9911796707
TMI Blog2023 (11) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 (for brevity 'the CHGST') and the order dated 4-1-2021 (Annexure - P/6) passed by the Authority for Advance Ruling, Chhattisgarh (for brevity 'the AAR') to be illegal wherein it was held that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unloading of consignments en route would not be allowed unless specifically permitted by the Company. The Transporter is strictly instructed that under no circumstances would any quantity of material carried in the truck be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the proposed draft agreement would form part of value of supply of service charged by the appellant and accordingly GST at the applicable rate would also be leviable on the value inclusive of the cost of diesel filled by the service recipient, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n conjunction with Section 15 which deals with value of taxable supply; * he would further submit that perusal of Section 15(1) would indicate that the value of supply shall be the transaction value, which is the price actually paid or payable and the words 'said supply' in conjunction with the phrase 'price 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on the fuel and the fuel is amenable to VAT (Value Added Tax) and 23% tax is payable as a VAT in the State of Chhattisgarh and whenever the legislature wanted it could have included the same in Section 7(1)(c) read with Schedule-I, which provides for supplies to be taxable even when there is no consideration. Since the fuel is not included in 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 simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit that in order to agitate the value of taxable supply, Section 15 would be applicable and the value of 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 and value of supply shall also include; * he would also submit that the supplier is liable to pay in relation to such supply but which has been incurred 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 lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son who is liable to pay the tax; and (iii) the rate at which the tax is to be paid. 9. The aforesaid test was further elaborated by a two Judge Bench of the Supreme Court in the matter of Messrs Govind Saran Ganga Saran v Commissioner of Sales Tax and Others 1985 (Supp) SCC 205 : AIR 1985 SC 1041 by further requiring the designation of the measure or the value to which the rate of the tax will be applied. Thus, the four canons of taxation are as 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 giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient 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; 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of [sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. 9. Levy and collection.--(1) Subject to the provisions of sub-section (2), there shall be levied 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 Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court at paras 44, 45, 46 & 47 held thus : 44. The idea which permeates GST legislation globally is to impose a multi stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail credit of tax paid at an anterior stage. As a result, GST fulfills the description of a tax which is based on value addition. Value addition is intended to achieve fiscal neutrality and to obviate a cascading effect of taxation which traditional tax regimes were liable to perpetuate. In a sense therefore, the purpose of a tax on value addition is not dependent on the distribution 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to" has extended the scope of the definition of GTA. It includes not only the actual transportation of goods but any intermediate/ancillary service provided in relation to such transportation, like loading or unloading, packing or unpacking temporary warehousing etc. If these services are not provided as independent activities but are the means for successful provision of GTA service, then they are also covered under GTA. Therefore, in respect of those who provide agency services in transport, the liability is cast on recipient in most of the cases or unless option to pay under forward charge has been exercised by the GTA. 20(c) 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. 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 go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross amount charged by the service provider, which is actually received, would be part of consideration to arrive at a gross amount charged by the service provider and it was further submitted that the tax is to be levied with reference to the value of service and the value of service which is actually rendered is to be ascertained. It was further stated that if certain goods or material is supplied by recipient free of cost and used for providing taxable service, only the gross amount charged by the service provider is to be examined. Much emphasis was placed on the wording "for such service provided" and in the instant case, it is therefore stated that for such supply, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily will depend on the nature of service and the nature of business. The petitioner who can survive to run the business of goods transport on fuel therefore cannot claim that the diesel is supplied by the service recipient free of cost, as such, it cannot be included as the fuel is an integral part used in providing the Transportation Service and is essential for GTA provider. Without fuel the entire business of GTA cannot survive. Therefore, fuel being an integral part cannot be bifurcated to over come a tax liability. 26. Another submission is made that the model GST law proposed to include in Section 15(2)(b) of CGST Act "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 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the transportation inter-alia is an inter- dependent on supply of fuel, it would be a crucial component to run the business of GTA. If such integral part of survival of reins are held by service recipient, in such a case, it would be actually doing the substance addition of GTA survival. Therefore, the Circular dated 8th June 2018 on which the petitioner tried to rely upon would not be of any help especially considering the nature of business and the provisions of Section 7(1)(a) and 15(2)(b) of CGST Act. 31. The last submission which is made that since there is divergent opinion between the two appellate authorities under the GST AAAR against the finding of AAR, therefore, the petitioner has been left with no remedy and this section is arbitrary and defeats the very purpose of advance ruling. In this aspect, section 101 sub-section (3) of the CGST Act would be relevant which purports that where the members of the Appellate Authority differ on any point or any points referred to in appeal or reference, it shall be deemed that no advance ruling would be issued in respect of question under appeal or reference. However, against such finding u/s 101(3) an appeal is provided u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
