TaxTMI 
TaxTMI 
2023 (11) TMI 870
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....ans (Federation Internationale Des Ingenieurs - Conseils) which is an International Standards Organization for Consulting Engineering & Construction Technology]. As per the prevalent Indian practices, applicant has made minor change in sub-clause 20.6 of the bid document dated 14.5.18. 4. A conjoint reading of FIDIC's GCC with applicant's amended sub- clause 20.6, reveals that,- • firstly, it provides for an internal dispute resolution mechanism wherein for any dispute a Dispute Adjudication Board (DAB) is constituted: • DAB after hearing the parties, adjudicates & passes an order; • in terms of clause 20.X of GCC, DAB is deemed not to be acting as an Arbitrator: • if either of the party is not satisfied with the decision of DAB. they may within 28 days after receiving the decision, give notice to the other party of its dis-satisfaction; • that if such a notice is not given within stipulated time period, decision of DAB will become final & binding upon both the parties; • that where either of the party has given notice citing dis-satisfaction, dispute then approaches for Arbitration wherein cla....
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....nt so deposited & utilised by the Contractor, is required to be paid back along with applicable interest. If the contractor fails to do so, the Applicant can en-cash the BG submitted by the contractor. 7. In the event where the challenged order/award is passed in favour of the contractor, the Applicant will be liable to pay the remaining 25% of the amount along with any remaining balance in the escrow account. 8. Even though the applicant has parted away with 75% of the disputed amount required to be paid in terms of the DAB decision/arbitral award, it is the applicant's case that the same has not been finally 'paid' to the contractor but only 'deposited' in an escrow account in accordance with directions of NITI Aayog. 9. The applicant further submitted that in terms of section 7 of the CGST Act, 2017, with respect to the transaction in question, it cannot be said that there is any supply of goods/services since there is no sale, transfer, barter, exchange or disposal made or agreed to be made for consideration by a person in the course or furtherance of business. 10. In view of the foregoing, it is the Applicant's claim that he is in complete c....
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....eeds. 15. Lastly, the applicant has tried to supplement his argument by pointing out the consequences in case, the AAR was to rule against him by stating that,- • the contractor will have to issue a tax invoice to the applicant to the extent of 75% amount deposited in escrow account, in absence of any actual supply and pending final outcome of litigation; • if the applicant succeeds in litigation, say after a period of 3 years, contractor will not be able to either cancel the invoice by issuing credit note (as the time limit for issuance of credit note & consequently; • adjust/reduce GST liability will be lapsed in terms of Section 34(2) of the Act) or seek refund of taxes already paid on 75% amount deposited in escrow account (as time period of claiming refund under Section 54(1) will also lapse by then. 16. In view of the foregoing, vide the aforesaid application, the applicant has sought advance ruling on the below mentioned question viz,- 1. Whether the amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DA....
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....letter dated 22-03-23 has submitted comments on the question on which Advance Ruling is sought and is as follows : (a) Whether the activity/service in respect of which an Advance Ruling has been sought is an 'ongoing activity' or a 'proposed' one. Reply : The Activity /Service is an ongoing activity as clarified in the Annexure-I of the Application from authorized person of the applicant. (b) Report in terms of proviso to sub-section (2) of Section 98 of the Act. Whether the questions/issues raised in the application arc already pending or decided on any proceedings in the case of the applicant. Reply : As per available records, the questions/ issuers raised in the application are neither already decided nor pending against the applicant. (c) Comments on Merits : Reply : On the issue of applicability of GST of the amount of deposit of 75 % into escrow account of the applicant, it appears the GST should be applicable on the portion of amount deposited into escrow account till final outcome of the light of Section 7 of GST Act, 2017 within the Scope of Supply; the expression of supply includes - which states as und....
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....his Act. the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) ^1[(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the 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; ^3[****] (c) ^4[****] ^5[(1A) where....
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....for the said supply. 25. We find that though the amount ie 75% paid into an escrow account is towards the dispute pertaining to the supply, what brings this particular transaction out of the scope of the consideration is the fact is that it is not paid to the contractor [supplier] but is deposited in an escrow account; that it cannot be withdrawn from the account without the explicit approval of the applicant; that the amount can be withdrawn only subject to the condition that the supplier) [contractor] provides a BG for the said amount. In-fact, the applicant, though he has deposited the amount in an escrow account, also does not term this as a consideration for the supply since he is agitating his ease, feeling aggrieved by the decision rendered against him. In view of the foregoing, we hold it to be outside the scope of 'consideration' as defined under section 2(31) of the CGST Act, 2017. 26. We now examine whether it is a supply. Supply, in terms of section 7, includes all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made /agreed to be made for a consideration by a person in the course or fu....