AAAR CASE

2019-TIOL-01-AAAR-GST

Toshniwal Brothers (SR) Pvt Ltd

GST - Applicant is a supplier of services to overseas clients and is engaged in the business of promotion and marketing and after-sale-support services as a composite supply - they sought an advance ruling as to whether pure and mere promotion and marketing services will be 'intermediary services' for the purpose of section 12 of the IGST Act, 2017 for determining the place of supply; if after-sale services are also provided under a composite contract, would it then be composite supply and what will be the principal supply for such contracts; whether the contracts would qualify as exports if the client is overseas entity and will be a zero-rated supply - AAR [ 2018-TIOL-197-AAR-GST ] held that the Contract of services supplied are not pure and mere promotion and marketing services but in the nature of facilitating the supply of goods and hence would amount to "intermediary services" ; that after sales services are not in the nature of composite contract and they are independent, hence there is no question of determining what will be principal supply; that as regards whether the contracts would amount to ‘export of service' since the same has to be decided on the basis of the 'place of supply', the authority is not competent to decide the same since not covered u/s 97(2) of the CGST Act; that the question is not answered and the application is rejected to the said extent in terms of s.98(2) of the Act - Appeal to Appellate Authority for Advance Ruling.

Held:

++ Argument of the appellant that the promotion and marketing services are supplied to the principal on their own account and hence they fall within the exclusion clause of the definition of ‘intermediary' [section 2(13) of the IGST Act, 2017] is not a correct interpretation of law - language of the exclusion clause is such that it is applicable to those persons who supply such goods or service (or both) on their own account - If a person either ‘facilitates' or alternately ‘arranges' any supply of goods or service (or both) between two or more persons and does not supply such goods or services (or both) on his own account, he would be regarded as an ‘intermediary' - Appellant is clearly facilitating the supply of the products of the overseas client directly to the client's customers in the territory of India and is not supplying such goods on his own account, therefore, the appellant does not fall within the ambit of exclusion -AAR decision is, therefore, upheld - it automatically follows that the place of such supply will be in terms of s.13(8) of the IGST Act viz. the ‘place of supply' shall be location of the supplier of services, namely, "intermediary" - decision given by AAR under the Service Tax regime in case of Go Daddy India Web Services (P) Ltd. [ 2016-TIOL-08-ARA-ST ] is distinguishable: AAAR [para 18.8, 18.9, 18.10, 18.11]

++ As regards whether the after-sales-support service provided under a composite contract would amount to a composite supply and if so what would be the principal supply, from the appellant's own admission, the after-sales-support installation service are not requied in every case of sale since there are equipments which are typically in the nature of plug-and-play; there are some equipments which do not require installation but need to be configured remotely and which is done by the manufacturers themselves, therefore, the question of being naturally bundled does not arise - held, therefore, that after-sales-support service, although rendered in a composite manner with the promotion and marketing service is not a composite supply - AAR ruling to this extent is also upheld: AAAR [para 19.3]

++ On the question as to whether the contracts would qualify as "exports" in terms of section 2(6) of the IGST Act and will be a zero-rated supply as defined u/s 16, one of the important requirements for supply of any service to be treated as ‘export of service' is that the place of supply of service is outside India - entire issue is intrinsically related to determination of ‘place of supply' of service by appellant - Authority for Advance Ruling has been constituted in exercise of the powers conferred by section 96 of the Karnataka GST Act which extends to the whole of the State of Karnataka - AAR is a creature of the statute and has to function within the legal boundary mandated by the Act - As the ‘place of supply' is not covered u/s 97(2) of the Acts, the AAR was right in refraining from answering this question on the grounds of lack of jurisdiction - AAR ruling on this issue upheld: AAAR [para 20]

- Appeal dismissed: AAAR

2019-TIOL-26-HC-AHM-GST

Palak Designer Diamond Jewellery Vs UoI

GST - Petitioner is engaged in the manufacture of jewellery from gold, diamond and precious metals on its own account as well as on job work basis - Search came to be carried out at the factory premises to ascertain whether the petitioner had paid GST correctly - officers seized the excess stock of finished goods under seizure memo and handed over the same to petitioner for safe custody - petitioner requested the Additional Commissioner of Anti Evasion, GST and Central Excise, to provisionally release the finished goods which belonged to the principal suppliers and had to be returned at the earliest - petitioner informed the respondent that they had paid appropriate amounts of CGST and SGST on the seized goods and penalty equal to 15% of CGST and SGST under the provisions of section 74(5) of the Act and requested the release of the goods in terms of the provisions of section 67 (6) of the CGST Act - respondents once again searched the premises of the petitioner and seized all the raw materials and finished goods lying on the first, second and third floors under the seizure memo - petitioner furnished various documents from time to time and vide letter dated 29.5.2018 provided the reasons as to why the goods were not required to be seized, inter alia, stating that the petitioner being a job worker was not responsible for payment of GST on the value of supply of goods and that it was liable to pay GST only on job work charges - competent authority extended the period of seizure in terms of section 67 (7) of the CGST Act for a further period of six months - Since the respondents failed to provisionally release the seized goods causing immense hardship to the petitioner, it has filed the present petition seeking the relief - Petitioner has challenged the validity of seizure orders and seeks directions to the respondent to forthwith allow provisional release of the seized goods - Referring to the show cause notice dated 8.1.2019, it was pointed out that in paragraph 75 (ii) thereof, the respondents have computed the total amount of tax payable on the seized goods at Rs.46,75,791/- - It is further submitted that, at best the penalty thereon would come to Rs.23 lakhs and, therefore, the total amount would come to approximately Rs.70 lakhs; that since the goods are still lying with the respondent no interest would be payable thereon; that the petitioner having already paid Rs.14,16,868/- and having reversed credit of Rs.7,90,793/-, the respondents may be directed to provisionally release the seized goods under sub-section (6) of section 67 of the CGST Act upon the petitioner furnishing a bank guarantee of Rs.50 lakhs.

Held: Respondents are duly empowered to provisionally release the seized goods, if the requirements of section 67(6) of the CGST Act read with rule 140 of the CGST Rules are satisfied - In the present case, adding 50% towards penalty, the total amount would come to approximately Rs.70 lakhs - petitioner has already deposited Rs.14,16,868/- by way of challan and has reversed credit of SGST to the tune of Rs.7,90,793/-, which comes to approximately Rs.22 lakhs - Under the circumstances, if the petitioner furnishes bank guarantee of Rs.50 lakhs and a bond for the value of the goods in FORM GST INS-04, the interest of justice would be served - without entering into the merits of the controversy, the petition is partly allowed - respondents are directed to forthwith provisionally release the seized goods of the petitioner under sub-section (6) of section 67 of the CGST Act, upon the petitioner executing a bond in FORM GST INS-04 for the total value of the seized goods, and furnishing a bank guarantee of Rs.50 lakhs: High Court [para 12, 13, 14, 14.1]

- Petition disposed of: GUJARAT HIGH COURT