TMI Blog2023 (11) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... disputably, the petitioner is a Goods Transport Agency (GTA) in terms of GST. In so far as the service of GTA is concerned, if the services (of goods transportation) are provided by GTA to specified class of persons, the tax liability falls on such recipients under the reverse charge mechanism, In terms of Notification dated 28.06.2017. In the case in hand, as per the proposed agreement/contract, the fuel (diesel) is not in the scope of the service of the petitioner. The agreement purports that the fuel would be free of cost basis for transportation of the goods and fuel would be filled by the service recipient for transportation. In the instant case, the scope of supply as defined in section 7 of the GST Act purports all forms of supply of services made or agreed to be made for consideration in the course or furtherance of business . The words used in Section 7(1)(a), in course or furtherance of business would point out about service to be provided by the transporter as a GTA. The contention of petitioner that the consideration is required to be confined as per the terms of agreement cannot be given a literal interpretation - The recipient is not a GTA or engaged in business of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Goods and Services Tax (for brevity the GST ) would be leviable on the value of diesel provided by the service recipient Free of Cost (for brevity FOC ). (b) The petitioner also challenges the provisions of Section 101 (3) of the CGST and CHGST along with agenda of the 8th GST Council Meeting held on 3rd 4th January, 2017 at New Delhi on the ground that the same is constitutionally invalid and ultra vires to Articles 14 and 19 (1)(g) of the Constitution of India, to the extent the provision provided that no decision would be rendered by the AAAR because of difference of opinion between the two members, which would lead to arbitrary and unreasonable distinction and left the parties without any remedy. (c) The petitioner is a Goods Transport Agency (for brevity the GTA ) service provider, engaged in providing service of transportation of goods by road. It is pleaded that the petitioner intends to enter into an agreement with service recipient for providing GTA services. As per the proposed terms of agreement, it was agreed that the petitioner would provide trucks/trailers along with driver for transportation of goods belonging to the service recipient on a day-to-day and non-exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed off in any manner other than by way of delivery of the goods to the destination against receipt. 2. FUEL 2.1 Fuel, a consumable, is in the scope of the company and would be provided to the truck for use exclusively for the required transportation of the goods loaded in the truck. 2.2 Such fuel shall be filled in the truck that is engaged for the concerned trip at the point of origin or at destination. The freight declared and agreed will not account for any cost/charges for fuel and the Transporter would not have any liability to pay for fuel for the said trip to be made by the Transporter. It is expressly clarified that the value of fuel which is in the scope of the Company shall by no means be interpreted as additional consideration payable for the transportation service provided by the Transporter or having been provided to the vehicle in lieu of freight. The said fuel would be issued by the Company for exclusive usage, as a consumable, in the underlying transportation only and the ownership of the fuel would at no point be transferred to the Transporter or to the vehicle engaged. The truck is required to use the fuel only for the specific transportation and would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient, under GTA service and there is no merit in the appeal filed by the Appellant Shri Arvinder Singh Bhatia, M/s Shree Jeet Transport, 127, Ward 15, Kharora, Raipur, Chhattisgarh having GSTIN- 22AKDPB5992PIZU against the Advance Ruling Order dated 04/01/2021. 6. Findings as per the SGST Member : xxx xxx xxx 6.7 Therefore, in light of the above, in my view the value of diesel which is in the scope of service recipient would not be included in taxable value of supply of the service provider. (g) Therefore, no ruling was rendered in terms of Section 101(3) of the CGST and CHGST. The petitioner, therefore, contended that since no ruling was given, the petitioner has been rendered remediless. Thus, on various grounds, the petitioner has preferred the instant writ petition. Submissions of the parties : 2. Mr. Kavin Gulati, learned senior Advocate appearing with Mr. Raja Sharma Mr. Abhishek Anand, learned counsel for the petitioner, would submit that : the object of advance ruling sought for by the petitioner has been defeated as divergent opinion has been given by two members of AAAR. learned counsel would submit that the petitioner, which is a GTA, transports the goods with a contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice actually paid or payable is directly relatable to such supply agreed to be made; learned counsel would submit that when the agreement has been entered between the parties, the same cannot be ignored while examining the tax liability. To buttress his contention, learned counsel would place upon the decision rendered by the Supreme Court in the matter of Commissioner of Service Tax v Bhayana Builders Private Limited (2018) 3 SCC 782. In the said case examining the valuation provisions under the Service Tax Act, it is held that free supplies made by the service recipient cannot be added to the taxable value of the service provider; according to the learned counsel the AAR has taken note of this fact but failed to interpret it correctly. learned counsel would submit that the value of supply would be a transaction value and price actually paid; he would submit that while the initial draft was prepared, legislation was conscious about such consideration and when the final draft came, the free supply was kept out of the legislation; while placing reliance upon the decision rendered by the Supreme Court in the matter of Union of India v Mohit Minerals Private Limited through Director ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Schedule I, it cannot be amenable for addition of tax; he would submit that there is no effort on tax evasion; the tax statute is to be interpreted by plain language of the statute; and the intention cannot be gone into; according to the learned counsel, the respondents cannot insist recovery even if it is not supported by statute. He would place reliance upon the decisions rendered by the Supreme Court in the matters of Union of India v Azadi Bachao Andolan and Another (2004) 10 SCC 1 and Commissioner of Income Tax, Mumbai v Walfort Share and Stock Brokers Private Limited (2010) 8 SCC 137; learned counsel would submit that with respect to the valuation, the language used in Finance Act, 1994 (Service Tax) and the CGST was substantially similar and Section 67 of the Finance Act, which deals with the service tax was also similar. Reliance is placed on (2018) 4 SCC 669 (2018) 3 SCC 782. he would submit that Section 101 (3) of the CGST is manifestly arbitrary for the reason that when there is a difference of opinion between the appellate members, it would render the petitioner remediless except to file a petition under Article 226 of the Constitution. Since in the instant case becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the recipient of the supply and included in the price actually paid or payable for the goods or services or both; learned counsel would next submit that the language used in Section 15(2)(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 would include the supply of diesel and in the instant case the petitioner tried to by-pass the object of legislation; and learned counsel would lastly submit that the vehicle cannot ply without diesel which is an important component, therefore, the contract though has been entered cannot override the plain language of GST whereby the petitioner would be liable to pay on inclusion of tax. 4. Mr. S.C. Verma, learned Advocate General appearing with Mr. Vikram Sharma, learned Dy. Govt. Advocate for the State, would submit that : for diesel no GST is applicable and Section 7 of the CGST would show all forms of supply of goods or services or both are to be considered. Therefore, if the diesel is supplied free of cost, which is essential for plying the transport vehicle eventual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : (i) The taxable event; (ii) The person on whom the levy is imposed; (iii) The rate at which the levy is imposed; and (iv) The measure or the value to which the rate will be applied. 10. In the case at hand since the diesel is supplied by the service recipient FOC to the GTA the measure or the value to which the rate of the tax is required to be assessed. 11. The petitioner who is a GTA under the CGST Act approached the AAR to determine its tax liability in advance under the Advance Ruling Mechanism in GST. The advance ruling mechanism is introduced to help any assessee to its activities which are liable for payment of GST, well in advance. It also brings certainty in determining the tax liability, as the ruling given by the Authority for Advance Ruling is binding on the applicant as well as Government authorities. Further, it helps in avoiding long drawn and expensive litigation at a later date. The object of seeking an advance ruling is inexpensive and the procedure is simple and expeditious. 12. Consequent thereto under Section 97 of the CGST the petitioner applied for advance ruling by an application dated 4-8-2020 before the AAR. Along with the said application the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral 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; xxx xxx xxx (93) recipient of supply of goods or services or both, means-- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; xxx xxx xxx (105) supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the State Governments. 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. (4) Where the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or manufacturing model. The tax which is paid at an anterior stage of the supply chain is adjusted. The fundamental object is to achieve both neutrality and equivalence by the grant of seamless credit of the duties paid at an anterior stage of the supply chain. 45. The State VAT legislation in India represented a significant stage in the evaluation of fiscal legislation based on the principle of value addition. In All India Federation of Tax Practitioners v. Union of India, this Court, speaking through a two judge Bench, noted the principle that VAT is a consumption tax as it is borne by the consumer. The Court observed that with its increasing importance in the economy, the service sector is occupying the centre stage of the Indian economy . As economists postulate, there is no distinction between consumption of goods and consumption of services both of which satisfy human wants and needs. The Court underscored that service tax is a destination-based consumption tax, not a charge on business but on the consumer of the service. 46. Though the erstwhile regime recognised the principle of value addition-based consumption taxes, there was an absence of a seamless flow of credit, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purview of the goods and services tax. 17. The predominant object is for supply of goods and services, except those which are kept out of the purview of the goods and services tax. 18. Indisputably, the petitioner is a Goods Transport Agency (GTA) in terms of GST. In so far as the service of GTA is concerned, if the services (of goods transportation) are provided by GTA to specified class of persons, the tax liability falls on such recipients under the reverse charge mechanism, In terms of Notification dated 28.06.2017, the following services are exempt from GST : (a) by road except the services of - (i) a goods transportation agency; (ii) a courier agency; (b) by inland waterways. 19. As per section 65B(26) of the Finance Act, 1994, Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. The Goods Transport Agency as is defined in clause 2(ze) of notification dated 28.06.2017 reads as follows : (ze) goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; Therefore in the Service T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, as per the proposed agreement/contract, the fuel (diesel) is not in the scope of the service of the petitioner. The agreement purports that the fuel would be free of cost basis for transportation of the goods and fuel would be filled by the service recipient for transportation. 21. The very definition and existence of the petitioner who is to provide transportation service, by plain and simple interpretation would point out the entire business and survival is premised and interdependent on the vehicles for transportation of goods. The obvious factor would be the vehicle cannot run without fuel. Therefore, the design of the entire activity of GTA is based on supply of fuel to the respective vehicles. In absence of fuel, the the entire business activity would stand arrested to provide service. Therefore, the need of fuel is glued for survival of a GTA. If the GTA has stitched up to provide service by obtaining fuel on FOC basis by contract with recipient Company, this phenomenon would transcend the activity which reflects a broader shift in name of contract, therefore, the revenue has power to remove the lid to find out the object and purpose. 22. In the instant case, the scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nexus between the amount charged and the service provided cannot be ignored. A careful reading of the aforesaid proposition would show that the nature of services rendered in the above cases were different. In the case of GTA, the centrality of the object revolves around the service provided by GTA which is fully based on supply of fuel. Section 7 of the Act explains that expression supply would include all forms of supply made or agreed to be made for consideration in furtherance of business by the supplier. So the nature of business would be the decisive factor and if such consideration is shifted by entering into agreement, it would be encroaching upon turf of G.T.A., and would only be a collective enthusiasm and that statutory liability cannot be evaded. As has been laid down by the Supreme Court in CLP India Pvt. Ltd. Versus Gujarat Urja Vikas Nigam (2020) 5 SCC 185, the parties by agreement cannot over-ride the statutory provisions in relation to matter of tariff. 24. Section 9 GST deals with levy and collection. The petitioner contended that section 9 of the CGST is a charging section and collection of revenue is confined to levy of GST on the value determined under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued . Therefore by such provision, free supply was included to be valued. However, in the final GST law, the provision of free supply by the service recipient was excluded. It is contended that the transaction value was an inclusive part in the proposed Model GST law under clause (b) Section 15(2) of the CGST Act. The provision to be added as per model GST Law in clause (b) of Section 15 (2) reads as under : (b) the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or being valued . The submission that free supply by the service recipient has been excluded as per final GST Law. Therefore, the legislative history in the draft GST Law is required to be seen. It is contended that there is a conscious omission by the Legislature to include value of free supply by recipient to evaluate the entire supply. The reference is made t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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