TMI Blog2022 (12) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The question sought to be answered is squarely covered u/s 97(2) of the CGST ACT. 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. - 04/AAAR/14/10/2022 - - - Dated:- 14-10-2022 - SHRI ASHISH VARMA AND SMT. MINISTHY S, MEMBER (Proceedings under Section 101 of the Central Goods and Service Tax Act, 2017 and Uttar Pradesh Goods and Service Tax Act, 2017) The present appeal has been filed under Section 100 of the Central Goods and Service Tax Act, 2017 and Uttar Pradesh Goods and Service Tax Act 2017 ( here-in-after referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioning, installation work of the goods supplied by it to the customers, however customers have option to get the supervision of the appellant for such services from third parties which is charged separately 6. GST is levied and payable on supply of goods or services or both made for a consideration in course of furtherance of business. Further, Schedule-Ill to the CGST Act, enlists various activities which are neither treated as supply of goods nor supply of services under GST. The Central Goods and Service Tax (Amendment) Act, 2018 amended Schedule-Ill to include within its ambit transaction pertaining to High Sea Sales, so as to treat such sales neither a supply of goods nor a supply of service under GST. 7. In the above background the appellant filed an appeal before the Authority for Advance Ruling on 27.10.2021 on following question.- Whether supply of components of Pneumatic Conveying System by the applicant 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? 8. The Authority for Advance Ruling decided the case vide Advance Ruling Order No. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that contrary to the question posed by them and the averments made in the Application, the Authority for Advance Ruling declined to pass a ruling on the premise that the issue of taxability of High Sea Sales transaction relates to import of goods which involves determination of place of supply. 10.4 The Appellant has submitted that in order to execute a High Sea Sales transaction, they merely required to transfer the title of goods by endorsing the bill of lading and executing the High Sea Sales agreement in favour of the customer (High Sea Sales Buyer) while the goods are in transit i.e., on international waters. As a consequence of the transfer to title, it is the buyer who actually becomes the importer and clears the goods from Customs authorities by filing the bill of entry etc. No question was posed in the Application before the Authority seeking clarification as regards liability of the Customer to pay IGST at the time of Customs clearance of goods sold by Appellant on High Sea Sales basis. As such, there was no occasion for the Authority to enter into Customs domain for examining the implications of IGST under Section 3(7) of the Customs Tariff Act. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act entered with M/s Technimont and purchase orders pursuant thereto attached) 10.9 The Appellant has submitted, that it was a settled position that no sales tax was payable on the sales effected on High Sea Sales. Under the GST regime, Section 7 of the CGST Act defines the term 'supply' in an inclusive manner to inter alia include all forms of supply of goods or services or both made or agreed to be made for a consideration by a person in the course or furtherance of business. Further, Section 7(2)(a) of the CGST Act refers to Schedule III of the CGST Act which enlists certain activities or transactions that are not to be treated as either supply of goods or supply of services for the purposes of GST law. 10.10 Pertinently, the Central Goods and Services Tax (Amendment) Act, 2018 inserted two new entries under the said Schedule Ill. 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. 10.11 The Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the appellant and reiterated the submission already made by them vide their reply dated 15 07 2022 He insisted that there was no supply of services at the time of high sea sales and there is no commission whatsoever involved therein Some clarification were asked from the appellant and the appellant sought one week time to make additional submissions The Appellant submitted following documents along with additional submission as under- (i) copy of Trade Notice No 145/2002 dated 03 12 2002 issued by the Commissioner (CUS) Mumbai vide F No S/26345/2002A(G) (ii) AR Com/07/2019 TSAAR Order No 30/2021 passed by the Authority for Advance Ruling Telangana in the case of M/s AIE FIBER RESOURCE AND TRADING (INDIA) PRIVATE LIMITED (iii) RELEASE NOTES- regarding inspection conducted at foreign suppliers site-M/s Technip Energies 10.15 Customers float tender for supply of PCS After the contract is awarded to the Appellant, customers issue separate purchase orders for offshore and onshore supplies In each purchase order, the scope of supply, terms of supply and respective contract prices are duly stipulated On the onshore supply portion, Appellant duly discharges appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant, the submissions made by the Appellant during personal hearing and other evidence on record. We find that as per the scope of work submitted by the Appellant they are 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. 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. 11.2 As regards the components imported from outside India, Appellant supplies the imported components to customers in India claimed to be on High Sea Sale basis under a High Sea Sales contract which is executed while the goods are on high seas 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 the Indian customer while the goods are on High Seas i.e., in international waters. On arrival of goods at the customs front ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such buyer of the original importer subsequently clears the goods through customs by paying applicable import duties and taxes. 11.6 We find that from the Scope of Work and other documents such as purchase orders, copy of contracts etc. submitted by the Appellant that they have entered into an agreement with their customers on high sea sale basis for supply of PCS on High Sea Sale Basis to their customers. 11.7 Now the question arises as to whether ruling asked by the Appellant is covered under the mandate of Authority for Advance Ruling as provided under Section 97(2) of CGST Act, 2017. For the sake of convenience, the relevant extract of Section 97(2) of the act is reproduced hereunder- (2) The question on which the advance ruling is sought under this Act, shall be 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In case of no specific conditions are indicated, the same conditions of this PURCHASE ORDER are intended to be valid. M. 1) FIELD SERVICES VENDOR assures the presence at SITE of its qualified and skillful personnel and/or personnel of its SUB-VENDOR(s) for supervision and assistance during erection, pre- commissioning, commissioning, start-up and test run to the PLANT, at soonest but in any case not later than fifteen (15) calendar days upon BUYER's written request at the conditions stated in the CONDITIONS FOR VENDOR FIELD SERVICES hereto attached at the daily rates stated in Annex 9 and conditions agreed below Also, for example, as seen from Annexure-5 to appellants submissions -CONTRACT: #201794C001 EPC-02 Package Polypropylene Unit associated off sites Utilities, Supply, as at paras 2.1 and 2.2 on pages 182 and 183, also includes:- '2.1 Supply It will include in particular: a. The design, engineering, fabrication and supply of Pellet Transfer system Package as per Attachment b. The drawings and all technical documents listed in the requisition including SUPPLIER mechanical catalogue and manufacturing inspection dossier, if applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service The package shall be designed and constructed so that the plant can operate continuously for three years between major maintenance that lead to shutdown the package. The equipment shutdowns and their duration shall be kept to an absolute minimum. VENDOR shall give full details of any operations that may require the machines to be shut down. VENDOR shall state the need, the frequency and the duration of all scheduled shutdowns. As seen from a few sample instances above, it appears that a number of activities are being under taken by the appellant which involve supply of goods as well as supply of services (including post-import and after-sale services including optional services which are integral part of supply). 11.10 GST council has deliberated the levy of IGST on high sea sales in the case of imported goods. IGST on such high sea sale(s) transactions of imported goods. whether one or multiple Shall be levied and collected only at the time of Importation, when the import declarations are filed before the Customs authorities for customs clearance for the first time Value addition accruing in each such high sea sale shall form part of the value on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the supply of components for pellet transfer systems on High Sea Sale basis. This is further evident from Clause 2.2 of the offshore purchase order (refer page 139 of Appeal) where against 'Additional Services' it is mentioned as 'NA', which means that there are no services which needs to be provided in respect of the High Sea Sale goods by Appellant to customer in addition to the supply of components of pellet transfer systems. D.10 The above submissions further find support from the 'Price' in Clause 3 of the offshore purchase order (page 139 - 140 of the Appeal). In clause 3.1, it is clearly mentioned that the total price would be EURO 18,57,573 whose break-up in Attachment 1 (at page 153 - 154 of the Appeal) clearly shows that the entire price is attributed for supply of components of pellet transfer systems and all other elements of the supply are included in the price for supply of components of pellet transfer systems. D.11 In view of the above submissions, it is absolutely beyond doubt that the scope of supply involved in High Sea Sale transactions between Appellant and customers involves only supply of goods and there is no suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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