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TMI Blog2024 (7) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... a) shall be available when further supplied. Therefore, the appellant is not holding the goods for further supply and therefore the exception in clause (A) of section 17 (5) doesn't apply to the appellant. Thus the ITC on motor vehicles used for demo purpose cannot be allowed as per the provisions of the GST Act. The Applicant is not entitled to avail the Input Tax Credit charged on inward supply of motor vehicles which are used for demonstration purpose in the course of business of supply of motor vehicle as input tax credit on capital goods. As by capitalising the motor car it is treated as asset for use in the business and therefore such motor car cannot be said to be held for further supply. - SHRI. SARPREET SINGH GILL AND SHRI. MAYANK KUMAR, MEMBER Persons Present for Hearing : Mr. Sanjay Wale, CEO, Goa Branch M/s Sai Service Pvt. Ltd., CA Nitin Vijaivergia, PW Co. LLP, CA T.Y. Thok, Mr. N.D. Bhandary, Senior General Manager PROCEEDINGS (Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Goa Goods and Services Tax Act, 2017) The present appeal has been filed under section 100 of the Goa Goods and Services Tax Act, 2017 and the Central Goods and Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 858 dated 30/10/2023. It is only after the disposal of rectification application the appeal of the taxpayer is taken on record and heard. PRAYER OF THE APPELLANT The appellant primarily makes the prayer that the application for appellate advance ruling be admitted and to hold the Order issued by the AAR invalid and void. It is further requested to provide any other clarification (if required) in context of the factual background provided vide EXHIBIT-I attached to application. It also requested to pass such other Orders and directions as may be deemed proper and necessary in this case. INTERPRETATION OF LAW AND/OR FACTS BY APPELLANT 1. THE AUTHORITY FOR ADVANCE RULING HAS ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED FOR ITC DESPITE FULFILMENT OF ALL CONDITION FOR ELIGIBLITY. i. The Appellant submits that the Authority for Advance Ruling has erred in concluding that the Appellant is not entitled to avail the ITC charged on inward supply of motor vehicles which are used for demonstration purpose in the course of business. ii. The Appellant respectfully submits that the Appellant is entitled to avail the Input Tax Credit charged on inward supply of motor vehicle being used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 17 (5) (a) of the CGST Act. ii. The Appellant puts credence upon the interpretation of the above legal provision and submits that as per Section 17 (5) (a) of the CGST Act, ITC is not eligible in respect of the motor vehicles for transportation of persons (having seating capacity of less than or equal to 13 persons, including the driver) whereas in the present case the demo cars are not used for transportation of persons but are used for providing demo to prospective customers which further assists them in the decision making process. iii. Input tax credit is permissible when used for making further supply of such vehicles iv. The Appellant further states that assuming without admitting that such demo cars are used for transportation of persons, they still get covered under the exception as carved out in Section 17 (5) (a) which provides that ITC shall be available in case there is further supply of such motor vehicles. As stated supra the Appellant purchases these demo cars and further sells such demo cars after prescribed period as agreed with MSIL. Accordingly, it can be said that such ITC is eligible as the Appellant is involved in further supply of such motor vehicles af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ITC shall not be available in respect of any outward supplies which are made at a price lower than its procurement value. The restriction imposed under section 17 (5) (a) (A) of the CGST Act shouldn't be applied on the ground that the supplies have been made after a certain period of time since there is no time limit prescribed in the GST law in this regard for making such further supplies. xii. Similar views have also been taken in the following cases: - a) M/s Chowgule Industries Private Limited, Maharashtra AAR, TS-1239-AAR-2019-NT b) M/s A M Motors, Kerala AAR, (KER/10/2018), TS-542-AAR-2018-NT c) M/s Titania Products Private Limited, JHR/AAR/2020-21/01/07. xiii. In light of the above rulings, it is aptly clear that there is no time limit prescribed in the CGST Act for making such further supplies of motor vehicles, hence the Authority for advance ruling has erred in observing that subsequent sale of motor vehicle after '/2 years cannot be considered as further supply and accordingly, does not fall under exclusion clause of section 17 (5) (a) of CGST Act. xiv. The Authority for advance ruling has also erred in observing that once goods are capitalized in books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Without prejudice to the above submissions, the Appellant would further like to submit that the terms for transportation of passengers under Section 17 (5) (a) provides that ITC shall not be available in respect of motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) except when such vehicles are used for making following taxable supplies, namely: (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles. ii. From the above, it can be understood that denial of ITC of Motor vehicles is only with respect to 'for transportation of passengers having seating capacity of not more than 13 passengers'. Whereas the impugned motor vehicle (Demo car) is not being used for transportation of passengers but is in fact being used for test drive in order to ensure further sale of Motor vehicles. iii. However, the Authority for Advance Ruling has observed that the expression motor vehicle for transportation of persons should be construed as motor vehicle intended for transporting passengers. Furthermore, ascertaining the use or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the similarity in the fact pattern between the applications submitted by M/s Chowgule Industries Private Limited and that submitted by the Appellant. In both the cases, demo vehicles were procured by the companies from the supplier on payment of taxes, and subsequently capitalized as fixed assets in their respective books of accounts. These demo vehicles are indispensable tools for promotion of sale as they are used for providing test drives to the customers. iii. The Goa Authority for Advance Ruling has issued contradictory rulings on similar fact patterns without considering the binding precedent that applies to AAR rulings. The AAR has disregarded the principle that its rulings are binding in subsequent cases that involve the same question of law or fact. iv. It is imperative for legal discipline to remove uncertainty around taxpayers, and for this reason, the AAR is bound by its earlier ruling unless there is a change in law or facts, and it cannot overrule its earlier ruling without even considering the submission. v. Furthermore, it is important to note that there have been no changes in the CGST Act 2017 with respect to the referred sections, such as Section 2 (19), S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Accounting Standards of India. c. That hence they capitalized their purchase. That the clause (a) of sub section (5) of section (17) of the CGST Act, 2017 does not rule out the exception to the general provisions therein on the ground that the purchases are capitalized. They brought to the notice of AAAR that the vehicles purchased by persons who intend to use for transport of passengers or to impart training in driving such motor vehicles also capitalized purchase of such vehicles. d. That they may dispose the demo vehicles by way of sale after completing the period obligated under the contract and also pay tax on such supplies. e. That they are not claiming depreciation on the input tax component of the assets. f. The applicant also clarified that the motor car for demo purpose are supplied to it by the OEM at a discounted rate. Similar discounts are also provided on older models of any motor car and thus it is normal trade practise. FINDINGS AND DISCUSSIONS The question before the Goa Advance Ruling Authority was that whether the applicant is entitled for ITC charged on inward supply of motor vehicles which are used for demonstration purpose in the course of business of furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgues that input tax credit is permissible when used for making further supply of such vehicles the appellate argues that the intention of the law is to allow ITC in respect of taxpayers dealing in motor vehicles. It is further argued that the expression further supply of such motor vehicles doesn't prescribe the time limit under which such supply shall be made. Further, the GST provisions nowhere specify that ITC shall not be available in respect of any outward supplies which is made at a price lower that its procurement value. It is also argued that section 7 of the GST law doesn't prescribe that the goods should be recorded as stock in trade for it to be supplied further. Further no such conditions have been prescribed under section 9. And therefore, the AAR has erred in arbitrarily creating distinction between stock in trade and capital goods which is not specifically provided for in the law. 3. The appellant argues that AAR has erred in its observation that the expression motor vehicle for transportation of persons cannot be interpreted by user of the product. 4. The appellant argues that AAR has erred by not considering of favourable ruling with similar facts passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d both in manner as well as intent. Meaning of in the course of or furtherance of business While business has been defined under the CGST Act, the terms in the course or furtherance of business are not defined anywhere under the CGST Act or the CGST Rules made thereunder. In the course of generally means something in the progress of process of'. The meaning of Furtherance as per Black's law dictionary: 6th edition 11th reprint 1997, is act of furthering, helping forward, promotion, advancement or progress . Furtherance of business will, thus mean, act of furthering business, helping forward business, promotion of business, advancement of business or progress of business. Thus, there is no doubt that the demo car is inherent and essential for the business of the taxpayer. Hence same is to be treated as used in the furtherance of the business. The Section 17 (5) of CGST Act refers to a specific provision under GST covering blocked credits or ineligible ITC. The taxpayer cannot claim ITC while paying output tax when they make purchases listed in this provision. Relevant extracts of the same have been reproduced as follows: (5) Notwithstanding anything contained in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) (omitted). (2) ................. Thus the expression 'further supply' is to be understood as motor vehicle held for sale, barter, transfer, lease and rental etc. as defined in the section 7. In the present case, by the self-admission of the appellant it is argued that demo car is held for sale after certain years. Therefore, in view of above discussion the expression for furtherance of the business and for further supply have different meaning assign to them. The expression for furtherance of the business is to be understood as used in the business . Whereas for further supply is understood as for sale/supply in the course of business. With respect to appellants interpretation on the expression further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (A) of section 17 (5) doesn't apply to the appellant. Thus the ITC on motor vehicles used for demo purpose cannot be allowed as per the provisions of the GST Act. The appellant has relied upon the following advance ruling in support of its claim for eligibility of ITC on demo car. a) M/s Chowgule Industries Private Limited, Maharashtra AAR, TS-1239-AAR-2019-NT. b) M/s A M Motors, Kerala AAR, (KER/10/2018), TS-542-AAR-2018-NT. c) M/s Titania Products Private Limited, JHR/AAR/2020-21/01/07. We also note that in following advance ruling the AAR and AAAR have negatively answered the advance ruling and have ruled that ITC on demo car shall not be allowed. a) M/s. KHATWANI SALES AND SERVICES LLP-2020-Authority for Advance Ruling, Madhya Pradesh. b) M/s. PLATINUM MOTO CORP LLP-2019-Appellate Authority for Advance Ruling, Haryana. c) M/s. BMW INDIA PVT. LTD. - 2022 (3) TMI 487-Appellate Authority for Advance Ruling, Haryana. Further, in case of appeal application by M/s. KHATWANI SALES AND SERVICES LLP before the AAAR, Madhya Pradesh against the ruling given by AAR, Madhya Pradesh, the AAA has upheld the ruling of the AAR, Madhya Pradesh vide Order No. MP/AAAR/05/2020 Dated 20/11/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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