TaxTMI 
TaxTMI 
2023 (7) TMI 243
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....ity for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression 'GST Act' would mean the CGST Act and the WBGST Act both. 1.2 The applicant is an entity engaged inter-alia in the business as holder of license issued by the Government of West Bengal, authorising him to carry on trade in Super Kerosine Oil, hereinafter also referred to as SK Oil, as a "Dealer" as defined under the Notification No. 2565/FS/FS/Sectt/Sup/4M-16/2014 dated 3rd November 2014 which is issued by the Department of Food and Supplies, Government of West Bengal. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made the....
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....s and permits and scales of distribution of S.K. Oil as may be fixed by the State Government from time to time and balance stock in hand". Therefore, the basis of allotment here is number of Ration Cards. 2.2. The applicant purchases S.K. Oil from agents of the Oil Companies and in terms of the aforesaid Notification, "Agents" means "a person who executed an agreement with the concerned Oil Marketing Company and has been granted a licence under paragraph 5 of this order as an Agent in West Bengal authorizing him/her to carry on trade in Kerosene as such Agent". It is obligatory on the part of the Agents to comply with the provision of the West Bengal Kerosene Control Order, 1968, Notification No. 2566/FS/FS/Sectt/Sup/4M-16/2014 dated 03/11/2014 issued by the Government of West Bengal, Ministry of Food and Supply Department, Para 5(iv), 5A and 5B(iii) of the said order which read as follows: Para 5(iv): "No Agent shall sell, supply or transfer Kerosene to any person other than an S K Oil Dealer duly licensed under Paragraph 6 of this order or a holder of Permit issued under Paragraph 11 of this order" Para 5A: "Every agent after having alloc....
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....y Charges 250.00 250.00 13. Compensation for Handling & Evaporation Loss @ 2% on Agent's price excluding GST on basic price and Agent's price. 1,508.49 1,508.49 14. GST @5% on items 10, 11, 12 & 13 above 0 159.66 15. Maximum Retail Price of the Dealer (if Agent and Dealer do not charge GST) 82,242.71 16. Maximum Retail Price of the Dealer (if Agent charges GST but the Dealer does not) 82,389.37 17. Maximum Retail Price of the Dealer (if both Agent and Dealer charge GST) 82,549.03 2.4. Thus the Oil Company is to sell S.K. Oil at a fixed base price called Base Price and charge Tax @5% on such base price. Therefore, the purchase price of the agent is base price +5% Tax. This price is being recovered by the Agents from the Dealers as pure agents. Dealers shall recover the same from Ration Card holders in the capacity of Pure Agents. The Agent may or may not charge tax @5% on the charges like agent's commission, agent's transport charges, stationery charges, compensation on handling & evaporation loss. Therefore, the price to be charged by the Agents to the Dealers shall be the cost....
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....tion card holders under the Public Distribution System. The license would be issued under an order issued under Section 3 of the Essential Commodities Act, 1955. In exercise of the power conferred by Section 3 of the Essential Commodities Act, 1955, the Government of West Bengal issued the West Bengal Public Distribution System (Maintenance & Control) Order, 2013 on 08/08/2013. The said order defines fair price shops as following: "Fair Price Shop" means a shop engaged and licensed under this Control Order for distribution of public distribution commodities against ration documents" Further, the West Bengal Kerosene Control Order, 1968 defines 'S.K. Oil Shop'. Paragraph 3(t) of the order is reproduced below: "S.K. Oil Shop means a shop belonging to S K Oil Dealer appointed and licensed under this Control order for distribution of S.K. Oil to consumers having valid Ration Cards" 2.7. Therefore, it appears that Fair Price Shop refers to the following: i.) Distributor of essential commodity, ii.) To valid Ration Card/Documents. Considering the above both the Agents as well as the Dealers are part of Fair Price Shop as according t....
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....sumers on behalf of the government. But since the applicant while acting as agent has to deploy certain resources which gets exploited in the due process, it earns its consideration in the form of Dealer's commission, Dealer's transport charges, stationery charges, compensation on handling & evaporation loss. These consideration after being reduced from the MRP collected from the customer is reimbursed back to the "Agent" who in turns reimburses it back to the IOCL and ultimately to the State Government. 2.9. The applicant clarifies that the regulation of prices by the government is done to benefit the ultimate consumers of the PDS, being the ration card holders in the instant case. This regulation is done so that the consumers receive its goods at a fixed base price which remains constant throughout the supply chain. The increment in the MRP over and above the base price is merely on account of cost of commission added to the product which the government has to bear on account on involving Dealer and the Agent for making it available to the end consumers. It is to be emphasized that this increment in price is only the price which the government recovers from the customer as a p....
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.... Vol. 3 page 431. The foot-note on this page refers to a case in which it was held that the use of the words "agency agreement" and "agent" by the parties in a contract does not necessarily establish a relationship of agency in the legal case. McCarty v. King County Medical Service Corp. 26 Wash 2d 660, 175 P2d 658. The law in India is the same. It has been held in several decisions that the fact that the parties have called their relationship an agency is not conclusive, if the incidence of this relationship , as disclosed by evidence does not justify a finding of agency, and that the court must examine the true nature of the relationship and the functions and responsibilities of the alleged agent: Banaras Bank v. Ram Prasad, AIR 1930 All 573, Phool Chand v. Agarwal B. M. Co., AIR 1938 Lah 814; Suryaprakasaraya v. Matheson's Coffee Works, (1913) 14 Mad L.T. 249. What is the real nature of the relationship created between the applicant and the IOCL under the so-called agreement of agency? Before analyzing the agreement, it is necessary to state the essential characteristic of an agency in law. Section 182 of the Contract Act defines an agent as "a person employed to do any act f....
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....Oil Dealership Agreement made between the applicant and IOCL, it clearly appears that the applicant does not act as an agent on behalf of the Oil Marketing Company- "Dealer to act as 'Principal': In all contracts, engagements or transactions entered into by the dealer with the customers for the sale of products or otherwise, the dealer shall act and shall always be deemed to have acted as a principal and not as an agent or on account of the Corporation except to the extent if any, permitted by the Corporation in writing and the Corporation shall not in any way be liable in any manner in respect of any such contracts, engagements or transactions and/or in respect of any act or omission on the part of the dealer, his servants, agents and workmen in regard to such sale or otherwise." 2.18. Furthermore, the applicant submits that if at all the instant supply fails to qualify as a supply of service, the objective behind inclusion of sl. No. 11A under the Exemption Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 would lapse. 2.19. That the distribution through PDS is covered under Entry No. 28 of the Eleventh Schedule of the Constitution. It is an activity in ....
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....shin Dinajpur [ para 6(A) of Notification dated 03/11/2014]. iv.) That the quantum which the applicant shall receive and the quantum that is to be supplied to the card holders is controlled by the State Government [para 6(A) of Notification dated 03.11.2014]. v.) That the recipients or the beneficiaries of the instant PDS Scheme being the persons to whom the S.K. Oil is to be supplied are identified by issuance of ration cards and tagged to the applicant by the State Government [para 6(C)(ii) of Notification dated 03/11/2014]. 2.22. Based on above, since the dealer, product, market, suppliers, recipient, quantity of supply and even the price, all the major ingredients that is necessary for supplying of goods or services or both are regulated and controlled by the State Government, therefore, the applicant submits that the applicant is nothing but a person who merely acts as an agent of the State Government in supplying the essential commodity being S. K. Oil to the ration card holders. 2.23. Further, the applicant submits that the "agency by estoppel" as defined in Black's Law Dictionary [page no. 71 of Ninth Edition] means "An agency created by operation of....
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....ction 3 of the Essential Commodities Act, 1955 to the ration card holders under the Targeted Public Distribution system" where "ration card" as per section 2(16) of the National Food Security Act, 2013 means "a document issued under an order or authority of the state Government for the purchase of essential commodities from the fair price shops under the Targeted Public Distribution System" and "Targeted Public Distribution System" as per section 2(23) of The National Food Security Act, 2013 means "the system for distribution of essential commodities to the ration card holders through fair price shops". Therefore, from the above definitions it is proved that the applicant is merely supplementing the essential supplies on behalf of the state government to the ration card holders in the capacity of an agent by estoppel. The applicant submits that sl. No. 11B of Notification No. 12/2017- Central Tax (Rate) dated 28/06/2017 as amended by Notification No. 21/2017- Central Tax (Rate) dated 22/08/2017 itself identifies that the supply of S.K. Oil to ration card holders by the fair price shops is supply of services to the State Government. 2.27.....
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....erosene oil to the ration card holders. The applicant, who is the 'dealer' as per this Notification, purchases S.K. Oil from the 'agent' where the agent purchases it from the oil marketing company. The purchase and selling price of the applicant is fixed and specified in the price chart, as mentioned in para. 2.3 above. The difference between the purchase price and sale price is mentioned in the price chart, and pertains to heads: Dealer's Commission, Transport Charges, Stationery charges and compensation for evaporation losses. 4.5. Further, in the affidavit submitted by the applicant during the course of the hearing, the applicant has declared that no other consideration is received by the applicant for these transactions. Consequently, the only consideration received by the applicant in these transactions is by way of sale of S.K. Oil to the ration card holders at the retail price specified in para. 2.3. It thus appears that the consideration is flowing only from the ration card holders to whom the S.K. Oil is being sold and no other consideration is received by the applicant from the Government for these transactions. Applicant being a Fair Price Shop: 4.6. As ment....
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.... the purpose of this ruling, the nature of supply has to be determined in consonance with the provisions of the GST Act and the provisions of the GST Act would over-ride any other interpretation with respect to determining the nature of supply. 4.10. As per the nature of business of the applicant, which is discussed form para. 4.3 to 4.5, it could be observed that the applicant in engaged in supplying S.K. Oil to the ration card holders. Further, the monetary consideration against this sale of S.K. Oil is received from the ration card holders only, who are purchasing the S.K. Oil from the applicant's fair price shop. Further, the applicant has submitted that no other monetary or non-monetary consideration is received for these transactions. It therefore appears that in respect of the supply of S.K. Oil being made by the applicant: i. Entire consideration is paid to the applicant by the ration card holders, and ii. No consideration is paid by the Government. 4.11. Section 7 of the GST Act inter-alia defines 'supply' as the following : '... "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer....
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....ntral Tax (Rate) dated 28/06/2017 (as amended) is not applicable in this case. Further, the supply to the ration card holders is of goods namely, kerosene oil, i.e., S.K. Oil, for which the consideration is paid by these recipients. 4.15. The applicant has raised three questions in the application on which advance ruling is sought. The same are being examined in light of the above findings. i. The first question is that whether the applicant being a Fair Price Shop, is liable to charge GST from the State Government against the supply made by them. In this regard, we find that Section 9 of the GST Act states that : Section 9. Levy and collection.- (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central/state goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. ....