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TMI Blog2022 (12) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean a reference to the same provisions under UPSGST Act, 2017 and the vice versa BRIEF FACTS OF THE CASE 1. M/s Coperion Ideal Private Limited (Appellant), situated at Ideal House A-35 Sector-64, Noida. Uttar Pradesh - 201307, is registered with jurisdictional authorities vide GSTIN-09AACCC3990N1Z4 2. The Appellant is engaged in designing, engineering, fabrication and supply of Pneumatic Conveying System (PCS') and its parts and components PCS is a system which is used for transportation of material through pipes from one location to another using air / gas pressure for moving the goods 3. Depending upon customers requirements, some of the components are manufactured by the Appellant or sourced from other domestic sources and then supplied to customers, while some components are imported from outside India 4. As regards the components imported from outside India, Appellant supplies the imported components to customers in India on High Sea sale basis under a High Sea Sales contract which is executed while the goods are on high sea i.e. In transit before crossing the customs frontiers of India. The said supply is carried out by merely transferring the title in goods to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Central Goods and Services Tax Act, 2017 ('CGST Act') for the reason that taxability of supply of goods on High Sea Sales is determined on the basis of 'place of supply' which does not come within the purview of section 97(2) of the CGST Act; rather the same fall within the domain of Customs authorities GROUNDS OF APPEAL SUBMITTED BY THE APPELLANT Being aggrieved by the aforesaid ruling, the Appellant has preferred instant appeal passed by the Authority for Advance Ruling, as the Authority vide its Impugned Ruling has declined to pass any ruling on the question of 'Whether supply of components of Pneumatic Conveying System by the applicant to customers on High Sea Sales basis will be treated neither as supply of goods nor as supply of service by virtue of entry 8 to Schedule III of CGST Act?". The grounds of appeal submitted by the Appellant are as under- 10.1 The question raised by the Appellant in the application for advance ruling falls under the purview of Section 97(2)(e) and (g) of the CGST Act and therefore the Authority had jurisdiction to pass a ruling on the same. 10.2 The Appellant has submitted that it never sought any ruling for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the advance ruling is to be sought. Section 97(2) of the CGST Act enumerates aspects on which an advance ruling can be sought by any applicant vide the Impugned Ruling, the Authority has held that the question sought to be answered by the Appellant requires determination of 'place of supply' which does not find a place under Section 97(2) of the CGST Act. 10.7 The Appellant has submitted that their question as to whether transactions of High Sea Sales would amount to supply of goods or services under GST or will it be treated as neither a supply of goods nor a supply of service under GST is squarely covered by clause (e) and (g) to Section 97(2) of the CGST Act and the Authority materially erred in declining to pass a ruling on the basis of reasoning that the question sought by the Appellant is out of the purview of Section 97(2) of the CGST Act. 10.8 The Appellant has submitted that Supply of imported components of PCS on High Sea Sale basis is neither a supply of goods nor a supply of service under GST. High Sea Sales is a concept which has been prevalent in the erstwhile indirect tax regime as well. By nature, 'High Seas' mean 'international waters' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply shall neither be treated as a supply of goods nor a supply of services. 10.12 The Appellant refers to Ruling given by the Authority for Advance Ruling, Telangana in the case of M/S. AIE Fiber Resource and Trading (India) Private Limited [2021 (12) TMI 1265], wherein the Authority considered the question of taxability of imported goods supplied to customers on High Sea Sale basis. The Authority have ruled that imported goods supplied on High Sea Sales are squarely covered by clause (b) to Entry 8 to Schedule III inserted vide CGST (Amendment) Act, 2018 w.e.f. 01.02.2019 and hence no IGST is payable on such transaction by the Applicant therein. 10.13 The Appellant has referred to the CBIC Circular 33/2017 dated 01 08 2017 which clarifies that IGST on imports shall only be leviable at the time of importation by the last buyer in the chain, and not before that. Thus, even the GST Council and CBIC clarified the position in relation to taxability of High Sea Sales only in the hands of the ultimate buyer who files the bill of entry for clearance of goods and not in the hands of the original importer or any other intermediary seller and accordingly the imported components of PCS so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de India without any extra charge for the same by treating the same to be integral part of the supply of components for pellet transfer systems. 10.17 It is clarified that the offshore purchase order issued by the customer is for supply of components for pellet transfer systems. The value is also agreed for supply of components for pellet transfer systems. Inspection, testing, certification, drawings, technical documents and pre-dispatch storage (if required by customer) are all integral to the supply of components for pellet transfer systems. Neither any of these activities have independent existence nor can they alter the characterization of supply of components for pellet transfer systems. 10.18 Inspection, testing, control and acceptance test etc. are all done outside India at the site of foreign supplier on whom Appellant places back-to-back purchase orders in terms of offshore supply purchase order of customer. A representative of customer remains also present at the site of foreign supplier during such inspection, testing, control and acceptance test.(Copy of Clearance Notes dated 14.02.2022 and 16.03.2022 attached). 10.19 It is further clarified that after dispatch of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CGST Act? and the Authority has ruled that import as well as High Sea Sales is determined on the basis of place of supply; that the 'Place of supply' is not covered by Section 97(2) of the CGST Act, 2017 at all and hence is outside the purview of Authority for Advance Ruling. 11.4 We find that High Sea Sales has not been defined in CGST Act, 2017; however Central Goods and Services Tax (Amendment) Act, 2018 has inserted two new entries under the said Schedule III. The extract of the relevant entry is reproduced below: "8. (a) ............... (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have dispatched from the port of origin located outside India but before clearance for home consumption." Further, Section 2 (28) of the Customs Act, 1962 defines "Indian customs waters" as the waters extending into the sea up to the limit of contiguous zone of India under Section 5 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976). 11.5 From the above it may be interpreted that 'High Sea Sales' is a sale through endorsement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority for Advance Ruling has erred in denying the ruling sought by the Appellant on the ground that import as well High Sea Sales is determined on the basis of place of supply which is not covered by Section 97(2) of the CGST Act, 2017 at all and outside the purview of Authority for Advance Ruling. 11.9 Now we take up the issue as to "Whether supply of components of Pneumatic Conveying System by the appellant to its customers on High sea sales basis will be treated neither as supply of goods nor as supply of service by virtue of entry 8 to the Schedule III of CGST Act." 11.9.1 On the basis of the description in the tender document and contract being executed by the appellant With its customer, the overall scope of work under Such contracts appear to include goods as also services, including post-import services and optional services that are integral part of the SUPPLY. For instance, in Order No 7500100976 Date 27-Dec-2021 Project BIN4266 on Page 268 as Annexure-8 Copy of off-shore purchase order from M/S Tecnimont dated 18 01 2022 it is specifically mentioned that (M) OPTIONAL ITEMS The following options may be released by the BUYER within the dates herein specified without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed and mutually agreed. o. KOM should be planned within 30 days on receipt of Order. 2.2 Additional services 2.2.1 Supervision Upon the CONTRACTOR's request, the SUPPLIER will furnish the specialist(s) for: Supervision at site during erection and/or pre-commissioning and/or commissioning and start-up as defined in Cl. No. 3.2.1. GST shall be extra as applicable. 2.2.2 Other Services - Training at Site/Sub-Vendor's Place- a) Vendor shall provide Training to NAYARA Specialist at Site and at Coperion works as and when requested by Contractor/Client as defined in cl. No. 3.2.2. Similarly, in Contract Code 8003-PA-MCR-130184 under Contract No 666720 at para 4.1.3 at page 53 it is explicitly specified that: The Vendor shall provide the following services with relevant documentation * Participation to KOM * Participation to P&ID review and 3D Model reviews. * Participation to HAZOP/SIL review. * Participation to coordination meetings after order. * Participation to control system FAT , participation in iFAT with logistics for PLC (daily rates), * Inspection and testing of the supply, as per applicable ITPs * Final Painting of the complete suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Circular reference made that Hon'ble Supreme Court, in the case of M/s Hyderabad Industries Limited [2000 (115) E L.T 593 (SC)] have also upheld that the service charges/high-seas-sales-commission (actuals) are includable in the CIF value of imported goods (emphasis added) Thereafter as a part of explanation it is explained that the 'importer would be required to furnish the entire chain of documents, such as Original Invoice high-seas-sales-contract, details of service charges/commission paid etc, to establish a link between the first international transfer of goods to the last transaction " Hence some services and commission being Ingrained In high-seas sale transactions appear to be a distinct possibility in cases of high-sea sales transactions. 11.13 However, during personal hearing held on 28 09.2022 and in Exhibit-2 submitted by them at para C to C.3 and from D to D.3 the appellant has mentioned that no element of service is there in their high-seas sale transactions and there is no commission etc either in the same. Some excerpts pertaining to service element in their Exhibit-2 are reproduced hereunder: "D.9 It is further clarified that after dispatch of goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumption." From a plain reading of entry no. 8 (b) to Schedule III as inserted by Central Goods and Service Tax (Amendment) Act, 2018 with effect from 01.02 2019 it is clear that, only supply of "goods" by the consignee by way of endorsement of documents of title to the goods during their sale on high sea sales basis for delivery in India, is covered therein. However, the supply of "services" is not covered in entry no. 8 (b) to Schedule Ill of CGST Act, 2017, as amended. 13 Accordingly, we rule as under- Ruling: 1. We set aside the impugned ruling UP ADRG - 01/2022 dated 25.04.2022 passed by the Authority for Advance Ruling against the Appellant as the question sought to be answered is squarely covered u/s 97(2) of the CGST ACT. 2. We hold that supply of imported goods i.e components needed for Pneumatic Conveying System made by the appellant to its customers on High Sea Sales basis will not be treated as supply of "goods" by virtue of entry 8(b) to the Schedule III of CGST Act, 2017 as amended, with effect from 01.02.2019. However, the supply of "services" in relation thereto, if any, will fall under the purview of "supply" as defined under Section 7 of the CGST Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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