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TMI Blog2019 (3) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... her such movement of goods constitutes otherwise than by way of supply under GST. During the advance ruling proceedings, the authorized representative had stated that the applicant had placed its own specified medical equipment at identified hospitals or laboratories by executing an agreement. They place the equipment in the premises of hospitals or laboratories without receiving any consideration. The employees of the hospitals or laboratories, where the equipment is installed have the full right to use the machine during the period of contract. But the title and ownership of the instrument continues to be the applicant. The users of the instruments only possess a non-transferable right to use the said instruments during the tenure of agreement. These medical diagnostic equipments are transferred from the warehouse located in Ahmedabad to Kerala against delivery challan. 3. The hospitals or laboratories at which the instruments are installed are bound to procure specified quantity of reagents, calibrators, disposals etc., from the applicant till the tenure of agreement. The price of these products is also specified in the agreement. These products are supplied against tax invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posite supply, applicable tax rate is @18% GST. 7. But the applicant established a business model, in such a way to split the supply by independent transactions. One transaction is the supply and installation of instrument owned by the applicant, at the premises of the customer on free of cost, till the tenure of contract. The 2nd transaction is supply of pre-defined minimum quantity of consumables like reagents, calibrators, disposals etc., on the pre- fixed prices. The applicant has designed such a modus operandi with the ultimate objective to avoid payment of tax at higher rate, which is applicable for composite supply. The Advance Ruling Authority held that this colourable business model of free supply of instrument accompanied with a monopoly purchase obligation to procure reagents, calibrators, disposals etc., is a contrivance to keep out of the ambit of composite supply. 8. Even though there is a right to use the instrument to the customer, during the tenure of the contract, no consideration is shown to be charged from the customer with the sole objective to avoid payment of tax at higher rate. If any visible rent is realized from the customer for the right to use the mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispensable for the fulfillment of contract and getting required output. Hence the supply of two components based on the strength of agreement qualifies the concept of combination of two or more 'naturally bundled' supply and becomes composite supply. 11. The supply of instrument and the products to a hospital/ laboratory is for monetary consideration. Being a composite supply, it is the discretion between the parties to fix the point of exchange of consideration. While supplying the instrument the applicant deferred the consideration and merged it with the price of products like reagents, calibrators, disposals etc, As the applicant has the monopoly to control the minimum quantity of procurement of consumables/ products, the rent/cost of the equipment for the particular period is merged with the price of products. But there is no visible or explicit demarcation of rent/ cost of the equipment and cost of products. This veil can be lifted once specified quantity of consumable is not procured by the recipient hospital. In such scenario there is clear provision in the agreement to the effect that, if the customer fails to meet its exclusive purchase obligation or its minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to GST under Sl No. 17 (iii) - Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28.05.2017." 14. Aggrieved by the said Advance ruling, the appellant preferred appeal vide paper read 2nd above, before the Appellate Authority for Advance Ruling and submitted that the ruling by the advance ruling authority is incorrect on facts as well as in law. The appellant was heard. During the personal hearing, the Appellant's legal representative Shri. Kalpesh Shah, Executive partner, M/s. Lakshmikumaran & Sridharan, Mumbai, reiterated the submissions made in the Appeal Memorandum and also made the following submissions; "We submit that the only question before the AAR was as under; "Whether in the facts of the present case, the provision of specified medical instruments by the Appellant to unrelated parties like hospital(s), Lab(s), for uses without any consideration, constitutes a "supply" or whether it constitutes "movement of goods otherwise than by way of supply" as per provisions of the CGST / SGST Act, 2017?" This question was raised under Section 7 of CGST Act, 2017. The AAR should have restricted himself to answer this question. However, the AAR held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. We also rely on the order of Intelligence officer with respect to instrument supplied on 04.03.2016. Thus, there was no change in the business practice and hence the allegation of establishing a business model to avoid any incidence of tax does not arise at all in any manner. Hence, such an allegation of establishing colorable device is completely incorrect. " DISCUSSION AND FINDINGS 15. We have gone through the entire records in the instant case and also heard the authorized representative of M/s. Abbott Healthcare Pvt. Ltd in the matter. 16. The issues to be decided in this appeal are as follows; (i) Whether the Advance Ruling Authority had gone beyond the questions raised by M/s. Abbott Healthcare Pvt. Ltd.? (ii) If the original authority had gone beyond the questions raised by M/s. Abbott Healthcare Pvt. Ltd., should the issue be remanded back to the said authority? (iii) If the original authority had passed a proper order in the first instance, is there sufficient new material before this appellate authority to set aside the original order? 17. On consideration of the first issue, the following facts emerged; a) M/s. Abbott Laboratories had sought an advance ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal authority and we do not find any reason to modify the Order. 20. In the Appeal Memorandum, and during the personal hearing the appellant's representative has placed reliance on the decision of the Hon'ble Supreme Court in the case of Devi Das Gopal Krishnan vs. State of Punjab. However, a thorough perusal of the facts of the said case, make it evident that it is not pari-materia, either on facts or on law, with the matter under consideration of this authority. In brief, the appellant has failed to provide any fresh cogent arguments or new evidence to further their case to modify the ruling of the advance ruling authority in the instant case. We are of the opinion that the ruling of the original authority that the placement of the specified medical instruments in the instant case constitutes a composite supply is legally correct and proper. Order No. AAR/04/2018 dated: 14.12.2018 We hereby uphold the original order as legally correct and proper and rule that the placement of specified medical instruments to unrelated customers like hospitals, labs etc., for their use without any consideration, against an agreement containing minimum purchase obligation of products lik ..... X X X X Extracts X X X X X X X X Extracts X X X X
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