9911796707
TMI Blog2020 (6) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... are exempt supply. Since, all the aforementioned supplies made by the Appellant are exempt supply, any inputs or input services viz. maintenance, upkeep, repair, providing security, garbage collection, sewage treatment, civil construction, sweeping cleaning, etc., pertaining to the residential quarters of employees of Ordnance Factory Bhandara other allied organisations, market area, places for worship of God, gardens, parks, playgrounds, swimming pool, footpaths, street lightings, which are used inside the residential colony will not be available to the Appellant for ITC in accordance with the provision of Section 17(2) of the CGST Act, 2017. Shops that are given on rental basis for commercial purposes - HELD THAT:- As per the provision of section 16(1) of the CGST Act, 2017, the Appellant is entitled to avail ITC in respect of expenditures incurred on the input services used in the taxable supply of the renting of immovable property for commercial purposes. Inter-connected roads between various establishments and facto premises - HELD THAT:- It is observed that the construction and maintenance of the roads in the factory estate is mandatory for the Appellant to carry out their b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture related to purchase of LPG cylinders used within industrial canteen? - HELD THAT:- Input Tax Credit in relation to LPG cylinders that are re-filled for use in industrial canteen should be allowed as per amended section 17(5) (b) 16(1) of the CGST Act, 2017. Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier s dues? - HELD THAT:- The transaction related to L.D. is being recorded in separate accounting code. Maintenance of such accounting codes by the Appellant clearly shows that the Appellant is paying the actual taxable amount and GST thereon to its suppliers, as mentioned in the tax invoices raised by its suppliers. Further, the reflection of the illustrated sample invoices in the GSTR -2A of the Appellant further substantiates the Appellant s claim that the suppliers are also aware of their liability to pay the actual GST and not the lesser amount of GST are being paid by the suppliers, even in the cases where there is deduction of liquidation damages from the payment made to such suppliers - the Appellant was rightful in challenging the ruling prono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atories like Defence Research & Development Laboratory are also there. B. The manufacturing process involves procurement of various raw materials from sister Ordnance factories and private entities. Majority of the purchase is from private entities. The output is then transferred to sister Ordnance factories/units of armed forces as per order. The consideration for transfer is fixed by OFB and is booked in the financial accounts of our organisation and the adjustment is done through book transfer. Money consideration is involved only for a small portion of the produce, where the goods are sold to units under Ministry of Home affairs. paramilitary forces like BSF, units of state police, defence PSU's and private entities. C. The goods are sent in finished condition to proof establishments (such as PXE Balasore, CPF [tarsi] for testing purpose. Such proof establishments are located outside the factory premises across the country and they also function under the Ministry of Defence, Government of India. Such sample goods are destroyed during testing process. The value of the raw materials used in the supply goods are destroyed is included in the value of the finished goods that are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the factory where manufacturing activity is carried out & the administration building. b) Estate area: It consists or the area other than factory premises. Residential quarters of employees of OFBa and allied establishments, gardens, parks, playground, factory school for children of employees, hall for recreational activities, places of worship of God, market area, guest houses, school for children of employees, factory hospital & open land is included is included in such estate area J. Ordnance Factory Bhandara had sought Advance Ruling on eight questions mentioned below before the AAR, Maharashtra. Question no. 8 was withdrawn later on by Ordnance Factory Bhandara. 1) Being a part of the Ministry of Defence, Government of India, whether our organization Ordnance Factory Bhandara is liable to pay GST on the following supply of services: - a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions. c) Security deposit left unclaimed by the suppliers and recognized as income after 3 years. d) Food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. c) Notification No. 36/2017 - Central Tax (Rate), in relation to payment of tax on reverse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. 8) Whether Input Tax Credit on services of passenger vehicles hired by our organisation is available? Advance Ruling dated 24.12.2018 passed by AAR, Maharashtra K. The AAR passed the Advance Ruling No. GST-ARA-79/2018-19/B-168 dated 24.12.2018 = 2019 (6) TMI 1236 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA in respect of the seven questions enumerated above, except the question no, 8, which was withdrawn by the Appellant later on from their advance ruling application itself. L. Aggrieved by the above rulings passed by the AAR, the appellant has preferred appeal in respect of questions 1,2,6 & 7 only on the basis of the grounds mentioned hereinunder: Grounds of Appeal 1. Appeal against ruling pronounced for question No. 1: - The Question No. 1 that was asked for in Form ARA-01 is as follows: -Being a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President." 3. The aforementioned definition & explanation of "Central Government" has been extracted from FAQ's on Government Services issued by the CBIC under the sectoral series on GST. Question No. 3 of such FAQ's issued by CBIC deals with the question - What is the meaning of "Government" and the aforementioned Para has been provided as an answer to such question. 4. It is pertinent to note here that Ordnance Factory Bhandara is an organisation under the Ordnance Factories Board(OFB) functioning under the Department of Defence Production and supply, Ministry of Defence, Government of India. Ordnance Factory Board (OFB) consisting of the Indian Ordnance Factories, is an industrial organisation, functioning under the Department of Defence Production of Ministry of Defence, Government of India. It is engaged in research, development, production, testing, marketing and logistics of a comprehensive product range in the areas o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actories under the Board is of the Union Government of India. The executive power of the Union Government is vested in the President. Thus, it becomes necessary to re-iterate the following: - "As per Article 53 of the Constitution, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or indirectly through officers subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President." 7. AAR, Maharashtra has ruled that Ordnance Factory Bhandara is not "Government" since it is engaged in research, development, production, testing, marketing and logistics of a comprehensive product range in the areas of air, land and sea systems and is having an industrial status and functions under Ministry of Defence. 8. Kindly note that such ruling is not proper in our knowledge. Nowhere under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de through union public service commission on behalf of President of India. 12. Ordnance Factory Board Procurement Manual is a manual issued by the Ordnance Factory Board for procurement Of stores for production in Ordnance Factories. This has been finalized by MOD in consultation with Integrated Defence Finance and has the approval of Hon'ble Raksha Mantri. Para 7.12 of the "Ordnance Factory Board Procurement Manual" states that- "The parties to the contracts into by ordnance factories are the President of India as the purchaser, acting through the authority signing the contract/ agreement/ purchase order etc., and the supplier named in the contract." Para 7.25 of the "Ordnance Factory Board Procurement Manual" states that- "All defence contracts are in the name and on behalf of the President of India." Para 14 of Annexure-2 of the "Ordnance Factory Board Procurement Manual" defines the term purchaser as follows- 14. Purchaser: The President of India acting through the Authority issuing the purchase/supply orders or signing the Contracts/Memo of Understanding/Agreements is the Purchaser in all cases of procurement on behalf of the Government of India. Enclosed herewith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & GST, Nagpur by Ordnance Factory Bhandara against the order-in-original of Assistant Commissioner, CGST and Central Excise, Division - Bhandara reiating to erstwhile law of Service Tax. Para no. 19 of the order-in-appeal (that is enclosed herewith) of the Hon. Commissioner (Appeals), Customs, Central Excise & GST, Nagpur bearing order no. NGP/EXCUS/000/APPL/367/18-19/2544 dtd. 28/12/2018, relying upon the facts of the case stated that- "As regards the imposition of penalty, I find that the appellant is a Govt. of India organization working under the Ministry of Defence. As per the various judgments of the judicial forums, mens rea cannot be attributed to a Govt. body and hence I feel that no penalty is imposable on the appellant." Thus, the order-in-appeal of the Hon. Commissioner (Appeals) treats Ordnance Factory Bhandara to be a Govt. body, which is a further proof in our claim that Ordnance Factory Bhandara is "Government." 18. Kindly also note that a certificate was issued by the Jt. Secretary, Ministry of Defence, Department of Defence Production dtd. 18/04/2006 for Sales Tax purposes in which it was stated as follows: - "It is certified that the Indian Defence Forces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Liquidated Damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions: - Ordnance Factory Bhandara also forfeits security deposit of its suppliers due to non-fulfillment of certain contract conditions. Such forfeiture though not in the form of L.D, it can be considered as a form of 'fine' that is recovered from suppliers' dues in the form of forfeiture of their deposit. Thus, exemption as per aforementioned Sr. No. 62 of the exemption list on supply of services as per notification no. 12/2017- Central tax (Rate) should be applicable on such forfeiture of deposit and hence Ordnance Factory Bhandara need not pay GST on the Liquidated Damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services as Ordnance Factory Bhandara is "Central Government". The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government". c) Security deposit left unclaimed by the suppliers and recognised as income after 3 years: - No a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinitions contained in notification no. 12/2017Central tax (Rate), "Renting in relation to immovable property" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. Thus, the service provided by the factory to its employees for letting them use cultural hall for their personal purposes falls within the definition of "Renting in relation to immovable property". However, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate), such services provided by Ordnance Factory Bhandara attract 'NIL' rate of tax since the provider of service (Ordnance Factory Bhandara) is "Central Government" and the recipient of services(factory employees) are non-business entities. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government" f) School bus facility provided to children ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory estate. c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. e) Expenditure related to purchase of LPG cylinders used within industrial canteen. The AAR, Maharashtra ruled that Input Tax Credit on all of the above shall not be available to Ordnance Factory Bhandara except sub-question e), that is, expenditure related to purchase of LPG cylinders used within industrial canteen. The explanation that AAR, Maharashtra gave for denying such credit was that the goods/services used in such activities are not used or intended to be used by Ordnance Factory Bhandara in furtherance of its business. 21. Input Tax Credit in relation to sub-question e), that is, expenditure related to purchase of LPG cylinders used within industrial canteen was allowed by AAR, Maharashtra on the pretext that the output supply of food and beverages to employees in industrial canteen is taxable. 22. We wish to counter the ruling of AAR, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r directly or indirectly, in or in relation to the business of manufacture of final products. In the case of Coca Cola India Pvt. Ltd. vs. CCE reported in 2009 = 2009 (8) TMI 50 - BOMBAY HIGH COURT, a Division Bench of the Hon. Bombay High Court held that the expression 'activities in relation to business' in the inclusive part of the definition of 'input service' further widens the scope of input service so as to cover all services used in the business of manufacturing the final products and that any service used in relation to the business of manufacturing the final product would be an eligible input service for availing CENVAT Credit. It was also held that the cost of any input service that forms part of value of final products would be eligible for CENVAT credit. Thus, it can be construed to mean from such decision that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. Therefore, applying the same logic, in the GST regime, the said following services can be said to be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service would fall within the definition of input service, in terms of Rule 2 (l) of the Cenvat Credit Rules, 2004. In Mukand Ltd's case Vs. Commissioner of Central Excise, Belapur {2016 (42) STR 88 (Tri-Mumbai)} = 2015 (9) TMI 944 - CESTAT MUMBAI, it was held by the Hon. Tribunal that the credit on 'gardening expenses' is fully allowable as the same is required for maintaining the good atmosphere in the manufacturing area and also a condition precedent as laid down by the State Pollution Control Board, without which the appellant cannot resort to manufacturing Activity. In HCL Technologies Ltd., Vs. Commissioner of Central Excise, Noida {2015 (4) STR 369 (Tri-Del) = 2015 (8) TMI 595 - CESTAT NEW DELHI, it was held by the Hon. Tribunal that Garden Maintenance Services qualify as input services. In Lifelong Meditech Ltd., Vs. Commissioner of Central Excise and Service Tax, Gurgaon II {2016 (44) STR 626 (Tri-Chan)} = 2016 (7) TMI 468 - CESTAT CHANDIGARH, it was held by the Hon. Tribunal that "horticulture services are directly related to the manufacturing activity by the appellant as without maintaining the garden, the appellant cannot run their factory. Therefore, I hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea that falls within the boundaries of Ordnance Factory Bhandara and are so controlled by Ordnance Factory Bhandara but such area is outside the precincts of the area where factory & administrative building is there. Such area comprises of establishments such as residential quajters of employees of Ordnance Factory Bhandara & allied organisations, market area, places for worship of God, shops that are given on lease rental basis for commercial purposes, gardens, parks, playgrounds, swimming pool, factory school for children of employees, hall for recreational activities, footpaths, street lightings, inter-connected roads between all such establishments and factory premises and land that is currently not used for any purpose whatsoever. The services of maintenance, upkeep, repair, housekeeping, cutting of trees & grass, civil construction, hiring of manpower for attending school bus, security services, garbage collection, sewage treatment, sweeping &cleaning etc. procured in relation to such establishments within the factory estate should be considered to be an "input service" as per section 2(60) of the CGST Act, 2017 and should also be considered to be "used or intended to be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. in the year 2012 = 2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT, the Hon. Andhra Pradesh High Court held that CENVAT credit of service tax paid on the taxable services used in the residential complex shall be available to the manufacturer. The relevant paragraph of the said judgment is extracted herein below. "The Commissioner's Order-in-Appeal dated 27-5-2008 reflects that he accepted that the efficiency of the employees of an organization would be dependent on various factors, one such being the provision of a housing colony. He further conceded that these facilities would contribute to the enhancement of the productivity of the organization. Having stated so, the appellate authority surprisingly took the view that maintenance of the residential colony by the respondent-Company was only an obligatory activity owing to situational exigencies and was not connected either directly or indirectly to the manufacture of its final products. This inherent contradiction in the Order-in-Appeal was noted by the CESTAT, which opined that if accommodation was not provided by the respondent-Company to its employees at this remote location, it would not be feasible for it to carry on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance Industries Ltd. vs CCE & ST, Mumbai = 2015 (11) TMI 100 - CESTAT MUMBAI, the dispute was in relation to allowance of CENVAT Credit of Service Tax in respect of services like construction services, repairs and maintenance services, security service, manpower recruitment and supply services, works contract services etc. It was noticed by the lower authorities that these services on which credit was availed of service tax paid were received in their residential township constructed for the employees. It was held by the Mumbai Bench of the Tribunal that the expenses which were incurred by the appellant for the setting up of the township/colony for their employees are expenses which are in relation to the business activity of the appellant which is manufacturing of petroleum products. It was also noted that while arriving at the price of the finished goods manufactured in these factory premises, appellant has considered the expenses incurred towards the residential township/colony as expenses and included the same while arriving at the cost of production of the final products manufactured in the factory premises and accordingly CENVAT Credit was allowed in relation to such serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C". In general, services related to maintenance of such land are procured. Such land is located within the factory estate and consists of mainly wild grass, trees & other vegetation. It is adjacent to the roads that are used for commutation. Input Tax Credit related to expenses mentioned in "Annexure C" in relation to such land should be admissible on the following grounds: a) It is necessary to cut wild grass & other vegetation that grows in such area on regular basis in order to maintain the factory estate area neat & clean and ensure that such vegetation does not spill over to and obstruct the roads used for commutation within the factory. b) Another reason is that such wild grass & other vegetation increases the bacteria count in the environment, factory and finished product that adversely affects the manufacturing process & the quality of the final product & the environment and hence it is necessary to maintain such wild grass & other vegetation. c) The cost of such services forms part of the cost of the final products and thus forms part of the value of taxable supply. d) Reliance is placed on the following judicial pronouncement of the Tribunal (CESTAT), wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance, upkeep and other activities also mentioned in "Annexure D" relating to such hospital should be admissible on the following grounds: - i) Hospital helps in keeping the employees fit and healthy, so that they can contribute for furtherance of business of Ordnance Factory Bhandara. ii) As a part of welfare measure, it is necessary to provide the employees basic medicinal facilities within the factory estate itself since the factory is located at a remote location. iii) Cost of such medicines and expenditure on maintenance, upkeep and other activities relating to such hospital forms part of the cost of the final products and thus forms part of the value of taxable supply. iv) Reference to the judicial pronouncements mentioned in above questions can be drawn in so much so that hospital has been set up for the benefit of the employees and it too forms a part of residential colony of Ordnance Factory Bhandara. All the aforementioned arguments and case laws were presented before the AAR, Maharashtra. However, the AAR, Maharashtra ruled that - "we find that hospital/dispensary maintained by the applicant for its employees and their dependents come within the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodation services to various guests including employees on duty/deputation. Room charges are recovered from such guests for their stay on per day basis that are different for such different guest houses. So, inward supply of inputs and input services that are used for maintenance and upkeep of such guest houses should also be considered to be for the purpose of furtherance of business of Ordnance Factory Bhandara and Input Tax Credit should be admissible on the following grounds: i) Such guests visit Ordnance Factory Bhandara for various purposes that are related to business of our organisation and thus such guest houses are used in the course or furtherance of business of Ordnance Factory Bhandara. ii) The management, maintenance and repair service obtained from the service providers in respect of guest houses has direct benefit to the business operations of the factory & has thus direct nexus with the core business of the factory. iii) Cost of such inputs and input services relating to such guest houses forms part of the cost of the final products and thus forms part of the value of taxable supply. iv) Reliance is placed on the following judicial pronouncement of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contends that availment of Input Tax Credit on expenditure related to maintenance and upkeep of guest houses maintained by Ordnance Factory Bhandara should be allowed. e) Expenditure related to purchase of LPG cylinders used within , industrial canteen: - The AAR, Maharashtra ruled that - "we have to state that we have already held that their canteen is providing services related to supply of food and. beverages to their employees and also charging consideration for the same and therefore such service is taxable under GST regime. The LPG cylinders are used to provide such services related to supply of food and beverages to their employees and therefore we are of the opinion that they are eligible to avail ITC on the purchase of LPG cylinders." We contend that allowing the availment of ITC on the aforementioned grounds by AAR, Maharashtra is incorrect in the light of the fact that Ordnance Factory Bhandara is "Central Government" and hence eligible for 'NIL' rate of tax on such supply of food and beverages done to factory employees that are non-business eraities as explained in question no. 1(d) above. It should be note here that As per section 9 of the CGST Amendment Act, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been raised before the AAR, Maharashtra to check whether lesser amount paid to suppliers due to deduction of liquidated damages from payment to be made to such suppliers shall also get covered under the aforementioned circumstances of lesser payrnent made to suppliers. Ordnance Factory Bhandara had put forth in its submission that deduction of L.D is a manner of compensating the supplier for his dues and hence such deduction should not fall under the purview of said circumstances of "lesser payment." It was also submitted that taxable value of goods/services does not change due to L.D deduction and the supplier Shall have to pay tax on the entire taxable amount and not on the amount after deduction of L.D. 25. The department had put forth in its submission that as per the provisions of section 16 of the CGST Act, 2017, the ITC is available to recipient subject to actual payment equal to supply of goods made to such supplier. If the recipient makes lesser payment towards liquidated damages from supplier, the recipient is eligible to take ITC proportionally equal payment made to such supplier. Hence, applicant is required to reverse ITC to that extent. 26. The AAR, Maharashtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .D cases with the following two illustrations: - 1) Ordnance Factory Bhandara procured certain raw material from a supplier by the name of "Lakshmi Ishwar Industries" vide Tax Invoice no. 1 dated 09/04/2018 of the supplier. The taxable amount of the Tax Invoice was ₹ 5,50,200/-, IGST amount levied evas ₹ 99,036/- and thus the total invoice amount was ₹ 6,49,236/-. Due to non-fulfillment of certain contractual conditions, Liquidated Damages @ 10% of the total invoice amount were deducted while making payment to the supplier in respect of the said invoice. Thus, 10% of ₹ 6,49,236/-, that is, ₹ 64,924/- were calculated as Liquidated Damages to be deducted from supplier's payment. However, while passing the accounting entry in the books of Ordnance Factory Bhandara for the transaction of paying the supplier, full amounts of ₹ 5,50,200/- & Rs, 99,036/- were recorded as taxable amount & IGST amount respectively. ₹ 64,924/- was shown as a deduction in respect of Liquidated Damages from the payment to be made to the supplier. Enclosed herewith is a copy of voucher for such transaction. The code head 01/806/01 is used for recording the taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not intend to pay lesser amount to the GST Department by issuing credit notes in respect of deduction of L.D from such invoices. Another matter that should be thought about is that if such supplier of Ordnance Factory Bhandara is being audited by the Department under GST regime, then would the. Department be okay with the fact that the supplier has made lesser payment of GST to the Department due to deduction of L.D by Ordnance Factory Bhandara and wouldn't the Department consider it as a case of short payment of GST? The answer to such question would be that the Department would consider it to be a case of short payment of tax by the supplier since the Department would contend that deduction of L.D does not decrease the taxable value of goods and hence GST should be paid on the original taxable value of goods. Thus, it is re-iterated that such deduction of L.D from payment of suppliers towards supply of goods cr services or both cannot be classified as "failing to pay to the supplier, the amount towards the value of supply along with the tax payable thereon." In fact, on the contrary, such deduction of L.D is a manner of compensating the supplier towards his dues in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, Government of India dated 15/07/2019 regarding Establishment of Ordnance Factories in India in which it is seen that Ordnance Factory Bhandara was established under Ministry of Defence by Government of India in the year 1964. This serves as a further proof that Ordnance Factory Bhandara is "Central Government" department. 32. Tax Invoices of suppliers attached for appeal filed in respect of question no.6: Enclosed herewith are Tax Invoices of suppliers referred to in appeal filed against Questionno.6 for your kind reference. 33. Notifications for Question no. 7: - Notification No. 2/2018- Central Tax (Rate), Notification No. 3/2018- Central Tax (Rate) & Notification No. 36/2017 - Central Tax (Rate) referred to in appeal filed against Question no. 7 are enclosed herewith your kind ready reference. Respondents Submission dt.11.10.2019 34. Question-(1)- Being a part of the Ministry of Defence, Government of India, whether they are liable to pay GST on the following supply of services: - a. Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services: Submission by Department: - In the present case, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the central Govt. or state Govt. It is noticed that the appellant has forfeited Security deposited of suppliers due to non-fulfillment of certain contract conditions, which is nothing but the additional "consideration" received by the appellant. Hence, the appellant is liable to pay on such additional consideration being the part of the value of supply of goods as defined under section 15(2) of the CGST Act,2017. c. Security deposit left unclaimed by the suppliers and recognized as income after 3 years. No appeal preferred by the appellant against this question. d. Food and beverages supplied at industrial canteen inside the factory premises. Submission by Department: - As clarified in revenue submission mentioned in question 1(a) the ordnance factory functioning under the Ministry of defense, Govt. of India, shall not be treated as "Government" defined under section 2(53) of the CGST Act, 2017, since the organization is having Apex Body and industrial status. The fact of the appellant organization having industrial status has already been mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent: - For conducting any examination by the organization, no exemption available from payment of GST on examination fee charged from candidates. h. Rent recovered from residential quarters of employees. No appeal preferred by the appellant against this question. 35. Question: -2) whether Input tax credit on expenditure on the goods and services consumed by our organization in following activity shall be available: a. Maintenance of garden inside the factory premises. Submission by Department: - As per the section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods and services or both by him which are used or intended to be used in the course of furtherance of his business and said amount will be credited to the electronic credit ledger of such person. However, the appellant has received services from the service provider towards the Maintenance of garden inside the factory premises of the appellant. Such taxable service received by the appellant is not covered under the negative list of Section 18(5) and hence input tax credit shall be available to them. b. Maintenance and upkeep activities relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Expenditure related to maintenance and upkeep of guest houses maintained by organization. Submission by Department: - As per the Section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods and services or both by him which are used or intended to be used in the course of furtherance of the business and said amount wilt be credited to the electronic credit ledger of the such person. However, the appellant has received services from the service provider towards the maintenance of guest houses maintained by organization within the factory estate. The said activities are neither relating to business nor relating to manufacture of final products and its supply. The said activities may be welfare activity undertaken while carrying on the business but to qualify as input service, the activity must have nexus with the business of appellant. The expression "in course or furtherance of business" appearing in section 16(1) of GST Act refers to activities which are integrally related to the business activity and not welfare activity. Hence, no ITC is available on such supplies of services. e. Expenditure related to purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the preceding financial year, will be NIL in respect of intra- State Supply of Service. The said exemption is to be verified with the actual services received from advocate considering the fact that said advocate are other than a senior advocate and not having any business entity. The Ordnance Factory, Bhandara is having a specific status of business organization having annual turnover of more than ₹ 100 Crs. and hence the appellant is liable to pay GST on supply of services under reverse charge. As per applicable rate of GST. b. Being a part of the Ministry of Defence, Government of India, what is the impact of the Notification No.3/2018. Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. Legal Submission by Department: - As per the schedule II (Section 7) of CGST Act 2017, renting of immovable property shall be treated as supply of service. In the appellant 's own case, they are providing non-residential property on rental basis to a registered person under the Act 2017, which shall be covered under the definition of supply of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LHI, 124, 1st Floor, Jaina Tower-I, District Centre, Janakpuri, New Delhi- 110058 has also held that "the cleaning services supplied by the applicant to the Northern Railways are not exempted under S. No. 3 of the Notification No. 09/2017- Integrated Tax (Rate) dated 28.06.2017, as amended by Notification No 2/2018/-Integrated Tax (Rate) dated 25.01.2018 and parallel Notification No. CGST and SGST." Hence, no comments on the above additional submission made by the appellant. Personal Hearing 38. A personal Hearing in the matter was conducted on 14.10.2019, which was attended by Shri Sagar Sahajwani, C.A., on behalf of the Appellant, wherein he reiterated the written submissions, and relied upon various legal provisions and judicial pronouncement in support of their contentions. In the aforesaid hearing, the Department was represented by Shri Hrishikesh Deep, Asst. Commissioner, who also reiterated the written submissions, filed before us. Discussions and Findings 39. have gone through the facts of the case, documents placed on record, and the entire submissions made by both the appellant as well as jurisdictional officer. We have also perused the ruling pronounced by the Advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product range in the areas of air, land and sea systems and is having an industrial status and functions under Ministry of Defence. 43. The Appellant further argued in this regard that nowhere under law is it mentioned that "Government" cannot undertake activities relating to "research, development, production, testing, marketing and logistics of a comprehensive product range in the areas of air, land and sea systems". They further contended that "Having an industrial status" is the result of the nature of activities carried out by Ordnance Factory Bhandara, and "functioning under the Ministry of Defence and being controlled by an apex body (Ordnance Factory Board)" is a result of the organizational structure put in place to govern the functioning of Ordnance Factories. so, these aspects should not be taken into consideration while analyzing whether Ordnance Factory Bhandara is "Government" or not as they are totally irrelevant. 44, They further argued that the only important factor to be analyzed is that whether Ordnance Factory Bhandara falls into the definition of "Central Government" as per the aforementioned clause (8) of section 3 of the General Clauses Act, 1897 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Union vested in the President, thereby submitting that Ordnance Factory Bhandara is not merely a Government organization, it is "Central Government" itself since as explained above, it satisfies the conditions of being called "Central Government" as per the aforementioned provision of the section 2(53) of the CGST Act, 2017 read with clause (8) of section 3 of the General Clauses Act, 1897 read with Article 53 & Article 77 of the Constitution of India. 49. Further, the Appellant for the purpose of justifying their legal status as 'Government', has highlighted the constitution of their PAN allotted to them, which is "AAAGG0001Q' , wherein the 4th letter is '"G", which stands for "Government." 50. Further, the certificate, which was issued by the Jt. Secretary, Ministry of Defence, Department of Defence Production dtd. 18/04/2006 for Sales Tax purposes, wherein it was certified that the Indian Defence Forces and Indian Ordnance Factories are integral part of the Ministry of Defence, Government of India, and funds for meeting the expenditure on salaries and wages, stores etc. are drawn from the Defence Services Estimates of the Union Budget, clearly showcase this fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G0001Q" wherein the 4th letter, which signifies the status of the PAN Holder, is "G", which stands for "Government" is expressly indicating the constitution and legal status of the Appellant as the "Government". 52. Hence, in view of the above discussions, we are of the opinion that the observation made by the AAR on account of these aspects is erroneous and arbitrary, and hence the same warrants to be set aside. 53. Now, that it has been established that the Appellant can be construed as Central Government, we will examine the applicability of GST on the various transactions/activities carried out by the Appellant as described under Question 1 of the Advance Ruling application, earlier filed by the Appellant. 54. As regards the questions I(a) and I(b) asked by the Appellant, wherein the Appellant had asked as to (a) whether Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services, and (b) Whether Amount of Security deposit forfeited by the suppliers due to non-fulfillment of certain contract conditions, it is observed that the aforementioned transactions/activities carried out by the Appellant would squarely get cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself and no outdoor caterer is involved in providing services related to supply of food and beverages. Thus, such supply of food and beverages by the factory to factory employees inside the industrial canteen falls within the category of 'services' as per the aforementioned clause 6 of Schedule Il to the CGST Act, 2017. However, in terms of the aforementioned Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central Tax (Rate), supply of services by the Central Government to non-business entities attract 'NIL' rate of tax. Since such supply of food and beverages is being made to factory employees, who are in the nature of non-business entities, the charges recovered by the factory from such employees for such supply attracts 'NIL' rate of tax since Ordnance Factory Bhandara is "Central Government" as explained above. The AAR, Maharashtra had ruled that the said exemption is not applicable to Ordnance Factory Bhandara since it is not "Government" 57. Since, it has been established that Appellant can be construed as Central Government and the activities carried out by the Appellant by way of the supply of foods or drinks in the canteen, located ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Appellant, we refer to the observations made in the above para 56 and conclude that the Appellant, being 'the Central Government' is providing services of renting of immovable property to its employees, which are non-business entities, hence such services rendered by the Appellant will not be subject to GST in accordance with the provisions of Sr. No. 6 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. 60. Now, we will examine question I(f) asked by the Appellant as to whether School bus facility provided to the children of the employees will be subject to GST or not. In this regard, the Appellant's submissions are as under: Ordnance Factory Bhandara provides the service of pick and drop of the children of its employees from school located outside the factory via bus owned by the factory. Charges in terms of monetary consideration are recovered by the factory from its employees in lieu of such service provided to them. So, keeping in view the above discussed Sr. No. 6 of the exemption list on supply of services as per notification no. 12/2017- Central tax(Rate), such services provided by Ordnance Factory Bhandara attract 'NIL' rate of tax since the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered here for any discussions or rulings in connection thereto. 65. Now, we will examine the question 2 of the Advance Ruling application filed by the Appellant. The question asked by the Appellant was whether Input Tax Credit on expenditure on the goods and services consumed by our organisation in following activities shall be available or not. (a) Maintenance of garden inside the factory premises. (b) Maintenance and upkeep activities relating to gardens, parks, playground, factory school for children of employees, hall for recreational activities, residential quarter buildings of employees, roads, footpaths, street lightings and other parts of estate area that are located outside the factory premises but within the factory estate. (c) Medicines purchased by the hospital maintained by our organisation and used for treatment of factory employees and their dependents. Expenditure on maintenance, upkeep and other activities relating to such hospital. (d) Expenditure related to maintenance and upkeep of guest houses maintained by organisation. (e) Expenditure related to purchase of LPG cylinders used within industrial canteen. 66. The AAR, Maharashtra ruled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned intention of the Hon. Finance Minister of broadening the Input Tax Credit base. 73. Even in the erstwhile laws relating to Excise Duty & Service Tax, the essential requirement of a service to be considered as "Input Service" for availing CENVAT Credit of the same as per Rule 2(l) of the CENVAT Credit Rules, 2004, was that such service should be used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. There is a plethora of decisions by various High Courts &various benches of Tribunal (CESTAT ) in which it was adjudged that CENVAT Credit of Service Tax in relation to the following services was allowable on the pretext that such services were used by the manufacturer, whether directly or indirectly, in or in relation to the business of manufacture of final products. 74. In the case of Coca Cola India Pvt. Ltd. vs. CCE reported in 2009 = 2009 (8) TMI 50 - BOMBAY HIGH COURT, a Division Bench of the Hon. Bombay High Court held that the expression 'activities in relation to business' in the inclusive part of the definition of 'input service' further widens the scope of input service so as to cover all services used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... better atmosphere and environment which increases working efficiency and thus its maintenance is essential in the course of business for better running & furtherance of business. 82. Cost of such 'gardening expenses' forms part of the cost of the final products and thus forms part of the value of taxable supply. 83. Reliance is placed on the following judicial pronouncements of the Tribunal (CESTAT) & various High Courts, wherein it was adjudged that CENVAT Credit of Service Tax was allowable on expenditure related to maintenance & upkeep of gardens in the factory: 84. In M/s. Rane TRW Steering System Ltd. vs The Commissioner of Central Excise and Central Tax (2018) = 2018 (2) TMI 1745 - MADRAS HIGH COURT, the Hon. Madras High Court held that garden maintenance service would fall within the definition of input service, in terms of Rule 2 (l) of the Cenvat Credit Rules, 2004. 85. In Mukand Ltd's case Vs. Commissioner of Central Excise, Belapur {2016 (42) STR 88 (Tri-Mumbai)} = 2015 (9) TMI 944 - CESTAT MUMBAI, it was held by the Hon. Tribunal that the credit on 'gardening expenses' is fully allowable as the same is required for maintaining the good atmosphere in the manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R, Odisha held that availing input tax credit for services in relation to plantation and gardening within the plant area, including mining area and the premises of other business establishments is allowed. 93. Thus, it is our contention against the order of AAR, Maharashtra that availment of Input Tax Credit in relation to maintenance of garden inside the factory premises should be allowed. 94. On perusal of the above submissions made by the Appellant including the various judicial pronouncements cited by the Appellant, wherein it was categorically held by the courts that Cenvat Credit in respect of the input services used in the maintenance of the gardens in the factory premises is admissible, it is opined that ratio of these judicial pronouncements is clearly applicable in the instant subject matter as the facts and circumstances of the instant subject matter is similar to the facts and circumstances of the above cited Madras High Court case of M/s. Rane TRW Steering System Ltd. vs The Commissioner of Central Excise and Central Tax (2018) = 2018 (2) TMI 1745 - MADRAS HIGH COURT, wherein the Appellant had contended on the ground that the maintenance of the garden inside the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l such establishments and factory premises and land that is currently not used for any purpose whatsoever. The services of maintenance, upkeep, repair, housekeeping, cutting of trees & grass, civil construction, hiring of manpower for attending school bus, security services, garbage collection, sewage treatment, sweeping &cleaning etc. procured in relation to such establishments within the factory estate should be considered to be an "input service" as per section 2(60) of the CGST Act, 2017 and should also be considered to be "used or intended to be used in the course or furtherance of business" as per section 16(1) of the CGST Act, 2017. Thus, input Tax Credit should be available in respect of expenditure done on such services in so far as they are not disallowed under any other provisions of the CGST Act, 2017. Let us analyze each establishment one by one for admissibility of Input Tax Credit: (i) Residential quarters of employees of Ordnance Factory Bhandara & allied organisations, market area, places for worship of God, gardens, parks, playgrounds, swimming pool, footpaths, street lightings, factory school for children of employees, hall for recreational activities: - Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the organization. Having stated so, the appellate authority surprisingly took the view that maintenance of the residential colony by the respondent-Company was only an obligatory activity owing to situational exigencies and was not connected either directly or indirectly to the manufacture of its final products. This inherent contradiction in the Order-in-Appeal was noted by the CESTAT, which opined that if accommodation was not provided by the respondent-Company to its employees at this remote location, it would not be feasible for it to carry on its manufacturing activity. The finding of the Commissioner that providing a colony to the employees was not directly or indirectly connected with the manufacturing activity of the respondent-Company was therefore; not borne out on facts. The staff colony, provided by the respondent-Company, being directly and intrinsically linked to its manufacturing activity could not therefore, be excluded from consideration. Consequently, the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding, etc., necessarily had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e township/colony for their employees are expenses which are in relation to the business activity of the appellant which is manufacturing of petroleum products. It was also noted that while arriving at the price of the finished goods manufactured in these factory premises, appellant has considered the expenses incurred towards the residential township/colony as expenses and included the same while arriving at the cost of production of the final products manufactured in the factory premises and accordingly CENVAT Credit was allowed in relation to such services. 96.1 We have carefully considered the above submissions made by the Appellant, which also included the above cited case laws. It is not forthcoming from any of the above cited judgments as to whether the manufacturers involved in the aforementioned cases is charging some amount/rent for providing the accommodation facility to its staffs in the residential colony maintained by them. Thus, the facts and circumstances of the above cited cases are different form the instant case, where the Appellant is charging some rent/consideration from their employees for providing accommodation facility in the residential colony maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , repair and maintenance of such roads is procured. Roads connect the various establishments within the factory premises; that is factory where manufacturing activity is done and administration building with various other establishments within the factory estate like residential quarters, market area and other establishments mentioned above. Thus, the Input Tax Credit related to expenses mentioned in "Annexure B" in relation to such interconnected roads should be admissible on the following grounds: - d) The road ranging from the main entrance gate from where the factory estate begins up to the factory premises is used for inward and outward transportation of raw materials & finished goods and is thus used in the course or furtherance of business. e) within the factory estate; that is the establishments like residential quarters, hospital, guest houses, market area and all other establishments as mentioned above are also used for the purpose of business of Ordnance Factory Bhandara since as argued above all such establishments are there for the benefit of employees of the factory& thus such roads are used in the course of business of Ordnance Factory Bhandara. f) The cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s & the quality of the final product & the environment and hence it is necessary to maintain such wild grass & other vegetation. g) The cost of such services forms part of the cost of the final products and thus forms part of the value of taxable supply. h) Reliance is placed on the following judicial pronouncement of the Tribunal (CESTAT), wherein it was adjudged that CENVAT Credit of Service Tax was allowable on expenditure related to jungle cutting services to keep environment, factory and finished product bacteria free: In the case of L'Oréal India Pvt. Ltd. vs. CCE (2011) 22 STR 89 (Tri. - Mum.) = 2010 (11) TMI 143 - CESTAT, MUMBAI, the Hon. Mumbai bench of the Tribunal held that CENVAT credit of service tax paid on jungle cutting services to keep environment, factory and finished product bacteria free are to be allowed as they have nexus with business activity of Appellant. 96.4. After careful consideration of the above submissions and case law cited by the Appellant, it is opined that the Appellant is entitled to avail ITC in respect of expenditure incurred on the maintenance of such unused land in the factory estate, as the same is essential for keeping the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment in section 17(5) (b) of the principal CGST Act, 2017 has been brought about where input tax credit shall not be available in respect of supply of health services except where the same is obligatory for an employer to provide to its employees under any law for the time being in force. (f) That as per the amended section 17(5) (b) of the principal CGST Act, 2017, Input Tax Credit in respect of medicines purchased in factory hospital and other inputs and input services used in factory hospital should be allowed since such inputs and input services are used in respect of supply of health services to employees and their families that are mandatory to be provided under Ordnance Factory Medical Regulations. With respect to the above issue, it was ruled by AAR, Maharashtra that the hospital/dispensary maintained by the applicant to its employees and their dependents is to be categorized as "clinical establishment" as defined at Sr. No. 2(s) of the Notification No. 12/2017-C.T. (Rate) dated 28.6.2017, and supply of health care service by such clinical establishment is exempted under Sr. No. 74 bearing heading 9993 of the Notification No. 12/2017- Central Tax(Rate) dated 28th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , prior to this amendment act, was not available to any registered person under section of the CGST Act, 2017. 99. As regards the ruling of the AAR, we observe that the impugned ruling is lucidly contrary to the provision of the CGST Amendment Act, 2018, which clearly says that the ITC in respect of the health services are available to a registered person subject to the condition that the employer i.e. the registered person, is under obligation to provide such health services to its employees in terms of the provisions of any law for the time being in force. In the present case, it is obligatory for the Appellant to provide the health services to its employees and their dependents as per the Ordnance Factory Medical Regulation. Hence, the ruling pronounced by the AAR in this regard is erroneous, and warrants to be set aside. 100. Now, let us examine the issue of admissibility of ITC, raised by the Appellant, in question 2(d) of the advance ruling application, wherein they had asked as to whether they were eligible to avail ITC in respect of input services pertaining to maintenance and upkeep of guest houses maintained by them. Here, it was held by AAR, Maharashtra that the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any of the inputs or input services pertaining to the guest house is not available to the Appellant as the Appellant themselves have submitted that they are recovering room rent for availing guest house facilities. Thus, the above discussed CESTAT Mumbai Order, cited by the Appellant in support of their contention has emerged out to be rather adverse for their contention, and has instead supported the ruling pronounced by AAR, wherein the ITC under question has been denied. 103. Further, as the Appellant is charging rent from the guests availing the guest house facilities, which may be considered as exempt supply in terms of Sr. NC. 6 of the Notification no. 12/2017- Central Tax-(Rate) dated 28.06.2017 as the Appellant, as discussed above, has been held to be the Central Government. Therefore, No ITC is available against the said exempt supply in terms of the provision of section 17(2) of the CGST Act, 2017. Therefore, the ITC in respect of the inputs and input services pertaining to the guest houses will not be available to the Appellant. 104. Now, let us examine the issue of admissibility of ITC, raised by the Appellant, in question 2(e) of the advance ruling application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person." Thus, Input Tax Credit in relation to LPG cylinders that are re-filled for use in industrial canteen should be allowed as per amended section 17(5) (b) & 16(1) of the CGST Act, 2017. 107. Here, we would like to refer to our earlier observation made in respect of the question I(d) of the Advance Ruling application, wherein we held that the Appellant's activities Of the supply of Food and beverages at the industrial canteen inside the factory premises would attract NIL rate of GST, that is the said supply was held to be exempt supply in terms of Sr. No. 6 of the Notification no. 12/2017- Central Tax-(Rate) dated 28.06.2017. Since the subject supply has been held to be exempt supply by the Appellant, the ITC in respect of the LPG cylinders used in the factory canteen of the Appellant will not be available in terms of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corresponding Tax Invoices, they have strenuously emphasized that they are not paying less taxable amount or GST thereon to their suppliers in the L.D. cases. Further, they emphasized that they are maintaining separate accounts for Liquidation Damages, whose accounting code is different from those used for recording the taxable amount, CGST amount and SGST amount or IGST amount, as the case may be. Thus, they strive to contend that the Deduction of L.D. is separate transactional event from the receipt of the goods and payment made in respect thereof, after deducting L.D. from the dues of the respective suppliers. 110. As regards the observation of the AAR in as much as the lesser payment being made to the suppliers would result in lesser payment of GST by the concerned suppliers, it was submitted by the Appellant that the taxable value of goods/services does not change due to L.D deduction. They inter alia submitted that the supplier shall have to pay tax on the entire taxable amount and not just only on the amount after deduction of L.D. They have corroborated this contention with the copies of GSTR-2A of the Appellant, wherein the above mentioned two sample invoices are bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the following notifications are applicable to our organisation and what shall be the impact of such notifications: - (a) Notification No. 2/2018-Central Tax (Rate), in relation to services by an arbitrator or an advocate to our organisation. (b) Notification No. 3/2018-Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. (c) Notification No. 36/2017 - Central Tax (Rate), in relation to payment of tax on reverse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. The AAR, Maharashtra answered in the negative for all the three aforementioned sub-questions of question no. 7 of the application by contending that the notifications are not applicable to Ordnance Factory Bhandara since it is not "Government" 114. The Appellant has contended the aforementioned ruling of the AAR on the basis of facts and explanations given for Question No.l that Ordnance Factory Bhandara is indeed "Government" and hence all the three aforementioned notifications in Question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e President of India. Thus, it is adequately evident that the Ordnance Factory Bhandara, the Appellant, is nothing but 'the Central Government' in accordance with the provision of section 2(53) of the CGST Act, 2017 read with clause (8) of section 3 of the General Clauses Act, 1897 read with Article 53 & Article 77 of the Constitution of India. In view of the above, the Appellant is not liable to pay GST on the following services supplied by them: (a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. (b) Amount of Security deposit forfeited of suppliers due to non-fulfilment of certain contract conditions. (d) Food and beverages supplied at industrial canteen inside the factory premises. (e) Community hall (Multipurpose Hall) provided on rental basis to employees of our organization. (f) School bus facility provided to children of the employees. (g) Conducting exams for various vacancies. Question: 2) Whether Input Tax Credit on expenditure on the goods and services consumed by our organisation in following activities shall be available: - (a) Maintenance of garden inside the factory premises. Find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the manufacturers involved in the aforementioned cases is charging some amount/rent for providing the accommodation facility to its staffs in the residential colony maintained by them. Thus, the facts and circumstances of the above cited cases are different form the instant case, where the Appellant is charging some rent/consideration from their employees for providing accommodation facility in the residential colony maintained by it, which renders the said activity of the Appellant as supply of residential services, which is an exempt supply in itself in terms of the provisions made at Sr. 12 of the Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. Further, the education services provided by the factory school to the children of the employees, renting of the recreational halls to the employees for organizing some family functions against certain considerations (are exempt supply as discussed while replying to the question 1 of the advance ruling application of the Appellant. Since, all the aforementioned supplies made by the Appellant are exempt supply, any inputs or input services viz. maintenance, upkeep, repair, providing security, garbage collection, sewage tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as exempt supply in terms of Sr. No. 6 Of the Notification no. 12/2017- Central Tax-(Rate) dated 28.06.2017 as the Appellant, as discussed above, has been held to be the Central Government. Therefore, No ITC is available against the said exempt supply in terms of the provision of section 17(2) of the CGST Act, 2017. (e) Expenditure related to purchase of LPG cylinders used within industrial canteen. Findings in Q. 2(e): - Since, the Appellant's activities of the supply of Food and beverages at the industrial canteen inside the factory premises would attract NIL rate of GST, that is the said supply was held to be exempt supply in terms of Sr. No. 6 of the Notification no. 12/2017- Central Tax-(Rate) dated 28.06.2017. Since the subject supply has been held to be exempt supply by the Appellant, the ITC in respect of the LPG cylinders used in the factory canteen of the Appellant will not be available in terms of section 17(2) of the CGST Act, 2017. Question: 6) Whether proportionate Input Tax Credit has to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues. Findings in Q. 6: - On p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. Findings in Q. 7: - Since the Appellant has been held to be "the Central Government" as per the discussions and findings carried out herein above, hence all the three aforementioned notifications in Question No. 7 to the application should be applicable to Ordnance Factory Bhandara. 117. Hence in view of the above discussions and findings, we set aside the ruling pronounced by the AAR, Maharashtra and pass the following order: ORDER For the reasons recorded in the body of the order, the questions against which the Appellant has preferred appeal against the ruling of the AAR, Maharashtra, are being answered as under: Question: 1) Being a part of the Ministry of Defence, Government of India, whether our organization Ordnance Factory Bhandara is liable to pay GST on the following supply of services: - a) Liquidated damages deducted from the payments to be made to suppliers in case of delayed delivery of goods or services. b) Amount of Security deposit forfeited of suppliers due to non-fulfillment of certain contract conditions. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be reversed in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues. Answer: No, the Appellant is not required to reverse any proportionate Input Tax Credit in cases where lesser payment is made to the supplier due to deduction on account of liquidated damages from supplier's dues. Question: 7) Being a part of the Ministry of Defence, Government of India, whether the following notifications are applicable to our organisation and what shall be the impact of such notifications: - d) Notification No. 2/2018-Central Tax (Rate), in relation to services by an arbitrator or an advocate to our organisation. e) Notification No. 3/2018-Central Tax (Rate), in relation to services supplied by our organisation by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017. f) Notification No. 36/2017 - Central Tax (Rate), in relation to payment of tax on reverse charge mechanism on sale of used vehicles, seized and confiscated goods, old and used goods, waste and scrap to a GST registered person. Answer: Yes, all the three aforementioned notifications will be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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