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TMI Blog2021 (12) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of supply of service, as per Schedule II to the GST Act. Supply presupposes a supplier, defined in section 2(105), a recipient, defined in section 2(93). consideration defined in section 2(31) and an activity. The activities that have been treated to be a supply in the definition are sale, transfer, barter, exchange, licence, rental, lease or disposal - It may thus be inferred that supply, so far as goods are concerned involves movement of goods or the transfer of possession of goods from one person to another. Supply of goods cannot happen without the movement of possession of the goods from one person to another. While a person has goods in his possession, he cannot be said to have supplied the goods to another. Under the GST Act there are provisions for ascertaining Time of Supply as well as the Place of Supply, which also corroborate that in supply of goods. there has to be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds being 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. 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? - HELD THAT:- 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was obtained by the Federation at the cost of the successful bidder in the joint name of the Federation and the successful bidder. 3.5 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 and the paid the first two instalments out of the four instalments which were to be paid under the terms of the agreement The Federation had duly issued the invoice for the Tendupatta covered under the first two instalments and delivered the Tendupatta to the applicant. 3.6 Unfortunately, due to a fire in the Godown of the Federation, the tendupatta stored, relating to the subsequent installments, was destroyed and could not ultimately be delivered to the applicant (Successful bidden by the Federation. 3.7 The federation had obtained insurance of the Tendupaua at the cost of the applicant (Successful bidder), wherein the Federation was the joint beneficiary of the insurance. Upon the fire, the claim for insurance was filed and the insurance proceeds were received by the federation. 3.8 Thereafter, the Federation directed the applicant (Successful bidder) to pay for the subsequent insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Applicant appeared personal hearing on 05.09.2020 and then on 18.09.2020 and 01.10.2020 through electronic mode and inform that no invoice has been issued of goods destroyed in joint custody. He made the following submission on 05.09.2020 in support of his contention. "16.1 The provisions relating to levy are given in Section 9 of the GST Act. The text of the provision is as under: 9. (1) Subject to the provisions of sub-section (2). there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (emphasis supplied) The taxable event for levy of GST is thus supply". The moment there is supply, the liability to GST arises, even though the payment of GST may have happened prior to the supply or is to happen at a later date as per the machinery provisions. Therefore, it is important to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract of sale the property in the goods is transferred from the Federation to the bidder, the contract is called a sale but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property, in the goods is to he transferred. 16.5 According to this section, where the transfer of the property in the goods is to take place in the future time or subject to some condition thereafter to be fulfilled the contract is an agreement to sell. In the case of the purchase of Tendupatta the goods in question (that is. Tendupatta fit for use for making bidi) were not in existence at the point of time when the Federation and the applicant (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 way to be made at a future point of lime and accepted for its quality. This fact is duly narrated in the Agreement al para 5(IV), the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful bidder) unless the whole of the amount was paid and in case of delay in payment interest was paid along with the sum due. The storage of goods in the Joint Custody would not amount la delivery of goods to the applicant (Successful bidder) Since the installments due were not paid, there is no question of delivery of the goods to the applicant (Successful Bidder). 16.10 It is further stated in the agreement that the applicant shall have the right to remove the Tendupatta only during the duration of the agreement After the expiry of the agreement, the Tendupatta shall become the property of the Federation. In this regard, kindly see clause 6(e) reproduced hereunder:- Therefore, even though the goods were stored in the Federation's godown under the joint custody of the Federation and the applicant, the goods were not delivered or sold to the applicant till such time as all the conditions of the agreement were not fulfilled by the applicant. 16.11 Regarding the point of time on which the property in goods passes to the bidder, it may be relevant to see the provisions of Section 23 of the Sale of Goods Act, 1930. As per the provision of the Act. the property' in goods in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the bidder, but when the property therein is transferred to the bidder, the goods are at the bidder's risk whether delivery has been made or not: 16.14 A joint reading of the provisions of Section 23 and 26 of the Sale of Goods Act, 1932, shows that neither the risk in the goods nor the property in the goods had passed to the applicant (Successful Bidder) Also, the fact that the Federation had obtained the insurance with its name in the insurer, shows that it was accepted by the Federation that the risk had not passed to the applicant (Successful Bidder). In these facts of the case, it is established beyond any doubt that the goods were not delivered to the Applicant, the properly in goods had nut passed to the applicant and also die risk in the goods had not passed to the applicant 16.15 Further, once the goods are ascertained and stored in the godown in case of destruction of the goods. before sale and after agreement to sell, the agreement is avoided. The relevant section of the Sale of Goods Act, 1930 is reproduced hereunder: 8. Goods perishing before sale but after agreement to sell. Where there is an agreement to sell specific goods, and subsequently the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed 16.19 The summery of the terms of the agreement and their implication, has been tabulated as under: 16.20 It is therefore clear that:- a) 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; b) the agreement of the Federation with the applicant was an agreement to sell. c) sale had not been made before the fire destroyed the goods since there was no delivery or payment of consideration which are the most important events for sale to occasion under the terms of the agreement; d) delivery of the goods had not been made before the destruction of the goods since the delivery' could only have been made after the full payment of the goods being delivered along with the interest due for the period of delay in making the full payment; e) the property in goods and the risk were both with the Federation and had not passed to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying for the advance ruling, but Is desirous of seeking registration under the CGST Act, in the state where advance ruling is sought. 1.3 Further. Section 22 of the CGST Act. specifies the person liable for registration and reads as under:- "22. (1) Every supplier shall be liable to be registered under this Actin the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both if his aggregate turnover in a financial year exceeds twenty lakh rupees:…………………" ... (Emphasis Supplied) 1.4 The above referred section can be vivisected into following essentials:- a. A supplier shall he liable to be registered under CGST Act in the State or Union Territory, from where he makes taxable supply of goods or services or both: b. If the aggregate turnover in the financial year exceeds rupees twenty lakh. 1.5 The Applicant submits that as on date, it is registered in Madhya Pradesh and also willing to make taxable supplies of goods from the same to its customers. Further, the turnover of the Applicant exceeds rupees twenty lakhs in the financial year. Given this. it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Authority appointed by the concerned Stale or Union Authority Government under concerned State or Union Territory Goods and Service Tax Act. shall be the deemed to be the Advance Ruling Authority for the purpose of CGST Act, The Section 96 of the Madhya Pradesh Goods and Service Tax Act, 2017, reads as under:- (1) The Government shall, by notification, constitute an Authority to be known as the Madhya Pradesh Authority for Advance Ruling: Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State. (2) The Authority shall consist of- (i) one member from amongst the officers of central tax; and (ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively. (3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed. Emphasis Supplied 1.11 The Applicant submits that in terms of the above referred section 96 of the Madhya Pradesh Goods and Service Tax Act, 2017. the Government of Madhya Pradesh constituted this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay GST on the same 3. Summary of the point of law involved: 3.1 The terms of the agreement and their implication: 3.2 The taxable event for levy of GST is thus "supply" The moment there is supply, the liability to GST arises, even though the payment of GST may have happened prior to the supply or is to happen at a later date as per the machinery provisions. 3.3 In this case, supply, if any is in the form of a sale. Therefore, to ascertain whether supply has happened, it has to be ascertained, whether sale has taken place. 3.4 The term sale is not defined under the Act and therefore, recourse shall be had to the Sale of Goods Act, 1930. Accordingly, based on the facts of the case, as per Section 4(3) of the Sale of Goods Act, 1930. the transaction is in the nature of an agreement to sell and not sale per se. 3.5 Further, in this ease, since the transaction relates to future goods, as per Section 6 of the Sale of Goods Act, 1930. the agreement is in the nature of an agreement to sell. 3.6 As per the terms of the agreement, even though the goods were in joint custody, the delivery of the goods was not given to the applicant since in case of joint custody, the delivery was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e full payment; l) the property in goods and the risk were both with the Federation and had not passed to the applicant before the destruction of the goods since the Federation obtained insurance as a person with insurable interest in the property; m) the destruction of the goods resulted in the agreement to sell becoming and avoidable contract; and n) in absence of the sale of the goods, there was no supply of Tendupatta giving rise to a liability to pay GST. 6.4 During the course of the hearing on 01.10.2020 the following queries were raised :- (a) 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 (b) 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. (c) Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (1) of section 100 [or of section 101C]. in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant:" As per the definition, the ingredients of an Advance Ruling are:- a) It is a decision on matters or on questions specified in Section 97(2); b) The matter or the question is in relation to supply of goods or services by the applicant: c) The supply may be one that has already been undertaken or proposed to be undertaken. 1.2 The definition stales that the question should be in relation to supply and not about supply. There is nothing in the text of the section that states that the question can only he about supply. Once this assumed pre-condition is done away with, it becomes clear how subject matter of the questions listed in Section 97(2) get covered under an Advance Ruling as per Section 95(a) The definition of Advance Ruling contains the term "in relation to", which enlarges the scope of a provision. 1.3 The term "in relation to" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to manufacture. The decision cited by Revenue are therefore not relevant as those decision have not considered the inclusive part of input service as defined under Rule 2(1) of Cenvat Credit Rules and these decisions have only considered the term in or in relation to the manufacture. Since Rent-a-Cab service is used for bringing employees to work in the factory for manufacture of goods it has to be considered as being used indirectly in relation to the manufacture or as part of business activity for promoting the business as any facility given to the employees will result in greater efficiency and promotion of business." 1.6 Also, in the matter of VICTOR GASKETS INDIA LTD Vs COMMISSIONER Of CENTRAI EXCISE, PUNE-I reported in 2008 (10) S.T.R. 369 (Tri. - Mumbai), the Honorable Tribunal stated as under:- "11. The illustrative list of activities relating to business in the inclusive definition of 'input service" as reproduced above, consists of accounting, auditing, financing, recruitment and quality control, coaching and training, computer, networking, credit rating, share registry, security. The credit of service tax paid on activities like coaching and trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o" (so also "pertaining to"), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context, see State Wakf Board v. Abdul Aziz (A.I.R. 1968 Madras 79, 81 paragraphs 8 and 10, following and approving Nitai Charan Bagchi v. Suresh Chandra Paul (66 C.W.N. 767), Shyam Lal v. M. Shayamlal (A.I.R. 1933 All. 649) and 76 Corpus Juris Secundum 621. Assuming that the investments in shares and in lands do not form part of the undertakings but are different subject matters, even then these would be brought within the purview of the vesting by reason of the above expressions. In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term "relate"' is also defined as meaning to bring into association or connection with. It has been clearly mentioned that "relating to" has been held to be equivalent to or synonymous with as to "concerning with" and "pertaining to". The expression "pertaining to" is an expression of expans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the emergence of manufactured goods, would come within the term "manufacture". This is because of the words used in Rule 57A, namely, "goods used in or in relation to the manufacture of the final products". Electricity is one form of heat. It gets generated in several ways. LSHS is a fuel used in the generation of electricity. Since, electricity is self-generated and since it comes into existence as an intermediary product, its utilization for production of final product is crucial. Hence, MODVAT credit on LSHS used in production of electricity cannot be denied. Lastly, we may point out that in order to appreciate the arguments advanced on behalf of the Department one needs to interpret the expression "in or in relation to the manufacture of final products". The expression "in the manufacture of goods" indicates the use of the input in the manufacture of the final product. The said expression normally covers the entire process of converting raw-materials into finished goods such as caustic soda, cement etc. However, the matter does not end with the said expression. The expression also covers inputs "used in relation to the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture". In the present case, the LSHS is used to generate electricity which is captively consumed. With out continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without such supply the process of electrolysis was not possible. Therefore, keeping in mind the expression "used in relation to the manufacture" in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory clause (c) even before 16-3-95. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57A." 1.9 Thus, when we look at the scope of Advance Ruling, all activities, which are in relation to supply of goods or services would fall under the scope of the an Advance Ruling. Extending this proposition further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contradictory 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 provisions is not to render them fruitless or destroy any statutory provision. * The provision of one section cannot be used to render useless the other provision, unless the court, despite all its efforts, finds a way to reconcile the differences. 1.10.2. It is endeavored to find out which provision is more general in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply by JSW Steel Limited to JSW Energy Limited is Job Work, not attracting GST. in this case, JSW Energy limited was the applicant and the supply by JSW Steel Limited was an inward supply to it. The order clearly covered a matter relating to supply by JSW Energy Limited, even though the supplier in this case was JSW Steel Limited. 1.11.2. Thus it is clear that definition of Advance Ruling given in Section 95(a) is not to be seen as solely relating to the act of supply being made but, extends to all activities carried on in relation to supply, which clearly includes procurement of inputs and input services in relation to a supply, In this case, the applicant is engaged in the trading of Tendupatta and the question is regarding purchase of Tendupatta. Clearly the question is on a matter in relation to supply. 1.12. The present application has been made u/s 97(2)(g), which states as under:- (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. 1.13 The ingredients of this provision are:- a) The matter should relate to an act done by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money when selling to another person for a sum lower than that offered by the applicant. Therefore, the agreement between the applicant and the federation contained specific clauses to ensure that there was no monetary loss to the Federation. 2.2 The agreement contained the following clauses, attempting to protect the financial interest of the Federation, which are not found in a normal sale transaction. The clauses are as under: (a) consequences that follow cancellation of the agreement [clause 14 (III)]:- a. Forfeiture of EMD; b. Forfeiture of the Tendupatta kept under joint custody, which has been paid for but not delivered; c. Sale of Tendupatta which has been paid for but not delivered and sale of Tendupatta which has not been paid for; d. In case Tendupatta is not sold under the first tender after cancellation of the agreement with the applicant (hereinafter referred to as the subsequent tender), recovery of the agreed price from the applicant; e. In case the Tendupatta is sold under the subsequent lender, the proceeds realized shall be adjusted against the amount receivable from the applicant; f. If the proceeds from the subsequent tender is in excess of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tendupatta at a godown. In this regard, kindly see clause 6(b) of the Agreement, the relevant extract of which is as under: ii. Under the agreement if the applicant did not wish to store goods in the allotted godown even then godown rent @ 4/- per bag per month for 8 months was to be paid by the applicant. Extract from the relevant clause is as under:- c. Other Charges: i. In case the delivery of Tendupatta was to be taken from the godown and not the collection centre, the applicant was required to pay charges for removal of Tendupatta from the godown. The relavant clause is as under: 2.3 On the whole, the agreement bound the applicant to pay the agreed amount along with the interest on any delay in payment, charges for loading and unloading at the godown and godown rent. In the event that the applicant was unable to make payment of the interest and charges, the Tendupatta was not to be delivered in the applicant and on expiry or termination of the agreement, the amount of agreed sale value and charges were to be recovered from the sale price of the Tendupatta vide the subsequent tender. The agreement did not give an option to the applicant to pay any sum on account of brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had the right to sell Tendupatta in the joint custody which was paid for as well as which was not paid for to recover the dues of the Federation in terms of Clause 14(III)(c)(1). To be able to sell the goods to a person other than the applicant and to be able to deliver the Tendupatta to such person, the Federation needed possession of the Tendupatta. Therefore, the Federation did not hand over the custody of the Tendupatta to the applicant. The relevant extract of the clause is as under: c) If the Tendupatta stored in the godown, was switched with another lot or any replacement of the lot was made by miscreants, without the knowledge of the applicant, there was no way for the applicant to ascertain this fact from a visual inspection of the goods stored. Therefore, the Federation, to ensure that there was no such claim by the applicant, the Federation gave symbolic custody by providing joint custody. From the above averments, read with the extract of the agreement between the applicant and the Federation, it is dear that till such time as all the conditions of the agreement were not complied with the goods were treated to be delivered nr sold to the applicant and therefore, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by you; 3.3.1 The applicant was required to take 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 stored in a Godown and 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: 3.3.2 This storage in the godown was not free of cost, but attracted a rent of ₹ 4/- per bag per month. This rent and the method of computation of rent was duly provided for in the agreement. In this regard, kindly see Clause 6(B)(4)(I) of the agreement, extract of which is reproduced hereunder for ready reference ; Computation of Rent : 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: 3.3.3. If the applicant did not want to store the goods in the allotted godown, then the applicant had to pay rent computed (a: ₹ 4/- bag per month for a period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 14(III) of the agreement]. 3.4.3 The agreement clearly stated that in case of delay in payment of the installments, interest shall be paid and only upon payment of the interest the goods shall be delivered to the applicant. Kindly see para 6(B), the relevant extract of which is as under: 3.4.4 The agreement also stated that in case of destruction of goods, if the insurance claim was received after the due date for payment of the goods, interest on such amount for such period shall also be payable by the applicant, of which is as under: From the above averments, read with the extract of the agreement between the applicant and the Federation, it is amply clear that the payment of interest was not dependent on the sale being made by the Federation. Even if the sale was not made to the applicant the applicant was bound in terms of the agreement to pay interest for delay in payment, which could be for the installment amount, godown charges or insurance claim." 7. Admissibility of the application: 7.1. The applicant wishes to question whether any particular thing done by the applicant, i.e. taking joint custody, with respect to any goods, i.e. tendupatta, amounts to or results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to allude that the question should be in respect of goods / services being supplied by the applicant. 7.9. However, when the questions specified in Section 97(2) are perused, we come across question about admissibility of input tax credit of tax paid or deemed to have been paid, which is covered u/s 97(2)(d). further question u/s 97(2)(e) is about determination of the liability to pay tax on any goods or services or both and 97(2)(f) is about whether applicant is required to be registered. Question in 97(2)(d) is purely related to an inward supply while the questions 97(2)(e) and (f) may be with respect to an inward supply covered under RCM too. 7.10 The definition states that the question should be "in relation to supply" and not about supply. There is nothing in the text of the section that states that the question can only be about supply. Once this assumed pre-condition is done away with, it becomes clear how subject matter of the questions listed in Section 97(2) get covered under an Advance Ruling as per Section 95(a). The definition of Advance Ruling contains the term "in relation to", which enlarges the scope of a provision. 7.11. Clearly the provisions point towards t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Section 95(a) and 97(2). interpreted following the principle of Harmonious Construction, it is clear that an Advance Ruling may be about an inward supply also, provided it is in relation to an outward supply made or proposed to be made. 7.15. 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 Tenduptalia. In terms of section 97(2)(g), the applicant wishes to question whether:- - any particular thing done by the applicant, i.e. taking joint custody. - with respect to any goods, i.e. tendupatta, - amounts to or results in a supply of goods, i.e. the tendupatta taken in joint custody. Since the applicant is engaged in the business of supply of Tendupatta therefore, the query is in relation to supply made by him. 7.16. Any Advance Ruling that is sought is for the correct compliance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake up the question regarding acceptance of joint custody resulting in supply of goods under the GST Act. The query is whether mere acceptance of joint custody of the goods without the rights and priviledges of ownership of the needs amounts to "Supply" within the meaning of Section 7 of the GST Act? 8.5. As per the applicant he does not have the right to take sole custody of goods on account of non-performance of a covenant of the agreement between the buyer and seller. The joint custody is only till the completion of the agreement period. If payment is not made till then, the applicant loses all rights under the agreement, it has to be therefore ascertained whether supply has happened upon granting joint custody of the goods to the applicant. 8.6. The definition of supply under the GST act is an inclusive definition. it defines supply as including all forms of supply or goods. Supply is an activity, including inactivity in case of supply of service, as per Schedule II to the GST Act. Supply presupposes a supplier, defined in section 2(105), a recipient, defined in section 2(93). consideration defined in section 2(31) and an activity. The activities that have been treated to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply u/s 7 of GST Act is 'inclusive', and it includes "all forms of supply of goods such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made". The highlighted portion of the provision poses a serious problem if it is to be interpreted that mere agreement to sale, transfer, barter, exchange, license, rental, lease or disposal shall give rise to supply. This provision seeks to include instances where consideration has been received under an agreement to sale, transfer, barter, exchange, license, rental, lease or disposal. In case of goods, advance for supply has been specifically exempted, while in case of supply of service, advance for supply is taxed upon receipt of the advance. Thus, this phrase "agreed to be made" does not mean "agreement sell" is also a supply, Agreement to sell becomes a supply only upon the sale of the goods, since the definition of Supply includes Sale. 8.11. The Applicant slated during lime of personal hearing that "3.5 ........since the transaction relates to future goods, as per Section 6 of the Sale of Goods Act, 1930. the agreement is in the nature of an agreement to sell." In the opinion of this Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the purchaser after 31st March. In that case also the sale is to be treated as made on 28th March only, and not after 31st March, Similarly, in case of goods supplied and retained by the supplier himself for any further process, though there is no actual delivery, but there is definitely constructive delivery, and the transaction of supply of goods is treated as completed. However, this is a case of the Agreement to Sell, which could not be completed on account of destruction of the goods. The delivery was not given to the applicant till the destruction of the goods is not in dispute, therefore, it becomes an important consideration. 8.14. As per Para 6.25(3.7) of personal hearing the Applicant's submission reads as under: "The delivery of the goods was to be given only upon the payment of the amount of the due installment along with interest for the delay in payment from the stipulated date, if any." 8.15. The above Para itself indicate that the transaction of supply was not complete, since the installment due and the interest computed for the delay in payment from the due date was not paid. 8.16. The term "sale" amounts to supply as per the definition of Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 930 states that, the property in goods, in case of future goods, passes to the bidder when they arc unconditionally appropriated to the contract Since the future goods are not appropriated to the contract unless the due amount is paid in full, the property in the goods did not pass to the applicant as per the terms of the contract between the Federation and the applicant. 8.21. The applicant has furnished copy of the Insurance Cover Note of the Insurance of the Tendupatta that was held in the joint custody by the applicant and the federation. From a perusal of the agreement and the cover note, it is seen that the not only the federation is the beneficiary of the insurance claim, the policy is also in the name of the Federation. The Federation may have become the beneficiary of the insurance claim even after having transferred the property in goods to the applicant, but for obtaining insurance policy in joint name, it is essential that 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 would not have insurable interest in the goods after sale. The fact that the federati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the first instalment. Again. Invoice No. JBWML0041 dated 30.01.2018 is for the sale of the II ns installment of the Lot No. 1777. The Release Letter for Delivery of Tendupatta and Transport Permit Letter dated 30.01.201S states that the Delivery is being given subsequent to payment of the IInd instalment. The Delivery Note also contains the particulars of the payment made for the IInd instalment. In the case of the 3rd instalment of the lot. invoice has not been issued. Also, letter for delivery of the 3rd Instalment of Lot No. 1777 has also not been issued. It is therefore clear that the invoice was issued along with the delivery of tendupatta upon the payment of the amount due as per the instalment. The fact that the invoice was not issued indicates that the sale had not been made as per the Federation and also delivery was given to the applicant. 8.26. Conduct of the parties co a transaction, prior to dispute between the parties is an important aide to interpretation of the covenants of agreement. The conduct of the Federation in not issuing Certificate of Sale, Invoice and Delivery Note for the 3rd installment of the Lot No. 1777 that was burnt under Joint Custody clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to sell specific goods, if subsequently the goods, without any fault on the part of the seller of buyer, perish or become so damaged as no longer answer to their description in the agreement, the agreement shall become void, provided the goods are perished before the ownership and risk passes to the buyer. This rule is based on the ground of impossibility of performance. 8.32 From the above discussion, it may he concluded that: a) upon acceptance of the quality of the Tendupatta. they were kept under Joint Custody of the Federation and the applicant. However, as per the terms of the agreement between the parties, the delivery of the Tendupatta was to be given only upon payment of the installment due. In case of delay in payment of the instalment, the amount of interest for the period of default was also to be paid before the delivery of the Tendupatta. Once the delivery was given, invoice was also concurrently issued for the value of the goods delivered; b) Since the sale was that of future goods, in the absence of the appropriation of the goods to the contract, the property in the goods did not pass to the applicant prior to the sale. Therefore, sale of Tendupatta in joint ..... X X X X Extracts X X X X X X X X Extracts X X X X
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