AI Drafter 
TaxTMI 
TaxTMI 
2021 (5) TMI 1044
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....egistration No. 05AABCV9136E1ZF and seeking advance ruling on the following question: Question No. 1: Whether the water and electricity charges as well as the notional rent of the land, provided free of charge by BHEL CFFP to the applicant, shall form part of the value of supply of oxygen gas by the applicant. 2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of Section 97 or sub section (1) of Section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 3. As per the said subsection (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of:- (a) Classification of any goods or services or both (b) Applicability of a notification issued under the provisions of this Act, (c) Determination of time and value of supply of goods or services or both, (d) Admissibility of input tax credit of tax paid or deemed to have been paid (e) Determination of the liability to pay tax on any goods or services or both (f) Wheth....
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....ly of gaseous oxygen to shops at pressure 14-17 Kg/cm2 (maximum Distance 2000 m from supply point) as per flow requirement on all working days, Sundays, holidays (in all three shifts) 4) The Tender Document also enshrines the scope of activities agreed to be undertaken by BHEL which inter-alia are as follows • BHEL will provide power supply, untreated water at one point and Shaded space. • The plinth area of shaded space is 15X28m2, height 7.60 meter and adjacent shaded area of 11.60X9 m2, height 3.50 meter. Beyond this no shaded space shall be provided. • Adjacent open space, if required can also be used with prior CFFP's permission. • If supplier wants to increase height of building, then that will be under supplier's scope at their cost but after taking permission & clearance by CFFP BHEL. 5) The ownership of the free of charge water and electricity provided by BHEL CFFP under the said Tender remains the property of BHEL CFFP at all times and the property/ ownership in the same is never transferred to the vendor at any stage. 6) Further, since the said contract is for supply of oxygen on BOOM basis, the ownersh....
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.... supply of oxygen gas for the purposes of levy of GST. 10) In the above backdrop and circumstances, the Applicant has hereby approached for seeking an advance ruling in respect of the questions raised in the instant application. The Applicant submits that the questions raised in the instant advance ruling application qualify as questions in respect of which an advance ruling application can be sought by the Applicant in terms of section 97(2) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). Further, the Applicant, having a registered office in India is eligible to approach this Hon'ble Authority for an advance ruling and qualifies as an applicant under section 95(c) of the CGST Act. 11) The Applicant submits that there are no pending proceedings under the GST law against the Applicant or initiated by the Applicant in relation to the question raised herein before any authority, Tribunal or Court. Exhibit III - Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant's view point and submission on issues on which the advance ruling is sought):- 1) It is....
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....es or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" 5) Section 2(72) of the CGST Act defines the term 'manufacture' to mean: - processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufacturer" shall be construed accordingly {Emphasis Supplied} 6) Section 15 of the CGST Act lays down the mechanism to determine the value of any supply for the purposes of levy of GST under the GST Law. Section 15 is reproduced herein for your ready reference:- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the s....
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.... 2. The Applicant is seeking an Advance Ruling on the following grounds, which are without prejudice to each other: 2.1 Activity undertaken by the Applicant Qualifies to be 'Manufacture' and therefore, Transaction between the Applicant and BHEL CFFP is a 'supply' under GST. • For a transaction to be a supply, there has to be inter-alia a sale or transfer for a consideration by a person in the course or furtherance of business. In the present case, BHEL CFFP requires regular supply of oxygen in its plant to carry out its operations. For this purpose, it has appointed the applicant to set up an oxygen manufacturing plant within its premises. The applicant is provided rent free space for setting up the said oxygen manufacturing plant and also provided electricity and water free of cost. The applicant shall further procure the air from the atmosphere and process the same using electricity and water and other requisite catalysts for extraction of oxygen from the atmospheric air. The ownership of the rent-free land, water and electricity always remains that of BHEL CFFP while the plant so setup shall always be of the property of the applicant (since the co....
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....the oxygen gas so supplied. • The term 'manufacture' has been defined under Section 2(72) of the CGST Act so as to mean processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use. Stating simply, an act can be said to be manufacture if:- i. there is involvement of raw materials or inputs, ii. such raw materials or inputs are processed in any manner, and iii. there is emergence of a new product as a result of such processing having a distinct name, character and use. • The term 'input' has been defined under Section 2(59) of the CGST Act as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, the processing should be undertaken on raw materials/ inputs that qualify to be goods'. The term 'Goods' has further been explained under Section 2(52) of the CGST Act as every kind of movable property while some specific items have been specifically excluded from the definition of goods, Water, atmospheric air and electricity are not amongst the list of items excluded....
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....9;processing' was discussed at length by the Bombay High Court in context of preparation of a Pan or Vida by a Pan Shopkeeper. It was determined that the word "process" is to subject to a particular method or technique or preparation, handling, or other treatment designed to effect a particular result. When vida or pan is produced or prepared, it is produced not only with the use of several articles but subjecting all these articles used to several processes. In fact, no one article is available in the same form once it is used in the vida. All the articles that go to make the vida are not available as independent articles. It was further stated that it is not necessary that in the processing of an article within the meaning of this section, there must be use of mechanical force in particular cases. • From the above discussion, it can be understood that the term 'processing' has a wider connotation which includes any activity carried out for the purpose of a particular result wherein as a result of such activity the articles lose their independent identity and a new product comes into existence. • Applying the said meaning to the facts of the c....
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....y free of charge for use in the manufacture of oxygen. These inputs are used by the applicant for the manufacture of oxygen gas. It is of no doubt to the applicant that the total amount obtained by it from BHEL CFFP towards supply of oxygen is a 'consideration' under Section 2(31) of the CGST Act and thus, the same shall be leviable to GST. • Here, a question that arises for your due deliberation is whether the value of rent-free space and cost of electricity and water provided free of charge by BHEL CFFP to the applicant is to be included in the value of manufactured oxygen for the purposes of levy of GST. • This doubt stems from the fact that BHEL CFFP is of the view that the value of rent-free land should not be included in the value of supply. On the other hand, under the erstwhile Excise Law, the activity carried out by the applicant was held to be 'manufacture1 in terms of Section 2(f) of the Central Excise Act, 1944 and the value of rent-free space and other free of cost materials was specifically included in the value of the manufactured oxygen in terms of Rule 6 of the Central Excises Valuation (Determination of Price of Excisable Good....
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....ture the oxygen without the availability of land space for setting up the plant and without the presence of the requisite quantities of water and electricity. Accordingly, in our view, the liability of incurring such expenditures would remain on the part of the applicant since the same are vital elements for the applicant to carry out its responsibilities under the agreement/contract. • In this reference, attention is invited to the Advance Ruling issued by the Authority of Advance Ruling in Karnataka in the cage of M/S Nash Industries (I) Pvt Ltd., Advance Ruling No. KAR ADRG 24 / 2018. In the said case, certain tools were required to manufacture the requisite components by the applicant, These tools were provided free charge by the recipient. It was held by the Authority that without e tools the final component could not have been manufactured and therefore, by application of Section 15(2)(b) of the CGST Act, the value of tools provided free of charge by the recipient would be included in the value of manufactured component, • It is a known legal position that the Advance Rulings arc not binding on any person apart from the respective applicant of the sa....
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....e land, provided free of charge by BHEL CFFP to the applicant, shall form part the value of supply of oxygen gas by the applicant. 4. In this regard we would like to go through the relevant provisions of the CGST Act, 2017 as follows:- 1) To determine the value of any supply, Section 15 of the CGST Act provides that: (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply- (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier, (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for....
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....pecified 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 Schedule II. ................................" As per above provisions all forms of supply of goods made or agreed to be made for a consideration is a part of supply. 3) Section 2(31) defines the term 'consideration' as under:- "(31) "consideration" in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods ....