TaxTMI 
TaxTMI 
2024 (6) TMI 226
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....gainst AAR. Rajasthan Ruling Order No. RAJ/AAR/2022-23/14 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 filed the appeal within the stipulated period of 30 days. BRIEF FACTS OF THE CASE 1. M/s Federal-Mogul Ignition Products India Limited, Bhiwadi having GSTIN-08AAACF4128M1ZJ) (hereinafter referred to as 'the Appellant') are engaged in the manufacture of auto components, supply and distribution of 'Spark Plug' used in two/three/four-wheeler automobiles. Further, they provide Canteen Services to their workers through contractual agreement with M/s Punjabi Flavours Catering Service and recovers ubsidized deduction from 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 considered as a "supply" by the Appellant under the provisions of Section 7 of Central Goods and Service Tax Act, 2017, and Rajasthan Goods and Service Tax Act, 2017. (a) In case answer to above is yes, I. Whether GST is applicable on the nom....
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....plementation 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 already being undertaken and GST being paid from 1.7.2017 onward. Hence, without going into the merits of the case the Authority for Advance Ruling pronounced that the subject application for Advance Ruling made by the Appellant is not maintainable and hereby rejected under ....
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....gned 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 supplier. In the instant case, the questions have been raised by the Appellant in the capacity of supplier of canteen services to its employees. Further, the Hon'ble Authority has failed to take cognizance of the fact that the ruling was also sought on eligibility of input tax credit with respect to the amount paid to the canteen service provider. A.3 The Appe....
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....yer by, paying part consideration of employees' refreshments. B.7. The Appellant also placed reliance on the recent decision of Maharashtra Authority or 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 factory 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 Inspecteur der Omzetbelasting Leeuwarden in 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 recipient enter into a legal relationship wherein the provider carries out a service and receives remuneration in return for the said service. In the present case also: there was no intention of the Applicant to contract with its employees with respect to the service of food and beverages in its canteen premises - and hence, this basic requirement of qualifying as a supply itself is not satisfied. B.9 The A....
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....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 he 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 /profile motive. B.17 The Appellant further stated that they have incurred capital expenditure on building the canteen facility and have also been making payment to the vendor out of their own pocket. The Appellant are of the strong opinion that this act of theirs affecting a recovery of a nominal amount from the employees against providing such facilities can by no stretch of imagination be said to have been undertaken considering business motive. B.18 Further, the Appellant that in the case of Indian Institute of Technology Vs. State of Uttar Pradesh & Ors. [1976 (38) STC 428 (A....
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....ployees, 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)." B.23 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 he 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 Appellant also submitted that the CBIC vide Circular No. 172/04/2022-GST dated 6 July, 2022 (hereinafter referred to as 'the Circular') has clarified that perquisites provided by the employer to the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. B.25 They added that in case perquisites are provided to the employee in terms of contractual agreement, the same will be treated as a part of the employment agreement and will not be subject to tax by virtue of Schedule III of the CGST Act. B.26 They Appellan....
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....egard 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 No. 172/04/2022-GST dated 06-07-2021, the provision of the services of transportation and canteen facility cannot he considered as supply of goods or services and hence cannot be subjected to GST.' B.33 The Appellant submitted that if such services are covered by employment contract and form part of the cost to the company (C2C) then they are not to be considered as supply. Section 7 (2) of the CGST Act, which overrides Section 7 (1) of CGST, makes it amply clear that any transaction which is provided by the employee to employer in the course/relation to the employment shall be out of the scope of GST. Once the activity comes under Schedule III, then anything which contradicts or withstands this clause shall be ineffective or inope....
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....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 AAAR, Madhya Pradesh in the case of M/s Bharat Oman Refineries Limited 2021 (12) TMI 999] wherein it was held that provision of canteen facility was required to be provided by a company as per Section 46 of the Factories Act, 1948. Therefore, applying the proviso under Section 17 (5) (b) of the CGST, Act that the input tax credit in respect of such goods or services or both shall be available where it is obligatory for an employer to provide the same to its employees under any law, we are of the view that input credit of GST paid would be available to the Appellant. In light of the above facts& circumstances of the case, the Appellant averred that they were allowed to avail ITC on the GST charged by the....
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....as 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 Authority for Advance Ruling pronounced that they shall decide on matters or on questions specified in sub-Section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant. The authority held that Section 95 of the CGST Act, 2017 allows the authority only to decide on matters or on questions in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant. In other words, the subject application could be entertained only if the supply of goods or services or both being undertaken or proposed to be undertaken by the Appellant themselves. In this case. Th....
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....han in the matter of M/s 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, Thus, both the questions on which Advance Ruling is sought are questions on which an Advance Ruling can be filed. Thus, the Appellant has rightly filed the advance ruling. 15. The moot point for decision before us is as to whether or not the application dated 11.03.2022 filed by the Appellant for seeking advance ruling on various questions is maintainable. 16. In the instant case, the AAR, Rajasthan held that the supply is not covered under Section 95 of the CGST Act, 2017. On the other hand. the Appellant have contended that the transaction although being undertaken since July. 2017. it is still being undertaken and will be undertaken in the future also. They placed reliance on the Rulings of AAAR AAR and also relied upon the Flyer issued by the CBIC. As c....