AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 649
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....wer to Question 1 is in affirmative, whether 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 ....
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....referred to in Schedule II." On analysing the above definition, it may be observed that only when the transaction 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) s....
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....weller will not be liable to pay tax under reverse charge mechanism on such purchases. However, if an unregistered supplier of gold ornaments sells it 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 b....
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.... be construed strictly on the basis of plain language used by the legislature It is a well-settled principle of law that at first one has to apply "literal interpretation" and only in cases of absurd results, one has to 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 u....
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.... provisions, the applicant humbly submits as under - a. The applicant is owner of Cash Vans - these are dedicated vehicles which have been fabricated only for transportation of cash and other similar valuables. These vehicles are used by the 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 ....
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..../2017 - Central Tax dated 30.08.2017, to monitor movement of goods from one location to another. As per Rule 138 (14) of CGST Rules, E-way bill is not required to be generated in cases where certain 'goods' as specified in Annexure are 'transported'. It is interesting 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 refere....
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....Act, 1956. Consequently, department expressed the view that 'C' form would not be available for buying newsprint for printing newspapers. In other words, the purchasers were required to pay higher rate of tax and benefit of concessional rate of CST was not available to them. Having regard to the intention of exclusion 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....
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....k to safe vault where such gold is stored safely. Therefore, one needs to analyse Section 17 (5) of Central GST Act, 2017 in this factual matrix. The said Section is reproduced hereunder: "Section 17 Apportionment of credit and blocked credits (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; [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 m....
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....des -any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; Therefore the activity of supply of vehicles as scrap after usage shall fall under the definition and scopes of supply comes under the definition of Business. (ii) Further it is also clear that the said activity is not covered under a negative list given under Section 7(2) and 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 Dir....
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.... the definition of goods, the cash management services cannot come under the purview of "transportation of goods". Hence Input Tax Credit is not available to the applicant. The above submissions are made only as preliminary submissions about the admissibility of the application and detailed submissions would be filed at a later stage. From the discussion as made above tax is leviable under GST Act, 2017 and Input Tax Credit is not applicable. Hence, it is prayed that the application may be rejected at 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. OBSERVAT....
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....by way of totalisator or a licence to book maker in such club ; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 7. (l) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether 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....
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....ule Il begins with the premise that the activities are 'supply'. For the facts before us, we find that there is a supply of cash vans, which are ' goods', for a consideration and the transaction is in the natural course of business. The transaction and the provisions are obvious. In view thereof, we do not find merit in the argument of the applicant. Having seen that the transaction amounts to a 'supply' under the GST Act, we move on to the next aspect which the applicant desires to know and which is the rate of GST and Compensation Cess. Chapter 87 of the Customs Tariff covers motor 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 of....
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.... 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 claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. Section 17 - Apportionment of credit and blocked credits. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much 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-sect....
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.... 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 find that the applicant has argued that as per well-settled principle of law at first one has to apply 'literal interpretation" and only in cases of absurd results, one has to apply "purposive interpretation". However, this argument would not apply to the instant case. Here, the word 'further' has to be given the meaning as is intended by the Legislation. And I am convinced that there can be no other intention than the one as had by me. Then 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; ....
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....n-declared goods) required by him for use in the manufacture or processing of goods for sale and issues form "C" to the selling dealer, the selling dealer shall be liable to pay tax only at 4 per cent as per section 8(1) and not 10 per cent as provided in section 8(2), provided that the certificate of registration of the purchasing dealer specifies the class of goods purchased by him. (In case shows that it contains all the particulars, namely, the business of the dealer, the class/classes of goods specified for the purposes of sub- sections (1) and (3) of section 8 and in particular whether the goods being purchased are meant for resale or for being used in the manufacture or processing of goods for sale or for other purposes 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 fo....
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....e like any other manufacturers in this respect. But after newspapers were excluded from the purview of the "goods" by the 1958 (Amendment) Act, the Central sales tax authorities took the stand that by virtue of the said amended definition, the printers/publishers of newspapers were not entitled to the benefit of section 8(3)(b) read with section 8(1)(b) and are, therefore, not entitled to issue forms "C". Their reasoning was this: since the expression "goods" does not take in newspapers, it cannot be said that publishers of newspapers are purchasing the goods (raw material) for use by them "in the manufacture or processing of goods for sale"; what they purchase may be goods but goods manufactured out of them (newspapers) are not 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 conced....
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....the "goods" referred in the first half of clause (b) in section 8(3) refers to what may generally be referred to as raw material (in cases where they were purchased by a dealer for use in the manufacture of goods for sale) while the said word "goods" occurring for the fourth time (i.e., in the latter half) cannot obviously refer to raw material. It refers to manufactured "goods", i.e., goods manufactured by such purchasing dealer-in this case, newspapers. If we attach the defined meaning to "goods" in the second half of section 8(3)(b), it would place the newspapers in a more unfavourable position than they were prior to the amendment of the definition in section 2(d). It should also be remembered that section 2 which defines certain 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....
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....have to be given a meaning different from that contained in the interpretation clause; all definitions given in an interpretation clause are, therefore, normally enacted subject to the usual qualification-"unless there is anything repugnant in the subject or context", or "unless the context otherwise requires". Even in the absence of an express qualification to that effect such a qualification is always implied. 18. There is no dispute with the proposition that the meaning of a word or expression defined may have to be departed from on account of the subject or context in which the word had been used and that will be giving effect to the opening sentence in definition section, namely, "unless the context otherwise requires". In view of this 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 ....
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....: I find other definitions in the said Act, thus - (14) "goods carriage" means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not constructed or adapted when used for the carriage of goods,' (47) "transport vehicle " means a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle; A goods carriage under the Motor Vehicles Act would transport goods and the definition of goods therein does not exclude 'money'. In view of all above, I observe that I am in agreement with the claim of the applicant that the word 'goods' in sub-section would not take colour from the definition of "goods" which excludes money therefrom. 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 th....
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....x credit has been taken, the registered person shall pay an amount equal to the input lax credit taken on the said capital goods or plan,' and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher: Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15. As can be seen from the above, except in certain situations as enumerated, ITC is not available in respect of motor vehicles. Hence, I see the exceptions. As can be seen, the impugned activity of providing cash management services not being for transportation of passengers OR for 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 "....
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.... excluded from the definition of ' goods' , there arises no issue. However, the applicant has raised the question in terms of 'cash carry vans' and hence, "cash" would be the goods which would be transported. "Cash" here is the Indian legal tender which is 'money' and I find that 'money' has been excluded from the definition of 'goods' for the purposes of the GST Act. However, it is found that the applicant has specifically mentioned in his application that they are engaged in "cash management service" which they have specifically mentioned as under : * Providing ATMs and installing the same at various locations across India * Managing cash circulation through transporting cash from currency chests to bank branches * Cash pick up and delivery 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 f....
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....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; We see that legislative intent to allow input tax credit in respect of vehicles is very restrictive and requires to be interpreted accordingly and credit in respect of motor vehicles shall not be available except to the four persons/entities as enumerated above when there is specific exclusion of 'money' from being considered as goods in GST Act and provisions. The judgement of the Hon'ble Supreme Court in the case of 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 tre....
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....ng but for the provisions under the GST Act it is specifically excluded from treating them as 'goods' and if that had not been the intention then the transport of currency would not have been excluded from the provisions as applicable in respect of transport of all other goods as per the procedure prescribed through the mechanism of e-way bills as as per general understanding money is also 'goods' Thus the e-way bill provisions exclusively and clearly confirm and reaffirm that 'money' will not be treated as goods in the provisions under section 17(5)(a) (ii) of the GST Act which is reproduced as under - (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 o....