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2019 (3) TMI 1273 - AAAR - GSTInput tax credit - GST paid on the railway freight for transportation of the refining crude petroleum oil, inter alia, High Speed Diesel (HSD), Motor Spirit (petrol) and Aviation Turbine Fuel (ATF) from its Haldia Refinery to its export warehouse at Raxaul - Place of supply of goods or services or both - Held that - The goods are supplied to the recipient (in this case the Bihar Unit) in India as the movement terminates at Raxaul. In such cases it will be an inter-state supply to a distinct person as defined under section 25(4) of the GST Act, and the place of supply shall be determined under section 10(l)(a) of the IGST Act - The IOCL, Haldia issued ARE-3 against CT-2 for stock transfer of said goods to their Raxaul Depot. It is IOCL, Raxaul Depot who prepares the ARE-I for export of the said goods to the NOC, Nepal. Hence, the movement of goods through ARE-3 terminates for delivery to the recipient IOCL, Raxaul Depot, who is a distinct person as per GST Act. The final clearance being made from the export warehouse at Raxaul, it is the Bihar Unit that is responsible for export on preparing ARE-I. Removal of goods without paying duty (under Bond) from Haldia Refinery to the export warehouse at Raxaul, therefore, cannot be termed as export of goods within the meaning of section 2(5) of IGST Act and cannot be termed as zero rated supply under Section of the IGST Act. Movement from the Applicant's factory at Haldia to the export warehouse at Raxaul is not, therefore, inextricably linked to ultimate export to Nepal. The Appellant has admitted that the NOC issued PDO (Product Delivery Order) on Raxaul Depot of the IOCL which is actually the supply point of the products. And the Appellant's Raxaul unit prepared and submitted ARE-I (Application for Export) to the Customs Authority for endorsement. Hence, the final clearance of goods for export has taken place from the Raxaul unit, the export warehouse of the Appellant and not from the Appellant's Haldia unit. Therefore, endorsement copies of ARE-3 cannot be treated as final proof of export. There is no infirmity in the ruling rendered by the West Bengal Authority for Advance Ruling.
Issues Involved
1. Whether GST paid on the railway freight for transportation of refining crude petroleum oil from Haldia Refinery to the export warehouse at Raxaul can be availed as Input Tax Credit. 2. Classification of supplies from Haldia to Raxaul as zero-rated or non-taxable. 3. The linkage of goods movement from Haldia to Raxaul with the ultimate export to Nepal. 4. The interpretation of the agreement between IOCL and NOC regarding the supply and export of POL products. Detailed Analysis Issue 1: Input Tax Credit on Railway Freight The appellant sought an advance ruling on whether GST paid on railway freight for transporting refining crude petroleum oil, including products like High-Speed Diesel (HSD), Motor Spirit (petrol), and Aviation Turbine Fuel (ATF), from Haldia Refinery to the export warehouse at Raxaul can be availed as Input Tax Credit (ITC). The West Bengal Authority for Advance Ruling (WBAAR) ruled that the appellant cannot claim credit of the GST paid on the railway freight for transportation of ATF and other non-taxable supplies from West Bengal to the Bihar Unit, as these are not zero-rated supplies but non-taxable supplies to a distinct person under Section 25(4) of the GST Act. Issue 2: Classification of Supplies The appellant argued that the supplies from Haldia to Raxaul should be considered zero-rated under Section 16(1)(a) of the IGST Act, as they are inextricably linked to the ultimate export to Nepal. The WBAAR, however, held that these supplies are non-taxable under Section 2(78) of the CGST Act and not zero-rated supplies, as the movement of goods terminates at the Raxaul warehouse, which is a distinct person under Section 25(4) of the GST Act. Issue 3: Linkage to Ultimate Export The appellant contended that the movement of goods from Haldia Refinery to the Raxaul export warehouse is inextricably linked to the ultimate export to Nepal, supported by the agreement with NOC, which mandates that the products be dispatched from Haldia and sold to NOC free of Indian duties and taxes. The WBAAR, however, concluded that the movement from Haldia to Raxaul is not inextricably linked to the ultimate export, as the goods could be diverted for home consumption and the Raxaul warehouse is considered a distinct person under the GST Act. Issue 4: Agreement Interpretation The appellant emphasized clauses in the agreement with NOC that indicate the products are meant for export to Nepal, including the execution of a B-3 bond and the issuance of certificates in Form CT-2 for procurement of excisable goods. The WBAAR found that the agreement with NOC is an umbrella agreement and not an export order, with specific Product Delivery Orders (PDO) raised by NOC being the actual export orders. The final clearance of goods for export occurs from the Raxaul unit, not the Haldia unit, and the movement of goods terminates at the Raxaul warehouse, making it an inter-state supply to a distinct person under Section 25(4) of the GST Act. Conclusion The Appellate Authority upheld the WBAAR's ruling, concluding that the movement of goods from Haldia to Raxaul is not zero-rated but non-taxable supplies to a distinct person under the GST Act. Consequently, the appellant cannot claim ITC on the GST paid for the railway freight. The appeal was dismissed, affirming that the final clearance for export takes place from the Raxaul unit, and the movement of goods from Haldia to Raxaul is not inextricably linked to the ultimate export to Nepal.
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