9911796707
TMI Blog2021 (12) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... T or MPGST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF THE CASE - The Applicant in his argument gave following brief facts of the case. 3.1 The applicant is engaged, inter alia, in purchase of Tendupatta from the MP State Minor Forest Produce (Trading and Development) Cooperative Federation Limited (hereinafter referred to as the Federation for the sake of brevity) for the purpose of trading of Tendupatta. 3.2 The sale of Tendupatta, was made to successful bidder of lender floated by the Federation and the transaction of the sale of Tendupatta was governed by the agreement that the successful bidder entered into with the Federation. The text of the agreement formed the part of the Fender. 3.3 The Tendupatta to be procured was to be verified by the successful bidder to establish its quality and usefulness for the purpose for which it was to be procured. Once the quality was accepted, the bidder would make the payment for the Tendupatta as per the instalments stipulated in the agreement and take delivery of the Tendupatta. In case the bidder was not able to make the payment, the Tendupatta was to be stored in the Godown of the Federation till such time a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case, where the goods are destroyed by fire before being delivered under an agreement to sell, can there be "Supply" within the meaning of Section 7 of the GST Act after the destruction of the goods by fire? 5. DEPARTMENT VIEW POINT- The Asstt Commissioner, State Tax, Sagar vide his letter No.Vak/ARA/2021/M5 dated 06.02.2021 informed that on the following reasons, the issued covered in the application should not be considered as supply under Section 7(1):- (i) All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Although this definition is inclusive but for supply the condition, is in the course of furtherance of business in addition to made or agreed to be made and for a consideration is essential. In the said issue, the condition of consideration is not fulfilled as in the definition of consideration, the deposit is excluded. (ii) In this case, the title of goods not transferred, hence the goods not to be considered as supply. (iii) As per the provision of Section 31:- A registered p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule I. made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Of the four limbs to Section 7(1), the limbs, (b), (c) and (d) do not apply to the transaction at hand Also, out of the forms of supply given in sub-clause (a), except for the term "sale", none of the types of supplies are applicable in this case If the transaction at hand can be classified us "sale' then there shall be supply within the meaning of the GST Act. else the transaction cannot be classified as Supply". Therefore. in the given facts of the case where the goods stand destroyed, it has to be seen whether sale has happened or not. 16.3 A joint reading of the two sections, viz and 7(1)(a) and (9(1) would show that for the liability to pay GST to arise, there has to be supply of goods or services. Unless there is supply, there cannot be a taxable transaction. In the instant case the item involved is "goods". Therefore, for liability pay GST to arise, goods i.e. Tendupatta has to be shown to have been supplied. The type of supply in this case is sale and therefore it has to be established that "sale" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the Federation, or future goods. (2) There may be a contract for the sale of goods the acquisition of which by the Federation depends upon a contingency which may or may not happen. (3) Where by a contract of sale The Federation purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods. Thus, by virtue of Section 6 also, since the contract in present for sale of future goods has been entered into, the contract would be an agreement to sell the goods. 16.8 Under clause 6(B) of the agreement, it is stated that if delivery is not taken from the society, the facility of delivery from the godown shall be provided to the applicant (successful bidder). Further it is also stated that in case of facility of delivery from godown is granted, facility for safe storage of goods shall be provided by storing the Tendupatta in godown of Federation Society Department under joint lock. The relevant clause is as under: It is therefore clear that the delivery of the goods was to be given from the godown and till such time us the delivery w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditionally appropriated to the contract, either by the Federation with the assent of the bidder or by the bidder with the assent of the Federation, the property in the goods thereupon passes to the bidder Such assent may be express or implied, and may by given either before or after the appropriation is made. In the facts of the case, unless all the conditions of the agreement were complied with, the goods were not to be treated as delivered or sold. Therefore, property in the goods would only pass to the applicant after the compliance with all the conditions of the agreement. 16.12 The agreement has further stated that in case of non-compliance of the terms and conditions of the contract in toto. the Tendupatta shall be deemed not to have been delivered or sold. The relevant clause is as under: 16.13 The goods were insured by the Federation at the cost of the Bidder. The Federation was not the beneficiary of goods insured by the bidder. For obtaining insurance, the person entering into the contract with the Insurer should have insurable interest in the goods. Until and unless the risk is with the Federation, the Federation does not have insurable interest in the goods after sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that it was accepted by the Federation that the sale was not made by the Federation. The relevant clause is as under: 16.17 The provisions of Time of Supply of goods is given in Section 12 of the GST Act, 2017, which states that the liability to pay GST shall arise at the lime of supply, determined as per the provisions of Section 12 Further, sub-section (2) specifies the time of supply in the case of goods. The text of the provision is as under:- (2) The time of supply of goods shall be the earlier of the following dates, namely:- (a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31 to issue the invoice with respect to the supply or (b) the date on which the supplier receives the payment with respect to the supply: In the instant case, invoice has not been raised by the Federation and also payment has not been made by the Applicant Therefore, assuming but not accepting that there is supply, the time of supply had not come before the destruction of the goods by fire. Therefore, till the lime of the fire, there was no liability to pay GST. 16.18 Once the subject matter of the sale is destroyed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject matter of sale is destroyed before delivery of the goods, subsequent actions cannot result in supply of the goods within the meaning of the term "Supply" under the GST Act." 6.2. He submitted the following documents that they may be taken on record:- a) Letter from Managing Director, District Forest Produce Co-operative Union, West Mandla to the applicant demand GST on the Tendupatta destroyed by fire; b) Letter from Managing Director. District Forest Produce Co-operative Union. West Mandla to the Additional Managing Director (Insurance) MP Minor Forest Produce (Trading and Development) Cooperative Federation. Bhopal: c) Agreement of the applicant with MP Minor Forest Produce (Trading and Development) Cooperative Federation. Bhopal for procurement of Tendupatta; d) Copy of Invoice For sale of TenduPatta by MP Minor Forest Produce (Trading and Development) Cooperative Federation. Bhopal: e) Copy of Delivery letter of Tendupatta and Transport Permit: and f) Copy of Insurance Policy for TenduPatta. 6.3. During the course of the Personal Hearing on 01.10.2020, the counsel made the following submission on email: 1. APPLICANT'S ELIGIBILITY TO FILE PRESENT AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been paid; (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. ... Emphasis Supplied 1.7 In this case, the applicant has taken custody of Tendupatta jointly with the seller of the Tendupatta, which is to be held in such joint custody till such time as the payment for the Tendupatta is not made or till the end of the period of contract, along with interest in case of delay in payment beyond the stipulated time. The query of the applicant is whether the act of taking joint custody of Tendupatta results in a supply of Tendupatta. In terms of section 97(2) (g). the applicant wishes to question whether:- (a) any particular thing done by the applicant, i.e. taking joint custody, (b) with respect to any goods, i.e. tendupatta, (c) amounts to or results in a supply of goods, i.e. the tendupatta taken in joint custody. 1.8 Thus in view of the above, it is submitted that advance ruling may be sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited (hereinafter referred to as the Federation for the sake of brevity)for the purpose of trading of Tendupatta. 2.2 The applicant was the successful bidder in NIT No. T.P.2 Dated 01.11.2016 and accordingly entered into an agreement for sale of Tendupatta with the Federation for purchase of Tendupatta from Lot No. 1777 in four instalments. 2.3 The applicant had paid the price for two lots and taken the delivery of the Tendupatta relating to the first two lots. The Federation has accordingly issued the following invoices :- - Invoice No. JBWML0024 dated 30.11.2017 for Rs. 11881751.00 and - Invoice No. JBWML0041 dated 30.01.2018 for Rs. 11788569.00 2.4 Before the payment of the next two installments could be made, the Tendupatta was destroyed by fire, while still in the godown of the Federation. 2.5 The Federation, in terms of the agreement, received the insurance money for the destroyed Tendupatta kept in the godown and appropriated the proceeds as under: S.No. Particulars Amount (Rs) 1. EMD 3742050.00 2. Insurance Claim proceeds 17787668.00 3. Balance from the 2nd installment 29683.00 Total 21559401.00 2.6. The Federation vide its letter vide no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint name of the Federation and the Applicant. Therefore, the Federation has insurable interest in the goods. Accordingly, the risk in the goods had not passed on to the applicant. 3.10 further, in terms of Section 8 of the Sale of Goods Act, 1930, in case of an agreement to sell, if the goods are destroyed prior to passing of the risk to the buyer, the agreement becomes avoidable. Since the risk has not passed to the buyer in terms of Section 23 of the Sale of Goods Act, 1930. after the destruction of the goods, the contract becomes and avoidable agreement to sell. 3.11. In terms of Section 12 of the GST Act, time of supply of the goods, is earlier of the due date of issue of invoice and receipt of payment, hi this case, neither has happened. Also, since the goods stand destroyed, neither of the acts can happen now, 3.12. Joint reading of the provisions of the Sale of Goods Act. 1930 and the provisions of the GST Act shows that;- h) accepting joint custody of the goods without the rights and privileges of ownership does not constitute completion of sale in the eyes of law. further such custody was not interpreted as delivery or sale of Tendupatta to the applicant; i) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the applicant on 12.10.2020 submitted as under on email: "During the course of the hearing, the following queries were raised: I. As per clause (a) of Section 95 of GST Act, the Advance ruling means a decision provided by the Authority or the Appellate Authority for Advance Ruling on matters specified in sub-section (2) of Section 97 or sub-section (1) of Section 100, in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant. It is observed that the questions referred by you are not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by you, therefore, why not your application should be rejected being outside the purview of Advance Ruling. II. Moreover, as per your submissions, if the goods under joint custody of yourself and the Federation, is not to be treated as supply, then explain the following:- (a) what is the purpose and requirement to keep the said goods under joint custody of yourself and the Federation; (b) why you are a beneficiary in insurance of the said stock, if the supply is not complete: (c) why rent of the godown, in which said stock is stored, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, couching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal." (emphasis supplied) 1.5 In this regard, kindly see the matter of COMMISSIONER OF C. EX.. NASIK Vs CABLE CORPORATION OF INDIA LTD. reported in 2008 02) S.T.R. 598 (Tri. - Mumbai), where the Honorable CESTAT stated as under:- "7. ..................................From the above definition it is very clear that the input services besides being used in or in relation to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically stated in the list of activities in the definition of the "input service" under Rule 2(l) ibid yet it is an activity relating to the business of the appellants as this facility is being provided exclusively only to the employees of the factory of the appellants within the premises of the factory. The canteen facility is beneficial for the workers as they are served with food stuff, etc. at concessional rates and it is they who are engaged in the business of the appellants, which is nothing but the manufacture of goods. In any case, the canteen facility provided can also be said to be used by the manufacturer indirectly as the canteen facility is only for the benefit of the appellants' employees, who play a significant role in the activity of manufacture." Thus, the Tribunal and Courts have consistently held the term "in relation to" expands the scope of the term in question. 1.7 further, the Honorable Apex Court has also interpreted the term "in relation to" in like matter, in the matter of Doypack Systems (Pvt.) Ltd v. Union of India - 1988 (36) E.L.T.201 (S.C.) after a magisterial analysis of precedential authority reiterated the principle that the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant extract from the order is as under: "8. In our view, there is no merit in this civil appeal filed by the Department. At the outset, we may clarify that electricity is not an excisable item. Further, in this batch of civil appeals we are concerned with the electricity which is generated inside the plant by heating of LSHS and which is captively consumed and used to manufacture cement/caustic soda. Rule 57A, quoted above, has an Explanation clause which stated as to what inputs are included in MODVAT credit. Explanation clause (c) refers to "input used as fuel". This clause was introduced by Notification No. 4/94. At that time the Government made it clear that inputs used as fuel were entitled to MODVAT credit. That fuel either utilized directly or for generating electricity, as an intermediary product, is integrally connected with several operations which results in the emergence of the final product, namely, cement/caustic soda. It is important to note that with out utilization of LSHS, it is not possible to manufacture cement/caustic soda. The electrolysis process is dependent on continuous flow of electricity. If there is disruption in the supply of electricity from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in saying that the input must be raw-material consumed in the manufacture of final product, however, in the present case, as stated above, the expression "used" in Rule 57A uses the words "in relation to the manufacture of final products". The words "in relation to" which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words "in relation to content of the expression "inputs" so as to attract goods which do not enter into finished goods. In the case of M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. v. The Sales Tax Officer, Kanpur and another - 'AIR 1965 S.C. 1310, this Court has held that Rule 57A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw-material is used in the manufacture of final product it is an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to supply. 6 whether applicant is required to be registered; Question regarding liability to get registered cannot be with respect to a supply, but is in relation to a supply 7 whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. Any act of omission or commission may result in a supply. The supply need not result in the hands of the applicant However, the act of omission nr commission must by the applicant. From the above table, there appears to be a conflict in the language of Section 95(a) 97(2). In such cases, the Rule of interpretation - Harmonious Construction is to be resorted to. Law as propounded is not always rational or follows logic. Court does not import rationality in an enactment under the guise of interpretation. The law. as enacted should he interpreted in such a manner as to attempt to reconcile, to harmonize, to adjust the overlapping and often conflicting claims and demands, so that the sacrifice of the conflicting provisions is seldom made. 1.10 Harmonious Construction:- 1.10.1 The Rule of Harmonious Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary nature and/or conflict between them. * Both the provisions that are conflicting in nature or are repugnant to each other are to be read as a whole and the entire enactment in question must be considered. * Of the two conflicting provisions, choose the one that is wider in scope. * Compare the wider provision with the narrow provision and then try to interpret the wider provision to see further consequence. If the consequence is as reasonable as to harmonize both the provisions, and it gives their full effect separately, no further inquiry is needed. One important aspect to be kept in mind is that the legislature while framing the provisions was fully aware of the situation which they entered to cover and therefore all provisions enacted require to be given their full effect on scope. * When one section of an Act takes away powers conferred by another Act, a non-obstante clause must be used. * It is imperative that the Court must try to find out the extent to which the legislature has intended to give one provision an overriding power over another provision. In the case of Eastbourne Corporation v. Fortes Ltd. it was held that if two contradictory sections cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 95(a), read with Section 97(2)(g). 1.16. Concept of Locus standi: 1.16.1 Locus standi is an essential tool for the realisation of rights. The concept of standing is intertwined with the right of access to justice. Furthermore, effective access to justice is considered as the most basic requirement of a legal system, which purports to guarantee legal rights. The essence of the provision is that the applicant should have locus standi in the matter and it should not result in frivolous questions being asked by applicants who do not have any interest in the transaction in question per se. Thus, once the applicant has locus standi with respect to the goods, he cannot be precluded from raising a question in an Advance Ruling. From the above averment it is clear that the subject matter of the question is solely in relation to the supply made by the applicant and is therefore covered under section 95(a) read with Section 97(2). 2. Special nature of the agreement: 2.1 Before the agreement is interpreted in light of the GST Laws and for the purpose of its application to the Advance Ruling sought, the background of the agreement has to be understood and appreciated for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant was not satisfied with the quality and refused to accept the Tendupatta. the tendupatta was to be inspected by the officials of the Federation and their assessment regarding fitness of Tendupatta for the purpose of making Bidi was to be final. Therefore, even if the Tendupatta was not up to the mark as per the applicant he was bound to pay for the same the officials of the Federation pronounced it to be fit. In this regard kindly see para 5(IV) of the agreement. The relevant extract from the para is as under: From the above narrative it is clear that the agreement was loaded in favour of the Federation and the cost of any non-compliance was to be borne by the applicant. (c) Conditions in the agreement regarding payment of interest, godown charges and other expenses: - a. Interest: i. The payment for Tendupatta was to be made in four installments. The agreement al clause 6(b)(1) specified the due dates of payment, which were as under: Installment Due date 1st 05.10.2017 2nd 23.11.2017 3rd 05.01.2018 4th 23.02.2018 Extract from the agreement is as under: ii. In case of delay in payment of the installment, intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borne in mind while coming to any conclusion in this matter. 3.1.2, The applicant was required to lake delivery of the Tendupatta from the collection centre. However, in the event that the applicant was not able to take the delivery at the collection centre.it was deemed that the applicant did not want to take delivery from the collection centre. In such case, as per the agreement, the Tendupatta was to be delivered from the Godown instead of the Collection Centre. The storage in godown was in terms of clause 6(a) (III). The text is as under: 3.1.3. When clause 6(a) (III) came into operation, the Tendupatta was to be stored in the godown allotted by the Federation. The storage of the Tendupatta was under the Joint Custody of the applicant and the Federation, but under the control of the Federation. This requirement of Joint Custody was in terms of clause 6(b) of the agreement. The text of the clause is as under: The control over the Tendupatta in the godown was with the Federation in terms of Clause 6(b) (5). The text of the provision is as under: 3.1.4 The reason for joint storage was as under: a) This Tendupatta was not paid for and therefore, was not treated to be sold to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to obtain insurance of the goods for sum. not less than the amount of dues of the applicant towards the Federation in respect of the Tendupatta stored in the godown. Also, the insurance claim was to be paid to the Federation in case any claim was filed. 3.2.3. The relevant clause for Insurance of The Tendupatta stored in the godown is clause 6(B)(6). The relevant extract of the clause is as under: 3.2.4. From the above discussion it is amply clear that the insurance was obtained in compliance of the terms of the agreement with the Federation and also that the beneficiary of the insurance was the Federation and not us. 3.2.5 Further, from the copy of the Insurance Cover Note, it is clear that the insurance is in the name of the MD, MPFE (T & D) Co Op Fed Ltd Mandla. Insurance in the name of the Federation means the Federation has an insurable interest in the goods, which shows that not only the benefit of the insurance but the insurable interest was also that of the Federation. From the above averments, read with the extract of the agreement between the applicant and the Federation and copy of the Insurance Cover note filed by the applicant, it is clear that the applicant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it was repealed and a separate Act named Sale of Goods Act. 1930 came into existence. A contract may be verbal or written and in case of dispute, the terms of the agreement are tested against the provisions of the sale of goods act for their application and interpretation of the terms. Where the contract is verbal, the conduct of the parties, the common practice in the trade, legality of the actions etcetera arc taken into consideration, while in case of a documented agreement, the terms of the agreement become the foundation for the interpretation of the terms of the agreement, subject to they being legal. 3.4.2 In this contract between the Federation and the Applicant for sale of Tendupatta, special provisions, not generally found in sale agreements have been provided for. These special provisions are aimed at protecting the financial interests of the Federation. Therefore, once the agreement is entered into by the applicant, the agreed amount is to be paid by the applicant even if he does not buy the Tendupatta eventually. Under the terms of the agreement, the matter payment of the Godown Charges. Labour Charges, interest on delayed payment all became part of the amount due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce amount of which interest has also been charged by the Federation from the applicant. 7.4. It has to be examined whether the question - 'Whether the transaction of supply of impugned goods by the Federation is completed or not' is a question to be decided on the application of the Federation only or whether it can he decided on the application of the applicant. 7.5. Also. it is to be considered whether in a case where the supplier i.e. the Federation themselves have treated the disputed transaction as supply, then is it open for the Applicant to question whether there is supply. 7.6. Advance Ruling under the Act is defined in Section 95(a) and is as under; "(a) "advance ruling" means a decision provided by the Authority or the Appellate Authority [or the National Appellate Authority] to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (I) of section 101) [or of section I01C], in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant:" 7.7 As per the definition, the ingredients of an Advance Ruling are; - It is a decision on matters or on questions specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inconsistency and repugnancy within a section or between a section and other parts of a statute. The rule follows a very simple premise that every statute has a purpose and intent as per law, and should be read as a whole. The interpretation which is consistent with all the provisions and makes the enactment consistent shall prevail. The doctrine follows a settled rule that an interpretation that results in injustice, hardship, inconvenience and anomaly should be avoided. The interpretation with the closest conformity to justice must be picked. The / Supreme Court laid down 5 main principles of the 'Doctrine of Harmonious Construction'- * The courts must avoid a 'head of clash' of contradictory provisions and they must construe the contradictory provisions so as to harmonize them. * When it is not possible to completely reconcile the differences in contradictor provisions, the court must interpret them in such a way so as to give effect to both provisions as much as possible. * Courts must keep in mind that the interpretation which reduces one provision to a useless standing is against the essence of 'Harmonious Construction'. * To harmonize the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 97(2)(g) of the Act. being related to supply of goods. 7.18. In light of the above we are of the opinion that the question regarding the act of supply of rate of GST applicable on the inward supply of the applicant is covered under the definition of Advance Ruling as per section 95(a) of the GST Act and the application is therefore admissible. 8. Discussing and findings: 8.1. We have carefully considered the submissions made by the applicant in the application, the pleadings on behalf of the Applicant made during the course of personal hearing and the Department's view provided by the jurisdictional officer. 8.2. Admittedly, in one instance, the Tendupatta was destroyed in fire in the Godown under the joint lock and key of the applicant and the federation. The applicant has provided copy of letter no. Serial No. T.P./19/731 dated 31.05.2019 of the Managing Director. District forest Produce Co-operative Union. West Mandla addressed to the applicant where GST has been demanded on the value of the third and fourth installments of Lot No. 1777 of the jointly held Tendupatta destroyed in the godown. On the other hand, it is the contention of the applicant that sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movement of possession from one person to another. The provision of time of supply of goods, under section 12 of the GST Act slates that time of supply of goods shall be the date of issue of invoice and section 31 stales that invoice is to be issued before the removal of the goods for supply, in case where movement of goods is involved. Where movement of goods is not involved, then delivery of goods or making available for delivery shall be the time of supply. Under the IGST Act. place of supply in case of movement of goods, there is reference to delivery of the goods for ascertaining the place of supply thus. the provisions of the GST act. in the matter of supply of goods, envisages delivery of the goods, whether physically or constructively by delivery of document of title to the goods. 8.8. The definition of 'Sale' given in Sale of Goods Act and the term sale is not defined under the GST Laws. Therefore, wherever the term sale comes, resort is to be had of the definition of Sale given in the Sale of Goods Act. However, it has to be seen whether the provisions of Sale of Goods Act shall apply in this case. The provisions of the GST Act are to be looked into and are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Godown' or otherwise. However, the agreement has stated different points of delivery of the goods depending on different conditions. Therefore, it becomes important to see at which point the delivery of the goods is given to the applicant to complete the transaction and convert the Agreement to Sell into a Sale. In this case, the payment was not made by the applicant at the point of collection and therefore, delivery was not given and the goods were stored in the Godown. In a case, the delivery was to be given from a certain place, the situs of such sate would be the place such 'right to use' is transferred. However, in case of oral or implied transfer of right to use (where the goods are not ascertained goods), the situs would be where location where the property in goods is transferred. In this case the property in goods would have been transferred upon payment of the full consideration and therefore, upon delivery at the godown, it would have been the situs. 8.13. The delivery of the said goods stored in warehouse is not given to the applicant, and that is relevant to decide whether the supply of the said goods is completed or not. There can be cases where there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (Successful bidder) entered into the contract for the purchase of Tendupatta. The sale of tendupatta was subject to the acceptance of the tendupatta for its quality. Also, the sale was to be made at a future point of time and accepted for its quality. This fact is duly narrated in the Agreement at para 5(IV). 8.18. At the time of the contract, the goods were not in existence and therefore, the goods in question were Future Goods. The sale of future goods is governed by Section 6 of the Sale of Goods Act, 1930 Section 6(3) states that present sale of future goods is an agreement to sell goods. 8.19. The delivery of the Tendupalta was conditional on the payment of the due installment and during the pendency of the dues, the Tendupatta was to be kept under Joint Custody of the federation and the noticee. Also, in ease of delay in payment of the installment, the installment was lo be paid along with the interest for the period of delay in the payment of the installment. The relevant terms are given in para 6(B)(1) of the contract. It is clear from the clause of the agreement that the delivery of the goods was not made to be made to the applicant unless the whole of the amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed to the applicant the terms of the agreement and the conduct of the parties to the agreement also show that the property in goods and the risk thereof was with the Federation and not the applicant. Also that the Joint Custody did not amount to the delivery of the goods to the applicant. 8.24. As per the agreement that the Federation had entered into with the applicant, the Federation was required to issue a Certificate of Sale to the applicant in terms of the Madhya Pradesh Tendu Patta (Vyapar Viniyaman), 1966. In the case of the Tendupatta destroyed by fire in the godown, the Federation had not issued Certificate of Sale to the applicant. This conduct of the Federation is determinative of the fact that the Federation did not treat Joint Custody of the Tendupatta as sale. 8.25. As per the agreement of the applicant with the Federation, Tendupatta number Lot No. 1777 was to be purchased from Ghorkheda Society. the payment for the purchase of the lot was to he made in four installments, the date of which was duly indicated in the agreement at para 6(B) (1) of the agreement. The applicant has furnished copy of Invoice raised by the Federation and Relase letter for Delivery of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, in the case of the goods that were destroyed in fire, neither delivery was given nor invoice for sale was issued, which shows by the conduct of the parties that there was no sale per se. 8.28. Also, since the contract was to culminate upon compliance of numerous conditions and also after passage of certain lime, as also the contract being that of future goods, the nature of contract was an agreement to sell and therefore upon destruction of the subject matter of sale, i.e., the Tendupatta, the agreement became an avoidable agreement to sell; 8.29. In this case, the subject matter of supply does not exist. Conditions of a contract cannot go beyond the law of the land and any stipulation in a contract that there shall be sale of goods under an agreement to sell even when the goods are destroyed, in contradiction to Section 8 of the Sale of Goods Act. 1930 shall not hold much water in the eyes of law. 8.30. it is also worthwhile to note that the federation, in case of non-compliance with the conditions of the agreement of the Federation and the applicant, has the right to sell the goods lying in the joint-custody. This shows that the goods lying in the joint custody are mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold to two different persons. This would be an absurd result and therefore such an interpretation would be erroneous in the eyes of the law. 8.34. The second question of the applicant, is whether in the given circumstances of the case, where the goods are destroyed by lire before being delivered under an agreement to sell, can there be "Supply" within the meaning of Section 7 of the GST Act alter the destruction of the goods by fire. 8.35. "Supply" within the meaning of Section 7 of the GST Act can only be of goods that are in existence. Although a contract may be entered into for supply of future goods and consideration also be received for such supply of future goods, non-existent or future goods cannot be supplied in terms of Section 7 of the GST Act. In this case, the goods are destroyed by fire. There cannot he any transaction in respect of such non-existent goods after their destruction that would amount to supply. 9. Order u/s 98 of the CGST Act, 2017 and MPGST Act, 2017: 9.1. Considering the Argument and submission by the Applicant in respect of the First Question raised before this authority, it is ruled that in the given circumstances, taking joint custody of Tendup ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
