TaxTMI 
TaxTMI 
2021 (10) TMI 118
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....omers and subsequently the cost of the fuel is reimbursed by customers at actual (without charging any mark-up); that GVHL undertakes the activity of procurement of fuel as a 'pure agent' on behalf of the customers. 2. The appellant has filed their submission along with the appeal filed on 21.08.2020 against Advance Ruling Order No. GUJ/GAAR/R /21/2020 dated 14.07.2020 passed by the Gujarat Advance Ruling Authority (herein after referred to as the 'GAAR'). In their submissions, the appellant has mentioned that the relevant clauses of Contract No. ONG / COL / HMM / CSR / AL / CH / HELICOPTER / CREW CHANGE / 09 / 2014 / P76BC4008-GR-1 dated 31.07.2015 with M/s. Oil and Natural Gas Corporation Ltd.(ONGC) are as under: * Clause 10 - PROVISIONS OF SERVICES AND FUEL - Clause 10.2 - By Charterer - Clause 10.2.1(iii) "ATF shall be provided as free supply item by ONGC at Mumbai and Offshore. For other locations, ATF charges shall be reimbursed as per actuals on production of original vouchers from the ATF supplier of the concerned Airport. In case due to any reason ONGC is unable to supply ATF at Mumbai, operator has to make arrangements for the ATF. ATF charges shall be reimburs....
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....ax Act, 2017 (herein after referred to as the CGST Act, 2017 and the GGST Act, 2017 respectively and the GST Acts, 2017 collectively) and the Central Goods and Services Tax Rules, 2017 and the Gujarat Goods and Services Tax Rules, 2017 (herein after referred to as the CGST Rules, 2017 and the GGST Rules, 2017 respectively and GST Rules, 2017 collectively). The appellant has referred to section 2(31) of the GST Acts, 2017 providing the definition of consideration, section 9 and section 15 of the GST Acts, 2017 and rule 33 of the GST Rules, 2017. 8. The appellant has inter-alia submitted that in the instant case, it was agreed between the appellant and the customer that (only) Rental services would be provided, and the consideration for the same would be fixed as monthly charges and flying hourly charges; that it was also contractually agreed between the parties that ATF would be provided by the Customer to the appellant on free of cost basis. It was never agreed between the parties that ATF would be supplied by the appellant to the customer. This is clearly emerging from the clause 10.2.1 (iii) and clause 11.2.1 of the Rental agreement. The appellant has submitted that as the amoun....
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....f the appellant, are treated as receivables from the customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables; that the books of accounts have been prepared and audited as per accounting standards as required under the Companies Act, 2013. 12. The appellant has submitted that as per section 15(2)(b) of the GST Acts, 2017, where it is agreed between two contracting parties that certain amounts would be incurred by the service recipient in relation to the service to be provided by the service provider, the same cannot be included in the value of services provided. They relied upon the decision in the matter of Rolex Logistics [2009 (13) STR. 147 (Tri-Bang)] in this regard. 13. The appellant has referred to Section 67 of the Finance Act, 1994 and has submitted that the principles of determining value of taxable service are similar under the Finance Act, 1994 and the under the GST Acts, 2017 and therefore the principles of determining value of taxable service under the pre-GST regime can also be applied for determining the value of taxable supply under the GST regime. The assessee has placed reliance on the judgement of Hon'ble Supreme....
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..... The appellant has submitted that the value of goods supplied by the service recipient is includable in the taxable value only in specific situations covered under Section 15(2)(b), as follows - i. Where any amount is required to be incurred by the supplier in relation to a supply. ii. However, the same is incurred by the recipient of the supply and iii. The said amount is not included in the price actually paid or payable for supply of goods/services or both. The appellant has submitted that in the instant case, the cost of ATF was always required to be borne by the customer. Further, the arranging of ATF was not in relation to the rental services agreed to be provided by the appellant. Thus the essential condition (i) specified above is not fulfilled. Further, the amount of reimbursements charged by the appellant for ATF is not in respect of supply of services that were agreed to be provided to customer in terms of the rental agreement. Accordingly, in terms of Section 15(2)(b) of the GST Acts, 2017 also, the value of ATF cost reimbursed by customer cannot be included in the value of rental services provided by the appellant. 17. The appellant has referred to Section 15(....
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....placed on the decision of House of Lords in the case of Customs and Excise Comrs v. British Telecommunications plc. [1999] 1 WLR 1376. 23. The appellant has submitted that the GAAR has assumed that each time the helicopter flies, the supply takes place. The appellant has further submitted that the supply in the present case is renting of helicopters and not transportation service, therefore, the supply takes place when the helicopters are made available to ONGC. Thus any amount charged by way of reimbursement for ATF made available after the supply of services by way of renting of helicopters is made, is not includible in the value of supply. 24. The appellant has further submitted that as per Section 9(2) of the GST Acts, 2017, no tax is leviable on supply of aviation turbine fuel. It will be levied from a date to be notified by the Government on the recommendation of the Council. Once there is no levy under the charging section on ATF, tax cannot be levied indirectly by including it in the value of supply. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CCE, Pondicherry v. Acer India Ltd. [2004 (172) ELT 289 (SC)] wherein the decision of PSI Data ....
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.... the ONGC, then it provides the helicopter registration number to the ATF supplier. This clearly indicates that the ATF procured by the appellant is on behalf of the ONGC and will be used in that particular helicopter which is given on hire to ONGC. This satisfies the conditions of Rule 33 of the GST Rules, 2017 and therefore, the cost of ATF cannot be included in the value of supply provided by the appellant. 28. The appellant has also placed reliance on HMRC Guidelines (VAT Notice 700) on costs or reimbursements passed to customers under the UK VAT law and has referred to the decision of the House of Lords in the case of Neil Gwynn House Maintenance Fund Trustees v. Customs and Excise Commissioner [(1999) STC 79] and in the case of De Danske Bilimporter v. Skatterministeriet [(2006) ECR 1-4945]. 29. The appellant has submitted that the fuel procured on behalf and for the account of ONGC is not an expense incurred by the appellant nor is it necessary/essential element for providing its own supply of renting of helicopters. Thus the amount of reimbursement claimed is as a pure agent of ONGC and accordingly the amount is not includible in the value of supply. On the basis of the a....
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....lation to the service to be provided by the service provider, the same cannot be included in the value of services provided', we find that the appellant has misread or misinterpreted Section 15(2)(b) of the GST Acts, 2017. In respect of "Rental service of aircraft", as per the terms of the contract, the appellant is required to make arrangements for fuel, except at Mumbai and Offshore, where the ONGC would provide fuel as free supply. Even at Mumbai, as per the terms of the contract, it is the responsibility of the appellant to arrange for the fuel where the ONGC is unable to provide fuel. It is, thus apparent that it is the appellant who is primarily liable to arrange for fuel at all the places, which is required for flying of Helicopters in respect of which appellant would get consideration in the form of 'Monthly Charges' and 'Flying Hour Charges'. As such, in the cases where ONGC, as recipient of "rental service of aircraft" provides fuel as free supply, the amount of such fuel not included in the price actually paid or payable for the 'rental service of aircraft' is required to be included in the value of supply, in terms of clause (b) of sub-section (2) of section 15 of the C....
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....it is also not covered under 'any amount charged for anything done by the supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or supply of services; that in the impugned order, it has been held as "in the instant case, the applicant is filling ATF fuel in the aircraft before the supply of services to the customer i.e. "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator" and the amount of the ATF fuel is being charged from the customer, which the applicant is receiving in the form of consideration, which has been received by them as reimbursement. This act of the applicant would be considered as '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' and would, therefore, form part of the value. Therefore, the contention of the assessee that the recovery of fuel cost does not represent an amount charged for anything done by the applicant in respect of supply of rental services provided by them does not hold water"; that with regard to the above observati....
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....nthly rental charges and flying hourly charges by the customer. As per the contract, the helicopters of the appellant are required to carry passengers/and or cargo of the customers to various destinations in India. These aircrafts/helicopters cannot fly to the various required destinations without ATF filled in them. In short, it is impossible for the appellant to provide the supply of 'rental services of aircrafts' without ATF being filled in the aircrafts and therefore, the appellant's contention that the amount of reimbursements charged by them for ATF is not in respect of supply of services is unacceptable as even a layman can make out that aircrafts cannot fly without fuel. Further, we also do not agree with the contention of the appellant when he states that 'the impugned order has gone beyond the tenor of the agreement to defy the nature of supplies that were agreed to be provided by the appellant to the customer and the contention of the AAR that provision of ATF is a part of appellant's scope of service is misplaced', simply because of the fact that the supply or provision of ATF either by the customer (ONGC) or the appellant is very much a part of the agreement/contract s....
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....the amount of ATF, which is received as reimbursement by the appellant will undoubtedly form a part of the 'consideration' i.e. the value of the services provided by the appellant and GST is liable on the same. 36. From a plain reading of the clauses 10.2.1. and 11 of the contract/agreement in Schedule-A (under the head 'Scope of Work & 'Special Conditions of Contract'), it is observed that although it has been agreed upon by ONGC that they will provide ATF as free supply at Mumbai and offshore, condition of clause 10.2.1.(iii) specifically mentions that in case of any reason, ONGC is unable to supply ATF at Mumbai also, operator has to make arrangement for ATF. Further, as per the agreement/contract, ONGC will supply fuel free of cost only at 2 locations as mentioned above, whereas in all other locations of India, the supplier has to arrange for ATF and even in cases, where ONGC is not in a position to arrange for ATF at Mumbai, it is the appellant's responsibility to arrange for the same. It therefore, emerges from the conditions of the contract, that ultimately, it is by and large, the responsibility of the appellant to arrange for ATF for the customer i.e. ONGC. Therefore, the....
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....is own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration. - Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A's recovery of such expenses is a disbursement and not part of the value of supply made by A to B." 37.2 The said rule contains three conditions (i) to (iii) and also contains an Explanation for 'Pure agent' which contains condition (a) to (d). Therefore, in terms of the provisions of Rule 33, the amount received as reimbursement by the appellant would be excluded from the value of supply, if and only if, it satisfies all the aforementioned conditions envisaged in Rule 33. This fact has also been clear....
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.... the recipient of supply to incur expenditure or costs in the course of supply of goods or services or both. (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; We do not agree with the contention of the appellant since it is apparently clear from the conditions of the contract that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Furthermore, the ATF arranged by the appellant or provided by the customer as free supply at Mumbai and Offshore, is used as fuel by the helicopter while providing 'rental service of helicopter'. In fact, the ATF is not supplied to the recipient of the service. Thus, the condition that the appellant neither intends to hold nor holds any title to the goods (ATF) so procured or supplied as pure agent of the recipient of supply, cannot be said to be fulfilled in this case. Also, there is no doubt about the fact th....
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....mbai, the appellant has to arrange for it. Thus, it is very much clear that it is by and large, the responsibility of the appellant only to arrange for the ATF for their customer. We also do not agree with the contention of the appellant when they say that 'the scope of Charter Hire Services does not include provision of fuel and it has been abundantly established that renting of aircraft services(with pilots) was never dependent upon provision of ATF as appellant would have received the fixed monthly charges even if the aircraft was not in use, although the rentals were also partly chargeable based on the flying hours of the aircraft', since the terms of the conditions of the contract, especially Clause 10 and 11 of Schedule-A of the contract of the appellant with ONGC (customer) specifically mentions about the supply/provision of ATF for the aircrafts/helicopters and therefore supply/provision of ATF forms a crucial part of the contract. Also, there is no doubt about the fact that only the ATF procured and filled by the appellant in the fuel tank of the aircraft would enable it to fly, thus enabling the appellant to supply the 'rental services of aircrafts'. Further, as per claus....
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....pellant will undoubtedly be included in the value of supply of 'Rental Services of Aircraft' provided by them. 41. We may also examine whether the conditions mentioned in Rule 33 of the CGST Rules, 2017 have been satisfied in the present case in respect of the expenditure or costs incurred by the appellant in respect of ATF so that the said expenditure or cost may be excluded from the value of supply. (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; As already mentioned herein above, the appellant does not act as a 'pure agent' in the present case. When the appellant arranges for ATF, his own interest of supply of 'rental service of helicopter' is involved and the appellant does not act as an agent or a pure agent of the recipient of the supply of ATF. Furthermore, in terms of the conditions of the contract, especially Clause 10.2.1.(iii) of Schedule-A of the contract of the appellant with ONGC (customer) dated 31.07.2015, it is apparently clear that ONGC will arrange for the ATF only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the....
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....ure agent of the customers and are in addition to the rental of aircraft services' since the terms of the conditions of the contract, especially Clause 10 and 11 of Schedule-A of the contract of the appellant with ONGC (customer) specifically mentions about the supply/provision of ATF for the aircrafts/helicopters and forms a crucial part of the contract and is certainly not in addition to the rental of aircraft services as contended by the appellant. We, therefore, conclude that the ATF procured by the appellant for the aircraft is not in addition to the services they supply on their own account, but is an extremely crucial part of the above service since only the ATF fuel filled in the fuel tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the aforementioned service to their customer. Hence this condition is also not satisfied. 42. As the conditions mentioned in Rule 33 of the GST Rules, 2017 have not been satisfied in the present case, the expenditure or costs incurred by the appellant in respect of ATF cannot be excluded from the value of supply. 43. As regards the several decisions relied upon by the appellant, we find that the ca....
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....er at actual. A separate debit note is raised by the appellant for recovering this cost of ATF, which does not form part of the consideration paid for rendering rental services and accordingly, no GST is payable on same; that reliance is placed on M/s. Nash Industries Pvt. Ltd. [2019 (3) TMI 435 AAAR], Karnataka and M/s. Lear Automotive India Pvt. Ltd. [2018 (12) TMI 766-AAR], Maharashtra, wherein the above Circular dated 8.6.2018 has been followed and it has been held that the amortised value of tools supplied free of cost by the recipient of the supply is not liable to be included in the taxable value. 44.2 The issue mentioned in Circular No. 47/21/2018-GST dated 8.6.2018 pertains to provision of moulds and dies owned by the Original equipment manufacturer (recipient) to the equipment manufacturer (supplier of goods) free of cost and the inclusion/exclusion therein of the value of the said items in the value of supply. Such moulds and dies are in fact, used by the equipment manufacturer for the manufacture of other goods. However, this circular cannot be made applicable to the instant case for the simple reason that the issue cited in the circular pertains to manufacture of good....
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....he above case, the adjudicating authority held that the value of electricity should be included for determining the taxable value for purpose of service tax in terms of Section 67 of the Act read with Rule 3 of the Valuation rules on the ground that electricity is essential for the operation of the plant and is therefore integral to the service of operation and maintenance provided to the customer. However, the Mumbai Tribunal did not agree with the above view of the adjudicating authority and held that electricity cannot be considered as an input for providing the services of operation of air separation plant, it cannot be considered as an additional consideration flowing to the appellant from their client for providing the service of operation of plant and cannot be considered as part of the gross amount charged for the service of operation of the plant. The appellant has further stated that similarly in the instant case, value of fuel cannot be considered as additional consideration received by the appellant from customer towards 'Rental service of aircrafts' and hence in view of above judgements, no GST is payable on the value of ATF supplied free of cost by customer to the app....
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....ursement by the appellant from their customer i.e. ONGC (towards arrangement/provision of ATF to their customer) is covered under the definition of 'consideration'. Further, as discussed earlier, this issue pertains to the inclusion of reimbursement of ATF in the value of supply wherein the aspect of 'Pure Agent' comes into play. In such instances, such reimbursements can be excluded from the value of supply of 'Rental services of aircrafts' if and only if, all the conditions envisaged in the provisions of Rule 33 of the GST Rules, 2017 are fulfilled/satisfied, since Rule 33 itself begins with the words ' Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a Pure Agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely-------Thus, the provisions of Rule 33 of the GST Rules, 2017 specifically states that the reimbursements received by the supplier as a 'Pure Agent' will be included in the value of supply if the conditions specified in the said Rule are not satisfied. Hence, the aforesaid judgements cannot be made applicable to the issues in t....
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....for the purpose of excise duty and when an exemption has been granted from levy of excise duty on software, excise duty cannot be levied on it by including it indirectly in the value of supply. Accordingly, the Court decided in favour of the assessee. The appellant has submitted that applying the above ratio in the present case, what is taxable is hiring of helicopters by the appellants to ONGC, that ATF is not covered within the purview of GST as of now and adding the value of ATF in the value of hiring of helicopters services provided by the appellant is indirect attempt to tax what is not covered within the tax net. Therefore, the observation made by Hon'ble Court as referred above, directly applies to the facts of the present case; that the above decision has been affirmed by the Constitution Bench of the Supreme Court in the case of Constitution Bench in CCE, Indore v. Grasim Industries ltd. - 2018 (360) ELT 769 (SC). Thus, in the present case, the supply of ATF is not leviable to GST, the same cannot be made taxable indirectly by including it as a part of value of supply. 47.2 We have gone through the above case of CCE, Pondicherry vs. ACER India ltd. relied upon by the appe....
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....017. However, we find that the issue mentioned in the above case pertains to VAT and pertains to the pre-GST era and therefore cannot be made applicable to issues in the GST era where value of supply is governed by the provisions of Section 15 of the GST Acts, 2017 which elaborately discusses the valuation aspect of supply. Further, it has already been discussed in the foregoing paras, that the activity of reimbursement of amount of ATF received by the appellant from their customer, is aptly covered under Section 15(2)(c) of the CGST Act, 2017 and therefore the contention of the appellant that they have not 'charged' the cost of ATF to ONGC is not acceptable and does not hold water. 49. We also find that the appellant has placed reliance on HMRC guidelines (VAT notice 700) under the UK VAT Law as well as on the House of Lords in the case of Nell Gwynn House Maintenance Fund Trustees vs. Customs and Excise Commissioner [(1999) STC 79]. We find that both the matters pertain to the United Kingdom which is a separate country governed by a different set of laws and rules as compared to India. Further, the matters pertain to VAT laws also. Hence the aforementioned cases cannot be made a....