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2023 (11) TMI 206
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.... Service Tax Act, 2017 (for brevity 'the CGST') and the Chhattisgarh Goods and Service Tax Act, 2017 (for brevity 'the CHGST') and the order dated 4-1-2021 (Annexure - P/6) passed by the Authority for Advance Ruling, Chhattisgarh (for brevity 'the AAR') to be illegal wherein it was held that Goods and Services Tax (for brevity 'the GST') would be leviable on the value of diesel provided by the service recipient Free of Cost (for brevity 'FOC'). (b) The petitioner also challenges the provisions of Section 101 (3) of the CGST and CHGST along with agenda of the 8th GST Council Meeting held on 3rd & 4th January, 2017 at New Delhi on the ground that the same is constitutionally invalid and ultra vires to Articles 14 and 19 (1)(g) of the Constitution of India, to the extent the provision provided that no decision would be rendered by the AAAR because of difference of opinion between the two members, which would lead to arbitrary and unreasonable distinction and left the parties without any remedy. (c) The petitioner is a Goods Transport Agency (for brevity 'the GTA') service provider, engaged in providing service of transportation of goods by road. It is pleaded that the petitioner....
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.... case of non-compliance of this obligation, the Company will not be responsible for any expenses on this account. 1.5 Shifting/unloading of consignments en route would not be allowed unless specifically permitted by the Company. The Transporter is strictly instructed that under no circumstances would any quantity of material carried in the truck be disposed off in any manner other than by way of delivery of the goods to the destination against receipt. 2. FUEL 2.1 Fuel, a consumable, is in the scope of the company and would be provided to the truck for use exclusively for the required transportation of the goods loaded in the truck. 2.2 Such fuel shall be filled in the truck that is engaged for the concerned trip at the point of origin or at destination. The freight declared and agreed will not account for any cost/charges for fuel and the Transporter would not have any liability to pay for fuel for the said trip to be made by the Transporter. It is expressly clarified that the value of fuel which is in the scope of the Company shall by no means be interpreted as additional consideration payable for the transportation service provided by the Tran....
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....attisgarh under its order No.STC/AAR/ 07/2020 Raipur dated 04/01/2021 that diesel to be filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles as per the proposed draft agreement would form part of value of supply of service charged by the appellant and accordingly GST at the applicable rate would also be leviable on the value inclusive of the cost of diesel filled by the service recipient, under GTA service and there is no merit in the appeal filed by the Appellant Shri Arvinder Singh Bhatia, M/s Shree Jeet Transport, 127, Ward 15, Kharora, Raipur, Chhattisgarh having GSTIN- 22AKDPB5992PIZU against the Advance Ruling Order dated 04/01/2021. 6. Findings as per the SGST Member : xxx xxx xxx 6.7 Therefore, in light of the above, in my view the value of diesel which is in the scope of service recipient would not be included in taxable value of supply of the service provider." (g) Therefore, no ruling was rendered in terms of Section 101(3) of the CGST and CHGST. The petitioner, therefore, contended that since no ruling was given, the petitioner has been rendered remediless. Thus, on various grounds, the petitioner has p....
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.... made for a consideration; • learned counsel would submit that the expression agreed to be made indicates that the mandate of the Act is to see what are the services which are being agreed, between the parties to be supplied; • he would therefore submit that Section 7(1)(a) has to be read in conjunction with Section 15 which deals with value of taxable supply; • he would further submit that perusal of Section 15(1) would indicate that the value of supply shall be the transaction value, which is the price actually paid or payable and the words 'said supply' in conjunction with the phrase 'price actually paid or payable' is directly relatable to such supply agreed to be made; • learned counsel would submit that when the agreement has been entered between the parties, the same cannot be ignored while examining the tax liability. To buttress his contention, learned counsel would place upon the decision rendered by the Supreme Court in the matter of Commissioner of Service Tax v Bhayana Builders Private Limited (2018) 3 SCC 782. In the said case examining the valuation provisions under the Service Tax Act, it is held that free supplies....
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....he Supreme Court in the matter of Union of India v Intercontinental Consultants and Technocrats Private Limited (2018) 4 SCC 669 wherein it was held that service tax can be imposed only on the value of the service agreed to be provided and when there is no service tax payable on the value of fuel it cannot be subject matter of taxation in GST; • learned counsel would also submit that it is not a case that tax is not being paid on the fuel and the fuel is amenable to VAT (Value Added Tax) and 23% tax is payable as a VAT in the State of Chhattisgarh and whenever the legislature wanted it could have included the same in Section 7(1)(c) read with Schedule-I, which provides for supplies to be taxable even when there is no consideration. Since the fuel is not included in Schedule I, it cannot be amenable for addition of tax; • he would submit that there is no effort on tax evasion; the tax statute is to be interpreted by plain language of the statute; and the intention cannot be gone into; • according to the learned counsel, the respondents cannot insist recovery even if it is not supported by statute. He would place reliance upon the decisions rend....
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....¢ he would submit that Section 2 (105) defines the word 'supplier' in relation to any goods or services or both and Section 2 (108) defines the words 'taxable supply', which means a supply of goods or services or both which is leviable to tax under this Act; • according to the learned counsel, as per Section 7 of the CGST, the expression supply includes all forms of supply of goods or services or both and Section 9 makes mandatory that tax would be payable on all intra state supplies of goods or services or both; • learned counsel would submit that in order to agitate the value of taxable supply, Section 15 would be applicable and the value of 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 and value of supply shall also include; • he would also submit that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and included in the price actually paid or payable for the goods or services or both; • learned counsel would next submit that the language used in Section 1....
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....ting the goods. 7. The question falls for consideration is that "whether diesel filled by the service recipient FoC in the truck of the GTA can be added to value of supply being rendered by the GTA for the purpose of levy of GST under the CGST Act, 2017 ?" 8. In the matter of Mohit Minerals Private Limited (supra) the Supreme Court held that in assessing the claim, the Court is bound by a decision of the Constitution Bench of the Supreme Court rendered in the matter of Mathuram Agrawal v State of Madhya Pradesh (1999) 8 SCC 667, which has identified three essential elements of taxation i.e. (i) the subject of the tax; (ii) the person who is liable to pay the tax; and (iii) the rate at which the tax is to be paid. 9. The aforesaid test was further elaborated by a two Judge Bench of the Supreme Court in the matter of Messrs Govind Saran Ganga Saran v Commissioner of Sales Tax and Others 1985 (Supp) SCC 205 : AIR 1985 SC 1041 by further requiring the designation of the measure or the value to which the rate of the tax will be applied. Thus, the four canons of taxation are as follows : "(i) The taxable event; (ii) The perso....
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.... the provisions of Section 15(2)(b) which provides that 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 does not include FoC diesel for the simple reason that the liability to pay for the diesel as per draft contract is of service recipient. 15. In order to appreciate the rival submission of the parties, certain provisions of the CGST Act, 2017 are relevant, which are quoted below : 2. Definitions.--In this Act, unless the context otherwise requires,-- xxx xxx xxx (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 ....
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....he supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business;[and]; (c) the activities specified in Schedule I, made or agreed to be made without a consideration. [(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.] (2) Notwithstanding anything contained in sub- section (1),-- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of [sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the ....
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.... electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. 15. Value of taxable supply.--(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....
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.... person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term "person" also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. 16. The Supreme Court in the matter of VKC Footsteps India Private Limited (supra) has defined the constitutional scheme of GST. Mainly it demonstrates that the idea which permeates GST legislation globally is to impose a multi stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail credit of tax paid at an anterior stage. As a result, GST fulfills the description of a tax which is based on value addition. The Supreme Court at paras 44, 45, 46 & ....
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...."1.14 ... In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a continuous chain of set-off from the original producer's point and service provider's point upto the retailer's level is established which reduces the burden of all cascading effects. This is the essence of GST, and this is why GST is not simply VAT plus service tax but an improvement over the previous system of VAT and disjointed service tax." 47. The Statement of Objects and Reasons appended to the Constitution (One-Hundred and Twenty-Second Amendment) Bill 2014 which eventually became the Constitution (One Hundred and First Amendment) Act 2016 postulates that GST shall replace a number of indirect taxes levied by the Union Government and the State Governments. The object was to introduce a goods and service tax which would fulfil two fiscal priorities namely, (1) removing the cascading effect of taxes; and (2) providing for a common national market for goods and services. An extract from the Statement of Objects and Reasons is set out below: "Statement of Objects and Reasons.--The Constitution is proposed to be amended to introduce the goods and services t....
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....not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee. Therefore, it is only the service of such GTA, who assumes agency functions, that is being brought into the GST net. The individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. 20. (a) The 'Consignment Note' is neither defined in the Act nor in the Notification dated 28.06.2017. The guidance is availed from explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, 'consignment note' means a document issued by a goods-transport-agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the go....
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....etation. Section 2(31) of the CGST 2017 mandates that "consideration" in relation to supply of goods or services includes - (a) any payment whether in money or otherwise made or to be made; (b) monetary value of any act or forbearance for the inducement of supply of goods or services. Reading of section 2(31) along with scope of supply as defined u/s 7(1)(a) makes it clear that the petitioner who is a GTA wanted to transport the goods for recipient. The recipient is not a GTA or engaged in business of transport. Consequently it is the petitioner GTA "in course" or "furtherance of business" has agreed to supply the goods or service for consideration. When it is the primary business of the GTA, in order to allow running the vehicles by fuel, it is a potential combination. If that part of responsibility is delegated by way of an agreement to the recipient, in such a case, the recipient would step into the shoes of GTA as its component and would be playing central role in setting narratives. 23. The petitioner has relied on a decision of Supreme Court in Union of India Vs. Inter Continental Consultants and Technocrats Pvt. Ltd. (2018) 4 SCC 669 and CST Versus Bhayana Builders Pvt. L....
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....is liable to pay in relation to such supply but it has been incurred by recipient of supply and not included in the prices actually paid. This section imposes statutory obligation. The very existence of petitioner as GTA is for goods transport. Naturally, it would be the obligation for the GTA to run the vehicles and this factor needs a merited attention. The provision of Section 15(2)(b) has been tried to be by-passed by the agreement wherein the diesel was agreed to be supplied FOC by service recipient to the GTA. If we look into the facts by other angle, the expenses to fill the diesel in vehicle in furtherance of supply of service in normal condition was to be incurred by the GTA and it was his liability to fulfill such supply. However, in this issue, the expense of fuel has been agreed to be incurred by the recipient by agreement and value of diesel is excluded to evaluate the value of supply. The statutory provision of Section 15(2)(b) takes within its sweep to value, which is incurred by recipient. Therefore even by agreement in between the GTA and service recipient, this statutory liability cannot be sidelined and the merited attention of the statute sets a red line. Theref....
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....tegorically enveloped such kind of supply within the ambit unless exempted by any provision. Therefore, the emphasis cannot be made at this stage while interpreting the provisions of Section 15(2)(b) of the GST Act, 2017 with the proposed GST Law specially taking into consideration the nature of business by GTA, the service provider. 28. Another submission is made by the petitioner that the purpose of advance ruling stands defeated and the section is arbitrary. Another submission of the petitioner is that Circular issued by the Government of India provides a free supply is not to be added to the valuation of the service provider and therefore the Circular issued u/s 168 of the CGST Act would prevail. 29. A perusal of the said circular No. 47/21/2018-GST would show that it has been confined to specified subject material of moulds and dies of Car manufacturing, which are being supplied by the Original Equipment Manufacture OEM) to a Component Manufacturer free of cost and the Circular purports that it would constitute the supplier as there is no consideration involved. 30. Again when we examine the nature of business of the petitioner, who is a GTA, the nucleus of survival o....