TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1063
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....rifications (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 vehicles. The appellant vide his application dated 30/12/2022 had sought clarification on following point: Whether the applicant ....
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....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 of Vehicles is inherent to business of the Appellant viii. Further it is important to note that demo activity is important pre-requisite in Auto Industry wherein even if not all but most of t....
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....pply 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 authorities vide ruling dated 30-June-2020, held that, "the applicant is eligible to avail input tax credit on purchase of demo vehicles which can be set off against output tax payable under GST." x. The standard business practice of a car dealer is to purchase vehicles i....
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....ds 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 that defines the time limit to make further supplies, the said vehicles gets covered in the exclusion provided in Section 17 (5) (a) (A) of the CGST Act, and therefore, the ITC on the same is eligible. xviii. From the said observation, it appears that the Authority for Advance Ruling seems to be of the view that car sold without use ....
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.... 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 goods. It is further submitted that the intention of Appellant is to procure such motor vehicle for demonstration purposes (not for transportation of persons) which is not specifically restricted under the law. Hence ITC on the use of demo cars should be eligible. 4. THE AUTHORITY FOR ADVANCE RULING HAS ERRED BY NOT CONSIDERING FAVORABLE RULING WITH SIMILAR FACTS PASSED BY THE SAME AUTHORITY IN THE ORDER i. T....
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....he 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 unit namely Mr. Sanjay Wale, CEO, Goa Branch M/s Sai Service Pvt. Ltd., CA Nitin Vijaivergia, PW & Co. LLP, CA T.Y. Thok, Mr. N.D. Bhandary, Senior General Manager attended the personal hearing held on 12/02/2024. The authorised representative reiterated their averments in the application submitted: 1. The Authorised representative reiterated the contentions already submitted along with the application. 2. Further, the authorised representative/Appellant M/s. Sai S....
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....lowing 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 depression is charged, and is sold for a lower price than it was procured. 4. The AAR concludes that the demo car capitalised in the books of the applicant is used in the furtherance of business (to be used in the business) and not for the further supply. 5. The applicant having aggrieved by the ruling provided by the AAR has filed an appeal application dated 11/05/2023 before this authority requesting to hold the order issued by the AAR as invalid and void. This appellate authority has heard the arguments advanced by the appellant. Also necessary explan....
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....s 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 rate by OEM to the appellant. 6. A favourable ruling in case of M/s. Chowgule Industries Pvt. Ltd. was delivered by AAR bench considering of ex members. 7. There are both favourable as well as unfavourable rulings issued by various state benches for advance ruling. 8. The appellant had made a rectification application before the AAR for non-consideration of favourable ruling. The said application has been disposed without a rectification in the original order. Having duly considered the facts of the matter and material on record, we find that although the appellant fulfils the condition laid down under section 16, it is also required to clearly....
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....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 persons. It further provides certain exceptions under which the ITC shall be available. In case before the Authority, the appellant claims that it is duly covered under the clause (A) of said sub-section (5). It tenders its argument that, 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. As the appellant, the expression "such' bears a wide connotation which does not put any restriction in respect of supply of demo vehicles. It is further argued that when the appellant purchases demo vehicles, such purchases are also meant for further supply....
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....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/assets is held for sale in the course of business or to be used in the business can be understood from the actual use the good/assets. In the instant case we note that the AAR has relied upon the accounting treatment of the goods to determine the classification for these purposes. We further note that the motor vehicles supplied for demo purpose are supplied at a discounted rate. Therefore, are treated as different category of vehicles as compared to those which are supplied for sales to the appellant. We find that when the OEM supply vehicles for demo purpose categorised them differently than other vehicles and require the dealership to capitalised such vehicles for a period as per customary practices of the business. We also do not find any reason not to rely on the accounting treatment of the goods to deter....
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....M 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 first put to the mentioned uses. These are disposed of after prolonged use, which may even not restrict to 2 years as mentioned by the Appellant. As regards to the Applicant's alternative contention that the ITC may be allowed as Input, we have observed that in the very first demonstration run demo car loses the character of the new motor vehicle and demo vehicles is sold akin to second hand goods and which is different from new Vehicle and accordingly treated differently under GST law, so the demo car is not an input. So it appears that the Demo Vehicles received by the Appellant have never been received with the intent to simply further supply/ sell' as such. Input Tax Credit on these vehicles, thus, cannot be allowed." Further, in the Appeal before the AAAR, Haryana in case of M/s BMW INDIA PVT. LTD has rejected the appeal and upheld the order of AAR, Haryana. T....