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TMI Blog2025 (5) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... lity or reducing the amount of admissible input tax credit shall be made, unless the Appellant has been given an opportunity of being heard. 2. Under Section 103 (1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the Appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the Appellant as if such advance ruling has never been made. M/s High Energy Batteries S.F. No. 243/7, 243/8B, Pakkudi r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that the price is the sole consideration for the supply. To determine whether value of taxable supply is the 'sole consideration', the definition of 'consideration', as per Section 2 (31) of the Act, indicates that the transaction value agreed between the parties is only relevant for valuation purposes under GST. The appellant claimed that it is matter of commercial arrangement between the supplier and the recipient and stated that once it is clear that supplier only has to supply final goods then there is no question of adding the value of the free materials for determining the transaction value. (d) In terms of Section 15 (2) (b), value of supply includes two elements namely, (i) supplier is liable to pay the amount (for free issue material) and (ii) the amount was incurred by the recipient. In this case, supplier is not liable to pay for the old batteries containing Silver, i.e 'free of cost' material supplied by the recipient. The appellant stated that the provision of Section 15 (2) will apply in cases where the supplier orders inputs from a third party. There is no such arrangement here and contended that Section 15 (2) (b) will not be applicable in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Sample copy of contract/agreement entered into with customers other than Naval formation or Air Force where silver is procured by themselves and used in manufacture of batteries. (iii) The clause in contract agreement that after extraction of Silver, the remaining portion of the batteries are sent back to Naval formation. DISCUSSION AND FINDINGS 6. The appellant is a manufacturer and supplier of customized batteries required for Naval formation as per the contract and specifications agreed between them. Silver, used in the batteries are essential and forms integral part of the battery. This Silver, in the form of used batteries, is being supplied 'free of cost' by the Naval formation which is then extracted and used by the appellant in the manufacture of new batteries. 7. The Appellant filed Advance Ruling application under Section 97 of the CGST Act before Authority for Advance Ruling (AAR) and sought (1) Whether the value of the silver supplied free of cost by the Naval formations (in the form of old batteries) are to be included in the taxable value adopted by the appellant on the batteries manufactured by the appellant and supplied to the Naval formations for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ild interpretation. As per Section 2 (31) of the CGST/TNGST Act, 'consideration is defined as follows. "consideration" in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, 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; (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; 'consideration' in relation to supply of goods or services mandates to include, (i) Any payment made or to be made whether in money or otherwise, (ii) Monetary value of any act or forbearance for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) ......... (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) ......... (d) ......... (e) ......... Explanation:- For the purpose of this Section, ................... (3) The value of the supply shall not include any discount which is given- (a) before or at the time of the supply .... .; and (b) after the supply has been effected, if- (i) ............ (ii) ............ (4) where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. 14. The section 15 (2) (b) states that the value of supply shall include, any amount that the supplier is liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both. However, in this case, the appellant relying on paras 2 & 3 in Part-Il of the contract entered with Naval formation, contends that since 'Silver' is supplied free owing to contractual obligation, the value of Silver will not form part of the taxable value of supply. This contention of the appellant is not acceptable in view of statutory provisions as discussed above. Also, we find that the issue of valuation of free supplies under GST has been decided by the Hon'ble Chhattisgarh High Court in the case of M/s. Shree Jeet Transport [Writ Petition (T) No. 117/2022], on 17-10-2023. 17. In the instant case, the free supply material supplied by the recipient of goods to the supplier is an additional consideration (non-monetary) for the supply. This non-monetary consideration i.e supply of used batteries free of cost has a direct nexus with the underlying supply. The appellant stands to gain substantial economic benefit out of the free issue material provided by the receiver of goods. Here the appellant is not paid wholly in money. The contract is for the supply of Silver Oxide - Zinc Torpedo propulsion Battery Type A-187M3-Complete with Hardware. The main input/raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order. 20. In view of the above discussions, we are of the view that the value of taxable supply on this issue on hand is to be determined from the Rule 27 (b) of CGST/TNGST Rules 2017, mentioned above. 21. To sum up, the value of Silver supplied free of cost by the Naval formation in the form of old batteries is required to be included in the taxable value in terms of provisions of Section 7 read with Section 2 (31), Section 15 (2) (b) as also Section 15 (4) of the CGST/TNGST Act read with Rule 27 (b) of the CGST/TNGST Rules, 2017. 22. The appellant has also relied on the Circular No. 47/21/2018-GST dated 8th Jun, 2018 which was confined to that specific subject material of moulds and dies (Capital Goods) which are being supplied by the Original Equipment Manufacturer (OEM) to a Component Manufacturer free of cost. The context which lead to issuance of this circular need to be examined. In the erstwhile Central Excise era, the dutiability of the product is on the activity of manufacture and hence the concept of 'amortization' of value of tools and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire transaction would be covered under job work provisions and the activity of the appellant would be classified as 'manufacturing service' attracting GST @ 18% rather than 28% as per the decision of AAR. We would like to reproduce the definition of 'job work' provided under Section 2(68) for better understanding. (68) "job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly; 26. As per the above definition, it is 'any treatment or processes done on the goods belonging to another person'. As per the facts presented to this forum, the appellant is not doing any treatment or process on the goods supplied by the recipient, but is extracting 'Silver', an important component for use in the further manufacture and supply of brand new batteries to the Naval formation. Hence, the argument of job work put forth by the appellant is not acceptable. 27. In view of the facts and circumstances of the case, and based on the discussions, we pass the following order. ORDER We uphold the ruling given by the Authority of Advance Ruling in Order No. 28/ARA/2024 dated 06-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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