2020 (7) TMI 347 - AAR - GST

Nature of supply - sales goods after import - single supply or two independent supplies - - applicable rate of tax - import of drill bits for supply to ONGC at its location in India on consumption basis involves two supplies namely, Import into India of drill bits - Indigenous movement from the port of import to ONGC s location - If two supplies are involved in the abovementioned transaction then whether two Essentiality Certificates (EC) are required to be issued for availing benefits with respect to concessional duties of IGST and CGST - HELD THAT - It is a self-asserted and admitted fact on record that the Applicant, under a contractual obligation, is required to import drill bits by themselves as an importer and undertake to supply drill bits to the delivery location of ONGC on consignment basis i.e. sale on approval basis - the activity of import and subsequent supply of drill bits by the Applicant to ONGC does not qualify as one single supply. In terms of Section 7(2) of the Integrated Goods and Services Tax Act, 2017, the supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-state trade or commerce. As per Section 2(4) of the Integrated Goods and Services Tax (IGST) Act, 2017, read with Section 2(11) of the Customs Act, 1962, customs frontiers of India means the limits of a customs area viz. the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities - It is a settled legal proposition that once the goods imported are cleared by the Customs authorities, all the provisions of the Customs Law (relates to imported goods) ceases to be applicable or extendable to such goods. It is therefore, clear that the activity of import of drill bits by the Applicant is a distinct activity of supply of goods in the course of inter-state trade or commerce. The post import activity of the Applicant is therefore, clearly falls within the scope of inclusive portion of expression supply under Section-7(a) of the Central Goods and Services Act, 2017. Depending upon the nature of supply, such supply of drill bits done by the Applicant are taxable services and is leviable or chargeable to CGST or IGST under CGST Act, 2017 or IGST Act, 2017, as the case may be. Any exemption from the whole or part of the tax, either absolutely or subject to conditions as may be specified, is only through a Notification issued by the Government by virtue of power vested in Section 11 of the CGST Act, 2017 or Section-6 of the IGST Act, 2017, as the case may be. It is evident that the exemption granted under Notification No. 3/2017-Central Tax (Rate) dated 28.06.2017 is a conditional one. It is a settled law that the benefits or exemption of a Notification (a conditional in nature) is available or eligible to the goods, only if the conditions specified therein are fulfilled or complied with.

Summary

Issues Involved:
1. Whether the import of drill bits for supply to ONGC involves two supplies: import into India and indigenous movement.
2. Whether two Essentiality Certificates (ECs) are required for the transaction.
3. If only one supply is involved, whether a single EC is sufficient.

Detailed Analysis:

Issue 1: Two Supplies Involved
The applicant, Halliburton Offshore Services Inc. (HOSI), sought clarification on whether the import of drill bits for supply to ONGC involves two distinct supplies: import into India and indigenous movement from the port of import to ONGC's location.

The judgment affirmed that these are indeed two separate supplies. The import of drill bits into India is treated as a supply in the course of inter-state trade or commerce until the goods cross the customs frontiers of India. The subsequent movement of drill bits from the port of import to ONGC's location is considered an indigenous supply. The ruling emphasized that once the imported goods are cleared by Customs, they become part of the general mass of goods within the country, losing their character as imported goods and thus are subject to separate taxation under GST.

Issue 2: Requirement of Two Essentiality Certificates (ECs)
The applicant questioned whether two ECs are required for availing concessional duties: one for the import of drill bits under Notification No. 50/2017-Customs and another for the indigenous movement under Notification No. 3/2017-Central Tax (Rate).

The ruling confirmed that two ECs are indeed required. For the import of drill bits, the concessional rate of Customs duty (BCD - NIL and IGST - 5%) is available under serial no. 404 of Notification No. 50/2017-Customs, subject to conditions including the production of an EC from the Directorate General of Hydro Carbons to the jurisdictional Deputy Commissioner of Customs. For the indigenous movement, the exemption from central tax under Notification No. 03/2017-Central Tax (Rate) is conditional upon producing an EC to the Deputy Commissioner or Assistant Commissioner of Central or State Tax having jurisdiction over the supplier of goods.

Issue 3: Sufficiency of a Single EC
The applicant also sought clarification on whether a single EC would suffice if only one supply is involved. However, since the judgment already established that two supplies are involved, this question was rendered not applicable.

Conclusion:
The judgment provided a comprehensive analysis, affirming that:
1. The transaction involves two separate supplies: import into India and indigenous movement.
2. Two Essentiality Certificates are required to avail the concessional duties for both the import and the indigenous movement.
3. The question of a single EC covering both supplies is not applicable.

This detailed analysis ensures compliance with the respective GST and Customs provisions, emphasizing the necessity of fulfilling specific conditions to avail the exemptions.