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TMI Blog2023 (7) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling; (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law. facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as the same is not a part of the employment contract and the canteen facility is provided as mandated under factories Act. the nominal cost, which is recovered from the salary as deferred payment is 'consideration' for the supply and GST is liable to be paid." 4. Aggrieved of the decision of AAR in the Order No: 20/AAR/2022 dt. 31.05.2022. M/s Kothari Sugars and Chemicals Limited preferred the subject appeal, the grounds of appeal, inter alia were as follows: * that perquisites forming part of employment contract were excluded from GST as per Circular No. 172/04/2022-GST; the employment appointment order shows the starting basic pay and it is also stated that "they will be eligible for only those benefits as applicable to others of the cadre"; * that under Section 17(2) of the Income Tax Act, 1961 provides an inclusive definition for the term "perquisites' wherein sub-clause (viii) provides that the value of any other fringe benefit or amenity may be prescribed; * that recovery of canteen cost from employees was a mere cost sharing arrangement between the employees and the Appellant as per Factories Act and does not amount to consideration; that the provision of canteen fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vendor caterer or the employer, the AR submitted that it is received by the company/employer; but it is ultimately paid to the vendor caterer against the relevant invoice, received from the supplier of the service. 5.3 It was submitted that there is only a single service transaction in the said ease and the aspect of recovery from employees is merely a passthrough activity and not a separate transaction, Hence the levy under GST should be applicable only on the element of service provided by the vendor caterer to the company. 5.4 In response to the query as to how the charges collected from the employees by the company towards canteen facility/food & beverages provided to the employees, would form part of salary/remuneration of the employees, the AR drew attention to various ease laws and the rulings of AAR/AAAR of other states, cited in the additional submissions; and requested to adopt the ratio of the same; and decide the matter in their favour. 5.5 The AR/ Company's representative were offered three working days to submit further submissions, if any. 5.6 The AR has submitted further submissions as follows: i. The appellant relied on ruling of the Gujarat Authority fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount charged by Appellant/employer from their employees for the supply of food/beverages. 7.1 Thus, fundamentally, the subject issue pertains to the transaction between the Appellant/ employer and employees, i.e., with respect to the food/beverages being supplied by Appellant/ employer to employees for a consideration, although at subsidized rates: but not with regard to the transaction between the caterer (third party vendor/service supplier) and the Appellant/employer. This aspect is also evidenced by the fact that the employer pays the total consideration for the supply of food/beverages to the caterer/service supplier; and the Appellant/employer in turn supplies the above said food/beverages to their employees. 7.2 It is an undisputed fact that the money consideration charged, although at subsidized prices, for the supplying of food/beverages from their employees is being collected by the Appellant/employer but not by the caterer/third party service supplier. 7.3 Therefore, it is evident on record that there are two distinct and totally different transactions in the gamut of supply of food/beverages to the employees of the Appellant. They are:- i) Supply of food/bevera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same are provided in terms of the contract between the employer and employee. 7.8 As per the contents of the employment appointment orders issued to their employees, it is evident that, inter alia, there exists a clause stating that '"employees will be eligible for only Those benefits as applicable to others of the same cadre'. This is more of a generic clause featured in the appointment orders of most companies and by no stretch of imagination such expression among the terms of the employment can be construed to mean that the subsidized supply of the food/beverages was a contractual agreement entered into between the Appellant and their employees in both the factories. 7.9 In order to claim the benefit of non-levy of GST in terms of the above circular, the relevant Perquisites should have been expressly mentioned in the terms of agreement between the employer/Appellant and their employees, Even assuming that the terms of the agreement with the employees in this case cover the subject facility being offered by the Appellant, the benefit of the non-levy of GST could be extended only to the extent of the consideration being borne by the Appellant out of the total cost for sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two hundred and fifty workers were ordinarily employed, it does not provide for any provision for exemption from levy of any taxes. In fact, Tax in this case is leviable in terms of the provisions of the GST law, on the consideration (on the actuals, at subsidized rates) for supply of the food/beverages; and is not covered by any exemption, at all. Further, the said consideration for supply of food/beverages, although at the subsidized rates, is also do not qualify as the perquisite to extend the benefit of non-levy of GST in terms of the above cited Circular dated: 06.07.2022, as already narrated above. The appellant relied on the advance ruling given in the case of HAZIRA TNG PVT LTD [FINAL ORDER No. A/11349/2022 DATED 02.11.2022], wherein it has been ruled that there would be no tax implications in case of mere cost sharing agreements. The relevant portion of the judgment reads as follows: "Cost sharing undertaken between associated enterprises on common Junction service received from a third party service provider in respect of which each enterprise had to bear the allocated cost. Where the activities under taken under the cost sharing agreement do not amount to provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/employer from their employees towards the supply of the food/beverages. Thus, the facts of the said judgement in the case of GSFCL are totally different; and hence the ratio of the said case cannot be applied to this case. 7.14 further, the Appellant had contended that the provision of canteen facility was not covered by the scope of supply. AAR had deliberated on this issue and had decided that supply of food is service. Also, the Appellant admits that no invoice was being raised by the caterer/third party service provider on individual employees towards the supply of food/beverage. As admitted by the Appellant, the third-party catering vendor, maintaining the canteen has been issuing two consolidated invoices to the Appellant every month, for the supply of food/Beverages by the said caterer/third party service provider to the Appellant. Although, the caterer/third party service provider has been raising one invoice to the extent of the value of the supply being recouped from the employees by the company; and the other invoice to the extent of the balance amount which was being borne by the Appellant, it is obviously at the instance of the Appellant and is for the case of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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