TaxTMI 
TaxTMI 
2024 (6) TMI 225
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....8.11.2022 (also submitted hard copy on 9-12-2022 by the Appellant against AAR, Rajasthan Ruling Order No. RAJ/AAR/2022-23-13 dated 18.10.2022. According to the Appellant, the AAR Order was communicated to them on 21.10.2022 and they have filed an appeal on 18.11.2022 as such they have appeal within the stipulated period of 30 days. BRIEF FACTS OF THE CASE 1. M/s Federal-Mogul Goetze India Limited (GSTIN - 08AAACG3769M2Z4) (hereinafter referred to as 'the Appellant) Village-Ghatal, Alwar, are engaged in manufacturer of auto components, supply and distribution of automotive components used in two/three/four-wheeler automobiles. They offer Value Seat, Value Guide and Structural Part etc. Further, the Appellant have employed about 440 employees in their factory and are providing Canteen Services to its employees through contractual agreement with M/s Ashri Associates and later with M/s Priya Associates and recover subsidized deduction from the employees/workers. 2. The Appellant had sought Advance Ruling on the following questions:- Whether the subsidized deduction made by the Appellant from the Employees who are availing food facility in the factory would be cons....
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....s. In this case, the supplies of Services are being undertaken or proposed to be undertaken not by the Appellant but by the supplier(s) of services to the Appellant. These suppliers are distinct persons as per the provisions of the GST Act and GST is being paid since implementation of GST law. Thus, the authority opined that the Appellant are not a supplier in the present case, the Appellant as per the contract is a receiver of services supplied by the canteen service provider also. The AAR held that Advance Rulings can be given for a proposed transaction as well as a transaction being undertaken by the Appellant but the transactions on which GST is being paid since July 2017 are out of preview of advance ruling. Moreover, that Appellant filed their application before the Authority for Advance Ruling, Rajasthan on 11.03.2022 i.e. much later from the execution of contract i.e. July 2017 and Appellant are discharging his GST liability since July 2017 on canteen service supplied by them. Since the Appellant has asked for ruling on the transactions effected prior to the date of filing of the application before the Authority for Advance Ruling, Rajasthan with respect to supplies alre....
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.... Applicant (now Appellant) are not a supplier in the present case and are only a receiver of services supplied by the canteen service provider. A.1 The AAR under Paragraph 12 of the impugned Order has observed that the transaction is not being undertaken by the appellant but by the supplier of canteen services. While under Paragraph 13 of the impugned Order the AAR have also observed that the Appellant have been discharging GST liability since July 2017 on canteen services supplied by them. Thus, the Hon'ble Authority for Advance Ruling has given contradictory observations in the impugned Order and has not understood the specific question with regard to which the advance ruling has been sought. A.2 It is further submitted by the Appellant that as per Section 97 (2) (d) of the CGST Act, 2017, an advance ruling can be filed on admissibility of input tax credit of tax paid or deemed to have been paid. This implies that the Appellant should either be a supplier or a recipient of the underlying supply on which ruling is sought. Thus, the Hon'ble Authority for Advance Ruling has erred in rejecting the application on the basis of the observation that the Appellant is not a s....
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.... wherein the Ruling of AAR was modified, and it was ruled that no GST is to be levied on third-party canteen charges collected by employer from employee. B.6 The Appellant placed reliance on the decision of Karnataka Authority for Advance Ruling in the case of M/s Dakshina Kannada Co-Operative Milk Producers Union Ltd [2021 (8) TMI 352] wherein it was held that there is no supply of services by employer by paying part consideration of employees' refreshments. B.7 The Appellant also placed reliance on the recent decision of Maharashtra Authority for Advance Ruling in the case of M/s Emcure Pharmaceuticals Limited (Advance Ruling No. GST-ARA-119/2019-20/B-03, Dated 04 January 2021) wherein it is held that GST would not be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factor) and office. B.8 The Appellant further relied upon the judgement of European Court of Justice (ECJ) in the case of R.J. Tolsma Vs Inspccteur der Omzetbelasting Lccuwardcnin case C-16/93 (Judgement of the Court. Sixth Chamber) wherein it was held that the Supply of Service effected consideration only when the provider of the service and the ....
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....xpenses under employment relationship without any commercial objective and only to maintain discipline and prevent wastage of food and resources. The same is also shown as a deduction in die salary-slip provided to the employees. The Appellant submitted that there is no reciprocity of any activity or transaction i.e. quid-pro-quo between the Appellant and the employees in this respect. Thus, in the absence of an identifiable supply, the Appellant assert that the activity would not constitute 'consideration' for any supply. The Supply should be effected in the course or furtherance of business under the CGST Act. B.15 With respect to the definition of supply, as mentioned in Section 7 of the CGST Act. an activity could be considered as a supply only if it is in the course or furtherance of business. B.16 In this regard, the Appellant referred to the definition of 'business' as defined in Section 2 (17) of the CGST Act and their activity is not covered under the definition of business as the said services are not being provided to the employees with a business/profit motive. B.17 The Appellant further stated that they have incurred capital expenditure on b....
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.... contractual agreement entered into between the employer and the employee, will not be subjected to GST. Further, the input tax credit (ITC) scheme under GST does not allow ITC of membership of a club, health and fitness centre [Section 17 (5) (h) (ii)]. It follows, therefore, that if such services are provided free of charge to all the employees by the employer then the same will not be subjected to GST, provided appropriate GST was paid when procured by the employer. The same would hold true for free housing to the employees, when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost-to-company (C2C)." B23 The Appellant submitted that considering the press release dated 10th July 2017, common facilities provided commonly to employees without any recovery would not be subject to GST as they cannot be considered as gifts: 1. Telephone / mobile services 2. Internet services 3. Education reimbursement for employees' children 4. Transport facilities 5. Membership of gym, health club etc. 6. Subscription to journals 7. Canteen facility etc. B.24 The Appe....
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....ein the authority has held that amounts recovered towards Top-up and parental insurance premium from the employees does not amount to a supply of any service under Section 7 of the Central Goods & Service Tax Act, 2017. B.30 Further reliance has been placed on decision in the case of Posco India Pune Processing Center Private Limited [GST-ARA-36/2018-19/B-110 dated 7 September 2018] in a similar matter as above. B.31 The Appellant submitted that similar Ruling has been passed in the case of M/s Jotun India Pvt Ltd. [2019 (10) TMI 482] by the Authority for Advance Ruling, Maharashtra. B.32 Reliance in this regard is also placed by the Appellant on the Advance Ruling passed in the matter of M/s Zydus Lifesciences Ltd. [Guj/GAAR/R/2022/42] wherein it has been observed as under: 'The provision of services of transport and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment. As cited in the above referred provisions of Schedule III and the clarification issued vide Circular Nd. 172/04/2022-GST dated 06-07-2022, the provision of the services of transportation and canteen facility canno....
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....rified that the proviso after sub-clause (iii) of clause (b) of sub-Section (5) of Section 17 of the CGST Act is applicable to the whole of clause (b) of sub-Section (5) of Section 17 of the CGST Act. C.3 In this regard, the Appellant reiterated the fact that they are a Company engaged in the manufacture, supply and distribution of automotive components used in two/three/four-wheeler automobiles. As per Section 46 of the Factories Act, 1948, "in any specified factory wherein more than 250 workers are ordinarily employed, a canteen or canteens, shall be provided and maintained by the 'Occupier' for the use of the workers." In Section 2 (n) of the Factories Act, 1948 defines the term 'occupier' of a factory as "the person who has ultimate control over the affairs of the factory" - in this case it is the Appellant. C.4 The Appellant also submitted that in terms of Rule 72 of the Rajasthan Factories Rules, 1951 (hereinafter referred to as 'the Factories Rules'), it has been specified that food stuff, beverages and other items served in the canteen shall be sold on non-profit basis. C.5 Further reliance is placed by the Appellant on Ruling pronounced by ....
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....') to operate Canteen within the Appellant's factory premises. A part of the cost of the meals provided to employees is deducted by the Appellant from their salaries on a monthly basis and at fix rate opting for availing food facility in Canteen. A part of the cost of the meals provided to contractual workers is recovered from contractor. The Appellant are paying GST against supply of canteen service on recovery basis since July 2017. We further note that the Appellant had provided copy of contract made by them with M/s Ashri Associates ('the Canteen Service Provider') for the period 01.04.2021 to 31.03.2022 and whereas application seeking advance ruling was made by them before AAR, Rajasthan on 11.03.2022. 11. The AAR, Rajasthan had to inter alia decide whether the questions on which Ruling is sought by the Appellant is an existing or ongoing transaction and whether or not it falls within the meaning of the phrase "being undertaken" used in the definition of the term "Advance Ruling" as the supply started w.e.f. July 2017 and continues till date. 12. As per submissions averred by the Appellant before the AAR, they have been paying GST since 2017. The Authorit....
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....saction although being undertaken since July, 2017, is still being undertaken and will be undertaken in the future also. (ii) going by the meaning of the term 'ongoing* it can be said that the transaction being undertaken by the appellant falls within the purview of definition of 'Advance Ruling' prescribed under Section 95 of the CGST Act. (iii) the Central Board of Indirect Taxes and Customs (hereinafter referred to as 'the CBIC') in flyer on Advance Rulings has clarified that under GST, Advance Ruling can be obtained for a proposed transaction as well as transaction already undertaken by the Appellant. (iv) They placed reliance on advance ruling pronounced by the Appellate Authority for Advance ruling, Rajasthan in the matter of Shri Vinayak Buildcon (2022 (5) TMI 450, Rajasthan] and also Ruling pronounced in the matter of M/s KEI Industries Limited [2019 (3) TMI 1073, Rajasthan] (v) in the instant case, they wish to seek clarification on (i) admissibility of input tax credit of tax paid or deemed to have been paid and (ii) determination of the liability to pay tax on goods or services or both; of Section 97 of the CGST Act....