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TMI Blog2021 (10) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is charging the amount spent in respect of the said ATF, from the customer in the form of reimbursement. Hence, the conditions of Section 15(2)(c) have been fulfilled and accordingly, the amount charged by the appellant (in respect of the arrangement/provision of ATF made by them for supply of Rental service of Helicopter ) from their customer in the form of reimbursement, is undoubtedly includible in the value of supply of services of Rental services of aircrafts in the instant case. In terms of Section 15(2)(c) of the GST Acts, 2017, the arranging of/provision of ATF in the helicopters/ aircrafts is the activity done by the appellant at the time of OR before the supply of services to their customer AND the appellant is charging the amount spent in respect of the said ATF, from their customer in the form of reimbursement. Hence, the conditions of Section 15(2)(c) of the GST Acts, 2017 have been fulfilled and accordingly, the amount charged by the appellant (in respect of the ATF fuel) from their customer in the form of reimbursement, is undoubtedly includable in the value of supply of services of Rental services of aircrafts in the instant case. The contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icorp Limited (GVHL), employs a fleet of around 30 helicopters (aircrafts) for providing services classifiable under Service Accounting Code 996603 (i.e. Rental services of aircraft including passenger aircrafts, freight aircrafts and the like with or without operator) in terms of Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The appellant has submitted that they are responsible for providing rental services of aircraft (with or without operator) and in respect of Aviation Turbine fuel (ATF), it was agreed that provision of the same for the purpose of flying of aircrafts would be the responsibility of the customers; that at locations where the customers are unable to provide the fuel, in order to ensure continuity of flying, the contract requires GVHL to procure the fuel on behalf of the customers and subsequently the cost of the fuel is reimbursed by customers at actual (without charging any mark-up); that GVHL undertakes the activity of procurement of fuel as a pure agent on behalf of the customers. 2. The appellant has filed their submission along with the appeal filed on 21.08.2020 against Advance Ruling Order No. GUJ/GAAR/R /21/2020 dated 14.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination of question whether in terms of the valuation provisions under the GST legislation, amount recovered as reimbursement (at actual) by the appellant from the customer, for the fuel procured on behalf of the customer is required to be included in the value of services provided by the appellant. 5. The GAAR, vide Advance Ruling No. GUJ/GAAR/R/21/2020 dated 02.07.2020, held that in terms of the valuation provisions under the GST legislation, amount recovered (at actual) by the appellant from the customer, for the fuel procured on behalf of the customer, is required to be included in the value of services provided by the appellant. 6. Aggrieved with the aforementioned order, the appellant has filed the present appeal. 7. The appellant has referred to the various provisions of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017 and the GGST Act, 2017 respectively and the GST Acts, 2017 collectively) and the Central Goods and Services Tax Rules, 2017 and the Gujarat Goods and Services Tax Rules, 2017 (herein after referred to as the CGST Rules, 2017 and the GGST Rules, 2017 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide fuel, the same is procured by the appellant and the cost is reimbursed by the customers on an actual basis; hence it is not consideration for the services provided by the appellant. It has been submitted that the arrangement of fuel by appellant as per rental agreement, was for administrative convenience and debit notes raised by them for recovery of fuel cost, do not have any direct nexus with the rental services of aircrafts, therefore GST is not payable on debit notes raised for recovery of ATF cost. 11. The appellant has submitted that the accounting policies followed by it for recording transactions related to fuel reimbursements from customers have been audited by the statutory auditors of the appellant and such reimbursements have not been treated as service income; that fuel purchased by appellant are not debited to the P L account as the same are not expenses of the appellant, are treated as receivables from the customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables; that the books of accounts have been prepared and audited as per accounting standards as required under the Companies Act, 2013. 12. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Air Products Limited Vs. CCE, Nagpur [2015 (38) STR. 90 (Tri.-Mum)], (g) Naresh Kumar Co. Pvt. Ltd. Vs. UOI [2014 (35) STR 506 (Cal.)]. (h) Millennium Constructions Pvt. Ltd. Vs. CST, New Delhi [2015 (39) STR 477 (Tri.-Del.)]. (i) Ahluwalia Contracts(India) Ltd. Vs. CST, New Delhi [2015 (38) STR 38 (Tri. Del.)]. (j) Gurmehar Construction Vs. CCE, Raipur [2014 (36) STR 545 (Tri.-Del.)]. (k) CCE, Bhopal Vs. Sonali India [2014 (34) STR 47 (Tri.-Del.)]. (l) Dholu Construction and Projects Ltd. Vs. CCE, Jaipur-II [2013 (32) STR 245 (Tri.-del.)]. (m) Gulf Oil Corporation Ltd. Vs. CST, Hyderabad [2010 (20) STR. 830 (Tri.Bang.)]. (n) Era Infra Engineering Ltd. Vs. UOI [2008 (11) STR 3 (Del.)]. The appellant has submitted that the provisions of Section 67 of the Finance Act, 1994 are pari materia with Section 15 of the GST Acts, 2017 hence, the ratio laid down in these decisions is applicable in the present case. 16. The appellant has submitted that the value of goods supplied by the service recipient is includable in the taxable value only in specific situations covered under Section 15(2)(b), as follows - i. Where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that it is acting as pure agent of the customer, accordingly, reimbursement of fuel cost cannot be subjected to GST, as the expenditure or costs incurred by a supplier as pure agent of the recipient of supply are excluded from the value of taxable supply for computation of GST in terms of Rule 33 of the GST Rules, 2017. 21. The appellant, vide their additional submission, has submitted that in cases where ONGC is unable to supply ATF fuel and the appellant has to procure the fuel, the appellant has raised debit notes on the customer ONGC for claiming the cost of fuel as reimbursement, charging GST on the same, but ONGC has not paid GST on ATF costs considering the same as reimbursement of costs only. 22. The appellant has submitted that before proceeding to ascertain the value of supply, what is supply is required to be determined. It has been submitted that the supply in the present case is renting of helicopters and the obligation to procure fuel is of ONGC. The reliance is placed on the decision of House of Lords in the case of Customs and Excise Comrs v. British Telecommunications plc. [1999] 1 WLR 1376. 23. The appellant has submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Since the supply of fuel is not leviable to GST as per Section 9(2) of the GST Acts, 2017, no tax is payable whether as an independent supply or as including it into the value of the supply. 26. The appellant has also referred to the definition of sale price provided under the Central Sales Tax Act, 1956 and Value Added Tax Acts of various states, relied upon the decision of Hon ble Allahabad High Court in case of Aruna Trading Co. vs. Commissioner, Sales Tax UP reported in [1984 (55) STC 236 (All)] and has submitted that applying the ratio of the said decision to the present case, the cost of ATF is reimbursed by ONGC to the appellant and the appellant have not charged the cost of ATF to ONGC which can be included in the value of the supply under Section 15(2)(c) of the GST Acts, 2017. 27. The appellant has submitted that the appellant is providing services of hire of helicopters with operator to ONGC which cannot be used for any other person/other supply by the appellant. When the appellant procures ATF on behalf of the ONGC, then it provides the helicopter registration number to the ATF supplier. This clearly indicates that the ATF procured by the appellant is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include - (a) (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) (e) Explanation. - 34.2 Regarding the contention of the appellant that from section 15(2)(b), it emerges that where it is agreed between two contracting parties that certain amounts would be incurred by the service recipient in relation to the service to be provided by the service provider, the same cannot be included in the value of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is charging the amount spent in respect of the said ATF, from the customer in the form of reimbursement. Hence, the conditions of Section 15(2)(c) have been fulfilled and accordingly, the amount charged by the appellant (in respect of the arrangement/provision of ATF made by them for supply of Rental service of Helicopter ) from their customer in the form of reimbursement, is undoubtedly includible in the value of supply of services of Rental services of aircrafts in the instant case. 34.4 The appellant has referred to Section 15(2)(c) of the GST Acts, 2017 which reads as incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or supply of services , and comparing the same to the issue in hand has stated that the reimbursement of fuel cost by the customer to the appellant is not covered under incidental expenses as fuel costs are not incidental expenses; that it is also not covered under any amount charged for anything done by the supplier in respect of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and accordingly, the amount charged by the appellant (in respect of the ATF fuel) from their customer in the form of reimbursement, is undoubtedly includable in the value of supply of services of Rental services of aircrafts in the instant case. 34.5 The appellant has further submitted that as per Section 15(1) of the GST Acts, 2017, the value of supply of goods or services or both shall be the transaction value i.e. the price actually paid or payable for the said supply of goods or services or both where the supplier and recipient are not related; that in the instant case, only rental services are provided and consideration for the same is in the nature of fixed monthly charges plus flying hourly charges and that the amount of reimbursements charged by the appellant for ATF is not in respect of supply of services that were agreed to be provided to the customer in terms of the rental agreement. In this regard, we find that the supply of services provided by the appellant are rental services of aircrafts and for providing this supply of services, the appellant is being paid monthly rental charges and flying hourly charges by the customer. As per the contract, the helicopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; The above definition of consideration clearly includes any payment made or to be made, in respect of supply of goods or services or both by the recipient or by any other person. It also includes the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person. In the instant case, the payment made or to be made by the recipient includes payment towards the services rendered by the appellant as well as the payment towards ATF, which has been arranged for by the appellant and filled in the aircrafts. This means that payment made or to be made by the recipient to the appellant would not only include the payment for the supply of services i.e. Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator but would also include the amount for the ATF (fuel) filled in the aircraft by the appellant. Therefore, the amount of ATF, which is received as reimbursement by the appellant will undoub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely, - (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation . - For the purposes of this rule, the expression pure agent means a person who - (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. As per Explanation to Rule 33 of the CGST Rules, 2017, the following conditions are needed to be satisfied to qualify as a pure agent and therefore the same are also needed to be examined in light of the contentions of the appellant vis- -vis the views held by the GAAR. We find as under: (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; As per Clause 10.2.1.(iii) of Schedule-A of the contract dated 31.07.2015 of the appellant with ONGC (customer) dated 31.07.2015, it is apparently clear that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Thus, it is very much clear that it is by and large, the responsibility of the appellant only to arrange for the ATF for their customer. It is also apparent that the appellant has entered into a contractual agreement with the recipient of supply to incur exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the Rental services of aircraft to their customer. Thus, the fuel so procured by the appellant is with the intention to enable him to supply the aforementioned service. Therefore, it cannot be said that the appellant neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. Thus, the said condition is also not satisfied. (c) does not use for his own interest such goods or services so procured; Although we agree with the contention of the appellant that the aircrafts were to be flown as per the directions/schedule provided by the customer, we do not agree with their contention that ATF for flying the aircraft was the responsibility of the customer i.e. ONGC. It is apparently clear from the conditions of the contract that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TF fuel filled in the fuel tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the aforementioned service to their customers. Therefore, there is no doubt about the fact that the ATF so procured by the appellant is used for his own interest i.e. to enable the appellant to fly their aircrafts and in the process to provide the aforementioned service to their customer. Thus the said condition is also not satisfied. (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply, he provides on his own account.: Although the appellant have mentioned about the accounting method followed by them stating that they have only been reimbursed the actual amount without markup from their customers, they have not produced the relevant evidence/documents to prove this point. 40. We therefore, find that since none of the conditions envisaged in the provisions of Rule 33 of the GST Rules, 2017 for being a Pure Agent have been fulfilled/satisfied by the appellant, they cannot be said to be pure agent in this case and therefore the amount of reimbursement received by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, the supplies procured by the appellant from the third party is that of ATF, which they procure and fill in the aircrafts which are used to provide Rental services of aircraft . Thus, the supplies of ATF procured by the appellant from the third parties are in relation to or in order to provide rental services of aircraft and cannot be said to be in addition to the services being supplied by the appellant on his own account. As per the contention of the appellant, it has already been abundantly established that renting of aircraft services (with pilots) was never dependent upon provision of ATF as appellant would have received the fixed monthly charges even if the aircraft was not in use, although the rentals were also partly chargeable based on the flying hours of the aircraft. However, we fail to understand how the appellant would be able to provide the supply of Rental services of Aircrafts without filling the ATF in their aircrafts/helicopters or as to how the renting of aircraft services can be considered as never dependent upon the provision of ATF. We also do not agree with the contention of the appellant when they say that ATF was procured by the appellant fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined a more general description of valuation of services. Further, the provisions of Rule 33 of the GST Rules, 2017 specifically states that the reimbursements received by the supplier as a Pure Agent will be included in the value of supply if the conditions specified in the said Rule are not satisfied. Hence, the aforesaid judgements cannot be made applicable to the issues in the GST regime. 44.1 The appellant has placed reliance upon Circular No. 47/21/2018-GST dated 8.6.2018 stating that it is a settled position that where it is agreed between a service provider and service recipient that the service recipient shall provide certain goods to the service provider on free of cost basis, which are to be used by the service provider for provision of services, the value of the said goods cannot be included in the value of services provided/agreed to be provided by the service provider; that the above clarification squarely covers the issue on hand, as (in the instant case) customer is responsible to provide ATF on free of cost basis to the appellant and only in cases where the recipient is unable to provide the ATF, the appellant is required to procure the fuel and cost of ATF is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that an identical issue in service tax regime has been settled in favour of the assessee in the case of Heligo Charters Pvt. Ltd. vs. CST, Mumbai-VI, [2020 (4) TMI 182-CESTAT-Mumbai] wherein it was held by Tribunal that value of ATF supplied by service recipient to assessee was not liable to be included in taxable value of Rental services of aircrafts and that the Tribunal has relied upon the landmark judgements of CST vs. Bhayana Builders (P) Ltd. [2018 (10) GSTL 118 (SC)] and UOI vs. Intercontinental Consultants Technocrats Pvt. Ltd., [2018 (10) GSTL 401 (SC)] wherein law has been laid down in the context of Section 67 of the Finance Act, 1994. The appellant has placed reliance on the Mumbai Tribunal judgement in the case of Inox Air Products ltd. vs. CCE, Nagpur [2015 (38) STR. 20(Tri.Mum)] wherein the air separation plant owned by the appellant and lying in Customer s premises was leased to their customer, and by a separate agreement, the appellant undertakes the operation and maintenance of the air separation plant at the customer s place, receives service charges for the same and no separate charges are paid by the appellant for the electricity used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion value i.e. the price actually paid or payable, hence the ratio laid down in above decision is applicable in the present case. 45.3 In this regards, we find that all the above judgements referred to by the appellant are pertaining to the pre-GST era and based on interpretation of Section 67 of the Finance Act, 1994. As discussed earlier, Section 15 is the section for determination of value of supply in the GST era, which is different from Section 67 of the Finance Act, 1994 as it elaborates in great detail the items/things that are required to be included in the value of supply. Sub-section (2) of Section 15 itself starts with the words The value of supply shall include and goes on to elaborate the items/things required to be included in the value of supply. Sub-section (3) of Section 15 specifies the items/things which are not to be included in the value of supply. Thus, all the aspects of valuation of supply have been covered in the GST Acts, 2017 itself which is not the case with Section 67 of the Finance Act, 1994 which contains a more general description of valuation of services. Also, consideration has been clearly defined in Section 2(31) of the GST Acts, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied indirectly by including it in the value of supply. The appellant has placed reliance on the decision of Hon ble Supreme Court in the case of CCE, Pondicherry vs. ACER India Ltd.-2004 (172) ELT 289 (SC). The issue before the Hon ble Court was whether the value of computer manufactured, for the purpose of levy of Excise duty, will include the operational software sold along with the computer. Software was exempted from levy of excise duty whereas computer was taxable at the rate of 16%. The Department argued that the computer cannot effectively function without software and that the definition of Transaction value in Section 4 of the Central Excise Act, 1944 includes any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of sale or at any other time. The Hon ble Court relying on the decision of PSI Data Systems ltd. v. Collector of Central Excise 1997 (89) ELT 3(SC) held that although a computer may not be capable of effective functioning unless loaded with software, the same would not tantamount to bringing them within the purview of the part of the computer so as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as envisaged in Rule 33 of the GST Rules, 2017 for the reimbursed amount to be excluded from the Value of supply . 48. The appellant has also relied upon the decision of Allahabad High Court in the case of Aruna Trading Co. vs. Commissioner of Sales Tax, UP reported in 1984 (55) STC 236 (All.). The facts of the case were that the assessee was a contractor and supplier of stone ballasts to Northern Railway. Along with the supply of ballasts, the assessee also charged transport and other charges from the Railways. The assessing officer assessed that the assessee is liable to pay sales tax on entire amount (including transport and other charges) received from the Railways. Hon ble Court considering the facts of the case observed, where the assessee is being paid price for the ballast separately and is being separately paid for the transport and other charges, the assessee cannot be taxed on anything other than the price of the ballast than he has been paid which had necessarily to be included in his turnover. The appellant has stated that applying the ratio of the above decision to the present case, the cost of ATF is reimbursed by ONGC to the appellant and the appellant hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of reimbursement received by them, from ONGC. It, therefore, appears that the appellant is very much aware about the fact that they are required to include the amount received by them as reimbursement (in respect of ATF procured by them for their customer) from ONGC, in the value of supply of services provided by them and pay GST on it, but has decided to protest simply because ONGC is not paying the GST leviable on the amount paid by them as reimbursement to the appellant. 51. Further, although the appellant have stated that fuel reimbursements from customers are not liable to GST as they are not debited to the P L, are treated as receivables from customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables and that books maintained are as per accounting standards, the fact remains that the value of supply needs to be determined in accordance with the statutory provisions of the GST Acts, 2017 and rules framed there under, which have been elaborately discussed hereinabove, and the valuation of supply is not dependent on the accounting treatment given to any expenditure or cost, hence their contention cannot be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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