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TMI Blog2025 (1) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... Silver Oxide Zinc Torpedo propulsion Battery. Hence, the provision of Section 15 (1) of the CGST Act, 2017 i.e to adopt the transaction value as the value of supply of goods or services or both is not applicable for determining the value of supply in the applicant's case. In the instant case, old and used batteries are supplied by the naval formations i.e., by the Central Government Department to the applicant. For the said supply, unless otherwise exempted, the recipient of the said old used goods, that is the applicant is liable for payment of Central tax and State Tax or as the case may be the Integrated Tax, as envisages under Section 9(3) of the CGST Act or Section 5 (3) of the IGST Act, read with corresponding Notifications issued, viz., Notification No. 36/2017-Central Tax (Rate), dated 13/10/2017 and Notification No. 37/2017 Integrated Tax (Rate) dated 13/10/2017, respectively. With regard to the circular No. 47/21/2018-GST relied upon by the Applicant, on perusal of the said Circular, it would show that it was confined to that specific subject material of moulds and dies which are being supplied by the Original Equipment Manufacturer (OEM) to a Component Manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as the Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s High Energy Batteries S.F. No. 243/7, 243/8B, Pakkudi road, Mathur Industrial Estate, Mathur (hereinafter called as 'the Applicant') is engaged in manufacture of Silver Oxide Zinc Torpedo Propulsion batteries falling under Chapter sub heading No. 850640 and secondary Silver Oxide Zinc Rechargeable Batteries falling under Chapter sub heading No. 8501780 and supply the same to various Naval Defence formations (Indian navy) on payment of applicable GST. They are registered under the GST Acts with GSTIN: 33AAACH1479H1ZR. 2. The Applicant submitted a copy of challan dated 09-06-2023 evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. The applicant further stated that Section 15 (2) (b) of the said Act specifically states that where any amount which the supplier is liable to pay in relation to a supply but the same is incurred by the recipient on behalf of supplier, and not included in price paid/payable for goods/services, then such value is required to be included in the transaction value. 4.5. Further the applicant submitted that to determine whether the value of taxable supply paid by recipient to the supplier is the sole consideration , it is necessary to refer to the definition of the term consideration . That the term 'consideration' has been defined under Section 2 (31) of the CGST Act, to mean any payment (in money or otherwise) or monetary value of any act or forbearance which is made in respect of, in response to or for the inducement of supply of goods and/or services. That such consideration can flow from the recipient of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot constitute supply as there is no consideration. That the Board further clarified that the value of goods provided on FOC basis shall not be added to the value of supply of components. However, the case is different where the contractual obligation is cast upon the component manufacturer to provide moulds/dies but the same have been supplied by OEM on FOC basis and in such cases, the amortised cost of such moulds and dies shall be added to the value of supply of component. That once it is established that the obligation to provide tools on FOC basis is on the customer then the question of adding the amortised value of tools supplied by the customer does not arise. 4.9. The applicant submitted that in the backdrop of the above and in the light of the agreements signed between the Applicant and their customer the applicant would like to seek for advance ruling on- Whether the value of the silver supplied free of cost by the Naval formations (in the form of old batteries) are to be included in the taxable value adopted by the applicant on the batteries manufactured by the applicant and supplied to the Naval formations for the purpose of payment of GST or not? 5. PERSONAL HEARING: 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avy) on payment of applicable GST. 7.1. The issue involved herein is that the silver required for the manufacture of batteries are supplied free of cost by the respective Naval formations by way of supplying their used batteries (Non serviceable). After extracting the silver from the used batteries the applicant manufactures the Silver oxide-Zinc Batteries as per the specification provided by the Naval formations making use of the silver extracted from the old used batteries. It is also noted that while fixing the price for the batteries manufactured, the cost incurred by the applicant for extracting the silver from the old batteries is included, but the cost of the silver contained in the old batteries which is supplied by the Naval formations at free of cost in the form of old batteries are not included in the taxable value for the purpose of payment of GST as the same is supplied free of cost by the Naval formations, who are the customers of the applicant. 7.2. The applicant by referring to Section 15 of the CGST Act, 2017 which provides for Value of taxable supply and Section 2 (31) of the CGST Act, 2017 which provides for definition of the term consideration , argued that read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of old batteries) are to be included in the taxable value adopted by the applicant on the batteries manufactured by the applicant and supplied to the Naval formations for the purpose of payment of GST or not? 8.0. In order to determine the above query, it is imperative to delve into relevant provisions of the CGST Act 2017, which is extracted as below: Section 9 of the CGST Act 2017, provides for Levy and collection, wherein the Section 9(1) and Section 9(3) envisages as follows: 9(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the Central 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, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 9(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e monetary value of any act or forbearance, 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: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 8.4. It is to be noted that, in terms of Section 15 (1) of the CGST Act, 2017, in order to adopt the transaction value as the value of supply of goods or services or both, the following two conditions shall be satisfied, a. the supplier and the recipient of the supply are not related b. the price is the sole consideration for the supply 8.5. It is found in the instant case that the supplier i.e the applicant and the recipient i.e. the naval formations obviously are not related persons, as per the Explanation to Section 15. Whereas, as observed from the facts of the case in the case on hand as discussed, it is seen that the consideration is not paid wholly in money. On perusal of the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutional scheme of GST. Mainly it demonstrates that the idea which permeates GST legislation globally is to impose a multi stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail credit of tax paid at an anterior stage. As a result, GST fulfills the description of a tax which is based on value addition. The Supreme Court at paras 44, 45, 46 47 held thus : 44 The idea which permeates GST legislation globally is to impose a multi stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail credit of tax paid at an anterior stage. As a result, GST fulfills the description of a tax which is based on value addition. Value addition is intended to achieve fiscal neutrality and to obviate a cascading effect of taxation which traditional tax regimes were liable to perpetuate. In a sense therefore, the purpose of a tax on value addition is not dependent on the distribution or manufacturing model. The tax which is paid at an anterior stage of the supply chain is adjusted. The fundamental object is to achieve both neutrality and equivalence by the grant of seamless credit of the duties paid at an ant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Applicant, on perusal of the said Circular, it would show that it was confined to that specific subject material of moulds and dies which are being supplied by the Original Equipment Manufacturer (OEM) to a Component Manufacturer free of cost. The clarification issued by the Board relates to Moulds and Dies which are tools used for manufacture, where as Silver in the instant case is one of the essential ingredients used as input in the process of manufacture of batteries. Therefore, the analogy put forth by the applicant is not applicable in the instant case. It is also seen that in the case of M/s Lear Automotive India Private Limited the Maharashtra Advance Ruling Authority by placing reliance on the said Circular, had ruled that the amortized value of tool received on FOC basis from the customer is not required to be included in the value of finished goods manufactured and supplied by the applicant to the customer. Where as in the case on hand from the used batteries supplied by the recipient, Silver has been extracted, which is the main input for the manufacture of the Silver Oxide-Zinc battery and hence the above said Circular as well as the Advance Rulings have no rel ..... 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