for manufacturing supply of Oxygen gas to them. The applicant has contended that 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 el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term 4. Since applicant has sought advance ruling on Determination of time and value of supply of goods or services or both, therefore, in terms of said Section 97(2) (c) of the Act, the application filed by the applicant has been admitted. 5. On perusal of records submitted by the applicant, we find that the applicant is registered in Uttarakhand having GSTIN bearing no. 05AABCV9136E1ZF. On going through the statement of relevant facts put forth by the applicant as Exhibit II Exhibit III, they have submitted that: Exhibit II - Statement of the relevant facts having a bearing on the advance ruling sought by applicant 1) The applicant is a Company incorporated under the Companies Act, 1956, having its registered office located at UG 16, Ansal Majestic Tower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 specifically provides that:- the Vendor has to take out all equipment through material gate within one month after expiry of contract period, Vendor has to dismantle all equipment within 15 days after expiry of contract period and handover site to BHEL CFFP, failing to which, penalty of Rs. 50,000 per week/or as deemed fit by BHEL at that time, shall be imposed. 7) The applicant applied for the said Tender and has obtained a Purchase Order No. P9S0413 dated 21st December 2019 from BHEL CFFP for the supply of the requisite oxygen as per the terms and conditions of the Tender document. The said Purchase Order specifically provides at Point 21 that for the calculation of GST in the bills, value of power supply to be included/ excluded as per provisions applicable at the time of billing. Further, at Point 22, it has been stated that supply of electricity will be in CFFP scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 (hereinafter referred to as IGST Act ), extract of relevant Circulars and recommendations are extracted hereunder for the ready reference of the Hon'ble Authority. 2) Unlike under the erstwhile excise laws, where taxable event for levy of excise duty was 'manufacture', levy of GST is on the taxable event called 'supply'. The key pre-condition for levy of GST, therefore, is presence of a 'supply as envisaged under GST law. 3) Section 7 of the CGST Act, 2017 defines the term 'supply'. Relevant portion of the same is reproduced hereunder:- 7.(1) For the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, atmospheric Air is sucked in by a multi stage compressor through a filter and is compressed to the designed pressure. This compressed air is subjected to the following process: -At first, it is passed through inter-coolers to cool down the air, the temperature here is marginally reduced from the then room temperature.- - This cooled down air is thereafter sent to Industrial Refrigerator where this compressed air is further cooled down to bring it upto a temperature of 10 Celsius. - At the next step, Moisture Separators are installed which are responsible to separate the moisture content present in this cooled air. - Thereafter, a Molecular Sieve Battery is used to separate the oil traces and hydrocarbons (such as carbon dioxide, argon, hydroge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods under the erstwhile Sales Tax Law. It was held therein that 'goods' means all kinds of movable property. The term movable property when considered with reference to goods as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property. It is capable of abstraction, consumption and use. It can be transmitted, transferred, delivered, stored, possessed etc. in the same way as any other movable property. In view of the above, it can be categorically said that electricity qualifies to be a movable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess, 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 the atmospheric air used in the process. It has altogether a different character/ constitution, use as well as name. Hence, the condition (ii) as laid down under Section 2(721 of the CGST Act would also duly stand satisfied. With this, all the conditions of Section 2(72) off the CGST Act are satisfied being:- - All the products namely atmospheric air, water and electricity qualify to be inputs', - There is processing of these inputs/ raw materials, There is emergence of a new product namely oxygen having a distinct name, character and use. For the said reasons, in our view, the activity carried out by the applicant for BHEL CFFP would qualify to be 'manufacture' in terms of the GST Law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship 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 said that, it may also be noted that Section 15(2) of the CGST Act specifies certain inclusions in the value of supply. The said Section 15(2) at Clause (b) inter-alia levies GST on any amount which the supplier is liable to pay in relation to the 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. In this regard, it is vital to understand as to who can be said to be liable for incurring any expenditure in terms of any supply. In our view, the liability to incur the expenditure should be deciphered from the nature of the transaction and should not be merely restricted to the independent claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid 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. 6. Accordingly hearing was fixed on 06.04.2021 which was attended by the Mr. Rajeev Kumar Agarwal, Chartered Accountant on behalf of the applicant and he reiterated the facts as stated by the applicant in their application. DISCUSSION FINDINGS; 1. We have gone through the application filed by the applicant for Advance ruling and the supporting documents submitted by them as well as oral submission made by the Authorised Representative of the applicant, Mr. Rajeev Kumar Agarwal, Chartered Accountant, at the time of personal hearing held on 06.04.2021. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts the applicant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty 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 invoice issued in respect of such supply: and (b) after the supply has been effected, if - (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices, and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply In view of above provisions, it is categorically stated that value of supply is the transaction value i.e. the price actually paid or payable for the said supply of goods and the price is the sole consideration for the supply. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 goods but actually incurred by the recipient and this cost is also not include in the price actually paid/payable by the recipient. For the purpose of levy of , cost of inputs provided free of cost, has to be included in the value o irrespective of the fact whether this value is charged from recipient of goods or not. 6. In the instant case also, BHEL CFFP are also providing rent free space alongwith free water free electricity to the applicant for manufacturing supply of Oxygen gas to them. The applicant has contended that the ownership of land, water and electricity remains with BHEL CFFP du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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