TaxTMI 
TaxTMI 
2022 (12) TMI 808
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....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 sub-Section (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 original 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. Subject: GST - Appeal filed by M/s. Deccan Transcon Leasing Private Limited, Block -2 (DG-6) Flat No. :103, Raintree Park, Spinal Road, Kukatpally, Hyderabad - 500 072, Telangana State under Section 100 (1) of TGST Act, 2017 Against Advance Ruling TSAAR Order No.08/2021 d....
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....for the purchase of the container during the period of lease or at the end of the lease period by paying the agreed rate. The applicant contends that they have recognized the tank containers and assets in the books of account from the inception of the lease and there is certainty that the same would be purchased later. Therefore the applicant is of the opinion that this transaction is a transaction for supply of goods from the inception of the agreement in terms of Sl.No.1(c) of Schedule II to Section 7. The applicant abstracted the said entry and opined that all the requirements mentioned in the entry in the schedule II are fulfilled by them i.e., - - There shall be transfer of title in goods. - Such transfer is at future date as per pre-existing agreement. - Such transfer is after payment of full consideration. The applicant contends that the title is transferred at the end of the lease period as evident from the sale invoices raised by the supplier to the applicant. The applicant further contended that the said transfer of title occurred on a future date in pursuance of a pre-existing lease agreement and the supplier transfers title only after....
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....ution of India is relevant. 1. Appellant contends that Article 366(29A) of Constitution of India specifically & unequivocally provides that the present transaction is to be classified as 'sale of goods' thereby it shall be treated as 'supply of goods'. The Article 366(29A) of Constitution of India and 'Sale' definition given under CST Act, 1956 vide Section 2(g) remain untouched even after introduction of GST thereby making the lawmakers intention to continue the deeming fiction to treat the transaction as 'supply of goods' under GST law also. This is exactly done by the Sl. No. 1(c) of the Schedule II to the section 7, ibid by declaring the future title transfers with pre-existing agreement construes to be 'supply of goods' from the beginning of the transaction. Accordingly, the GST liability shall be determined. The transaction is 'supply of goods from the inception of the agreement: 2. Appellant contends that "the transaction of purchasing the containers during/end of the lease period is 'supply' under section 7 of CGST Act, 2017 and would be classified as 'supply of goods in terms of Sl. No. 1(c)....
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...., the present transaction entered with the supplier is 'supply of goods. 5. Appellant contends that the impugned order has vide para 7(v) have stated that "The Entry employs two phrases in order to emphasize the obligatory nature of the contract to ensure the passing of property from the supplier to the recipient at the completion of the period of the agreement or any such period, viz- a. "An agreement which stipulates that" b. "Property in goods shall pass at a future date" Thus, the law leaves no scope for uncertainty regarding the transfer of property. The law does not provide for an option to purchase the goods at the end of the lease period but makes it an obligation on the part of contracting parties to necessarily transfer such property on the completion of period of agreement. Thus, for a transaction to qualify under this entry it should be backed by an agreement which does not leave any option for return of the goods at the end of such agreement." 6. Further Appellant contends that the impugned order vide para (vi) has stated that "The above Entry in the Schedule II employs the word "Stipulation" to be enshrin....
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....it squarely fits in the definition of Hire Purchase Agreement as defined under section 2(c) of Hire Purchase Act which states that "hire purchase agreement as an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of agreement, and includes agreement under which - (i) possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments and (ii) the property in the goods is to pass to such person on the payment of last of such instalments and (iii) such person has a right to terminate at any time before the property so passes." 12. Appellant contends that though the Hire Purchase Act has been repealed but it can be said that in a hire purchase agreement, the possession of goods is delivered by owner to hirer on condition of payment of agreed number of instalments. Hirer has option to purchase the goods as per terms of agreement (usually, a nominal payment is provided at the end of hire period or property passes on payment of last instalment). Property in goods is passed on to the hirer after all terms ....
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....Court has held that "It is clear that under the law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a contract of bailment with an element of sale, as aforesaid, added to it. In such an agreement, the hirer may not be bound to purchase the thing hired; he may or may not be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire-purchase, even though the title to the goods has remained with the owner and shall not pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, nominal or otherwise." 17. Further Appellant wishes to rely on the international judgement in the case of the Commissioners for Her Majesty's Revenue & Customs v Mercedes-Benz Financial Services UK Ltd....
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....at 'sale' happens only at the time of exercising the option to purchase and 'sales tax can be levied only on the value at the time of exercising such purchase option. Pursuant to the 61st law commission recommendation, the Constitution of India was amended vide insertion of Article 366(29A) to specify 'hire purchase' or 'other installment' purchase transaction as 'sale' and the state sales tax laws, Central Sales Tax (CST) Act, 1956 was also amended to deem 'hire purchase' as 'sale of goods' at the time of entering into the agreement itself. The relevant extracts of the 61st law commission report, the amended definitions of 'sale of goods' under the Constitution of India, CST Act, 1956 and state sales tax laws is enclosed as annexure VII. 20. Appellant contends that the purpose & objective of the sl. 1(c) of Schedule II is to declare that the transaction involving future title transfers as per the pre-existing agreements shall be treated as 'supply of goods' from the commencement of the agreement even though there may be a stipulation to the effect that in spite of the transfer of goods to the hirer, the owner r....
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.... pre-agreed sale price irrespective of the fact that when the actual sale taken place as the lease rentals paid gets adjusted while paying the purchase price by the Appellant. Hence, though the title transfer is postponed, the intention of the parties is always to execute the sale of the tank containers at a future date with pre-agreed price & terms, which is precisely & concisely covered by the language of the Sl. No. 1(c) of Schedule II. 23. It is further submitted that the Appellant is responsible for the repairs, maintenance, damages, replacement and insurance of the tank containers which also fortifies the fact that the transaction is 'sale' and intention of the parties is to transfer the title from the inception of the agreement. 24. Appellant further contends that the initial lease rentals paid till the exercise of the purchase option would be adjusted for sale price of the tank containers and the suppliers would be issuing the credit note to nullify the previous transaction and raise the sale invoice for agreed sale price. The sample copies of the credit notes are enclosed as Annexure-V hence, the whole transaction is concluded as 'sale of tank containers&....
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....egal title to the leased asset, in the case offinance leases the substance and financial reality are that the lessee acquires the economic benefits of the use of the leased asset for the major part of its economic life in return for entering into an obligation to pay for that right an amount approximating to the fair value of the asset and the related finance charge." 29. In this regard, Appellant contends that the substance will prevail over the form which means the actual usage prevails when compared to terms of the agreements. Hence, the transaction would be treated as a 'supply of goods.' In this regard, reliance is placed on a. Avadhi Computers Pvt Ltd Vs CCE, Mangalore 2016 (46) STR 429 (Tri-Bang) wherein it was held as follows 3. Revenue's grievance is that if the MOU is read and most particularly Article 4 of the MOU, it shows that the appellant was not at all an agent or an employee or a sub-contractor of NIIT. Therefore, appellant cannot claim benefit under any other clause under Section 65(19) of the Finance Act, 1994. 4. Heard both sides on the submissions above. This does not appeal to common sense that the appellant was in the....
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....nt has to be read as a whole and the intention of the parties is to be gathered from it. Moreover, if the terms used in the agreements are not conclusive and one has to look at the substance rather than the form. In addition, it is equally well settled that a name given to a transaction by the parties does not necessarily decide the nature of the transaction. Thus, it is the substance of the contract that has to be regarded. d. In State of Andhra Pradesh v. Kone Elevators India Ltd. (2005) 181 ELT 156 (Supreme Court), Apex Court held that "the substance of the contract is determinative and not its form. Thus, the essence of the contract is crucial and to be seen, keeping in mind the intention of the parties." e. In Bharat Sanchar Nigam Ltd. v. Union of India (2006) 2 STR 161; (2006) 3 STT 245 (SC), it was held that "before determining the nature of the taxes which can attract in the context of the Agreements, it is essential to determine the intention of the contracting parties and the true nature of the transaction as per the law declared by the Hon'ble Supreme Court in various judgment." Therefore, Appellant contends that the Substance of the transa....
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....lant contends that scope of IGST Act, 2017 is limited to territorial jurisdiction to which it extends. Thus, IGST can be levied only to supplies occurred within the territorial jurisdiction of the IGST Act, 2017 qua Indian Territory. The present transaction taking place outside India. Hence, GST is not leviable in India on the same. 34. The Appellant wishes to rely on Mohit Minerals Vs UOI 2020 (33) G.S.T.L. 321 (Guj.) wherein it was held that the transaction which occurred totally outside the India is not liable for GST in India. 35. Appellant further contends that the tank containers are totally used for export business outside India and hence, the transaction remains totally consumed outside the territory of India. In this regard, Applicant wishes to rely on the decision in case of Genom Biotech Pvt. Ltd. v. C.C.Ex. & Cus., Nashik [2016 (42) S.T.R. 918 (Tri-Mumbai) wherein it was held that "Services that are not connected with manufacture or with the transport of goods till the customs frontier of the country can be disassociated from use within the country and hence would not lie within the ambit of the legal fiction of import of services. Services that are unden....
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.... 1962, and the same is to be levied and collected at the time of import into India. The goods are considered to be imported into India only after they cross the customs frontier after compliance with applicable procedures and payment of duty as applicable. Section 12 of the Customs Act, 1962 provides that custom duties which include integrated tax in respect of imported goods would be levied only at the time of import or export of goods. Accordingly, there is no levy in the present case as the goods do not cross the customs frontier in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act, ibid. 40. The CBIC vide Circular No. 33/2017-Customs dated 01.08.2017 has also clarified that GST is not leviable on the High seas' sales transaction referring to the above provisions. The relevant extract of the clarification is given below:- "4. GST council has deliberated the levy of Integrated Goods and Services Tax on high sea sales in the case of imported goods. The council has decided that IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e., when....
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....Associates LLP and Authorised Representative appeared for the Appellants. The appellants reiterated their written submissions made along with the application and no additional submissions were made at the time of personal hearing. They requested to set aside the advance ruling in respect of said issue that are being contested and consider their appeal favourably. 7. Discussions and Findings : The objections raised by the appellant are examined and arrived at the following conclusions:- 1) The appellant has entered into 'lease purchase agreements' with M/s Tankspan leasing Ltd, Surrey, United Kingdom, as per the agreements the appellant shall pay agreed rates of lease rentals every month and the appellant shall have an option to purchase the tank containers at the end of the lease period. 2) As per the copies of the lease purchase agreement submitted by the appellant, some of the conditions are as under:- a. Leasing- In consideration of the terms and covenanats herein contained, lessor agrees to offer on lease purchase to the lessee and the lessee agrees to hire from the lessor 100 New IMO Type 1 (T11) 25,000 Litre Tank containers to the specification pr....
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....per lift at time of redelivery. ii. Survey Charges - For each container delivered to the lessee, the lessee shall pay to lessor, a survey charges of US $ NIL per container. e. Replacement values- The replacement value for each container damaged beyond economic repair, lost or destroyed pursuant to paragraph 10 of the lease terms shall be Us $ 25,000.00. Such replacement value shall be depreciated by 4% per annum for each full year from the date of manufacture of the container, down to a residual value of not less than 40% of the said replacement value. Each container shall be insured, by the lessee, new for old, to the value of the said replacement value .................................... 3) From the terms of the Lease purchase agreement it is evident that the appellant is obtaining the containers on lease for a period of 5 years and after expiry of 5 years or prior to five years the appellant has an option to purchase the container on payment of certain amount as per the contract. On exercising the option to purchase and payment of corresponding amount the ownership of the container passes on to the appellant from the lessor. If the appellant fails ....
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....ailee, but the law of hire purchase has undergone considerable development during the last half a century or more and has introduced a number of variations, thus leading to categories and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question may arise as to what exactly were the rights and obligations of the parties to the original contract. 65. In Charanjit Singh Chadha (supra), this Court held that a Hire Purchase Agreement is an executory contract of sale, conferring no right in rem on the hirer, until the conditions for transfer of the ....
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....to the Financier taking possession of the vehicle when the hirer does not make payment of instalments/hire charges in terms of the Hire Purchase Agreement. However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation. Nor can such possession be taken by engaging gangsters, goons and musclemen as so called Recovery Agents." 5) From the Conditions of the Lease purchase agreements and Judgment of Hon'ble Supreme court of India M/s Magma fincorp Limited Vs Rajesh Kumar Tiwari mentioned supra, the ownership of the containers lies with M/s Tankspan Leasing Ltd until the appellant exercises option to purchase the container as per the agreement. 6) In view of the above there is no transfer of title in goods until the appellant purchases the container and this fact wasn't disputed either. 7) The appellant contends that this supply (obtaining Tankers on lease from M/s Tankspan Leasing Limited with an option to purchase them) falls under Entry 1 C of schedule II of CGST /TGST Act,2017, the contents of which are as under :- 1. Transfer (a) any transfer of the title in goods is a supply of goods; (b....
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....ated under the provisions of Article 269A of the Constitution of India. 14) Further, Entry 29A provides for as to what "tax on the sale or purchase of goods includes". It is doesn't classify the transactions as Supply (Sale or Purchase) of Goods or Services. The said classification was brought about through the Schedule -II of the TGST Act/CGST Act , which creates a deeming fiction as to which type of transactions shall be treated as Supply of Goods and which as Supply of Services. 15) The assessee contends his transaction to be Hire-purchase and thereby falling within the scope of Schedule II , Entry 1 (C) of the TGST Act, 2017 and interprets any other interpretation of the entry as rendering the entry itself as otiose. In this context, it is observed that GST Act doesn't differentiate between the type of leases as to whether it is a Hire-purchase, financial lease or Operating Lease. 16) Transfers are classified only under Entry 1 of Schedule- II, Entry 1 (c) being a conditional entry. Here, terms of the present agreement do not meet with the conditions laid out in the Entry 1(c). 17) Entry 1(c) shall not be rendered otiose merely because the transactions of th....