TaxTMI 
TaxTMI 
2025 (1) TMI 580
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....n of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein after referred to as the Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. The applicant M/s Haworth India Private Limited, having registered premises at Survey No. 260/4, Kiloy Village, Sriperumbudur, Kancheepuram, Tamil Nadu 602105 (hereinafter referred to as the applicant) is registered under the GST Act 2017 with GSTIN 33AAACH8417K1ZK. The Applicant has sought Advance Ruling on the following questions: 1. In the facts and circumstances of the case, whether the transfer of title of goods by the Applicant to its customers or multiple transfers within the FTWZ would result in bonded warehouse transaction covered under Schedule III of the CGST Act, 2017 r/w CGST Amendment Act, 2018? 2. Whether the Integrated Tax (IGST) Circular No.....
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....e flow of Transaction in FTWZ for Proposed Transaction as detailed below: * The Applicant secures space in the FTWZ for a fee to store the imported goods from a unit holder. The Applicant executes required lease agreement with the FTWZ unit holder and deposits the goods from the port by filing Bill of Entry (BOE). FTWZ, owned and operated by independent third party merely clears and warehouses the goods imported. The FTWZ shall collect warehousing charges from the Applicant. * On receipt of purchase order from the customer, the Applicant places an order with the overseas supplier for required goods. Once the goods are shipped, the Applicant intimates the FTWZ unit holder and provides copy of the purchase order and other documents for clearance of goods from the port and storage of the same in FTWZ. The FTWZ unit clears the goods from the port by filing Bill of Entry on behalf of the Applicant and stores the same in the warehouse. The FTWZ unit hands over the import invoice and other necessary documents to the Applicant. The FTWZ unit does not pay any import duty on clearance from the port. * The Applicant transfers the title of goods to customer under the cover of an invoice.....
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....on created by Section 53 (2) of SEZ Act and Rules mentioned above, thereby it can be construed that FTWZ is in parity with bonded warehouse under Customs Act, 1962. Therefore, that since FTWZ is equivalent to bonded warehouse, transfers within FTWZ before clearance shall fall under Schedule III of the CGST Act, 2017, thereby not attracting levy under GST. Question No. 2 "Whether the Integrated Tax (IGST) Circular No. 3/1/2018 dated 25.05.2018 is applicable to the present factual situation?" 3.3. The Circular clarifies the applicability of IGST on goods supplied while being deposited in customs bonded warehouse effective from 07.04.2018 and states that Integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption. This circular was made applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse on or after 01.04.2018. 3.4. Further, in ....
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....to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance of home consumption is neither a supply of goods nor a supply of service. According to Explanation II to Schedule III of CGST Act 2017, the expression "warehoused goods" in the schedule shall have the same meaning as assigned to it in the Customs Act 1962. According to Section 2 (43) of Customs Act 1962 "Warehouse" means a public ware house licensed under section 57 or a private ware house licensed under section 58 or a special warehouse licensed under section 58 (a). According to section 2 (44) "warehoused goods" means goods deposited in a warehouse; 4.1.2. Even though the day-to-day activities like warehousing and clearing of goods for home consumption on payment of applicable customs duties are supervised /monitored by Customs officials posted in the FTWZ in accordance with SEZ Act 2005, read with Customs Act, 1962, the approval/license/administrative control for FTWZ are fully governed under the provisions of SEZ Act 2005. Therefore, FTWZ is not a warehouse licensed under Customs Act 1962. Hence it was stated therein that the transactions narrated in the applic....
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....ivate Limited, appeared for the personal hearing which was held in virtual mode. The AR reiterated the submissions made in their original application and in the additional submissions dated 11.12.2023 submitted before the Appellate Authority for Advance Ruling who had remanded the matter back through their Order No. AAAR/06/2023 dated 20.12.2023. The AR reiterated the contents of the said submissions and requested the authorities to take the same on record. The AR further explained that apart from entry 8 (a) of Schedule III of the CGST Act, 2017, entry 8 (b) also merits consideration in the instant case. He also highlighted the fact that on similar issues in the case of M/s. Panasonic Life Solutions India Private Limited and M/s. Sunwoda Electronic India Private Limited., the same Authority for Advance Ruling, Tamilnadu (AAR), has pronounced a different ruling, the analogy of which may be considered for the instant case as well. He however stated that the ruling pronounced in so far as it relates to the query on proportionate reversal of ITC in the case of M/s. Panasonic Life Solutions India Private Limited is not proper as the recent amendments to Rules 42 and 43 of the CGST Rule....
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....s of self-declaration * The AAR in Telangana in the matter of AIE Fibre (2021 (12) TMI 1265-Authority for Advance Ruling, Telangana) has held that the goods warehoused in the FTWZ are warehoused goods for the purpose of the Customs Act, 1962 and would be covered by the relevant entry 8 in Sch III of the CGST Act. * Intention of the legislature to consider FTWZ like a customs warehouse is also clear from the documentation and procedures i.e., Form-II (Bill of entry for warehousing) is the document filed by the importer for moving goods from the port to FTWZ unit which clearly establishes FTWZ are considered as Warehouses. * Legislative History also points out the fact that there has been no question in the erstwhile tax regime or even in the present regime with regard to warehousing by FTWZ for purpose of Customs Act; Reliance in this regard is place on the order of Authority for Clarification and Advance Ruling of the TN VAT Authority in the matter of Reddington India Ltd (ACAAR No. 27/2015-16 dated 22.06.2015). * Chapter XA of the Customs Act, 1962 was omitted by the Finance Act, 2007 in view of the Special provisions made by separate SEZ legislation which had adopted the ....
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.... the activities proposed to be undertaken by the Applicant are covered by entry 8 (a), 8 (b) or any other entry in Schedule III of CGST Act, 2017 or otherwise. All aspects of the matter are kept open for decision by the AAR. We further find that this authority is empowered vide Section 101 (1) of the CGST/TNGST Acts, 2017 to pass such orders as deemed fit." 6.4 Accordingly, in pursuance of the direction from the Learned AAAR, the applicant rephrased the queries as given below in the additional submissions made during the hearing in the instant case on 21.08.2024, as follows:- a. Whether in the facts and circumstances the activities and transactions would fall under paragraph 8 (a) or 8 (b) of Schedule III of CGST Act and remain non-taxable? b. Whether irrespective of the activities and transactions falling under paragraph 8 (a) or 8 (b) as aforesaid input tax credit would be available without any reversals since no prescription has been notified for purpose of Explanation (ii) below Section 17 (3) of CGST Act? 6.5 Further, apart from reproducing the averments already made, the applicant put forth the following points as well in the additional submissions made on 21.08.2024, f....
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....t. Reliance in this regard is placed on the order in the matter of Reddington India Ltd. [2015 (6) TMI 1265 AUTHORITY FOR CLARIFICATION AND ADVANCE RULING] where the Authority has held that there would be no requirement to discharge VAT or CST on the transfer of title in the goods, so long as they remain in the warehouse. 6.5.4 The Applicant is of the view that transfer of title of goods by the Applicant to customers and subsequent transfers within the FTWZ would not result in supply and is not subjected to levy under Section 5(1) of the IGST Act or under the provisions of CGST Act or TNGST Act and the transfer of title of the warehoused goods is covered under Schedule III of the CGST Act r/w CGST Amendment Act, 2018 and thus, shall be treated as neither supply of goods nor services. The goods shall be taxable under the Customs Act in the hands of the final customer only on removal of the same from FTWZ as per amendment to Section 3 of the Customs Tariff Act, 1975. 6.5.5 The Applicant also draws reference to the following cases, wherein it has been held that transfer of title of goods within the FTWZ are squarely covered under Paragraph 8 (a) of Schedule III of the CGST Act. a.....
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.... supplies including zero-rated supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies". Further, Section 2 (47) of the CGST Act defines 'exempt supply' as 'supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the IGST Act and includes non-taxable supply.' Section 2 (78) of the CGST Act defines 'non-taxable supply' as 'supply of goods or services or both which is not leviable to tax under this Act or under the IGST Act'. 6.5.9 In terms of amended Section 17 (3) of the CGST Act with effect from 01.10.2023, "value of exempt supply" shall not include the value of activities or transactions specified in Schedule III, except, inter-alia, the value of such activities or transactions as may be prescribed in respect of paragraph 8 (a) of the said Schedule. However, the Applicant submits that when the instant transaction is not deemed to be a supply, it cannot be characterised as exempt supply for the purposes of ITC. Further, the Applicant submits that t....
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....USSION AND FINDINGS 7.1 We have carefully considered all the material available on record, the applicable statutory provisions, the 'Grounds of Appeal' furnished by the applicant, the submissions made during the personal hearing. It is seen that the questions raised in the application dated 07.07.2022 filed originally by applicant carried the following queries for clarification, viz., 1. In the facts and circumstances of the case, whether the transfer of title of goods by the Applicant to its customers or multiple transfers within the FTWZ would result in bonded warehouse transaction covered under Schedule III of the CGST Act, 2017 r/w CGST Amendment Act, 2018? 2. Whether the Integrated Tax (IGST) Circular No. 3/1/2018 dated 25.05.2018 is applicable to the present factual situation? However, in view of the fact that the Circular No. 03/01/2018-IGST dated 25.05.2018 was no longer in vogue, having been rescinded by Circular No. 05/01/2019-IGST dated 01.02.2019, and in view of the remand directions made by the AAAR in their Order dated 20.12.2023, i.e., "The AAR should examine afresh whether the activities proposed to be undertaken by the Applicant are covered by entry 8 (a), 8 ....
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....the Applicant. The FTWZ unit does not pay any import duty on clearance from the port. * The Applicant transfers the title of goods to customer under the cover of an invoice. The customer shall either clear goods from the FTWZ or shall make further transfer of such goods to other customers. It is important to note that every transfer of title of goods does not result in physical delivery of goods. The goods shall continue to remain in FTWZ unit holder till the final customer files BOE and clears goods from FTWZ. The Applicant wishes to highlight that multiple transfers are made while goods are lying in FTWZ. * The final customer, produces transfer of title document and files BOE for re-warehousing (SEZ) / home consumption (others) and clears the goods from the FTWZ. At this juncture goods are removed from the warehouse and is taken to the premises of the Customer. 7.4 For facilitation, the relevant provisions, viz., paragraph 8 (a) and 8 (b) of Schedule III of the CGST Act, 2017, are reproduced as under :- 8 (a) Supply of warehoused goods to any person before clearance for home consumption; 8 (b) Supply of goods by the consignee to any other person, by endorsement of docume....
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....hedule III that reads as "8 (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption." It is to be noted here that the above provision specifically refers to the term 'by endorsement of documents' in absolute terms, and not just 'transfer of title' in general. We are therefore of the opinion that the term 'by endorsement' assumes significance in the context of the instant case. 7.8 In this regard, it is seen from the 'Principles of Insurance and Banking' authored by Dr. S.S. Kundu, the term 'Endorsement' and its properties has been discussed as below:- "1.9 ENDORSEMENT The word 'endorsement' in its literal sense means, writing on the back of an instrument. But under the Negotiable Instruments Act it means, the writing of one's name on the back of the instrument or any paper attached to it with the intention of transferring the rights therein. Thus, endorsement is signing a negotiable instrument for the purpose of negotiation. The person who effects an endorsement is called an 'endorser', and the person ....
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....e forming part of paragraph 8 (b), i.e., "after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.", points to a situation when the goods lie midway, or, are in transit. Ideally, when a 'High Sea Sale' takes place, 'Bill of lading' normally becomes the crucial document that could be subjected to endorsement. We are of the opinion that this is precisely the reason as to why paragraph 8 (b) of Schedule III is conceptually linked to 'High Sea Sale'. 7.11 We further find that the applicant in para 2.5 of the application for advance ruling have stated as follows: "The Applicant transfers the title of goods to customer under the cover of an invoice.". The document in the instant case being an invoice, the same is to be treated as a proper document for sale, whereby a straightforward 'transfer of title' through an invoice happens between the applicant and the customer in respect of the transactions in question. Accordingly, it becomes clear that the transaction involved in the instant case is to be considered as a mere 'transfer of title', and it cannot be treated as a case of "Supply of goods, by endorsement of doc....
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....ively for trading or warehousing purposes; or (c) the non-processing areas for activities other than those specified under clause (a) or clause (b)." 7.15 And, as far as the provisions of SEZ Rules, 2006, are concerned, the following provisions that involve the term 'warehouse', attract attention, viz., 27. Import and Procurement. - (1) A Unit or Developer may import or procure from the Domestic Tariff Area without payment of duty, taxes or cess or procure from Domestic Tariff Area after availing export entitlements or procure from other Units in the same or other Special Economic Zone or from Export Oriented Unit or Software Technology Park unit or Electronic Hardware Technology Park unit or Biotechnology Park unit, or warehouse all type of goods, including capital goods (new or second hand), raw materials, semi-finished goods, (including semi-finished Jewellery) component, consumables, spares goods and materials for making capital goods required for authorized operations except prohibited items under the Import Trade Control (Harmonized System) Classifications of Export and Import Items. 27 (7) The goods already imported or shipped or arrived before the issue of Letter o....
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....epots or specified land custom stations or customs warehouse or international exhibitions held in India, as the case may be, for admission into the Special Economic Zone" "3. We, the obligors shall furnish to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, at port or air-port or inland container depot or land customs stations or a warehouse evidence to his satisfaction within a period of forty-five days from the date of dispatch from any warehouse or unit that the said goods have duly arrived in our unit in the Special Economic Zone." It could be seen from the above that an intimation is required to be furnished to the Assistant/Deputy Commissioner of Customs, about the arrival of goods in SEZ, and that the 'BLUT' form refers to Customs warehouse', 'a warehouse' and 'any warehouse', and thereby all types of warehouses stand referenced. 7.18 Further, we notice that the provisions of Rule 28(4) of the SEZ Rules, 2006, reads as, "28 (4) The Unit or Developer may also procure goods required for the authorized operations, without payment of duty, from International Exhibitions held in India or from bonded warehouses set up under the For....
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....ve overriding effect. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." We observe that by way of Circular No.19/2016-Customs dated 20.05.2016, on the subject "Allotment of Warehouse Code for Customs Bonded Warehouses", the Central Board of Excise and Customs in para No.1 stated as follows:- "Please refer to the changes made in the Finance Act, 2016 to shift towards record based control with respect to Bonded Warehouses. It is proposed that each warehouse be allotted a unique warehouse code so that importers can declare the warehouse in which goods shall be deposited, at the into-bond bill of entry stage." It has also been explained in the Annexure to the said Circular about the generation of eight digit Warehousing Code, whereby the first 4 characters indicates the EDI port of registration, the fifth character to denote the type of warehouse and the sixth, seventh and eighth characters are running numeric serial numbers. The User Manual on 'SEZ Web Forms' by ICEGATE 2.0 prescribes two types of Bill of Entr....
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....he CGST Act, 2017, viz., "Supply of warehoused goods to any person before clearance for home consumption" applies to the instant case. 7.24 As far as Query No. 2 of the applicant's application for advance ruling is concerned, we notice that the same reads as, "Whether irrespective of the activities and transactions falling under paragraph 8 (a) or 8 (b) as aforesaid input tax credit would be available without any reversals since no prescription has been notified for purpose of Explanation (ii) below Section 17 (3) of CGST Act?". In this regard, we observe that the provisions of Section 17(2) and 17 (3) that talks about apportionment of credit in such situations when a taxable person effects taxable supplies as well as exempted supplies, reads as below, "(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero- rated supplies. (3) The valu....
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.... Rules, 2017, by way of insertion of "Explanation 3" after sub-rule (5) to Rule 43 of the Rules, ibid, as provided under point No.7 of the Notification No. 38/2023 Central Tax dated 04.08.2023, that reads as below:- "7. In the said rules, in rule 43, after sub-rule (5), (a) in Explanation 1, clause (c) shall be omitted; (b) after Explanation 2, with effect from the 1st day of October, 2023, the following Explanation shall be inserted, namely: - "Explanation 3: For the purpose of rule 42 and this rule, the value of activities or transactions mentioned in sub-paragraph (a) of paragraph 8 of Schedule III of the Act which is required to be included in the value of exempt supplies under clause (b) of the Explanation to sub- section (3) of section 17 of the Act shall be the value of supply of goods from Duty Free Shops at arrival terminal in international airports to the incoming passengers.". 7.27 Further, perusal of the excerpts of para 7.59 of the 'Minutes of the 47th Meeting GST Council held on 28th & 29th June, 2022', confirms the position that the legal intent behind these amendments, is to include certain transactions (supplies from Duty Free Shops', specifically) under p....