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TMI Blog2023 (7) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... /06/2017 (as amended). Consideration in the form of commission or margin - HELD THAT:- The applicant receives consideration from the ration card holders against sale of S.K. Oil at the price mentioned in the price schedule - In the table mentioned in this price schedule, the entries 10-14 mention the difference between the purchase price and sale price wherefrom it appears that the sale price i.e., the consideration against which the applicant supplies S.K. Oil to the ration card holders comprises inter alia of Dealer s Commission . Supply of services to the State Government - HELD THAT:- The recipient would be a person who is liable to pay consideration for the supply of goods or services. In this case, the person liable to pay the consideration is the ration card holder, and is thus the recipient of the supply. The supply is of S.K. Oil and the recipients are the ration card holders. Consequently, this supply is in the nature of supply of goods to the ration card holders. In the instant case, there is no supply made by the applicant to the Government and that the ration card holders are the recipient of the supply. The applicant has made various submissions arguing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing him to carry on trade in Super Kerosine Oil, hereinafter also referred to as SK Oil, as a Dealer as defined under the Notification No. 2565/FS/FS/Sectt/Sup/4M-16/2014 dated 3rd November 2014 which is issued by the Department of Food and Supplies, Government of West Bengal. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01 : i. Whether the applicant being a Fair Price Shop as defined under the Notification No. 2565/FS/FS/Sectt/Sup/4M-16/2014 dated 3rd November 2014 issued by the Government of West Bengal, is liable to charge GST from the State Government against the supply made by them? ii. Whether the other charges like Dealer s commission, Dealers Transport Charges, Stationery Charges, H E Loss etc. would be chargeable to GST or treated as exempt? iii. Whether the supply of S.K. Oil along with charges would be treated as a composite supply wherein the principal supply would be the supply of S.K. Oil ? 1.4 The aforesaid question on which the advance ruling is sought for is found to be cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od and Supply Department, Para 5(iv), 5A and 5B(iii) of the said order which read as follows: Para 5(iv): No Agent shall sell, supply or transfer Kerosene to any person other than an S K Oil Dealer duly licensed under Paragraph 6 of this order or a holder of Permit issued under Paragraph 11 of this order Para 5A: Every agent after having allocation of S K Oil made by the DCG for distribution to S.K. Oil dealers shall take delivery of allocation from the concerned Oil Marketing Company. While making an allocation, the DCG shall consider the weekly or fortnightly requirements of the concerned agent on the basis of ration cards tagged and scales of distribution of S.K. Oil as may be fixed by the State Government from time to time and balance stock in hand . Para 5B (iii): The Agent shall not charge any excess price other than the fair price fixed by the State Government from time to time and shall issue a cash memo against sale of S K Oil to the Dealers . Thus, it transpires that the applicant being an Agent is allotted such quantity of S.K. Oil by the authorities, commensurate with the weekly or fortnightly requirements of the concerned agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Dealer's Stationery Charges 250.00 250.00 13. Compensation for Handling Evaporation Loss @ 2% on Agent's price excluding GST on basic price and Agent's price. 1,508.49 1,508.49 14. GST @5% on items 10, 11, 12 13 above 0 159.66 15. Maximum Retail Price of the Dealer (if Agent and Dealer do not charge GST) 82,242.71 16. Maximum Retail Price of the Dealer (if Agent charges GST but the Dealer does not) 82,389.37 17. Maximum Retail Price of the Dealer (if both Agent and Dealer charge GST) 82,549.03 2.4. Thus the Oil Company is to sell S.K. Oil at a fixed base price called Base Price and charge Tax @5% on such base price. Therefore, the purchase price of the agent is base price +5% Tax. This price is being recovered by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined as under: fair price shop means a shop which has been licensed to distribute essential commodities by an order issued under Section 3 of the Essential Commodities Act, 1955 to the ration card holders under the Targeted Public Distribution system . The above definition thus covers fair price shops that have been licensed to distribute to the ration card holders under the Public Distribution System. The license would be issued under an order issued under Section 3 of the Essential Commodities Act, 1955. In exercise of the power conferred by Section 3 of the Essential Commodities Act, 1955, the Government of West Bengal issued the West Bengal Public Distribution System (Maintenance Control) Order, 2013 on 08/08/2013. The said order defines fair price shops as following: Fair Price Shop means a shop engaged and licensed under this Control Order for distribution of public distribution commodities against ration documents Further, the West Bengal Kerosene Control Order, 1968 defines 'S.K. Oil Shop'. Paragraph 3(t) of the order is reproduced below: S.K. Oil Shop means a shop belonging to S K Oil Dealer appointed and licensed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business for supply of kerosene under Public Distribution System (PDS). iii.) With respect to consideration received by the dealer against the instant supply to the ration card holders, the applicant submits that as per the above mentioned price sheet under sl. No. 1.3, the applicant first recovers the whole of the MRP from the consumers on behalf of the government. But since the applicant while acting as agent has to deploy certain resources which gets exploited in the due process, it earns its consideration in the form of Dealer s commission, Dealer s transport charges, stationery charges, compensation on handling evaporation loss. These consideration after being reduced from the MRP collected from the customer is reimbursed back to the Agent who in turns reimburses it back to the IOCL and ultimately to the State Government. 2.9. The applicant clarifies that the regulation of prices by the government is done to benefit the ultimate consumers of the PDS, being the ration card holders in the instant case. This regulation is done so that the consumers receive its goods at a fixed base price which remains constant throughout the supply chain. The increment in the MR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct done by the person on behalf of another is in its essential nature one of agency, the one is the agent of such other notwithstanding he is not so called. Conversely the mere use of the word by agent in the contract cannot have to be held the effect of making one agent, who, in fact is not such. American Jurisprudence, IInd edition Vol. 3 page 431. The foot-note on this page refers to a case in which it was held that the use of the words agency agreement and agent by the parties in a contract does not necessarily establish a relationship of agency in the legal case. McCarty v. King County Medical Service Corp. 26 Wash 2d 660, 175 P2d 658. The law in India is the same. It has been held in several decisions that the fact that the parties have called their relationship an agency is not conclusive, if the incidence of this relationship , as disclosed by evidence does not justify a finding of agency, and that the court must examine the true nature of the relationship and the functions and responsibilities of the alleged agent: Banaras Bank v. Ram Prasad, AIR 1930 All 573, Phool Chand v. Agarwal B. M. Co., AIR 1938 Lah 814; Suryaprakasaraya v. Matheson s Coffee Works, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e else thereby establishing the agency relationship. 2.16. It is pertinent to mention that the said agency service can never be said to be rendered to the IOCL as it is neither the IOCL who is responsible for the proper functioning of the PDS nor the goods belong to the IOCL. 2.17. Moreover, as per clause 11(a) of the Kerosene/Light Diesel Oil Dealership Agreement made between the applicant and IOCL, it clearly appears that the applicant does not act as an agent on behalf of the Oil Marketing Company- Dealer to act as Principal : In all contracts, engagements or transactions entered into by the dealer with the customers for the sale of products or otherwise, the dealer shall act and shall always be deemed to have acted as a principal and not as an agent or on account of the Corporation except to the extent if any, permitted by the Corporation in writing and the Corporation shall not in any way be liable in any manner in respect of any such contracts, engagements or transactions and/or in respect of any act or omission on the part of the dealer, his servants, agents and workmen in regard to such sale or otherwise. 2.18. Furthermore, the applicant submits that if at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the dealer cannot charge any excess price other than the fair price fixed by the State Government [para 6(B)(ii) of Notification dated 03/11/2014]. iii.) That the territorial jurisdiction within which the applicant can supply the S.K. Oil is fixed by the State Government being the Balurghat Municipality, Dakshin Dinajpur [ para 6(A) of Notification dated 03/11/2014]. iv.) That the quantum which the applicant shall receive and the quantum that is to be supplied to the card holders is controlled by the State Government [para 6(A) of Notification dated 03.11.2014]. v.) That the recipients or the beneficiaries of the instant PDS Scheme being the persons to whom the S.K. Oil is to be supplied are identified by issuance of ration cards and tagged to the applicant by the State Government [para 6(C)(ii) of Notification dated 03/11/2014]. 2.22. Based on above, since the dealer, product, market, suppliers, recipient, quantity of supply and even the price, all the major ingredients that is necessary for supplying of goods or services or both are regulated and controlled by the State Government, therefore, the applicant submits that the applicant is nothing but a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt accepts the fact that the applicant acts as an agent on its behalf. 2.26. Furthermore, it is submitted that Section 2(4) of The National Food Security Act, 2013 defines fair price shop as a shop which has been licensed to distribute essential commodities by an order issued under Section 3 of the Essential Commodities Act, 1955 to the ration card holders under the Targeted Public Distribution system where ration card as per section 2(16) of the National Food Security Act, 2013 means a document issued under an order or authority of the state Government for the purchase of essential commodities from the fair price shops under the Targeted Public Distribution System and Targeted Public Distribution System as per section 2(23) of The National Food Security Act, 2013 means the system for distribution of essential commodities to the ration card holders through fair price shops . Therefore, from the above definitions it is proved that the applicant is merely supplementing the essential supplies on behalf of the state government to the ration card holders in the capacity of an agent by estoppel. The applicant submits that sl. No. 11B of Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Government. The applicant is working under the provisions of the West Bengal Govt. Notification No. 2565/FS/FS/Sectt./Sup/4M-16/2014 dated 03/11/2014 issued by the Government of West Bengal, Ministry of Food and Civil Supply Department, regarding the supply of kerosene oil to the ration card holders. The applicant, who is the dealer as per this Notification, purchases S.K. Oil from the agent where the agent purchases it from the oil marketing company. The purchase and selling price of the applicant is fixed and specified in the price chart, as mentioned in para. 2.3 above. The difference between the purchase price and sale price is mentioned in the price chart, and pertains to heads: Dealer's Commission, Transport Charges, Stationery charges and compensation for evaporation losses. 4.5. Further, in the affidavit submitted by the applicant during the course of the hearing, the applicant has declared that no other consideration is received by the applicant for these transactions. Consequently, the only consideration received by the applicant in these transactions is by way of sale of S.K. Oil to the ration card holders at the retail price specified in para. 2.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that there is an Agency by estoppel in this case, and that the applicant is working as an agent of the State Government for supplying S.K. Oil to the ration card holders. [paras. 2.23, 2.24, 2.25.] 4.9. Without prejudice to the aforesaid arguments, we find that for the purpose of this ruling, the nature of supply has to be determined in consonance with the provisions of the GST Act and the provisions of the GST Act would over-ride any other interpretation with respect to determining the nature of supply. 4.10. As per the nature of business of the applicant, which is discussed form para. 4.3 to 4.5, it could be observed that the applicant in engaged in supplying S.K. Oil to the ration card holders. Further, the monetary consideration against this sale of S.K. Oil is received from the ration card holders only, who are purchasing the S.K. Oil from the applicant s fair price shop. Further, the applicant has submitted that no other monetary or non-monetary consideration is received for these transactions. It therefore appears that in respect of the supply of S.K. Oil being made by the applicant: i. Entire consideration is paid to the applicant by the ration card holders, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient as per the Section 2(93) of the GST. 4.14. We therefore find that the applicant is making supply to the ration card holders and not to the State Government. Thus the entry 11A of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 (as amended) is not applicable in this case. Further, the supply to the ration card holders is of goods namely, kerosene oil, i.e., S.K. Oil, for which the consideration is paid by these recipients. 4.15. The applicant has raised three questions in the application on which advance ruling is sought. The same are being examined in light of the above findings. i. The first question is that whether the applicant being a Fair Price Shop, is liable to charge GST from the State Government against the supply made by them. In this regard, we find that Section 9 of the GST Act states that : Section 9. Levy and collection.- (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central/state goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental 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 at the time of, or before delivery of goods or supply of services. The aforesaid clause thus clearly specifies that in respect of supply of goods, any amount charged for anything done by the supplier at the time of, or before delivery of goods shall be a part of the value of supply. In view of the above discussions, we rule as under: RULING Question : Whether the applicant being a Fair Price Shop as defined under the Notification No. 2565/FS/FS/Sectt/Sup/4M-16/2014 dated 3rd November 2014 issued by the Government of West Bengal, is liable to charge GST from the State Government against the supply made by them? Answer : The applicant is not making any supply to the State Government. No tax is, therefore, to be charged to the State Government. Question : Whether the other charges like Dealer s commission, Dealer s Transport Charges, Stationery Charges, H E Loss etc. would be chargeable to GST or treated as exempt? Answer : GST would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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