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TMI Blog2020 (11) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... Medicare Limited, Bangalore unit are holders of the same PAN and they are distinct persons. Hence,the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Hence, it is treated as deemed supply of goods. The subsequent questions of applicability of SI.No.2 of the Notification No.12/2017- Central Tax (Rate) dated 28.6.2017 and the transfer of unutilised ITCdon't arise as the transaction is classified as 'supply of goods' between distinct persons. Can ITC-02 be filed for transfer of ITC from the Vizianagaram Unit to the Karnataka Unit? - HELD THAT:- There is no supply of service but a supply of goods (assets of the Vizianagaram Unit to the Unit in Karnataka State). Therefore, the question of transfer of ITC would not arise - In the instant case, there is no evidence of change in the constitution of the registered person . A change in the constitution would envisage a change from say a proprietorship entity to a Partnership or a Company, or from a Partnership to a Company; or change in the constitution of the Shareholders, etc. There is no such thing happening in this case. M/s. Shilpa Medicare Limited, Vizianagaram is one and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lpa Medicare Limited undertakes Research Development work in Active Pharmaceutical Ingredient (API) formulation molecules manufacture of formulation products in small quantity for R D purpose. 3. R D centre is involved in formulation Analytical development and also method validations for analytical tools. Formulation research centre is concentrated in developing generic equivalents and super generics to reference listed Drugs for Global Market like USA, Europe and Row for injectable and oral formulations used for the treatment of cancer and other indications like Multiple sclerosis, Hypertension, CNS disorders, Anti-Diabetics, Myasthenia gravis, Ogilvie syndrome, Ulcerative colitis urinary retention, liver diseases, HIV, smoking cessation, Alopecia, and eye disorders etc. 4. It was mentioned that the whole business of M/s. Shilpa Medicare Limited unit, Vizianagaram, Andhra Pradesh - 531162 vide GST No. 37AADCS8788F1ZR, is being shifted to M/s. Shilpa Medicare Limited, Bengaluru, Karnataka - 562117, vide GST No. 29AADCS8788F1ZO, as a going concern. 5. M/s. Shilpa Medicare Limited unit, Vizianagaram, stated that the GST returns for the month of Jan-19 were filed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F1Z0 but not to another person. As M/s. Shilpa Medicare Limited, Survey No. 2017, Modavalsa Village, DenkadaMandal, Vizianagaram, Andhra Pradesh-531162 having GSTIN 37AADCS8788F1ZR are holders of the same PAN, they are distinct but same persons in terms of section 2 (84) of CGST Act, 2017 and M/s. Shilpa Medicare Limited, Bengaluru cannot be treated as another person. So the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Hence, it cannot be treated as supply of services. Moreover, as per the AAR order No.05/AP/GST/2020 dated 24.02.2020, it was enunciated that the applicant had not submitted any documentary evidence to establish that the transaction is a going concern except for his categorical declaration in the application as such. Hence this office cannot conclude beyond doubt that the business is transferred as a going concern. 2.3. As per the GST registration details available with this office as on date, the PAN in registration details of the applicant remained the same. Hence the appellant is of the opinion that there is no change in the constitution of business of the applicant. 2.4. As discussed in AAR Order No.05/AP/GST/2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed. The methodology for the transfer of such credit is given in Rule 41 of the CGST Rules, 2017 as detailed below: A registered person shall in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee . 4.1. The Section 18 (3) of the CGST Act, 2017 is applicable only when there is a change in the constitution of business of the registered person. The phrase registered person has been defined in section 2 (94) of the CGST Act, 2017 to mean a person who is registered under Section 25 but does not include a person having a unique Identity Number. Section 25 of the CGST Act, 2017 mandates that every person shall be registered in every state in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their arguments as under. 5.1. At the outset it is submitted that the appeal filed by the Department is solely based on assumptions and presumptions and not based on the provisions of Law and hence the same merits to be set aside on this ground alone. In this regard it is submitted that in para no 1.3 of the Grounds of Appeal, in the last sentence the Department has admitted that it is presumed view when it has stated that - quote- Hence it can be presumed that there is no consideration... Unquote. 5.2. With regard to the other points raised by the Department, the main objections of the Department are: a. The assesse has declared as their nature of business activity as 1. Scientific and Technical Consultancy (SAC 00440125) 2. Technical Testing, Inspection, certification (SAC 00440249). The department observes that the assesse has mentioned in the application for Advance ruling as, 'undertakes Research Development work in API formulation molecules manufacture of formulation products in small quantity for R D purpose'. R D centre is involved in Formulation Analytical development and also method validations for analytical tools. Formulation res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause (45) of section 2 of the companies Act, 2013; h) anybody corporate incorporated by or under the laws of a country outside India; i) a co-operative society registered under any law relating to co-operative societies; j) a local authority; k) Central Government or a State Government; I) Society as defined under the Societies Registration Act, 1860; m) Trust; and n) every artificial juridical person, not falling within any of the above; As the AAR order itself made it very clear that the thus, it disqualifies the going concern' to be grouped under 'supply of goods' as per the above - mentioned clause 4 ( c). So the objections of the learned JO are not at all clear and hence not maintainable. 5.4. The learned JO points about the letters sent by the department to M/s. Shilpa Medicare Limited. The copies of the said letters are submitted herewith along with the replies given and the attachments/ documents submitted. The allegation of no reply to their above mentioned letters dated 24.07.2019 and 30.07.2019 is totally not correct and not acceptable. 5.5 The remark of the learned JO stating that the applicant had not sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable, transfer of business cannot be said to be a transfer of goods. Now, we shall examine whether the said transaction can be called as service. In terms of sec. 2 (102), services mean anything other than goods. The term service is wider in its scope. As it covers anything other than goods, transfer of business which cannot be considered transfer of goods will fit into the definition of service . Further, in case of the judgement given by Andhra Pradesh High Court in case of Paradise Food Court v. State of Telangana 2017 VIL 238 AP in the context of VAT Law, it was held that the business is not movable property and is, therefore, not goods. Hence, based on the above we can conclude that transfer of business is a service. In the case of itemized sale, if the business is not transferred as a going concern then the same shall be treated as sale of goods in accordance with entry no.4(c) of Schedule II of CGST Act, 2017. (Detailed discussion follows in subsequent paras). 5.9 Whether the activity of transfer of business satisfies the definition of supply? As per Sec. 7 of CGST Act, 2017, supply includes all forms of supply of goods or services or both such as sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o which the enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations . Based on this we can conclude that if any enterprise is having the intention to continue the business it could be said to be a going concern. It is not necessary that all the assets and liabilities shall be transferred, it is sufficient if only those assets which are essential to continue the business are transferred, but that is being transferred should be capable of being considered as a whole or an independent part. Further, in AAR No.10/2019 given by the Advance Ruling Authority of the state of Uttarakhand in case of M/s. Rajeev Bansal Sudarshan Mittal it was held that transfer of business as a going concern is the sale of business including assets. In terms of Financial transaction going concern has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation. Thus, transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless- (i) the business is transferred as a going concern to another person; or Now we examine, in the instant case, whether transaction is qualified to be business being transferred as a going concern to 'another person' or not. In terms of section 25 (4) and section 25 (5) of CGST Act, 2017. Section 25 (4) A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act . Section 25(5) Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act. The concept of distinct person has been newly introduced under GST law. In brief, the establishments of a person with separate registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of change in the constitution of the registered person . A change in the constitution would envisage a change from say a proprietorship entity to a Partnership or a Company, or from a Partnership to a Company; or change in the constitution of the Shareholders, etc. There is no such thing happening in this case. M/s. Shilpa Medicare Limited, Vizianagaram is one and the same entity as M/s. Shilpa Medicare Limited, Bangalore, Karnataka. There is no change in the constitution of the entity as required under Section 18 (3) of the CGST Act and therefore the provisions for transfer of ITC under Section 18 (3) would not be permissible in this case. Further, the GST law comprising of the Central GST Act, the Integrated GST Act and State / UT GST Acts, does not envisage the transfer of ITC in the form of CGST and SGST / UTGST accumulated in one State to another State. The scope of the AP GST Act cannot extend beyond the territory of the State of Andhra Pradesh. Similarly, the KSGST Act cannot extend beyond the borders of the State of Karnataka. Credit (ITC) accumulated under a particular State GST Act cannot be utilized in another State as there is no such provision under the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X
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