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TMI Blog2022 (5) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract with the service recipient for providing GTA services. As per the terms of the draft agreement:- * The scope of service of the Appellant is to provide the truck/ trailer along with the driver and report at the unit of the service recipient. * The Appellant is only responsible for the safe delivery of the consignment. Further, any accident or damage arising out of accident is the responsibility of the Appellant. * The Appellant is also responsible to the drivers. * The component of the fuel is not the responsibility of the Appellant nor is the same is in its scope of supply/work/service. * The Appellant will be issuing consignment note/bilty (by whatever name called) for each vehicle load/consignment. The consignment note, inter-alia, will bear information such as the consigner, consignee, name of goods being transported, quantity of material loaded for transportation. * On completion of the transport service (successful delivery of raw materials to the service recipient), the Appellant will raise invoice, charging freight for the GTA service provided. The invoice will carry the details of consignment notes for the GTA service provided. * The Appellant will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of the recipient of service and not in the scope of the Appellant. Considering this contractual position, whether GST would be chargeable on the value of diesel used in transportation of goods belonging to the recipient of service. The Appellant contends that value of diesel, being not in Appellant's scope, is not part of freight consideration and hence is not exigible to GST, in support of their contention the Appellant has made elaborative submissions, which are summarized as under:- a) Relevant terms of draft Contract with regard to diesel: 2.1 Fuel, a consumable, is in the scope of the Company and would be provided to the truck, for use exclusively for the required transportation of the goods loaded in the truck. 2.2 Such fuel shall be filled in the truck that is engaged for the concerned trip at the point of origin or destination. The freight declared and agreed will not account for any cost/charge for fuel and the transporter would not have any liability to pay for fuel for the said trip to be made by the transporter. It is expressly clarified that the value of fuel which is in the scope of the company shall by no means be interpreted as additional conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Appellant will issue Bilty/Consignment note signifying the transfer of responsibility on the Appellant to deliver the goods. The Bilty will contain the requisite details about the consignment and other relevant details. The Appellant on successful completion would raise invoice, wherein GST on the total amount of freight charged by the Appellant will be invoiced and on the total freight so charged/invoiced, the Appellant would be charging GST at the applicable rate under forward charge mechanism. 3.3 That for the purposes of levy of GST, Section 9 is the charging section. The levy of GST is on supply of goods or services which is in contrast to the position under the preceding laws of Excise Act where levy arose on manufacture, Finance Act 1994 where levy arose on the provision of services and the State VAT Act, where levy arose on sale. Hence, under the GST Act, taxable event is not on manufacture/ sale/provision of service but the tax is on specific activity (supply) undertaken by the supplier/service provider. Thus, under GST laws the tax is leviable only on the contractual activities that are obligated to be carried out by the supplier/ service provider. As the cost of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case would be procured by the recipient of supply as it is in recipient's scope and considering that the diesel will not be issued to the Appellant, but filled directly in the fuel tank of the truck after loading of the material, the Appellant will be unware of the rate and quantity of diesel so filled, it will not be possible for him to charge GST on the value of diesel. That such impossibility of compliance is impermissible and cannot be the intention of GST law. 3.7 The Appellant furthermore submitted that under the GST law deeming fiction has been created to charge FOC supplies i.e. supply made without consideration. Such deemed taxable FOC supplies have been specified in Schedule- I to the CGST Act. A perusal of the Schedule-I makes it clear that the deeming fiction does not apply to the transaction under consideration. Hence, absence of free diesel transactions between unrelated parties from Schedule-I clearly shows that the law does not seek to levy GST on such transactions. 3.8 Appellant also referred to the model GST law and compared the section 15 thereto with the presently enacted section 15 of CGST, Act 2017 and contended that in the model GST law, the draft l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in disregarding settled judicial pronouncements to hold that diesel being an essential input, will form part of the value of service irrespective to the fact that it is not in scope of Appellant. It is relevant to reiterate that in the judgments relied upon the Appellants, this very issue had been raised by the Department Authorities, but it has been consistently held by judicial forums that value of FOC diesel cannot be added in the value of service. * The Impugned Order has mis-applied the business process test. It is settled law by the Hon'ble Supreme Court that commercial expediency has to be adjudged from the point of view of the assessee and the Tax department cannot enter into the ticket of reasonableness of amount paid by the assessee [Shiv Raj Gupta v. CIT 2020 (7) TMI-SC]. Thus, the Revenue authorities cannot comment as to why diesel will be being given 'free of cost' or if diesel will be supplied 'free of cost' today than in the coming times the trucks/trailers may also be given 'free of cost' which will cause revenue loss to the exchequer. * >The Impugned Order has misread and misapplied Section 15 as because Section 15 only seeks to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities etc. Various decisions in the Service tax regime dealing with identical issues were explained to the Authority as referred above. However, the Authority erred in side stepping rationale of these decisions. * >The impugned order has ignored the aspect that transaction is revenue neutral as the service recipient is entitled to input tax credit of GST charged. However, admissibility of input tax credit cannot be the reason for levying GST beyond the provisions of law. Further, the aspect of revenue neutrality also makes it clear that the Appellant cannot have any intention to circumvent the provisions of law or to avoid incidence of tax. This averment in the impugned order is out-rightly fallacious and would be violate article 265 of the Constitution as no tax can be imposed without authority of law. * The impugned order has also avoided intentionally the facts of the case of Navodit Agarwal [STC/AAR/10/2018 dated 26.03.19], wherein the value of diesel was being recovered by the service recipient from the GTA (service provider) by way of debit note, but has declined the contention of Appellant by holding that GST will be leviable on FOC diesel which is not in scope of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion services will be provided by the Appellant by engaging vehicles. The Appellant/Transporter would be charging freight for the GTA services provided. The terms of contract state that the diesel required in providing the transport services shall be in the scope of service recipient and that procedure described in the contract elaborately explains that the diesel, as required for the trip, will be directly filled into the truck/vehicle by the service recipient. Relevant terms of draft Contract with regard to diesel are produced below:- 2.1 Fuel, a consumable, is in the scope of the Company and would be provided to the truck for use exclusively for the required transportation of the goods loaded in the truck. 2.2 Such fuel shall be filled in the truck that is engaged for the concerned trip at the point of origin or destination. The freight declared and agreed will not account for any cost/charge for fuel and the transporter would not have any liability to pay for fuel for the said trip to be made by the transporter. It is expressly clarified that the value of fuel which is in the scope of the company shall by no means be interpreted as additional consideration payable for the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Section 15 of CGST Act 2017: Value of taxable supply: (1) The value of a supply of goods or services or both shall be the transaction value, -which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. 5.5 I have examined the copy of Draft Model Agreement submitted by the appellant. Para 3.4 of the Draft Model Agreement is reproduced below "The Transporter will ensure that specific LR/GR book and prenumbered machine serial are issued exclusively for the purpose of transportation of material from the Company's plant to various Units". 'Goods transport agency' is defined in para 2(ze) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 as follows: (ze) "goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. I find that the definition contemplates satisfaction of following ingredients for any agency to be termed as a goods transport agency-The agency must be a person and it must provide the services in relation to transport of goods by road and must issue consignment note by whatever name called. It is clear that the applicant is providing GTA service. The AAR in its order has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 1125] CESTAT New Delhi. 5.10 I have carefully examined the aforesaid judgments. All the above case laws pertain to the erstwhile service tax regime, i.e. prior to April'2012. I find that out of the five judgments, only three i.e. Jain Carrying Corporation v. CCE Jaipur [2019 (3) TMI 864] CESTAT New Delhi, R.K. Transport Company v. CCE [2020 (11) TMI 34] CESTAT New Delhi and Ganpati Associates, Munshi Lal Durga Prasad v. CCE Jaipur 2019 (5) TMI 1233 - CESTAT New Delhi, are concerned with the present matter. As regards to other cases, in the case of Heligo Charters Pvt. Ltd., the assessee was engaged in the business of providing helicopters on charter hire basis to ONGC for transportation of personnel and cargo of ONGC as per their requirement and the dispute was whether the assessee is providing "Business Support Service" or "supply of tangible s goods for use without transfer of right of possession and effective control" for levying service tax liability under RCM. Hence, the issue involved in this case has no similarity with the present case and thus has no bearing on it. In the case of Karamjeet Singh, the assessee was getting work orders from the Western Coal Fields ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed Explanation.- For the purposes of this section,- (a) "consideration" includes- (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. 3[*] (c) "gross amount charged" includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the price of fuel outside the value of supply and nor does it go outside the purview of Section 15(2)(b) of the CGST Act. This view has been held in para 5.6 & 5.7 of the signed order copy of AAAR, as referred above. Since the contents of Section 15(2)(b) of the CGST Act, 2017 is different from the contents of Section 67of the Finance Act 1994, and the issue in present appeal relates to GST matter, the ratio of decision of the apex court in Commissioner of Service Tax v/s Bhayana Builders (P) Ltd. will not apply in this case. 5.16 Attention is also invited to the Judgment of Honble CESTAT, South Zonal bench, Chennai in the case of Stage 3 Ace Eventz Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai, Final order No. 40573 dated 13.2.2020. This case distinguishes the order of the apex court in Commissioner of Service Tax v/s Bhayana Builders (P) Ltd. The case related to event management service where the appellant was rendering services like organizing events of rock shows, corporate shows, marriages, promotions etc. and collecting charges for conduct of the events. It entered into separate contracts with the party- one for providing music systems etc on rent and the other for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where moulds and dies owned by Original-Equipment Manufacturers (OEM) are sent free of cost (FOC) to a component manufacturer The circular clarifies that in case the component manufacturer was supposed to supply components manufactured out of his own moulds 8s dies then the amortized cost of such moulds 8s dies shall be added even if they are sent FOC by the OEM manufacturer, otherwise not. The circular clarifies about the addition of the cost of moulds and dies, which are in the nature of capital goods that are used multiple times during the course of manufacture for making different components. In the instant appeal the issue is different. Diesel which is used for providing the GTA service is a consumable and not capital goods. It is an essential component for supply of GTA service and in absence of fuel/ diesel, the appellant will not be able to provide the requisite service. Since the issue, as discussed in the said circular is entirely different from the issue in this appeal, the said circular is not applicable to this case. 5.19 I also agree with the observation of Ld. AAR and have correctly held as under: "In the case of supply of components, which is supply of goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient, then the cost of steel should not be added to the value of steel casting. This is just not acceptable. The GST laws and in fact the Central Excise and Service Tax laws before that have always envisaged that the cost of inputs and consumables shall always be added to the value of the final product / service. There are provisions to offset the tax on inputs / input services but then a prescribed procedure is required to be followed. This procedure has been prescribed in MODVAT/ CENVAT rules. In the instant case the appellant is aware that there is no input tax credit available on fuel. He is therefore trying to circumvent the GST laws to lessen the GST liability by artificially bifurcating fuel expense and thus not including the same in value of taxable supply. This is clearly not permissible. 5.21 Thus I find no reason to differ from the findings of the Authority of Advance Ruling, Chhattisgarh under its order No. STC/AAR/07/2020 Raipur dated 04/01/2021 that diesel to be filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles as per the proposed draft agreement would form part of value of supply of service charged by the appellant and acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with the First Schedule to the CGST Act. Perusal of the First Schedule makes clear that FOC supply made between unrelated parties under the terms of contract are not taxable supplies. Further, having considered section 15(2)(b) which provides that "any amount that the supplier is liable to pay in relation to -such supply but which has been incurred by the recipient of the supply" does not include FOC diesel for the simple reason that the liability to pay for the diesel as per draft contract is of service recipient. 6.4 GTA service was taxed for the first time in the year 2005. Post introduction of negative list of services in the year 2012, GTA service remained unchanged and in CGST Act, 2017 its taxability remains the same with a facility that option is available to GTA to deposit tax under forward charge else this can be continued under reverse charge. The inadmissibility of input credit of Excise Duty or GST deposited on diesel also remains same. Thus I agree with the view given by AAR that the provisions of Finance Act and GST Act are symmetrical for the issue under consideration. In my view the judgment of Karamjeet Singh 8s Co. [2017 (9) TMI 1125] as upheld by Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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