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TMI Blog2020 (11) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... as a going concern does not constitute a supply of goods. The transfer of a business as a going concern is tax-exempt under GST, whereas sale of assets as above being supply of goods will be out of the purview of exemption from tax, eventually having GST implications. Further, as per the sale notice issued by the appointed liquidator, for effecting sale of assets and properties owned by M/s. Vandana Vidhuyat Limited (in Liquidation) under Insolvency and Bankruptcy Coode, 2016, in addition to the Biomass Power Plant (8 MW Capacity) in question, sale of Thermal Power Plant-2x135 MW Capacity was also initiated and it is seen from the letter of intent issued by the liquidator, that the question had bid for the said Biomass Power Plant (8MW Capacity) only M/s. Vandana Vidhuyat Ltd. - whenever there is transfer of business as a Going concern, it shall involve transfer of goods and/or services. Whether the instant supply of sale of assets in entirety is to be treated as supply of woods supply of services con be determined in terms of the definitions of composite supply and mixed supply read with section 8 of the CGST Act 2017. Whenever there is transfer of business as a Going concern, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by the applicant is not eligible to the benefit of Notification No. 12/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 supply of goods, attracting GST at the applicable rate. Exemption provided under serial no.2 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the said intrastate supply of Biomass Power Plant (8 MW Capacity) as a going concern. GST at the applicable rate is leviable on the said supply. X X X X Extracts X X X X X X X X Extracts X X X X ..... t obtains on Advance Ruling regarding this issue, hence this application is being submitted. 3. Contentions of the Applicant:- The applicant's contention ore as under :- 3.1 thot, on the issue on which advance ruling has been sought, it is applicants contention that in terms of SI.No.2 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, acquiring a power plant unit as a going concern is exempted from the levy of GST. 3.2 Applicants point wise interpretation and view points ore as under:- (i) Liquidator appointed under insolvency And Bankruptcy Code' 2016 has published Sale Notice on 07.02.2020 for E-Auction of the Unit to be held on 24.02.2020 in which he has clearly declared that he is under directions of Hon'ble NCLT, Cuttack vide order dated 16.12.2019 to endeavor to sell the unit as a going concern. (ii) it was a clear condition in point 1 of the terms and conditions of sale notice that unit will be sold on "AS IS WHERE IS". "AS IS WHAT IS" and "WHATEVER THERE IS BASIS". A single bid amount was to be quoted by every bidder for unit "AS A WHOLE", (iii) The basis of taxation under the Goods and Services Tax Act revolves around 'supply' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gravity of the situation Applicant hope and opined that the case is covered under the exemption Notification No.12/2017-Central Tax (Rate) doted 28.06.2017. (ix) It's request to Hon'ble Authority to provide a ruling in applicant's favor that not to charge GST on sale of the unit of M/s. Vandana Vidyut Limited under insolvency, which is to be considered under GST Act as o supply of service by way of transfer of a going concern and will be exempt/Nil rated levy from GST. 4. Personal Hearing:- Keeping with the established principles of natural justice, personal hearing in the matter was extended io the applicant through virtual mode and accordingly their authorized representative Shri Siddhesh Sharma, C.A. appeared online before the authority for hearing on 21/10/2020 and reiterated their contention. 5. The legal position, Analysis and Discussion:- 5.1 At the very outset, we would like to make it door that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as the CGST Act and the CGGST Act"' are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) New Delhi, the 28th June, 2017 is reproduced hereunder:- G.S.R (E).- 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 intro-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely: SI.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (percent.) Condition (1) (2) (3) (4) (5) 2 Chapter 99 Services by way of transfer of a going concern, as a whole or on independent part thereof Nil Nil 5.6 CGST (Amendment) Act. 2018 dated 30-08-2018 inserted sub-Section (1A) to Section 7 of the CGST Act, 2017 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration the usage or making available of such goods is a supply of services; (c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of Goods The following shall be treated as supply of goods, namely:- Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. 5.7 In the instant case, the applicant is acquiring biomass power plant of 8 MW capacity situated at Sirgitti Industrial Area, Bilaspur of M/s Vandana Vidyut Limited. Applicant has emerged as successful H1 bidder for the above plant through e-auction conducted on 24.02.2020 by the liquidator appointed by Hon'ble NCLT under Insolvency and Bankruptcy Code '2016. In this context, it is seen that when a company goes into liquidation its assets are sold to repay creditors. The company name remains live on Companies House but its status switches to 'Liquidation'. Insolvent liquidation occurs when a company cannot carry on for financial reasons. 5.8 For the sake of brevity, we are reproducing herewith the order portion of Hon'ble National Company Law Tribunal, Cuttack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of the Corporate Debtor. x. The Company Liquidator shall be entitled to charge such fees as stated under pares 4 herein above for the conduct of the liquidation proceedings or in such a proportion to the value of the liquidation estate assets as specified under Regulation 4 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. xi. Copy of this Order shall be sent to the concerned Registrar of Companies, Chhattisgarh, Regional Director of North-western Region, and Registered Office of the Corporate Debtor, by the company Liquidator viz., Mr. Sanjay Gupta for information and compliance. xii. In terms of the above, IA No. 82/CTB/2019 in TP No. 245/CTB/2019 arising out of CP(18) No. 219/MB/2018 by the Resolution Professional under Section 33 (1) (a) read with Section 33 (2) of The Insolvency and Bankruptcy Code, 2016 for initiation of the Liquidation Proceedings against the Corporate Debtor viz., M/s. VANDANA VIDHYUT LIMITED stands disposed off. xiii. The Registry is directed to send a copy of this Order to the Company Liquidator, Financial Creditor and the Corporate Debtor, concerned ROC and to the IBBI, New Delhi by Speed Post as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RTIFICATE OF SALE Dated: 23th June, 2020 (Under Schedule I of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016) was issued by the said liquidator in respect of assets of Vandana Vidhyut Limited to the effect that the liquidator by the virtue of the liquidation order and powers provided under the Insolvency and Bankruptcy Code, 2016 sold the asset, BLOCK B 'as a GOING CONCERN' i.e. Biomass Power Plant (8 MW Capacity) situated at Sirgitti Industrial Area, Sector B, Bilaspur Chhattisgarh - 495001, including Land, building, plant & machinery, furniture and fixtures (biomass division), tangible fixed assets (electrical installation and office equipment) and stock (and more particularly described herewith in the annexed Schedule) of the Corporate Debtor through e-Auction in favor of the applicant, Shikhar Commodities, ("Purchaser"), which is in the custody of the Liquidator as provided under Section 35(1)(b) of the Code and handed over the delivery and possession of the scheduled property to the purchaser. The Liquidator hereby acknowledges that the above mentioned property has been sold to the Purchaser against receipt of Rs. 17,35,00,000/- (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a going concern, to realise maximum value for the creditors and to ensure the welfare of the employees. Liquidation is the process that entails the disposal of the assets of the entity. The liquidator does not undertake the task of managing or overseeing the company; his task is to liquidate and the liquidator may do only such things, and carry only such activities, as are conducive to the immediate objective, viz. liquidation. The amendments introduced on 28.03.2018 to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (the "Regulations"), allows the liquidator to sell the "corporate debtor as a going concern". Thereafter, consequent to the amendment dated on 22.10.2018 made to the regulations supra, Regulation 32 reads as under: The liquidator may- (a) sell on asset on a standalone basis; (b) the assets in a slump sale: (c) a set of assets collectively; (d) the assets in parcels; (e) sell the corporate debtor as a going concern; or (f) the business(s) of the corporate debtor as a going concern: "Going concern" is an established accounting notion, and one of the fundamental assumptions in preparation of financial statements. "Goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fines the term service as: "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged." 5.15 As discussed in the preceding pare, SCHEDULE II to Section 7 of the CGST Act supra, specifies about the Activities or Transactions which are to be treated as supply of Goods or supply of Services, wherein clause 4 (a) categorically stipulates that where goods forming part of the assets of a business are transferred or disposed of by or under the direction of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a supply of goods by the person. Thus disposal of goods forming part of assets have been categorically stipulated under clause 4(a) of Schedule II to Section 7 of CGST Act, 2017 as supply of goods. Whereas, clause 4(c) of the said schedule II to Section 7 of the CGST Act, 2017 specifically stipulates that the transfer of a business as a going concern does not constitute a supply of goods. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; Section 2 (90) of CGST Act, 2077 stipulates that "principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming port of that composite supply is ancillary; Section 2 (74) of CGST Act, 2017 defines "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, mode in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. As per section S of CGST Act, 2017, tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case in hand, as here the issue involved is sole of assets as discussed above and not supply of services by way of transfer of business as a going concern. 5.20 Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017, supra provides for exemption to intro-Slate supply of services by way of transfer of a going concern, as a whole or an independent part thereof, whereas here in the case of applicant the supply of biomass power plant is supply of goods and not supply of services in view of the stipulations under schedule II to Section 7 of CGST Act, 2017. In the case of sale of assets as a going concern which is supply of goods, as is the case here, the some is exigible to GST as applicable. Thus, Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 inter alia exempts services by way of transfer of business as a going concern, whereas here in applicants case it is sale of assets as a going concern initiated by the liquidator in terms of the orders issued by Hon'ble NCLT as discussed above. Applicant appears to have misconstrued the sale of Biomass power plant by way of sale as a going concern as supply of services whereas the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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