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TMI Blog2022 (5) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions for the same have to be followed. From the plain reading of the explanation (ii) to the notification No. 8/2018 -Central Tax (Rate) dated 25th January, 2018, it is noticed that the explanation (ii) clearly used the word purchase price not the purchase cost of the goods. It means only the amount paid at the time of purchase of used and old cars can be considered as `purchase price for the purpose of this notification. - RAJ/AAAR/02/2021-22 - - - Dated:- 10-12-2021 - SH. SATISH KUMAR AGRAWAL, AND SH. RAVI JAIN, MEMBER Present for the appellant : Sh. Yash Dhadda, CA and Authorised Signatory. (Proceedings under section 101 of the Central GST Act, 2017 read with section 101 of the Rajasthan GST Act, 2017) At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act, 2017 would also mean a reference to the same provisions under Rajasthan GST Act, 2017. 2. The present appeal has been filed under Section 100 of the Central GST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of preparing refurbished old and used car. The said cost is incurred towards: a. Getting the car to the applicant s premises, if inspection is done at consumer s place. b. Sending the car at mechanic s place (for refurbishment) and getting it back to the applicant s premises. c. Sending the car to the parking yard (where car is parked till the time it is not sold). d. Cost of 5 liters of fuel in the tank of the car, as it has been decided as a policy matter to fill the tank with 5 litres at the time of selling. 3.2 Mostly individuals shall be prospective and target customers of the appellant however sales shall not be only restricted to them. The appellant twill sell old and used refurbished car to the corporate and car dealer customers if they are interested. Appellant shall be in the business of selling old and used refurbished car, hence its purchase and related costs incurred in bringing it to refurbished condition shall be treated as a profit and loss item from the perspective of accounting and inventory of such acquired old/used refurbished car shall not be treated as fixed asset in the books of account, rather it shall be treated as an inventory / s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... margin. 4. That aggrieved by the ruling, the appellant has filed appeal before this forum on following ground. 4.1 Appellant submitted that the ruling passed by Authority for Advance Rulings is unreasoned and revenue biased since no mind has been applied to the submissions of the applicant and none of the submissions have been disposed of. A single paragraph has been given as findings where no reasoning or backing has been given for the irrational and presumptive interpretation of the provision. 4.1.1 That the applicant has given a detailed analysis of the relevant provisions of law in line with principles of interpretation of statutory interpretation and legal jurisprudence significant for the analysis. However, the Authority has brutally ignored the submissions without application of mind with a revenue biased mindset to ignore any submission which is not incremental for the revenue collection. 4.1.2 That in response to such a detailed analysis, the AAR has given the ruling on basis of a single paragraph only containing a presumptive interpretation that the Explanation (ii) undoubtedly/clearly used the word purchase price not the purchase cost of goods and it mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value that represents margin. The AAR ruling has stated a settled jurisprudence principle that when the words of a statute are clear, plain and unambiguous, i.e. they are reasonable susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. 4.2.4 Now, if the most common and ordinary sense is applied in the above scenario and one is asked to compute the margin in the whole transaction, the obvious answer would be Rs. 50,000 computed as difference between Rs. 170000 and Rs. 120000. Hence the ruling by AAR is not in accordance with the principle enumerated by it. 4.2.5 That the Notification exempts the tax in excess of tax payable on value that represents margin. The margin in its ordinary commercial sense can undoubtedly be calculated in the above manner only. The Explanation in the Notification further also explains such manner of computation of margin only by stating that margin shall be the difference between the selling price and the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of supplies in the statute unworkable. 4.2.11 Hence the appellant understands that the term price includes every amount paid or payable for the transaction of supply as a whole and includes any charges paid or payable in relation to the transaction and hence such amounts are included in value of supply by the virtue of Sec. 15 (1) only. 4.2.12 That the view is in line with the principle laid down by the Hon ble Supreme Court in the case of M/s. Msco. Pvt. Ltd vs Union of India Ors on 31 October, 1984 that But while construing a word which occurs in a statute or a statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject matter of the statute or statutory instrument understand it. 4.3 Appellant further submitted That the Authority has taken a revenue biased view only on the ground that the statute has not clearly defined the terms purchase price and it has erred to understand that only in absence of a clear definition, need for interpretation and an Advance ruling has arisen and hence analysis must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve. 4.3.5 That on the basis of aforesaid principle laid down by the Hon bie Apex Court of India it is clear that when meaning of a word is not given in the statue its contextual meaning needs to be understood to interpret the provision of the law. 4.3.6 That in this background, it is pointed out that there is an undisputed fact that appellant will be engaged in the business where it will procure old and used cars, refurbish it and then sell it as old and used second hand refurbished car. The refurbishment activity on the car is the essential ingredient of the business of the applicant. If it will not undertake the same or will not have competence to do so, then it cannot survive in the business at all. Further the cost of such refurbishment is not standard and will depend upon the condition of the car and the judgment of the applicant. 4.3.7 That further, when the car will be sold in the market to the customer, the said customer shall be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell-known expression in commercial transactions. Every purchase involves a corresponding sale. The put-chase money or purchase price for property is the price to be paid for it. Speaking technically, acquires by words of purchase and is a purchaser when he obtains title in any other mode than by descent or devolution of law. 17. In the Sale of goods Act and also in the Central Sales Tax Act or in any of the sales tax laws made in the several States, the definition includes the sale of goods, and not to the purchase of goods. That must be so because the sale of a commodity must include within its ambit the concept of sale as well as purchase. It is not possible to conceive of a sale of goods without a buyer. 4.3.12 That thus on basis of above it is evident that meaning of sale can be used as inference to arrive at meaning of purchase. In fact, normal meaning of the word purchase is acquisition for money or for any consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings buy, acquire , another meaning given to the word purchase is procure . The word procure consists of much wider import than the word purchase . In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r more and of length of 4000 mm Explanation. - For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. 18% 3. 8703 Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles. Explanation. - For the purposes of this entry, SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above. 18% 4. 87 All Old and used Vehicles other than those mentioned from S. No. 1 to S. No.3 12% 4.4.4 That in the Explanation to the said notification, where depreciation under the provisions of the Income Tax Act 1961 is not claimed, then the margin is required to be determined in accordance with the provisions of the Explanation (ii). The said explanation (ii) is read as under: (ii) in any other case, the value that represents the margin of supplier shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he used car includes the cost of the used car, the refurbishment charges, the management fee, free service and warranty, besides business margin. 4.4.9 That the intention of given notification needs to be understood in correct perspective which is to avoid double taxation. Normally GST is charged on the transaction value of the goods. However, in respect of old and used goods, a person dealing in such goods is required to pay tax on the margin, i.e. the difference between the value at which the goods are supplied and the cost at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the supply and the economic supply chain. 4.4.10 That hence when applicant would incur the cost towards the procurement it would pay GST (as maybe applicable) and may also pay GST while incurring the refurbishment cost, if applicable. However, since ITC is not available under the given notification hence if deduction of refurbishment expenses is not given then it shall lead to a situation of double taxation and hence would defeat the whole purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between purchase price and the entire sale price - Directing the appellant Company to pay sales tax on the entire amount resold would amount to double taxation - Assam General Sales Tax Act, 1993 (12 of 1993) - S. 8(1)(a) - Assam General Sales Tax Rules, 1993 - R. 12 - Taxation - Double taxation - Determination of 4.5 That the rationale has also been validated in various advance rulings that activities which do not change the nature of goods would be allowed and the goods sold shall remain used and old goods for purpose of valuation under Rule 32 (5) of CGST Rules which has similar provision. 4.5.1 That in various orders passed by various AARs also it has been held that activities of repairing or cleaning or polishing which does not change the nature of goods would be allowed and the goods sold shall remain used and old goods. Such goods are commonly known as Second Hand Goods also in the popular sense. 4.5.2 That in fact for valuation of sale of second hand goods under GST, there is specified Rule 32 (5) of the CGST Rules 2017 which brings out that minor processing which does not change the nature of goods is carried out on used goods, then they shall remain Second ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly selling such used and old motor vehicle. 4.6.5 That in aforesaid case, any cost incurred on the repair or refurbishment of such cars which are held as fixed asset and on which the depreciation is claimed is only to ensure that its use in the business is effective. However such refurbishment is never undertaken to enhance the sale value of the such motor car as selling of such motor car is never an aim while procuring or repairing it. Hence the cost of repair or refurbishment has no relationship whatsoever with the further supply of such used motor car. 4.6.6 That in such cases, the motor car is being sold at nominal price or at written down cost. If the condition of the car is good then the person may incidentally earn some gain or profit but it is never the targeted activity. 4.6.7 That on the other side, the case of the applicant does not fall in above category of users and it is not intending to acquire the motor vehicle to use it for running the business. Rather the applicant intends to procure the old and used motor vehicles and by applying its expertise and skills, would incur refurbishment cost at the time of procurement only with a view to sell it in the open m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purpose for which the goods are required, so as to show that the buyer relies on the seller s skill or judgment, and the goods are of a description which it is in the course of the seller s business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. (2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. (3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. 4.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation (ii) to the Notification No. 8/2018 -Central Tax (Rate) dated 25 th January, 2018 that it is observed that the Explanation (ii) undoubtedly/clearly used the word purchase price not the purchase cost of goods. It means only the amount paid by the applicant at the time of purchase of used cars can be considered as purchase price , there is no provision in the said notification to include the cost of refurbishment in the purchase price. Therefore, we find that there is no reason to include cost of refurbishment in the purchase price for calculation of margin. 6.4 Before examining the contention of the appellant, it is imperative to reproduce Notification No. 8/2018 -Central Tax (Rate) dated 25th January, 2018 In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the central tax on intra-state supplies of goods, the description of which is specified in column (3) of the Table below, failing under the tariff item, sub-heading, heading or C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored; and (ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored. 2. This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. 6.5 The aforesaid Notification exempts the goods specified in column (3) falling under heading/Tariff Item as specified in column 2 from so much of tax as is in excess of amount calculated at the rate specified in the corresponding entry in column 4 of the table to the said notification on the value that represent margin of the supplier on supply of such goods. As per explanation - (ii), margin of supplier shall be the difference between the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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