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TMI Blog2022 (5) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 2 of the GST Act. To qualify as a going concern , the business must not have intention or necessity of liquidation or of curtailing materially the scale of the operations . In this context, it is mentioned that the applicant has not furnished any documentary evidences from the auditor with regard to the entity's ability to continue in operation for the foreseeable future‟ in absence of which we are unable to conclude that the applicant has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations. The transaction of transfer of business unit of the applicant involved in the instant shall be treated as a supply of services - transaction would be covered under Entry No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 subject to fulfillment of the conditions to qualify as a going concern. - Case Number 05 of 2022 Order number 02/WBAAR/2022-23 - - - Dated:- 22-4-2022 - MR. BRAJESH KUMAR SINGH, AND MR. JOYJIT BANIK, MEMBER Applicant s representative heard : Mr. N.D. Saha, Authorised Advocate Mr. Sonwal Tibrewal, Authorised Advocate Preamble A person within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of goods and services? (ii) Whether the transaction would be covered under Entry No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017? 1.5 The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a) and (e) of sub-section (2) of section 97 of the GST Act. 1.6 The applicant states that the question raised in the application has neither been decided by nor is pending before any authority under any provision of the GST Act. 1.7 The officer concerned from the Revenue has raised no objection to the admission of the application. 1.8 The application is, therefore, admitted. 2. Submission of the Applicant 2.1 The applicant submits that he intends to sell his CRF unit as a whole with all assets and liabilities to Cosmic CRF Limited (herein after referred to as, the purchaser) for which he has entered into a Business Transfer Agreement (hereinafter referred to as, the BTA) with the purchaser. 2.2 The applicant submits that the CRF unit has fixed assets in the form of land, building, plant and machinery, inventories and other current assets and he has also availed credit facilities from finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets (Ref: Clause 2.1.3 at page 4 of the BTA) (c) Conduct of business to ensure continuity (Ref: Cause 7 at page 8 of the BTA) (d) Non-Compete Clause by seller (Ref: Clause 9.4 at page 9 of the BTA) (e) Transfer of permission and licenses (Ref: Clause 10(a) at page 10 of the BTA) The aforementioned provisions have been provided to ensure that the CRF unit continues to do the same business as it was involved in before the proposed takeover/transaction. It is further stated that the very basis of the BTA has been to continue the business of the unit as being done by the seller. Transfer of Assets and Liabilities Clause 2 on page 4 clause 4 from page 5 envisages sale of entire CRF unit including liabilities both Term Loan and current liabilities. The purchase consideration being paid after due consideration of the Assets and Liabilities being taken over. 2.8 The applicant, in support of his argument that the transfer is made as a going concern, has relied on the following judgements: (a) The concept of transferring a company as a 'going concern' was examined by the Delhi High court in ln re Indo Rama Textile Limited (2013) 4 Comp LJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erates that as the proposed transaction is infact transfer of business as a going concern and hence Entry no 2 of the Notification No. 12/2017- Central Tax Rate dated 28.06.2017 will apply therefore will attract NIL rate of GST. 2.12 The applicant further placed his reliance on the following rulings given by the Advance Ruling Authority on similar question: a. Advance Ruling No. KAR ADRG 06 / 2018 dated 23rd April 2018 by the Karnataka Authority for Advance Ruling b. Advance Ruling No. GUJ/GAAR/R/46/2021 dated: 27-08-2021 by the Gujrat Authority for Advance Ruling 3. Submission of the Revenue 3.1 The concerned officer from the revenue has expressed his view in writing stating that the documents including Business Transfer Agreement (BTA) as furnished by the instant applicant had been scrutinized in full. With respect to BTA the reliance is hereby placed on the following clauses: (a) Transfer of employees of the said CRF unit to the employment of the Purchaser (Ref Clause 3.00 page 5 of the BTA) (b) Takeover of Current Net Assets (Ref: Clause e 2.1.3 in page 4 of the BTA) (c) Conduct of business to ensure continuity (Ref: clause 7 in page 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liabilities and assets: Net current assets will be assessed as on the closing date and the Purchaser will pay and equivalent amount to the Seller for the same as per terms written hereunder. It is clarified that the value of Net Current Assets will form a part of the total consideration CRF unit on slump Sale Basis. The net current assets inter alia include the following as on closing date:- i. Actual Stock in hand valued at prevailing market price on the closing date. ii. Sundry Creditors, Debtors, Advance to Creditors, SD BG, and any security deposit related to CRF unit as mutually agreed iii. It is however clarified that any dues with Oscorp Industries Pvt Ltd in the form of overdue outstanding in the debtor s book will be excluded.[Clause 2.1.3] Employees The Purchaser shall continue to employ the current Employees of CRF unit even after the takeover of the CRF business. The seller will not object if the Employees of CRF unit working for the Seller opts to join the Purchaser company as employees of CRF Unit. The said employment will be with effect from the closing on terms and conditions of service, which are no less favourable than those, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the transfer of the business of the CRF unit involved in the instant case shall qualify as a supply of services or not. 4.6 Clause (a) of sub-section (1) of section 7 of the GST Act reads as follows: (1) For the purposes of this Act, the expression supply includes (a) 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; 4.7 In the instant case, admittedly the applicant has entered into an agreement which inter alia involves transfer of goods forming part of the assets of the business. In a standalone manner, such transfer shall be treated as supply of goods in terms of clause (a) of Entry No. 4 of Schedule II. 4.8 However, here the applicant intends to sell his entire CRF unit where the purchaser agrees to take over the assets as well as the liabilities of the said CRF unit along with the employees and their benefits. In our view, such transfer of a unit of a business cannot be treated as supply of goods since business cannot be said to be a movable property so as to qualify as goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /GAAR/R/46/2021 dated: 27-08-2021 by the Gujrat Authority for Advance Ruling 4.13 In the matter of Rajashri Foods Pvt Ltd (Advance Ruling No. KAR ADRG 06 / 2018 dated 23rd April 2018), the Karnataka Authority for Advance Ruling held that the transaction of transfer of business as a whole of one of the units of the applicant in the nature of a going concern amounts to supply of services and is covered under Sl. No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 subject to the condition that the unit is a going concern. 4.14 In the matter of M/s. Airport Authority of India (Advance Ruling No. GUJ/GAAR/R/46/2021 dated: 27-08-2021), the Gujrat Authority for Advance Ruling held that the subject supply of Transfer of Going Concern service is Supply under Section 7 CGST Act and is covered at Entry No. 2 of Notification 12/2017-CT(R). 4.15 We find that the applicant has entered into BTA agreeing to sell the CRF Business located at Vill-Ajabnagar, P.O.-Molla Simla, Dist-Singur, PIN-712409. The purchaser has also agreed to purchase the CRF business having assets and all liabilities attached to the said CRF Unit as a going concern. 4.16 The BTA f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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