AI Drafter 
TaxTMI 
TaxTMI 
2020 (1) TMI 64
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....te 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 subsection (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 sb-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. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimila....
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....s along with appropriate support and assistance to various customers across India. 2.1 In order to comply with the provisions of GST law and ensure operational feasibility, SML Maharashtra has entered into a formal service arrangement with all SML branch offices (including SML TamilNadu) by entering into a Memorandum of Understanding (MoU), wherein SML Maharashtra has agreed to provide cranes and crane components to all SML branch offices on hire charges. As part of the service arrangement, whenever the appellant receives a final work order from its customers for providing cranes on hire charges, they will in turn raise an internal work order on SML Maharashtra for providing the required cranes on hire charges. On receipt of internal work order from the appellant, SML Maharashtra transports the crane and its components to the customer's location /project location on the instructions of the appellant. For each type of crane given on hire charges, the crane operator maintains a separate monthly log sheet at the customer/ project location, wherein daily and hourly details of crane usage and idle time are maintained, based on which the monthly service invoice is raised by the appell....
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....eration is agreed in the MOU only because the following sentence has been used in Para 10 of the MOU: .......At the time of raising internal work order on SML HO by SML Depot lease/ hire charges for the Cranes, Cranes components, parts and Trailer' will be charged at rate as per the rates agreed in a respective work order and up-keepment charges will be as per and specified in Schedule I enclosed hereunder." • The above clause in Para 10 when read with the preamble, clearly indicates that the consideration specified in the MOU is only for the purposes of compliance with valuation provisions under GST law. Such consideration does not have any sort of commercial substance. • Being a legal entity, accounting of revenue and flow of money is only when the transaction is with customer, inter-branch transactions are not considered to be revenue generating transactions. Since GST law requires the tax payers to undertake GST compliances and discharge GST liability, it is necessary to assign a value for such inter-branch transactions. • The objective of preparing MOU is to ensure business operation feasibility and compliance with provision unde....
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....aised by SML Maharashtra on the Appellant. • As per Schedule I of CGST Act, any activities or transactions between distinct person (i.e. SML Maharashtra and SML Tamil Nadu in this case) will be deemed to be supply, even if made without consideration. The present transaction clearly falls within the ambit of Schedule I of the CGST Act wherein SML Maharashtra supplies services to SML Tamil Nadu without any commercial consideration. Further, for the purpose of GST compliance and discharging GST, the MOU provides the mechanism to determine the value. • In terms of Section 31 (2) of the CGST Act, it is mandatory for a registered person supplying taxable services to issue a tax invoice, showing the description, value and tax charged thereon. Therefore, in the instant case, since SML Maharashtra is supplying taxable services to SML Tamil Nadu in terms of Schedule I of the CGST Act, it is mandatory for SML Maharashtra to issue a tax invoice showing the value and tax charged thereon. If the interpretation adopted by the Authority were to be adopted, it would lead to absurd situations wherein distinct persons i.e. every branch office of a legal entity would be force....
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....that the up-keepment charges receivable by SML Tamil Nadu are being netted off against the lease/ hire charges payable by SML Tamil Nadu and hence full consideration is not being paid. It is clearly mentioned in clause 10 of MOU that "lease/ hire charges payable by SML Tamil Nadu to SML Maharashtra shall be settled by netting off the lease/ hire charges receivable by SML Maharashtra with the lease/ hire charges payable by SML Tamil Nadu, in the books of accounts of SML as a whole. The Authority has erred by concluding that the up-keepment charges receivable by SML, Tamil Nadu are being netted off against the lease/ hire charges payable by SML Tamil Nadu. The up keepment charges and the lease/ hire charges are two separate charges which are not netted off against one another. Rather the up-keepment charges payable my SML Maharashtra are netted off against the up-keepment charges receivable by SML Tamil Nadu and the lease/ hire charges payable by SML Tamil Nadu are netted off against the lease/ hire charges receivable by SML Maharashtra, by way of book adjustments at an entity level. • Based on accounting principles, the receivable and payable have to be considered at an....
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....ivable by SML Tamil Nadu against the lease/hire charges payable by SML Tamil Nadu) has to be construed as in full compliance with the proviso to Section 16(2) of the CGST Act. Accordingly, the input tax credit cannot be denied. • The definition of consideration under Section 2(31) of CGST Act, provides the scope and ambit for modes of payment. It includes "any payment made or to be made, whether in money or otherwise". The term "otherwise" is very wide, and it would include all modes of payment i.e. netting of receivable and payable in books of account, barter, exchange, etc. as well. There is no specific restriction under the CGST Act, which restricts that payment should be made in cash or through bank account only. • The mode of payment (i.e. netting off) between supplier i.e. SML, Maharashtra and recipient i.e. SML Tamil Nadu, is already agreed well in advance through the MOU (relevant para of MOU is also referred in the order). In such a case, denying ITC of IGST merely by claiming that payment is not made by SML Tamil Nadu to SML Maharashtra would be incorrect and will be against the provision of GST law. • In the ruling pronounced by the....
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....reditor. Therefore, in this case, the netting off of receivable and payable between the debtor i.e. SML, Maharashtra and the creditor i.e. SML Tamil Nadu, (though both are a part of the same legal entity), would be permissible under Ind AS 32 since the MOU grants a legally enforceable right to set off and clearly indicates both the parties intention to settle the asset and liability on a net basis. Accordingly, SML, Tamil Nadu should be eligible for full ITC as all the conditions of Section 16(2) of the CGST Act, are being satisfied. PERSONAL HEARING: 5. The Appellant was granted personal hearing as required under law before this Appellate Authority on 10^th October 2019. The appellant sought adjournment vide their letter dated 27^th September 2019. Another opportunity was extended on 08.11.2019. The Authorized representatives of the Appellant S/Shri. K. Sivarajan, CA; Nitin Vijaivergia, Abhijit Sawarkar and Vipin Bang appeared for hearing. They handed out a compilation of Flow of Transactions and relevant Statutory Provisions along with additional written submissions, which they reiterated. DISCUSSION: 6. We have carefully considered the various submissions made by the....
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....or the full Input Tax Credit but only to the extent specified in the restrictions as per the second proviso to Section 16(2) of the CGST Act and Rule 37 of CGST Rules 7.2 The appellant have stated that the MOU between the distinct persons was necessitated to adhere the provisions of GST. The supply between the SML HO and the appellant is taxable as per the deeming provision of Section 7 of the Act readwith Schedule I of the Act and therefore the proviso to Rule 37 which provides for full ITC is applicable to their case. The consideration on the tax invoice raised by SML HO on the appellant is approximately 95% of the price charged on the ultimate customer by the appellant. SML HO pays IGST on the value. The receipts and payables are calculated on an entity level and the receivables/ payables between the distinct persons are set off as brought out in the tax invoice raised by the SML HO and Clause 10 of the MOU and setting off of receivables against payables are recognized in the accounting standards. Further, the ultimate customer is directed to make payment in the Bank Account of HO and therefore the entire consideration of value raised by the SML HO on the appellant stands pai....
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....section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed; Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. ....
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....provisions to the case at hand, we find that the Lower authority has examined and held that the supply in this case is one between distinct persons; the appellant is in possession of the Tax Invoice, the goods are sub-leased to the appellant for use in the furtherance of business; tax is paid by SML HO; returns are furnished. The Lower Authority has restricted the ITC to the amount of value set-off, i.e, it is held that the ITC is available only to the extent of payment of value by the appellant to their HO denying the exemption under proviso to Rule 37 of the CGST Rules available to supplies between the distinct persons. Therefore the issue to be decided is whether the appellant is eligible for the ITC of the entire tax paid by SML HO in the stated transactions. 8.3 From the various submissions before us, we find that this is a case which is covered by Schedule I of the CGST Act. The transaction is between distinct persons. The appellant in the tax invoice raised on their customers mentions that the payment to be made either by Cheque/DD in the name of 'SANGHVI MOVERS LIMITED' or directly to the account of SML HO at Pune. The appellant has represented that the receipts and paya....