TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 649
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....er Input tax Credit is available to CMS Info Systems Ltd. ('CMS' or 'the applicant') on purchase of motor vehicles i.e, cash carry vans which are purchased, used for cash management business and supplied post usage as scrap? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- "Statement of relevant facts having a bearing on the question(s) raised. The applicant is having cash management network pan India. During the course of providing cash management services, the applicant is engaged in following activities: * Providing ATMs and installing the same at various locations across India ....
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....ansaction is in the course or furtherance of business, the transaction would be treated as supply. For reaching to a conclusion whether the transaction is supply or not, it is important is to understand the term 'business'. Section 2 defines business as under: "Secnon 2 (17) "business" includes - (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his tr....
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....t to registered supplier, the tax under RCM will apply " From the above clarification given by the Finance Ministry, it clearly appears that the intention of Government is not to treat all the transactions as 'supply' unless the same are carried in the normal course of business activities which are carried with an intention to engage supplier into the activities of buy and sell of relevant commodities/services. Another important point which needs to be noted is certain activities are deemed to be 'supply' when specified in Schedule I. Clause I of Schedule I reads as under: "SCHEDULE 1 [See section 7] ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION 1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets .." On analysing the above clause, it reveals that permanent transfer or disposal of business assets is also treated as supply. However, the important point to be noted is such transfer or disposal will be deemed to be supply only where input tax credit has been availed on such assets. Therefore, the disposal of cash carry vans should not be regarded as supply an....
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....apply "purposive interpretation. It is well settled law that while interpreting a statute the basic principle of literal rule of interpretation has to be followed. In light of the above submission, Applicant rely on the decision of Hon'ble Supreme Court in the case of B. Premanand v. Mohan Koikal, 2011 (3) TMI 1590 - SUPREME COURT = (2011) 4 SCC 266 , which is binding upon the Advance Ruling Authority also. The relevant portion of the said decision is as follows: "9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation CIVIL APPEAL NO. 2684 OF 2007 other than the literal rule, vide Swedish Match AB vs. Securities and Exchange Board, India, AIR 2004 SC 4219 = ....
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.... Banks for transportation of cash and bullion; b. The Cash Vans are classified as 'Transport Vehicle" as per the Notification issued under sub-section (4) of section 41 of the Motor Vehicles act, 1988 (59 of 1988) dated the 19th June, 1992, (The Notification is attached herewith for your ready reference as Annexure 'A'); c. The Cash Vans if procured on or after 01st July, 2017 is chargeable to Goods and Services Tax; d. The Applicant on perusal of the provision of Law stated above wishes to claim Input Tax Credit paid on purchase of such vehicles based on following interpretation - As per provisions of Section 16 of the CGST Act - Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. As the applicant is going to use the said vehicle in furtherance of the business of transporting valuables (cash and bullion), we feel Input Tax Credit shall be available relying provisions of....
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....to note that one such goods mentioned is "currency". Relevant extract of the said sub-rule along with Annexure are reproduced below: (14) Notwithstanding anything contained in this rule, no e-way bill is required to be generated- (a) where the goods being transported are specified in Annexure; ANNEXURE [(See rule 138 (14)] Sr. No. Description of Goods (1) (2) " ... 6 Currency ... The term 'currency' has been defined in the Foreign Exchange Management Act, 1999. The extract of the definition is reproduced herein below (h) "currency" includes currency notes, postal notes, postal orders, money orders. cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes credit cards or such other similar instruments as may be notified by the Reserve Bank; Accordingly, with reference to the above definition of the term currency, it may be noted that currency includes, inter alia, currency notes, cheques, draft. b. It is pertinent to note that the words used in the CGST rules are -'goods being transported". Thus, e-way bill is not required to be generated when currency is tran....
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....of 'newspaper' from the definition of goods, Hon'ble Supreme Court observed that the definition of 'goods' was amended to adhere to Constitution of India i.e. not to levy CST on sale of newspapers which is constitutionally not permitted and the same interpretation cannot be adopted for the purpose of another provision and take away the benefit available to assessee. In other words, the Principle provided by Hon'ble Supreme Court is 'for the purpose of taxability, definition of 'goods' shall exclude newspapers whereas for the purpose of C Forms, 'goods' shall include newspapers. Similarly, in the present case, for the purpose of taxability, 'money' is excluded from the definition of 'goods' whereas for the purpose of input tax credits, 'goods' would include 'money'. 6) Our case is more strengthened in light of the fact that cash carry vans are registered as 'goods carriage' under Motor Vehicles Act, 1988. The definition of 'goods' under Motor Vehicles Act, 1988 reads as under: "goods" Includes live-stock, and anything (other than equipment ' ordinarily used the vehicle) c....
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....x credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used-- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; [Emphasis supplied] Therefore, as per the above provision, input tax credit is available in respect of motor vehicles and other conveyances when they are used for transportation of 'goods'. Such transportation of goods may not be a taxable supply. In fact, the transportation of goods may be done once in the life cycle of the motor vehicle. However, as long as such motor vehicle is used for transportation of goods, input tax credit is available. 8) In the present case, the applicant provides various services including the following wherein dedicated fabricated vehicles i.e. cash carry vans are used for transportation of money and also other valuable items (including gold) such as: - Cash pick-up and cash Deliveries; - Cash Va....
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....Schedule-III of CGST Act, activities or transactions which shall be treated neither as a supply of goods nor a supply of services. Schedule-III of the Act gives: - (i) Services by an employee to the employer in the course of or in relation to his employment. (ii) Services by any court or Tribunal established under any law for the time being in force. (iii). (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; (b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause. (iv) Services of funeral, burial, crematorium or mortuary including transportation of the deceased. (v) Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. (vi) Actionable claims, other than lottery, betting and gambling. Accordingl....
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....this stage only." 04. HEARING The case was taken up for preliminary hearing on dt.14.02.2018 when Sh. Jayesh Gogri and Ms. Payal Shah, both Chartered Accountants, attended. On dt. 27.02.2018, Sh. Jayesh Gogri, and Sh. Manish Goel, Chartered Accountant attended alongwith Sh. Abraham Joseph (Associate Director (Taxation) and reiterated the contention as made in the written submission. Written submission was tendered during hearing and a request was made to make a further submission. The same has been tendered. None was present on behalf of the concerned officer from the Central Tax Office. However, a written submission has been furnished. 05. OBSERVATIONS We have gone through the facts of the case. Lt has been informed thus - * The applicant is having cash management network pan India. Such transportation of cash is done through security vans popularly known as cash carry vans. * The applicant purchases raw motor vehicles and with the requisite fabrications, gets it converted to cash carry vans. For this purpose, the applicant purchases motor vehicles and pays GST and also pays GST on fabrication. * While purchasing cash carry vans under pre-GST era,....
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....her or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. The disposal of the scrap vehicles for consideration is a sale and section 7 explaining the expression 'supply' covers supply of goods such as sale or disposal made for a consideration. Section 7, further, says that the supply has to be in the course or furtherance of business. With regard to this, we see that the applicant is in the business of having a cash management network involving transportation of cash, The disposal of the cash carrying vans is a transaction in connection with or incidental or ancillary to the business of having a cash management network. As and when the vehicles become scrap, they have to be disposed off and the proceeds therefrom to be identified as income for the business which is reflected in the Profit & Loss Account of the business. Buying new assets and discarding the old and unusable assets is an activity in the course of carrying on of the business. Hence, we conclude that supply of su....
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....or vehicles. The applicant has not informed the Customs/ Excise Tariff Heading, Neither has any copy Of the invoice effecting the supply been tendered. The applicant has submitted a sample agreement copy which it enters into while delivering services of cash management. However, the same throws no light on the type of the motor vehicles to be used. Further, whether the vehicles are sold as scrap and unusable OR sold as old vehicles is not found confirmed from any document. It is generally seen that there is surrender of the RTO Registration Book when the vehicles are disposed off as scrap. Hence, it needs to be ascertained as to whether the vehicles are sold as scrap. For vehicles sold as scrap which does not amount to sale of a vehicle as such, the rate of the material sold as scrap would apply. For vehicles sold as vehicles, a perusal of the notifications issued for the purposes of the GST Act reflects thus - I. Notification No.2/2017-Central/State Tax (Rate) - (as amended from time to time) enlisting the goods exempted from GST does not cover the impugned cash carrying vans. 2. Notification No.1/2017-Central/State Tax (Rate) (as amended from time to time) enlisting....
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....uch of the input tax as is attributable to the purposes of his business. (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used-- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; (6) In case of supply of capital goods or plant and machinery. on which input tax credit has been taken, the registered person shall pay an amount equal to the inpu....
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....n comes sub-section which speaks about exception if the motor vehicles are used for transportation of goods. The word 'goods' has been defined thus - "Definitions. 2. In this Act, unless the context otherwise requires,- (52) "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; (75) "money" means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value; I find that the applicant has also mentioned that besides 'cash', the cash carry vans are also used for transport of bullion. Bullion not being excluded from the definition of goods' , there arises no Issue. However, the appl....
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....poses mentioned in section 8(3)(b). It also mentions, inter alia, the goods manufactured by that dealer. Form "C" similarly contains all the relevant particulars. This has to be issued by the purchasing dealer. In this certificate, the purchasing dealer mentions his registration certificate number and all other particulars including the statement that the goods being purchased by him are meant for being used, inter alia, in the manufacture or processing of goods for sale. Of declared goods, the selling dealer has to pay tax at the rate applicable to sale of such goods within the appropriate State.). It necessarily means that the selling dealer will collect (pass on) tax from the purchasing dealer only at the said concessional rate. The idea behind this provision is self-evident. It is to ensure that the price of the product manufactured by such purchasing dealers does not go up to the detriment of the consumers of those goods. The Parliament does not want to tax both the raw material and the finished goods at the full rate. Where the finished goods are meant for sale, the raw material utilised or consumed for the manufacture of said finished goods is taxed at the concessional rate,....
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.... goods; hence, they do not satisfy the requirement of section 8(3)(b). The result was that the publishers of newspapers were disabled from issuing forms "C" and hence became liable to pay tax at the higher rate of 10 per cent on goods (non-declared goods) purchased by them as raw material for producing (manufacturing) their newspapers, while all other manufacturers continued to enjoy the said benefit..... If a literal construction is adopted, it is conceded on all hands that the view taken by the Karnataka High Court is the correct one. But what the Madras and Kerala High Courts have done is to take the spirit behind the amendment of the definition of the expression "goods" as well as the scheme underlying entry 54 of List II read with entries 92 and 92-A of List I of the Seventh Schedule to the Constitution and hold on that basis that the expression "goods" occurring in the latter half of clause (b) of section 8(3) does not exclude newspapers from its purview [clause (b) of sub-section (3) : "The goods referred to in clause (b) of sub-section (1) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as bein....
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....expressions occurring in the Act opens with the words "in this Act, unless the context otherwise requires". This shows that wherever the word "goods" occurs in the enactment, it is not mandatory that one should mechanically attribute to the said expression the meaning assigned to it in clause (d). Ordinarily, that is so. But where the context does not permit or where the context requires otherwise, the meaning assigned to it in the said definition need not be applied. If we keep the above consideration in mind, it would be evident that the expression "goods" occurring in the second half of section 8(3)(b) cannot be taken to exclude newspapers from its purview. The context does not permit it. It could never have been included by Parliament. Before the said amendment, the position was: the State could not levy tax on intra-State sale of newspapers; the Parliament could but it did not and entry 92-A of List I bars the Parliament from imposing tax on inter-State sale of newspapers; as a result of the above provisions, while the newspapers were not paying any tax on their sale, they were enjoying the benefit of section 8(3)(b) read with section 8(1)(b) and paying tax only at 4 per cent ....
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....his qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words in a particular section. But where there is no obscurity in the language of the section, there is no scope for the application of the rule ex visceribus actus. This rule is never allowed to alter the meaning of what is of itself clear and explicit. The authorities relied upon by the High Court are, therefore, not applicable." Thus, the Hon. Courts have laid down that the context has to be seen. In the present case, money is not included in the definition of 'goods'. However as the applicant has pointed, the GST E-Way Rules in rule 138(14) refer to an Annexure which enlists the goods in respect of which no e-way bill is required to be generated. At sr. no.6 of this Annexure In column 2 about "Description of Goods", one finds mention of the word "currency" Thus, "currency" is goods where the goods being transported are specified in the Annexure in rule 138(14) of the CST E-Way Rules, the transportation of which would not require the generat....
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....efrom. In consideration of the above, the impugned activity of providing cash management services involves use of the motor vehicles for transportation of 'goods'. The motor vehicles would be covered by the exception in sub-section 5(a)(ii) of section 17. Thus, the applicant would be entitled to the ITC on the purchase of the cash carry vans i.e motor vehicles used for transportation of goods, subject to the provisions of the Rules made in this regard. As per Sh. Pankaj Kumar, Member This question pertains to the eligibility to avail Input Tax Credit (ITC) on the purchase of cash carry vans which are used for the cash management business. I have seen above that the disposal of the cash carry vans as scrap vehicles is a 'supply' in the course of furtherance of business and is amenable to GST. In view thereof, the applicant queries as to whether ITC would be available on the purchase of cash carry vans which are later disposed off as scrap, For answering this, I would have to refer to the relevant provisions relating to ITC and we find thus - INPUT TAX CREDIT Section 16 - Eligibility and conditions for taking input tax credit (3) Where the registered person has c....
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....or imparting training on driving, flying, navigating such vehicles or conveyances, it would not be covered by the exceptions in (B) and (C) of sub-section 5(a)(i). Sub-section 5(a)(i)(A) is about making "further supply of such vehicles or conveyances". The words "further supply" herein are in the nature of "resale". It should be noted that it is not mentioned as being just "supply of such vehicles or conveyances". The word "further" before the word "supply" has to be given its proper due. Here, the legislature intends to cover motor vehicles which are purchased for the purpose of being sold. In this category, we have the chain of the distributors/ dealers of motor vehicles who purchase from the manufacturers for the downward sale to the final customer. The use of the word "further" is indicative of a further supply and not such a supply as in the present case which is the disposal as a scrap and which happens after the motor vehicle has been used till its full working life. In view thereof, the impugned activity of providing cash management services not being for making a further supply of the motor vehicles would not be covered by the exception in (A) of sub-section 5(a)(i). I fin....
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....from and to dedicated banks Thus, from the above it is very clear that the applicant is engaged in cash management services. Further section 17(5) of the GST Act specifically mentions that - (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used-- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; Further, it is very clear that section 2(52) very clearly gives definition of goods which reads as under :- (52) "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; Thus from the above definition of 'goods', it very clear that 'money' is specifica....
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.... Printers (Mysore) Ltd Vs Asst. Commercial Tax Officer (cited supra) as referred by the applicant is in respect of very different statute i.e. the Central Sales Tax Act,1956 wherein the issue was whether purchase and use of newsprint in Manufacture of Newspaper can be treated as not being used in manufacture of 'goods' as newspapers were kept out of definition of 'goods' under the Central Sales Tax Act. The definition of 'goods' under Central Sales Tax Act which was under consideration in the aforesaid judgment is reproduced as under - " 'goods' includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities. Thus the issue before the Hon' ble Supreme Court was whether newspaper manufactured from newsprint would be 'goods' or not as a new product 'newspaper' was manufactured. Thus there is no denying that newspapers are goods but were excluded from 'goods' under the Central Sales Tax only with a view to ensure that there is no Sales Tax liability on sale of newspapers. Thus, the context in the case law as referred is tota....
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....er supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; And therefore, transportation of money is not covered in section 17(5)(a) (ii) of the GST Act and the applicant is not eligible for availing input tax credit in respect of motor vehicles used in transport of money. 06. In view of the detailed deliberations held hereinabove, it is ordered thus - ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-08/2017/B-11 Mumbai, dt. 19/03/2018 For reasons as discussed in the body of the order, the questions are answered thus - Question 1 Whether supply of such motor vehicles as scrap after its usage can be treated as 'supply' in the course or furtherance of business and whether such transaction would attract GST? If yes, please provide the rate of GST and/or Compensation Cess. Answer 1. The question is answered in the affirmative. As regards rate of G....