TaxTMI 
TaxTMI 
2025 (10) TMI 1455
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 4. Advance Ruling obtained by the applicant by fraud 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 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. M/s. Aditya Birla Global Trading (India) Private Limited, SF No. 461, Ragavendra Garden, Subramaniyam Palayam Road, G.N. Mills Post, Coimbatore-641029 (hereinafter 'the Applicant') The Applicant is engaged in the business of (i) import and trading of certain goods, and (ii) providing cargo handling services. While the Applicant presently import and trade in Tea (HSN 0902), wood charcoal (HSN 4402), coal (2701) dried leguminous vegetables (HSN 0713) in the state of Tamil Nadu, it is contemplating to restructure its business operations and diversify ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clarity & to avoid any sort of interpretational challenges, the present business model is being re- evaluated by the Applicant. The Applicant company has observed significant business opportunity in offering handling services independently to buyers of Goods or to any other person. Therefore, it is contemplating to change its business model to delink the sale contract and the service contract and propose to offer handling services independently as a separate offering. 3.2 The Applicant wishes to state that the Applicant company has received a Show Cause Notice in the state of Gujarat proposing to impose penalty under Section 122 of the CGST Act on the grounds that the Applicant company has actually not provided any service under the service contract. The Applicant company has filed its reply to the said show cause notice and the same is pending for adjudication. A copy of a Show Cause Notice bearing Ref No. DGGI/GRU/36-13/2024-25 dated 31 July 2024 issued on the Applicant in the state of Gujarat (GSTIN 24AATCS0544F1ZC) is attached by the applicant. 3.3 The Applicant states that the proposed business model with respect of goods in the state of Tamil Nadu is that it includes t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he classification of services supplied under the Service Contract? 4.1 Under the 'Statement of facts' having a bearing on the question No.1, the applicant has stated as follows :- 1. The proposed business model being contemplated by the Applicant involves (i) sale of Goods imported by the Applicant by executing a 'Sales Contract'; and (ii) once goods are sold (ie title in the goods are transferred in-situ), the buyer may either transport the goods to their own warchouse / storage facility or let goods stored at the plot and transport the same on a later date, under a 'Service Contract'. There will be two separate agreements executed with the buyers, namely, sales contract for goods and cargo handling service contract. 2. The Sales Contract provides for an approximate quantity of the Goods, subject to a +/- 10% variation Pricing is set on an ex-port or ex-warehouse basis, and payment terms includes cash and carry, letter of credit, EMD, initial payments, etc .- as may be mutually agreed upon depending on the relationship and contract details. Title transfer to the buyer happens on the invoice date, and from that point, the buyer must secu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 1872. Section 148 defines bailment as a "delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them." In the present case, the Applicant received the possession of goods back from the buyer under a contract of providing handling services under the terms of Service Contract. 5. The Applicant is of the considered opinion that supply of goods and the supply of services are two separate transactions. Services covered under the Service Contract commence only on acceptance of delivery of goods for and on behalf of the buyer. In view of the above, any service provided by the Applicant after the said constructive delivery cannot be regarded as being provided along with the supply of goods. 4.2 Under the 'Statement containing the applicant's interpretation of law' in respect of question No.1, the applicant has stated as follows :- 1. Sales Contract and the Service Contract are not interdependent on each other. These are separate transactions and are not provided in a combination. The buyer is fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he erstwhile service tax regime, wherein following indicators were provided1: i There is a single price, or the customer pays the same amount no matter how much of the package they actually receive or use. ii The elements are normally advertised as a package. iii The different elements are not available separately. iv The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. ● and supplied in conjunction with each other in the ordinary course of business: This indicates that different elements of the supply are so integrally linked that they form a single indivisible economic activity. ● one of which is a principal supply: Out of different elements of the supply (referred supra), one is the principal supply. 5. In this case, it is important to highlight that the Sales Contract and Service Contract are entirely independent of each other. These are separate transactions, not bundled together. The buyer has the option to take physical possession of the goods upon the transfer of title and arrange transport to their own warehouse. The Appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance cover for fire, floods, storm, earthquake, theft, etc. in respect of the goods belonging to the buyer. d) The Applicant would ensure water sprinkling on the Goods (specially coal) so as to avoid the risk of spontaneous combustion. e) The Applicant would ensure loading of goods on to the trucks for transport by the Buyer. f) Weighment of trucks; and other sundry works related to cargo handling. g) The Applicant would be responsible for any loss of goods inside the plot except for handling loss. h) Any loss post loading of goods on the trucks at the instruction of buyer would borne by the buyer. i) The Applicant would not be liable for generation of E-way bill, it would be the sole responsibility of the buyer to comply with the provisions of E-way bill at the time of removing the goods. j) If the Buyer defaults or delays in lifting of the goods, the Applicant would have the right to sell the balance quantity of the goods to third parties without any requirement of notice to the buyer to mitigate its losses/damages. 4.4 Under the 'Statement containing the applicant's interpretation of law' in respect of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vessel at the Indian ports or after arrival of goods at the port. In case of sale of goods before arrival of goods, once the vessel is loaded or discharged there is communication to the customers (i.e Applicant in the present case) as to the nature and quantity of the goods. Since Section 31 of the CGST Act requires the Applicant to issue Tax Invoice on or before delivery of the goods, therefore, the Applicant would issue the Tax Invoice on the date of contract itself. In case the sale is made after arrival of vessel at Indian ports, the Goods are present (commingled in larger lot) at the time of execution of the Sales Contract. The Applicant would issue the Tax Invoice on the date of contract itself. The Goods would be apportioned before delivery by appropriately marking the lot at the time of issuance of the invoice and transfer of the property in the subject goods is affected. 6. Under the terms of Sales Contract, the Applicant delivers the goods on the date of the invoice and under the terms of the Cargo Handling Service, accepts delivery for and on behalf of the buyer. Once the constructive delivery is completed, the Applicant holds custody of the goods as bailee. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....same constitutes supply of goods and GST is liable to be paid on such supply." 9. It is evident from the above that the requirement of issuance of invoice is based on the actual delivery or otherwise making available of the goods (constructive delivery) under Section 31 of the CGST Act. Therefore, the Applicant is of the considered opinion that the Applicant would be required to issue invoice on the date on which title and constructive delivery is passed on to the buyer (ie within 30 days from the date of execution of the contract). Since the date of invoice, which precedes the date of receipt of payment, the liability to pay GST would arise on the date of invoice. 10. Applicable rate of GST on the Goods would be as under: Goods HSN Rate Coal 2707 5% Iron Ore 260111 5% Petro Products Naphtha 18% Scrap 720449 18% Tea 090240 5% Packing Material 481940 18% Regarding the 'Treatment of supply of handling services under the Service Contract', 1. The term "service" has been defined under Section 2(102) of the CGST Act to mean anything other than goods, money and securities. The defin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h the proposed business model. 6.3 The Members enquired that in respect of those cases where the ownership of goods changes multiple times, whether the applicant has service contract with all owners of goods. The AR replied that the service contract post sale of goods is made only with the 1st buyer of goods and not with any other person who may subsequently own the title of goods. Further to a specific query as to whether they have filed any application with any other Authority for Advance Ruling, the AR replied in negative. DISCUSSION AND FINDINGS 7.1 We have carefully examined the submissions made by the applicant in their advance ruling application, the additional submissions furnished during the personal hearing and further submissions made after the personal hearing. 7.2 The questions on which an advance ruling is requested are as follows :- a. Whether the supply of goods under the Sales Contract and supply of handling services under the Service Contract would be regarded as independent supplies? b. If the response to (a) above is affirmative, what would be the classification of services supplied under the Service Contract? 7.3 As the above qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g and forwarding services, Warehousing Services, etc., which are charged to GST at 18%, while the sale of coal is charged to GST at 5%. Under these circumstances, it was observed therein that the immediate customer of noticee received the goods only, i.e., coal from them by way of transfer of title of goods, who in turn supplies it to another trader or end-user, and that the immediate customer did not avail any type of services relating to handling of coal in any manner. It was therefore alleged in the show cause notice that the noticee does not supply any cargo handling service to its customer and yet they are issuing tax invoice of 'cargo handling services' and furnishing the details of such invalid invoices into their GSTR-1M, enabling the coal recipients to avail and utilize the ineligible input tax credit, without actual supply of corresponding services. It was also alleged that by doing so, the noticee collects tax in the form of cash from customers and while filing the GSTR-3B they pay such tax from Input Tax Credit which lies accumulated in their electronic credit ledger. Accordingly, penalty under Section 122(1) of the CGST Act, 2017, read with Section 20 of the IG....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and circumstances of the case and the terms of contract related to the issue of show cause notice to their Gandhidham unit is different from the facts of the instant case for which the application for advance ruling has been sought by the applicant. They further stressed that the earlier agreement / business model is different from the proposed agreement / business model and therefore Advance ruling application is not affected by the Show Cause Notice / Order-in-Original / Appeal filed. Accordingly, the Members requested the AR to highlight the differences in their earlier business model with the proposed business model, and the AR furnished a 'Comparative Table', bringing out the clause by clause differentiation of the earlier and the proposed contract. Under the said table, the clauses relating to Quality determination, Price Adjustment, Quantity determination, Payment terms, Delivery, Insurance, and Risk & Title, were discussed and differentiated. 7.9 Under the facts and circumstances of the instant case as furnished by the applicant, it is indeed clear that the clauses of the earlier contract differ from the proposed contract. However, it is to be noted here that the....