TaxTMI 
TaxTMI 
2025 (1) TMI 580
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....ud or suppression of material facts or misrepresentation 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 Amendm....
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....irect taxes / compliance and avoids increase in transaction cost. 2.5. The Applicant has submitted the 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 imp....
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....ins the same i.e. to avail duty benefit under the Customs Act, 1962. Thus every SEZ becomes a bonded premises under the Customs Act, 1962 by virtue of the deeming fiction 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....
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....ee Trade Warehouse Zone). According to the Schedule III of CGST Act Sl.No.8 (b), the transaction/activity of supply of goods by the consignee to any other person by the 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 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 f....
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....w been taken up for decision afresh by providing another opportunity of personal hearing to the applicant on 21.08.2024, and Shri. S. Thirumalai, Advocate who is the authorized representative (AR) of M/s. Haworth India Private 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 p....
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....t therewith contained in any other law for the time being in force; d) Rule 27(10) of the SEZ Rules provides that: The Assessment of imports and domestic procurement by a Developer or a Unit, shall be on the basis of self-declaration. e) Rule 75 of the SEZ Rules says that the goods in the FTWZ shall be dealt with on the basis 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 C....
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....l the contentions of the Applicant put forth in their original application. Hence, we hold that, justice will be met by remanding the case to the lower authority, with direction to consider the question raised by the Applicant in its entirety, to give findings on the other points raised by the Applicant and to offer them another opportunity of personal hearing before deciding the case as per the provisions of law. The AAR should examine afresh whether 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 re....
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.... name suggests is a bonded premises engaged in the facility of warehousing and hence qualifies to be a bonded warehouse under the provisions of Section 2(43) of the Customs Act. Thus, a FTWZ is in parity with bonded warehouse under the Customs Act. 6.5.3 Moreover, the Applicant submits that an analysis of legislative history also points out the fact that there has been no question in the erstwhile tax regime or even in the present regime regarding warehousing by FTWZ for purpose of Customs Act. 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....
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....oods nor supply of services. QUESTION 2 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? 6.5.8 The Applicant submits that the Applicant is eligible to avail ITC on the proposed transaction. In terms of Section 17 (2) of the CGST Act, "where the goods or services or both are used by the registered person partly for effecting taxable 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....
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....ny benefit of refund of input tax credit in respect of supplies made from Arrival DFS, the input tax credit in respect of Arrival DFS may be required to be reversed under sub-section (2) of section 17, read with sub-section (3) of the said section, by including transactions under para 8 (a) of Schedule III in the value of exempt supply by substituting Explanation to sub-section (3) of section 17 of CGST Act, 2017 as proposed below....." Accordingly, the applicant stated that they would be entitled to avail input tax credit without any reversal on the proposed transaction. DISCUSSION 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 ....
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....arehouses 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. 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....
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.... 1992) shall have the meanings respectively assigned to them in those Acts." 7.6 Accordingly, the applicant opines that the transaction/activity in the instant case gets covered under paragraph 8 (a) of Schedule III of the CGST Act, 2017. However, the applicant is of the opinion that alternatively, the said transaction also gets covered under paragraph 8 (b) of Schedule III of the Act, ibid, as the provisions of the paragraph 8 (b) also gets satisfied. It therefore becomes imperative to analyse and fix as to whether the said transaction gets covered under paragraph 8 (a), or under paragraph 8 (b) of Schedule III of the CGST Act, 2017. 7.7 To begin with, we intend to take up the provisions of paragraph 8 (b) of Schedule 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 th....
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....rder for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented;" 7.10 On a conjoint reading of the phrases referred above, along with its properties and specifications, i.e., "by endorsement" and "documents of title to the goods", it becomes clear that the activity relating to "Supply of goods, by endorsement of documents of title to the goods" as enumerated under para 8 (b) of Schedule III of the CGST Act, 2017 refers to the mode of transaction for a specific activity, as against the practice adopted for normal sale transactions. Further the second part of phrase 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 ....
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....using and other activities related thereto are carried on;" 7.14 Further, Sections 3 and 6 of the SEZ Act, 2005, contains the following provisions involving the term/activity of 'warehousing', viz., "3. Procedure for making proposal to establish Special Economic Zone. (1) A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone." "6. Processing and non-processing areas. The areas falling within the Special Economic Zones may be demarcated by the Central Government or any authority specified by it as (a) the processing area for setting up Units for activities, being the manufacture of goods, or rendering services; or (b) the area exclusively 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....
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.... 'H' of the SEZ Act with the Customs authorities to avail the benefit of duty-free clearance. It is to be noted here that though the Form 'H' is prescribed under the provisions of SEZ Act and Rules, the 'BLUT' executed by any SEZ is presented before the Customs authorities as the duty benefits provided for, are related to the Customs Act. The fact that the BLUT form is accepted and signed by the Officer of Development Commissioner/Joint/Deputy Development Commissioner, and also by the Officer of Joint/Deputy/Assistant Commissioner of Customs, corroborates the fact that the procedural requirement under the SEZ Act and the Customs Act travel together without any inconsistency. Further, the 4th para of the BLUT form and para 3 of the Conditions of BLUT form, reads respectively, as below :- "And whereas the obligors can clear duty free imported goods from ports or airports or inland container depots 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 Custom....
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....ds and expressions used and not defined in this Act but defined in the Central Excise Act, 1944 (1 of 1944), the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Income-tax Act, 1961 (43 of 1961), the Customs Act, 1962 (52 of 1962) and the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) shall have the meanings respectively assigned to them in those Acts." 7.20 In this regard, it is to be highlighted here that it is quite normal that any definition provided under any Act would be naturally designed to serve its own purpose, and not with an intent to cater to any other Act or situation. We note that this is precisely the reason, the 'overriding' nature the SEZ Act, 2005 provides over any other law, through Section 51 of the Act, ibid, comes in to take care of any such inconsistencies, under any other law. For facilitation, the provisions of Section 51 is reproduced as under:- "51. Act to have 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." ....
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....idering the definition of 'warehouse' as in the Customs Act, 1962, as an anomaly or inconsistency, the overriding effect that Section 51 provides to the SEZ Act, 2005, obviates the anomaly, if any. 7.23 Under these circumstances, we are of the opinion that a Free Trade Warehousing Zone', as the name suggests, is a bonded premises providing warehousing facility, much in parity with the bonded warehouse under the Customs Act. Further, when the goods are imported and brought into a FTWZ unit, they are basically warehoused first and then traded or subjected to other authorized operations as the case may be. We notice that the applicant's queries for advance ruling in the instant case is restricted to the first stage, i.e., when the imported goods are supplied to any person before they are cleared for home consumption, while they still remain warehoused. Accordingly, we are of the considered opinion that the provisions of 8 (a) of Schedule III of the 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 t....
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.... from 1.10.2023 onwards by way of Notification No. 28/2023-Central Tax dated 31.07.2023, whereby apart from paragraph 5 of Schedule III, the activities or transactions referred to in clause (a) of paragraph 8 were also to be treated as "exempt supplies" and not as "non supplies". The moot point for consideration here is that once an activity/transaction is considered as an 'exempt supply', it attracts the proposition of apportionment of credit, as provided for under Section 17(2) of the CGST Act, 2017, whereby the credit on input tax that is attributable to exempt supplies is required to be reversed. 7.26 At this juncture, we notice that the phrase "as may be prescribed" in clause (ii) of the Explanation to sub-section (3) of Section 17, as above, carries significance, as it necessitates a recourse to the CGST Rules made thereunder. In this regard, we notice that parallel to the amendment to Section 17 of the CGST Act, 2017, an amendment (on the recommendations of the GST Council), has also been made to CGST 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 Ta....