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TMI Blog2023 (4) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... ast Manholes and Rises are movable property; hence we conclude that supply of Precast Manholes and Rises is supply of goods and not a supply of services on the basis of aforesaid findings. The manufacturing activities carried out by applicant do not fall under the ambit of job work as it involved whole manufacturing process for manufacturing of Precast Manholes and Rises and it cannot be termed as any treatment or process undertaken by a person on goods belonging to another registered person. Even concept of job work in GST is govern by different set of Rules and procedures and these are not question in hand. Hence in this case Precast Manholes and Rises are to be manufactured by applicant on order from recipient wherein main ingredients are supplied by recipient, and applicant will manufacture a fresh Precast Manholes and Rises, so the ownership of goods remains with applicant hence Subject supply is supply of goods under GST Act 2017. Valuation - inclusion of value of material supplied Free of Cost (FOC) by the buyer - HELD THAT:-t Free of cost supply of main ingredients from recipient is nothing but mutual understanding between both parties which do not debar them from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. SUBMISSION OF THE APPLICANT: (in brief) 1. M/s Natani Precast LLP (hereinafter referred to as applicant), has been incorporated with an intention to manufacture and supply Precast Manholes and Rises to various government and non government entities. The said supply of precast Manhole requires following inputs / raw materials / consumables for its manufacturing namely: a. Cement, b. Steel (TMT Bars) c. Coarse Aggregate d. Fine Aggregate/Sand/Dust The applicant submitted that the manufacturing process of said precast Manholes can be explained in brief as under a. A steel cage as per drawing and size of manhole and rings is prepared. b. Subsequently, the said cage is casted in the molds as per size of manholes and rings c. Afterwards, concrete (combination of cement, coarse aggregate, fine aggregate and water) is prepared and filled in the molds. d. Then after some time, molds are opened for finishing of the product i.e. precast manhole and after finishing the said item is moved for the curing stage. e. After curing of the item, the finished goods are ready for the dispatch as per requirement. 2. The applicant M/s Natani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -State supplies of goods or services or both except the exclusions mentioned therein at such rates as may be notified. The said section also clearly specifies that tax is calculated on the value determined under Section 15 of The Act. 2. That the tax is applicable either on supply of goods or on supply of services. The term goods and services have been defined under Section 2 of the CGST Act 2017 as under a. Section 2(52): goods means every kind of movable properly other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; b. Section 2(102): 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; [ Explanation . - For the removal of doubts, it is hereby clarified that the expression services includes facilitating or arranging transactions in securities;] 3. That further there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipient. Hence the process of manufacture shall be carried on goods belonging to the recipient. 10. That in this regard, reference to drawn to the clarification in Circular No. 52/26/2018, dated 9-8-2018 for arriving at the understanding about classification of given activity as supply of goods or supply of service, wherein applicable GST on the bus body building activity is clarified as under : 12.1 Applicable GST rate for bus body building activity: Representations have been received seeking clarifications on GST rates on the activity of bus body building. The doubts have arisen on account of the fact that while GST applicable on job work services is 18%, the supply of motor vehicles attracts GST @ 28%. 12.2 Buses [motor vehicles for the transport often or more persons, including the driver] fall under headings 8702 and attract 28% GST. Further, chassis fitted with engines [8705] and whole bodies (including cabs) for buses [8707] also attract 28% GST. In this context, it is mentioned that the services of bus body fabrication on job work basis attracts 18% GST on such service. Thus, fabrication of buses may involve the following two situations : (a) Bus body bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an undisputed fact that applicant has been approached by the recipient to supply precast manhole. For said supply of pre-cast manhole which are goods, a competitive price has been sought from the applicant. The applicant is expected to execute the order for supply which, if in case is awarded to it, is required to be executed at a price which shall be pre-agreed. 15. That term 'price' is not defined under the Act. The term is defined in Black's Law Dictionary as. The amount of money or other consideration asked for or given in exchange for something else. Further, consideration is defined under Sec. 2(31) as under: (31) Consideration in relation to the supply of goods or services or both includes - (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be quoted and agreed between the parties shall tantamount to price as mentioned in Section 15(1) of the CGST Act 2017. 19. That hence the rate to be quoted by the applicant and as agreed by the recipient has all the necessary characteristics of price as mentioned under Section 15(1) of the Act. 20. That it is also explained that applicant as supplier and recipient are not related parties as mentioned under Explanation to Section 15 of the CGST / SGST Act 2017. 21. That in fact, the price as mentioned above, is the sole consideration for the applicant to execute the supply of precast manhole. The definition of term consideration as given under Section 2(31) of the Act. It clearly lays down that any payment made in respect of, in response to or for inducement of supply is treated as consideration. In given case of the applicant, except the rate which shall be finalized between the parties, no other amount shall accrue, arise or shall be available at benefit of the applicant. The applicant shall not be entitled for receipt of any money, goods or services as a reward or consideration for the supply of precast manholes. 22. That any consideration, whether monetary or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as transaction value for the purpose of levy of tax. 28. That, further for the purpose of levy of tax, the transaction value has to be subsequently adjusted on account of instances as mentioned under Section 15(2) of the CGST / SGST Act 2017. 29. That provisions of Section 15(2) of the Act are read as under (2) The value of supply shall include - (a) any taxes, duties, cesses, fees and charges levied under any law for the lime 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, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both al the time of, or before delivery of goods or supply of services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the applicant for quoting of rates. 33. That the commercial understanding between the parties cannot be challenged by adding artificially the value which was not agreed between the parties. The contract or the commercial understanding between the parties needs to be read in total and the law needs to be applied on the basis of such commercial understanding. 34. That in fact it has been held in many judgments that the agreement and the conduct of the parties demonstrate the real state of affairs. Precedents which support the same are enumerated as under a) Union of India v. Mahindra and Mahindra [1995 (76) E.L.T. 481 (S.C.)] Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs. b) M/s. VISA International Limited v. Continental Resources (USA) Limited, [2009 (2) SCC 55], 27. What is required to be gathered is the intention of the parties from the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties. c) Rajasthan Spg. Wvg. Mills Ltd. v. Commissioner of C. Ex., Jaipur [2001 (131) E.L.T. 594 (Tri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stioned unless the otherwise is proved as contrary. 37. That further, on similar issue, on taxability of free supplies which are not within the scope of the applicant, the Hon'ble Supreme Court in the case of Commissioner v. Bhayana Builders (P) Ltd. - 2018 (10) G.S.T.L. 118 (S.C.) has held that: The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider. 38. That from perusal of above it is clear that value of material which are not agreed to be supplied by the applicant are not required to be included in the value of supply. In fact the Hon'ble Supreme Court in case of Union of India v. Intercontinental Consultants and Technocrafts Pvt. Ltd. 2018 (10) G.S.T.L. 401 (S.C.) he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for reversal of input tax credit availed on such moulds and dies by the OEM. 1.2 It is further clarified that while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer on FOC basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act for short). 1.3 However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components, hr such cases, the OEM will be required to reverse the credit availed on such moulds/dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former's business 42. That on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 1) We have carefully examined the statement of facts, supporting documents/photograhps filed by the Applicant along with application, oral and written submissions made at the time of hearing and the comments of the Central Tax Authority. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. We would like to discuss the submission made by applicant and will take up the above question for discussion one by one. 2) The applicant M/s Natani Precast, 22 Bajrang Colony Jhotwara Jaipur-302012,Rajasthan) have intention to manufacture and supply Precast Manholes and Rises to various government and non government entities. The main inputs of precast Manhole are 1) Cement, 2) Steel (TMT Bars), 3) Coarse Aggregate, 4) Fine Aggregate / Sand / Dust. 3) The applicant submitted that the manufacturing process of said precast Manholes can be explained in brief as under-: a. A steel cage as per drawing and size of manhole and rings is prepared. b. Subsequently, the said cage is casted in the molds as per size of manholes and rings c. Afterwards, concrete (combination of cement, coarse aggregate, fine aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ Explanation . - For the removal of doubts, it is hereby clarified that the expression services includes facilitating or arranging transactions in securities;] 5.4) In light of above definitions we observe that it is imperative for any act to be service that should not be goods. It would be worthwhile to mention that applicant himself stated that he has intention to manufacture and supply Precast Manholes and Rises. Even the manufacturing process submitted by the applicant itself shows that the applicant is engaged in manufacturing of goods ie Precast Manholes and Rises. The Precast Manholes and Rises are movable property; hence we conclude that supply of Precast Manholes and Rises is supply of goods and not a supply of services on the basis of aforesaid findings. 5.5) now, we would like to discuss that whether the stated supply to be made by applicant constitutes any form of job work. As per Section 2(68) of the Act which is read as under-: (68) job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly, We have gone through the BOQ. dated 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred circular denoting the bus body building on chassis fitted with engines and chassis fitted with engines is supplied by recipient. That act is modification and treatment on a good wherein in the instant case of applicant new goods are manufactured from raw materials and not the work done on the goods belongs to recipient. We also observe that reference ofSI.no. 26 of Notification No 11/2017-CT (Rate) dated 28.06.2017 is relevant here. As BOQ. dated 22.02.2022 and SCOPE MATRIX FOR SUPPLY OF PRECAST MANHOLE RISERS, Applicant will not be providing any manufacturing service to recipient. Applicant intended to manufacture and supply goods as per specification of applicant and to maintain that specific standards of goods cement and iron are to be supplied by recipient. 6) Now we would like to examine next both questions which are mingled to each other (i) Whether the price to be charged from the recipient i.e. M/s Larsen Toubro Ltd by the applicant for supply of precast manhole shall be transaction value in terms of Section 15(1) of the CGST/RGST Act 2017. (ii) Whether the material which are to be made available free of cost by the recipient and are not within the scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be bear by applicant itself. We observe that Free of cost supply of main ingredients from recipient is nothing but mutual understanding between both parties which do not debar them from the essence of supply of goods and consideration received under GST. 6.2 The contention of applicant that consideration flows from a contract and when such consideration is in money terms then same is treated as price ;The said rate which shall be quoted and agreed between the parties shall tantamount to price as mentioned in Section 15(1) of the CGST Act 2017; That in fact, the price as mentioned above, is the sole consideration for the applicant to execute the supply of precast manhole, is not correct as details below- As per Section 15(1) the price is not the sole consideration for the supply of goods as main inputs cement and steel supplied free of cost by the recipient of services, hence condition laid down under Section 15(1) is not fulfilled. Section 15(2)(b) clearly stipulated that the value of supply shall include- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be, added to the value of the components. In the case of applicant the goods supplied by the supplier wholly used for manufacturing of resultant goods ie Manholes and Risers. Hence, we found the aforesaid circular is not giving any force in favour of applicant. 6.4) The applicant quoted the many judgements that the agreement and the conduct of the parties demonstrate the real state of affairs. However we observe that when elaborated GST Act is available and we have to keep us under the boundaries of this Act, we should not go with other Acts to evolve new interpretation when subject matter is well defined in GST Act. Section 15 is well defined the situation in case of valuation of goods. 7) We have gone through the judicial pronouncements of various judicial authority referred by applicant. We have also gone through the decisions of various courts submitted by applicant. Most of them are pre GST era and applicant use particular portion of said pronouncements as per his suit will. We found that none of pronouncement submitted by applicant in his favors squarely covers the present question of law in respect of applicability of GST. In view of the foregoing, we rule as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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