TaxTMI 
TaxTMI 
2022 (3) TMI 1368
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....by the Appellate Authority under Chapter XVII of the Act shall be binding only (a). On the appellant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b). On the concerned officer or the jurisdictional officer in respect of the appellant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. 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 ....
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.... sales of appellant's products which in turn leads to increase in purchase of products by them from sub-stockiest. The retail outlets have an obligation to increase the sales of the products covered by the scheme as much as possible and once the purchase of products by retail outlets exceeds the specified limit under the scheme they automatically become eligible to the rewards/product. Broadly the obligations of the retail outlets under the 'Buy n Fly scheme are as follows: 1. To promote the sales of appellants products which in turn leads to more purchase of products by retail outlets from sub-stockiest. 2. The retail outlet is required to maintain proper accounts/documents which indicates the purchases made by them and also sales effected by them under the scheme. 3. The rewards/product specified under the scheme do not accrue to the retailers automatically and/or they cannot claim the same as a matter of right under the scheme. 4. They cannot participate in any other sales promotion scheme(s)/marketing scheme(s) of any other third party/vendor during the tenure of the 'Buy n Fly scheme i.e. 8th April to 8th July 2019. The terms ....
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.... chart as below: Announcement of 'Buy n Fly' ¯ Communicating the scheme, terms and conditions to retail outlets, distribution network ¯ Retailers to procure the eligible products from sub-stockiest during the term of the scheme after signing their acceptance to participants. ¯ GRB shall procure reward article (input/input services) from vendors which will be handed over to eligible retailers later. ¯ Submission of claim by the retail outlets through sales network ¯ Scrutinize the claim made by retail outlets, identify the eligible outlets and communicate the eligible reward articles. ¯ Handing over reward to eligible customer outlets. 2.3 On interpretation of law, the appellant has stated that they procured these goods and services in the course of business and it has direct nexus with the business carried on by the company/appellant; that marketing and business expansion is an indispensable activity of every company's operations and 'Buy n Fly scheme is a sales promotion scheme which was launched to promote the sales of GRB brand Instant mix, Masalas, ready to eat sweets and snacks; They have s....
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.... to them; the Trip to Dubai voucher, Gold voucher, Television and Air-cooler procured by them will be used in their business or in the course of business by way of handing over them as rewards to the eligible retail outlets who participated in the scheme. • As per the provisions of the Act, any registered person is eligible to claim input tax credit charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business. Further, the conditions specified u/s 16 (2) that the registered person should possess the tax invoice issued by the supplier; registered person must have received the goods; Tax charged in respect of such supply has been actually paid to Government; registered person has furnished the return u/s 39 of CGST Act, 2017 are fulfilled by them and hence they are eligible to take Input Tax credit of inputs and input services, being Trip to Dubai voucher, Gold voucher, Television and Air-cooler; that these are procured with an intent to implement the 'Buy n Fly' scheme which is part of business of the appellant; the expenditures incurred by the appellant in respect of Buy n Fly' scheme a....
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....ause of that, the advertising expenses are not includable in the assessable value, do not appear convincing as, by such advertisements, they have been ultimately enhancing marketability in trade, of their -concentrates for beverages'. The appeal so far as it relates to enhancement in assessable value by addition of expenses incurred for advertisement stands allowed. • In the case of Manhattan Associates Development Centre Pvt. Ltd. Vs Corn. Of ST B'lore - (2015 (11) TMI 344 - CESTAT BANGALORE), it was held that sub-clause under Rule 2 (1) of CENVAT Credit Rules 2004 clearly says that the input service which are used directly or indirectly, in or in relation to the final products and clearance of final products up to the place of removal of the manufacturer/ service provider would be covered within the definition of 'Input Service'. Further, reference was made to CESTAT, Ahmedabad's decision in the case of Ultratech Cement Ltd.Vs. CCE, Bhavnagar [2011(22) STR 578 (Tri. Ahmd.)], which has quoted Hon'ble Supreme Court's decision in the case of Maruti Suzuki Ltd. Vs. Commissioner [2009(240) ELT 641 (SC)} and Hon'ble Bombay High Court's d....
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....nder the present case which specifies that credit shall not be eligible in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Considering this context, it is submitted that rewards such as Dubai Trip voucher, Gold voucher, TV and Air-cooler handed over to eligible retail outlets shall not fall under clause (h). Clause (h) deals with goods disposed of by way of 'gift' which cannot be equated to 'rewards'. The term 'Gift' has not been defined under the CGST Act, 2017 and therefore it would be appropriate to refer to other enactments and judicial pronouncements in order to ascertain the meaning of the term 'gift'. * The term 'Gift' under Gift Tax Act, 1958 was defined as '(xii) -gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section' * As per Black's Laws Dictionary (Fourth edition): A voluntary transfer of personal ....
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....les and according to the scheme certain slabs/targets are set which, only if achieved by the retailers, they would become eligible to the rewards under the scheme. Therefore, the object of the scheme is purely sales promotion and not to offer any gifts voluntarily to its retailer outlets/dealers without conditions or eligibility criteria. The entire scheme has been formulated to further its business and the inputs and input services are procured purely and only in the course or furtherance of business. This fact has been admitted by the Advance Ruling Authority • The entire expenditure related to the scheme was incurred by them in the course or furtherance of their business, this is the primary condition for availment of Input Tax Credit and has been satisfied by them in line with sec. 16 (1) of the CGST Act, 2017. The term "input" is NOT to be equated with the term 'goods'. The phrase 'in the course or furtherance of business' encompasses a wide range of functions within the business. The term. "business" as defined under the GST law includes any activity or transaction which may be connected, or incidental or ancillary to the trade, commerce, manufact....
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....ven on such incentive schemes is available and hence ITC is available. • By reading the provision given under Section 17 (5) (g) of the CGST Act, no ITC shall be allowed where such goods/ services are used for personal consumption. It is very important to note the choice of words by the legislature i.e., "used" for "consumption". However, nowhere in GST law the term 'personal consumption' is defined. In such circumstances, they refer to settled legal principles under erstwhile indirect taxation regime to draw reasonable conclusion under current law. Under the erstwhile CENVAT Credit Rules, 2004 ('CCR') wherein similar term was used in definition of "input" and ''input service". As per the CCR, tax paid on input and input service shall be available as credit which can be utilised for discharging output tax. However, following two important point must be noted- • Definition of "input" excludes any goods, such as food items, goods used in guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee. • Definition ....
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....ution as to powers of the State to levy tax on the inter-state sales. "Article 286 of the Constitution so far as is material is as follows: 286(1). No law of a State shall impose, or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of the territory of India. EXPLANATION: For the purpose of Sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." • This is analysed in the context of 'Production' and 'Consumption' i.e., creation and then its utilisation. The judgment is conveyed in the context of levying tax in the state of consumption. Thus, it is bound to have a wider sense than the usual understanding of eating. The language of Entry 52 in....
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....pairs and Maintenance for Plant and Machinery and allied equipments) • Packaging Cost (both Inner and Outer Packing) • Transportation Expenses • Storage and Related Costs • Advertisement and Sales Promotion Cost • Head Office and Regional Office Overheads • Distributor Margin • Profit Margin All these elements of cost form the basis of fixation of the MRP. From the above it is evident that the price of the product has an element of the Advertisement and Sales Promotion Cost included and hence the consideration for the product on which GST is discharged has this element inbuilt. Generally, the objective behind running any Sales Promotion Campaign are as under • • Keeping Sales Volume at the same levels or achieve incremental volumes • Pushing sales volume at the expense of the Competitors by encouraging dealers to move the products • Giving Customers a taste of Products which helps to sustain or increase Sales Volumes and Values. • Sales, Promotion Expenses incurred are pursuant to a contractual obligation which is suppo....
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....d not as a result of a contractual obligation to transfer it and that no advantage of a material character was received by the transferor by way of return. Therefore the promotional materials which was provided to the dealers, stockiest and retailers was not voluntary and there was a contractual obligation and consideration which has been established and therefore the AAR authorities stand that the promotional materials are in the nature of Gift is not valid. • The AAR authorities have also taken a stand that the distribution of goods and services to the retailers as per the scheme is not a 'Supply' as defined under Section 7 of the CGST Act (Para 7.6 of the ruling). It is submitted that the stand of the AAR authorities is not tenable as there is consideration paid which fact cannot be denied and therefore it is a supply falling under the provisions of Section 7 of the CGST Act. • The Maharashtra Advance Ruling referred by the Advance Ruling Authority in the case of M/s Biostadt India Limited, [2019 (3) TMI 540] is not squarely applicable in the instant case as the facts of case differ wherein it also been observed by the learned advance ruling aut....
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....d upon by AAR which cannot be applicable to the case on hand have been highlighted in the Grounds of Appeal filed already. c. The language used in GST is "goods or services or both used for personal consumption and not goods or services or both for personal consumption use as provided in the Cenvat Credit Rules" d. The test for taking the ITC is not dictated under the GST law based on the last leg of consumption but whether the input and input services are procured and used for the purpose of the business. e. Attention of the learned members is invited to the example mentioned in the grounds of appeal. • Denial of Credit under section 17(5)(h)- Inconsistencies in the Order of AAR:- i. The AAR has held that the promotional materials were in the nature of gifts which was given voluntarily and hence would squarely fall under the provisions of section 17(5)(h) and hence credit has to be denied. ii. AAR has completely ignored the fact that there was a contractual obligation which was based on a scheme which was circulated to the trade in advance, sample copies of the Acceptance of the scheme by members of the trade has been furni....
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....s have sought for advance ruling as to whether the GST paid on inputs/input services procured by them to implement the promotional/ reward scheme by name called as "Buy n Fly" would be eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the GST Act. It is their contention that these goods/services do not fall under 'gift' (Section 17(5)(h)) as the same was not given in volition, but on contractual obligation, on their retailers achieving the targeted sales nor these goods/services called as 'goods/services used for personal consumption (Section 17(5)(g)). 8.1 In their submissions and at the time of personal hearing it is stated that the product costing included trade promotion expenses, i.e., for arriving at M.R.P. of their manufactured products, 'Advertisement and Sales Promotion Cost' are included in the pricing but the actual details of the product costing was not established. We find that the appellant has also stated that there was no change in the M.R.P. and the price pre-campaign and post-campaign remains the same. It was further stated that these goods/services were purchased for furtherance of business and there....
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....urement use and not on the last use would be of no avail to the appellant. In the example cited by the appellant, the goods though are in the nature of the consumables for the ultimate consumer, the dealer procures for further supply of such goods and therefore he is entitled for credit on such goods but the ultimate consumer to whom the dealer supplies such goods on charging GST is not eligible for the credit of tax paid by him on purchase of such goods, in view of Section 17 (5) (g) above. In the case at hand, the appellant has not procured the goods/services for further supply but for consumption by the retailers under the scheme and hence the cited example do not apply to the facts of the case as the appellant in the case at hand becomes the ultimate consumer of the said goods/services. Though the appellant claim that the cost of the products procured for the scheme are part of the M.R.P. pricing, the appellant did not file the actual value of costing attributed to the reward scheme in the final price of the products manufactured. Also, the referred decisions except in the case of CCE Pune Vs. Dai Ichi Karkaria [1999 (112) ELT 353 (SC)] and M/s. Coca Cola India Pvt Ltd Vs. CCE ....
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....xplained above. 8.5 Further, the claim that there was 24% increase in sales during period under reward scheme when compared to the same period in the previous year and that the scheme furthered the business and therefore the GST paid on the goods/services distributed under the scheme are eligible to the appellant is not acceptable in the given facts. Furtherance of business as imprinted in section 16 of the. CGST Act conveys that the inputs or input services 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 alone are entitled for taking credit. Here 'him' denotes the taxpayer, but the promotional rewards scheme for which inputs and input services procured by him meant for his buyers and not for his own activity like advertising the product, etc. But the fact remains that non-obstante clause in section 17(5) of the CGST Act, 2017 would make the argument of appellant that the reward scheme meant furtherance of business futile and hence on both clauses (g) and (h) of sub-section (5) of section put embargo on availability of input tax credit itself as such situations were obviously fou....