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TMI Blog2022 (7) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, BRBNMPL Township, KRS Road, Metagalli, Mysuru 570003 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 06/2022 dated 8th March 2022. Brief Facts of the case: 3. The Appellant is a registered Private Limited Company established by the Reserve Bank of India (RBI) as their wholly owned subsidiary. The Appellant is engaged in the printing of currency notes for the RBI at their two currency printing press units, one at Mysore, Karnataka and the other at Salboni, West Bengal. The currency notes are sold to RBI at an agreed rate. The sale of currency notes by the Appellant is wholly exempted from levy of GST vide SI.No 117 of Notification No 02/2017 Central Tax (Rate) dated 28-06-2017. The Mysuru unit also has an exclusive Ink Manufacturing Unit called "Vamika" (referred to as Vamika IMU) which is engaged in the manufacture of ink used for printing of currency notes. The ink manufactured by Vamika IMU is captively consumed by the Mysuru unit for printing of currency notes as well as transferred to Salboni unit. The ink transferred by the Appellant from the Mysuru unit to Salboni unit being a "supply of goods between distinct persons" is a taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a ruling on any of the above three questions on the grounds that the impugned questions were not covered under Section 97(2) of the CGST Act, 2017 as issues on which an advance ruling can be sought. 7. Aggrieved by the lack of ruling given by the AAR, the Appellant has filed this appeal on the following grounds. 7.1. The Appellant submitted that the AAR's contention that questions concerning the admissibility of ITC on common input services are nowhere covered in Section 97(2) is legally not tenable; that Section 97(2) of the CGST Act confers adequate powers to the appellant to question before the AAR, any questions concerning the admissibility of ITC. The usage of expression "in respect of' in the opening lines of Section 97(2) is a term of widest import to accommodate any questions concerning the admissibility of ITC of taxes paid or deemed to have been paid. They submitted that one of the key objectives of constituting the Authority for Advance Ruling is to bring certainty in tax regime in relation to activity undertaken or proposed to be undertaken by the Appellant and reduce the unending and tiresome litigation; that under such circumstances, the expression "in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a contradictory stand that Section 97(2)(d) does not seek to cover the situation of ascertainment of ITC on common inputs and services is unjustifiable. 7.4. They submitted that Rule 42(1)(e) is the provision that determines the admissible credit to be credited to the Electronic Credit Ledger; that the formula for reversal of credit demands for a proportionate reversal of common credit attributable towards the exempted supplies in line with the provisions of Section 17(2); that the very principle of the formula is founded on the fact that certain amount of credit which got admitted or credited to the Electronic Credit Ledger is liable to be disallowed or is basically an inadmissible credit which got admitted and is now liable for reversal. Thus reversal of a portion of common credit has a direct bearing on the admissibility of ITC. 7.5. The Appellant submitted that there is a glaring contrast in the impugned ruling; that the AAR after having admitted the application under Section 97(2) (d) should have proceeded to pronounce the ruling basis the legal issue involved in the questions raised and not changed their position that the questions raised do not fall into Section 97(2); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential quarters, Maintenance of Information system, Maintenance of sewage Treatment Plant, would be entitled as eligible ITC as they are used in the course or furtherance of business of both Varnika and printing press; that since the Appellant is engaged in both taxable and exempted supply, the ITC attributable to exempt supply is to be reversed in terms of the formula prescribed under Rule 42 of the CGST Rules, and the balance credit can be claimed by the Appellant. The Appellant had sought for a ruling on whether the ITC can be claimed on the common input services used for both taxable and exempt supplies and the correctness of the method of reversal of ITC and also turnover of which financial year is to be considered in Rule 42 while calculating ineligible ITC in a case where the ITC is availed in the subsequent financial year; that the AAR has refrained from answering the questions and passing a ruling on the grounds that the questions were not covered under Section 97(2). 8.2. He submitted that the AAR has taken a contradictory stand while admitting the application and while passing the ruling; that the application was admitted stating that the questions were within the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this Act; (c) Determination of time and value of supply of goods or services or both; (d) Admissibility of input tax credit of tax paid or deemed to have been paid; (e) Determination of the liability to pay tax on any goods or services or both; (f) Whether applicant is required to be registered; (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." 12. In this case we are concerned with clause (d) which is 'admissibility of input tax credit of tax paid or deemed to have been paid'. While the lower Authority has held that the questions raised by the Appellant are not covered within the scope of clause (d) of Section 97(2), the Appellant had argued otherwise. The provisions of input tax credit under GST are dealt with in Chapter V of the CGST Act containing Sections 16 to 21 and Chapter V of the CGST Rules containing Rules 36 to 45. Section 16 of the CGST Act lays down that the tax paid by a registered person for receipt of goods and services which are used or intended to be used in the course or furtherance of his bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or restrict the availment of credit to the extent of 50% of the eligible input tax credit in a particular month. - Section 17(4) * Certain goods and services listed in Section 17(5) are not eligible for input tax credit irrespective of fulfillment of the provisions of Section 16. 13. When we read the provisions of Section 16 and 17 of the CGST Act, we find that the term 'admissibility of input tax credit" as mentioned in clause (d) of Section 97(2) refers to whether a particular good or service is eligible for input tax credit by meeting the conditions laid down in Section 16 as well as adhering to the restrictions laid down in Section 17 of the CGST Act. Admissibility of input tax credit is therefore to be examined at two levels. The first level is by applying the provisions of Section 16 and 17(5) where one determines whether the goods and services received by a registered person are used in the course of or furtherance of his business, whether the registered person has fulfilled the conditions laid down in Section 16(2) read with Rule 36 and whether the goods and services are ineligible for credit in terms of Section 17(5). At the second level, the admissibility of input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. 15. Coming to the second question, "Whether the method followed in connection with claiming of ITC is in accordance with the provisions of law", we find that this question is not within the scope of an advance ruling. The correctness or otherwise of the method followed by the Appellant in claiming input tax credit is not a subject covered under Section 97(2) of the CGST Act. Such questions are to be raised before the assessing officer who is the proper officer to decide whether the method adopted by the Appellant in complying with the provisions of Rule 42 of the CGST Rules is correct or not. We therefore, we agree with the lower Authority that no ruling can be given on the second question. 16. As regards the third question regarding which financial year is to be considered for calculating the ineligible ITC as per Rule 42, we find that this question is also not within the scope of an advance ruling. An advance ruling can be sought on matters or questions specified in Section 97(2) which are in respect of supplies being undertaken or proposed to be undertaken by the applicant. In this case, the question does not fall within the scope of any of the matters listed in S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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