TaxTMI 
TaxTMI 
2024 (7) TMI 1063
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....the AAR is invalid and void • Provide any other clarifications (if required) in context of the factual background provided vide EXHIBIT-I; • Allow the Appellant to reiterate all the submissions made vide EXHIBIT-II without prejudice to one another; • Grant the Appellant with an opportunity of personal hearing to put forth our contentions and explain our submissions before passing any Ruling in this regard; • Allow the Appellant to amend, alter and add to the submissions made in the present Application; • Allow the Appellant to produce additional documents and other material during the personal hearing; and • Pass such other Orders and directions as may be deemed proper and necessary in this regard BRIEF FACTS Applicants Background: Sai Service Private Limited, 36/1, Alto Porvorim Goa hold GSTIN 30AABCS4998M1ZW. The Appellant is engaged in the business of sale of automobiles having a dealership of Maruti Suzuki India Limited, Bajaj Auto Limited & KTM and Chetak Technology Limited. The Company is also involved in providing servicing, repair, and related auxiliary service with respect to motor vehic....
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.... vehicles used for demonstration purpose by the Appellant is in the course or furtherance of business. iv. The Appellant puts credence upon the interpretation of the above legal provision and submits that as per Section 16 (1) of the CGST Act, the Appellant who purchases these demo cars for use in test drives for customers and with an intention of further sale within limited period shall be eligible to avail credit of input tax charged, as these are used in the course or furtherance of his business. v. Interpretation of the expression "used" or "intended to be used" in the course or furtherance of his business vi. The Appellant at the cost of repetition submits that primarily the demo car is being purchased in order to provide test drive facility to the customers which is essentially the demonstration facility used for making the customers understand the look and features of the vehicle and for providing trial drives to the customers which becomes an instrumental factor in the decision-making process of the customer during the procurement of vehicles. Such a facility is vital to promote sale of such vehicles of the Appellant. vii. Demonstration o....
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.... vi. Firstly, the intention of the law, as it appears from the expression, 'for further supply of such vehicles' is to allow input tax credit in respect of taxpayers dealing with motor vehicles as they are engaged in further supply of such motor vehicles. The expression, "such" bears a wide connotation which does not put any restriction in respect of supply of demo vehicles. vii. When the Appellant purchases demo vehicles, such purchases are also meant for further supply, the Appellant capitalizes the demo vehicles and has to keep such vehicle for a specific period of time. Such activities, in any manner, do not change the purpose of further supply. viii. As the demo vehicles are sold after a certain period, they fulfil the criteria of 'further supply of such motor vehicles', hence, the ITC on the same is not restricted under Section 17 (5) (a) of the CGST Act. ix. In this regard, the Appellant would like to draw attention to the Advance Ruling pronounced by the West Bengal Authority for Advance Ruling in the case of M/s. Toplink Motorcar Private Limited, West Bengal AAR, (03/WBAAR/2022-23), 2022 (7) TMI 181, wherein the authoritie....
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.... goods are being used for furtherance of business and not for further supply. xv. It is submitted that the Authority for Advance Ruling has created an arbitrary distinction between capital goods and stock in trade. The Appellant would like to highlight that Section 7 of the CGST Act does not prescribe that the goods should be recorded as stock in trade for it to be supplied further. Further, no such condition has been prescribed under Section 9 either which prescribes the provision for levy and collection. It merely specifies that tax is to be levied on output supply. xvi. The Appellant submits that the Authority for Advance Ruling has erred in arbitrarily creating a distinction between stock in trade and capital goods which is not specifically provided for in the law. In this regard, it is most humbly stated that the Authority for Advance Ruling cannot envisage anything which is not there in the law i.e. words cannot be added to the law arbitrarily. xvii. The Appellant further submits that in the present case, the Appellant sells the demo vehicles after using the same for demonstration purpose i.e. for business purposes. As there is no explicit provision....
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....transporting passengers." Furthermore, ascertaining the use or purpose for which goods are employed cannot be solely determined by the end-user, but rather should be inferred from the manufacturer's descriptions or the customary understanding in which it is generally utilized. iv. In this regard, the Appellant would like to state that in case a motor vehicle for transportation of goods is actually used for transport of goods, can the ITC for the same be allowed because though the motor vehicle was classified as motor vehicle for transport of persons, the same was actually used for transport of goods. v. Basis the foregoing discussions, it is noteworthy to note that the credit for motor vehicle used for purpose for transportation of persons has only been restricted. Further, credit for motor vehicle used for other purposes is eligible. It is further submitted that purpose of uses should be decided by the end user rather than description provided by manufacturer. vi. Basis the above submissions, it is submitted that ITC should not be eligible only on the transaction/activities as provided in the Section 17 (5) (a) of the CGST Act i.e. transportation of ....
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....s important to note that there have been no changes in the CGST Act 2017 with respect to the referred sections, such as Section 2 (19), Section 16 (1), Section 17 (5), and Section 18 (6), from the time of the earlier ruling mentioned in the case of M/s Chowgule Industries Private Limited until the passing of impugned order in the present case. vi. The Appellant in this regards places reliance on the judgement of the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. Vs. Union of India [(2006) 3 SCC 1], Genpact India Pvt Ltd Vs. Union of India [CWP 10302 of 2020], Stallion Rubbers Ltd vs. Commissioner of C. EX. & S.T., Jaipur-I [2018 (8) G.S.T.L. 151 (Raj.)] vii. The Appellant submits that as highlighted in Para 4.2 above, the facts in the case of the Appellant and those in the case of M/s Chowgule Industries Private Limited are identical, the Authority for Advance Ruling is ought to be bound by the principles of res-judicata also considering the fact that no appeal has been preferred by the department against the Ruling delivered in the case of M/s Chowgule Industries Private Limited. PERSONAL HEARING The Authorised representatives of the uni....
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.... FINDINGS AND DISCUSSIONS The question before the Goa Advance Ruling Authority was that whether the applicant is entitled for ITC charged on inward supply of motor vehicles which are used for demonstration purpose in the course of business of further supply of motor vehicles as input tax credit on capital goods. The Goa AAR in its ruling dated 30/12/2022 ruled that the applicant is not entitled to avail ITC charged on motor vehicle used for demonstration purpose. The AAR authority in its findings has based its opinion on following grounds: 1. The AAR accepts that demo car is used in the furtherance of the business. As the said vehicle is capitalised in the books of Accounts. 2. The AAR disagrees with the interpretation of section 17 (5) tendered by the applicant. The AAR points out that the exception provided under 17 (5) (a) (A) pertains to "further supply of such motor vehicles" and is not applicable to demonstration vehicles. The AAR reasons that the said exception allows ITC in respect of motor vehicles used for making further supply of such vehicles. 3. The AAR finds that the applicant sales the demo car after one or two years on which dep....
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....nd capital goods which is not specifically provided for in the law. 3. The appellant argues that AAR has erred in its observation that the expression "motor vehicle for transportation of persons" cannot be interpreted by user of the product. 4. The appellant argues that AAR has erred by not considering of favourable ruling with similar facts passed by the same authority in case M/s. Chowgule Industries Pvt. Ltd. After due consideration of submission made by the appellant and the document on record following observation are made: 1. Use of demo car is inherent and essential part of the business of the appellant. 2. The appellant fulfils the condition in section 16 - eligibility and condition for taking ITC. However, the dispute in the matter is regarding block credit under section 17 (5) (a) and exception there to under clause (A) of the said section. 3. The taxpayer as per business agreement is required to capitalize the demo car in its book of accounts. 4. The demo car is held for certain period for demonstration purpose before it is sold. 5. The motor vehicle supplied for demo purpose is supplied at a discounted ra....
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.... that the demo car is inherent and essential for the business of the taxpayer. Hence same is to be treated as used in the furtherance of the business. The Section 17 (5) of CGST Act refers to a specific provision under GST covering blocked credits or ineligible ITC. The taxpayer cannot claim ITC while paying output tax when they make purchases listed in this provision. Relevant extracts of the same have been reproduced as follows: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:- (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa) ..." From the bare reading of the section it clear that ITC shall not be available on motor vehicles with approved seating capacity of not more than 13 person....
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.... understood as motor vehicle held for sale, barter, transfer, lease and rental etc. as defined in the section 7. In the present case, by the self-admission of the appellant it is argued that demo car is held for sale after certain years. Therefore, in view of above discussion the expression "for furtherance of the business" and "for further supply" have different meaning assign to them. The expression for furtherance of the business is to be understood as "used in the business". Whereas "for further supply" is understood as for sale/supply in the course of business. With respect to appellants interpretation on the expression further supply of "such motor vehicle" tendered by the taxpayer we note that the expression "such" refers to class of motor vehicles provided under section 17 (5) (a) i.e. motor vehicle having approved seating capacity not motor than 13 persons. Therefore, the argument that expression "such" bares wider contention cannot be accepted as it is well defined under the said clause. Now therefore question before the authority is whether the demo car is held for further supply by the appellant? In this regard we note the following: Whether a good/ass....
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....R/2020-21/01/07. We also note that in following advance ruling the AAR and AAAR have negatively answered the advance ruling and have ruled that ITC on demo car shall not be allowed. a) M/s. KHATWANI SALES AND SERVICES LLP-2020-Authority for Advance Ruling, Madhya Pradesh. b) M/s. PLATINUM MOTO CORP LLP-2019-Appellate Authority for Advance Ruling, Haryana. c) M/s. BMW INDIA PVT. LTD. - 2022 (3) TMI 487-Appellate Authority for Advance Ruling, Haryana. Further, in case of appeal application by M/s. KHATWANI SALES AND SERVICES LLP before the AAAR, Madhya Pradesh against the ruling given by AAR, Madhya Pradesh, the AAA has upheld the ruling of the AAR, Madhya Pradesh vide Order No. MP/AAAR/05/2020 Dated 20/11/2020. The Appellate Authority for Advance Ruling, in the state of Haryana has upheld Order of AAR, Haryana in case of M/s. PLATINUM MOTO CORP LLP, the AAAR, Haryana has made the following observation in its order: "We find that use to which the Demo Vehicles are put to, does not fit into the uses which find mention in sub-Section 17 (5). The vehicles under question are not meant for further supply of such motor vehicles', but are fir....