Chattisgarh High Court
M/S Shree Jeet Transport vs Union Of India on 17 October, 2023
Neutral Citation
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WPT No.117 of 2022
AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
Judgment reserved on 01-09-2023
Judgment delivered on 17 -10-2023
WPT No.117 of 2022
M/s Shree Jeet Transport Through Proprietor, Arvinder Singh
Bhatia, S/o Jagjeet Singh Bhatia, Aged About 40 Years, R/o 127,
Ward 15, Kharora, Raipur (Chhattisgarh) --- Petitioner
Versus
1. Union of India Through its Secretary, Ministry of Finance,
Government of India, New Delhi.
2. State of Chhattisgarh through The Secretary, Department of
Commercial Tax, Government of Chhattisgarh, Mantralaya,
Mahanadi Bhawan, Nawa Raipur, Atal Nagar, Naya Raipur,
District Raipur Chhattisgarh
3. GST Council, through its Chairperson, 5th Floor, Tower II, Jeevan
Bharti Building, Janpath Road, Connaught Place, New Delhi
4. Authority of Advance Ruling, State of Chhattisgarh, 3rd and 4th
Floor, Vanijya Kar GST Bhawan, Sector 19, Atal Nagar, Raipur
Chhattisgarh
5. Appellate Authority of Advance Ruling, State Of Chhattisgarh,
3rd And 4th Floor, Vanijya Kar GST Bhawan, Sector 19 Atal
Nagar, Raipur Chhattisgarh --- Respondents
For Petitioner Mr. Kavin Gulati, Sr. Advocate with Mr.
Raja Sharma & Mr. Abhishek Anand,
Advocates
For Respondent/UOI Mr. Ramakant Mishra, Dy. Solicitor
General with Ms Anmol Sharma & Ms
Anuja Sharma, Advocates
For Respondent/State Mr. S.C. Verma, Advocate General with
Mr. Vikram Sharma, Dy.Govt. Advocate
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Hon'ble Mr. Justice Goutam Bhaduri, Judge &
Hon'ble Mr. Justice Sachin Singh Rajput, Judge
CAV Judgment
Per Goutam Bhaduri, J,
Facts of the case :
1. (a) This instant petition is filed to challenge the order dated
28-2-2022 (Annxure – P/5) passed by the Appellate Authority for
Advance Ruling, Chhattisgarh (for brevity ‘the AAAR’) as no
decision was rendered in terms of Section 101 (3) of the Central
Goods and Service Tax Act, 2017 (for brevity ‘the CGST’) and
the Chhattisgarh Goods and Service Tax Act, 2017 (for brevity
‘the CHGST’) and the order dated 4-1-2021 (Annexure – P/6)
passed by the Authority for Advance Ruling, Chhattisgarh (for
brevity ‘the AAR’) to be illegal wherein it was held that Goods
and Services Tax (for brevity ‘the GST’) would be leviable on the
value of diesel provided by the service recipient Free of Cost (for
brevity ‘FOC’).
(b) The petitioner also challenges the provisions of Section 101
(3) of the CGST and CHGST along with agenda of the 8 th GST
Council Meeting held on 3rd & 4th January, 2017 at New Delhi on
the ground that the same is constitutionally invalid and ultra vires
to Articles 14 and 19 (1)(g) of the Constitution of India, to the
extent the provision provided that no decision would be rendered
by the AAAR because of difference of opinion between the two
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members, which would lead to arbitrary and unreasonable
distinction and left the parties without any remedy.
(c) The petitioner is a Goods Transport Agency (for brevity
‘the GTA’) service provider, engaged in providing service of
transportation of goods by road. It is pleaded that the petitioner
intends to enter into an agreement with service recipient for
providing GTA services. As per the proposed terms of agreement,
it was agreed that the petitioner would provide trucks/trailers
along with driver for transportation of goods belonging to the
service recipient on a day-to-day and non-exclusive basis and
further as per Clause 2 of the draft agreement, the service recipient
will be responsible for providing fuel in the trucks/trailers
supplied by the petitioner on free of cost basis (FOC) thereby it
was agreed that component of fuel would not be the responsibility
of the petitioner, who is a GTA, in the scope of service recipient.
Copy of draft agreement has been annexed with this petition as
Annexure – P/7. Clauses 1 & 2 of the draft model agreement are
relevant and the same are quoted below :
1. TRANSPORTATION OF MATERIAL
1.1 By virtue of this Agreement, the Transporter
is engaged, at the discretion of the Company, as a
Registered Service Provider of the Company for
providing GTA services to transport material from
the Company’s factory at …….. to its Units by
engaging trucks/trailers. If material is required to
be delivered from and/or to any other destination
in the future, the terms of agreement for such
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1.2 The Transporter will ensure placement of
adequate number of trucks/trailers on the basis of
the dispatch planning of the Company as
intimated by the Company from time to time. The
trucks so placed by the Transporter shall be
engaged on dedicated trip charter basis for
transporting the Company’s intermediary goods.
In case, the Transporter fails to engage trucks
committed to the Company, the Company
reserves the right to arrange for alternate source of
transportation of the material at the cost and risk
of the Transporter.
1.3 The Company doesn’t own any responsibility
after the consignment has been loaded in truck
and moved out of factory. For any deviation and
consequent losses, if any to the Company, the
Transporter will be solely responsible.
1.4 In case, if the consignment is not accepted for
any reason whatsoever, the Transporter’s driver
should contact the Company’s office for suitable
advice/instructions. Under no circumstance, the
consignments should be brought back to siding
without the prior approval of the Company. In
case of non-compliance of this obligation, the
Company will not be responsible for any expenses
on this account.
1.5 Shifting/unloading of consignments en route
would not be allowed unless specifically
permitted by the Company. The Transporter is
strictly instructed that under no circumstances
would any quantity of material carried in the truck
be disposed off in any manner other than by way
of delivery of the goods to the destination against
receipt.
2. FUEL
2.1 Fuel, a consumable, is in the scope of the
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company and would be provided to the truck for
use exclusively for the required transportation of
the goods loaded in the truck.
2.2 Such fuel shall be filled in the truck that is
engaged for the concerned trip at the point of
origin or at destination. The freight declared and
agreed will not account for any cost/charges for
fuel and the Transporter would not have any
liability to pay for fuel for the said trip to be made
by the Transporter. It is expressly clarified that the
value of fuel which is in the scope of the
Company shall by no means be interpreted as
additional consideration payable for the
transportation service provided by the Transporter
or having been provided to the vehicle in lieu of
freight. The said fuel would be issued by the
Company for exclusive usage, as a consumable, in
the underlying transportation only and the
ownership of the fuel would at no point be
transferred to the Transporter or to the vehicle
engaged. The truck is required to use the fuel only
for the specific transportation and would not be
eligible to dispose of the same in any other
manner. In case fuel is given at the destination,
the quantity required would be as per the pre-
determined basis of the Company and all the
conditions specified herein would be applicable as
if fuel has been given at the source.
(d) Under these circumstances, as per Section 95 read with
Section 97(1) of the CGST, which enables the registered person
who undertakes the supply of goods or service to seek an advance
ruling on the questions enumerated in Section 97(2) of the CGST
by filing an application before the AAR. The petitioner filed an
application for advance ruling before the AAR raising a point that
whether the value of fuel provided by the service recipient on
FOC basis in terms of the draft agreement was required to be
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included in the value of GTA being proposed to be rendered by
the petitioner for the purpose of discharge of GST.
(e) After hearing the petitioner, the AAR initially passed an
order holding that the petitioner was required to include the cost of
free supplied fuel in the value of GTA service and thereby would
liable to pay GST on the same.
(f) Being aggrieved by the order of AAR, the petitioner filed an
appeal before the AAAR. Since it was presided-over by two
members there was a difference of opinion between the members
of State and Centre. The SGST (State Goods and Service Tax)
member held that the value of FoC would not be inclusive in the
taxable value for the purpose of discharge of GST whereas the
CGST (Central Goods and Services Tax) member held that as per
circular issued by the CBIC (Central Board of Indirect Taxes and
Customs) the GST at the applicable rate would be leviable on the
value inclusive of cost of diesel filled by service recipient. The
findings of the CGST and SGST members are quoted below for
ready reference :
“5. Findings as per the CGST Member :
xxx xxx xxx
5.21 Thus I find no reason to differ from the
findings of the Authority of Advance Ruling,
Chhattisgarh under its order No.STC/AAR/
07/2020 Raipur dated 04/01/2021 that diesel to be
filled free of cost by the service recipient in the
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WPT No.117 of 2022engaged chartered (dedicated) vehicles as per the
proposed draft agreement would form part of
value of supply of service charged by the
appellant and accordingly GST at the applicable
rate would also be leviable on the value inclusive
of the cost of diesel filled by the service recipient,
under GTA service and there is no merit in the
appeal filed by the Appellant Shri Arvinder Singh
Bhatia, M/s Shree Jeet Transport, 127, Ward 15,
Kharora, Raipur, Chhattisgarh having GSTIN-
22AKDPB5992PIZU against the Advance Ruling
Order dated 04/01/2021.
6. Findings as per the SGST Member :
xxx xxx xxx
6.7 Therefore, in light of the above, in my view
the value of diesel which is in the scope of service
recipient would not be included in taxable value
of supply of the service provider.”
(g) Therefore, no ruling was rendered in terms of Section
101(3) of the CGST and CHGST. The petitioner, therefore,
contended that since no ruling was given, the petitioner has been
rendered remediless. Thus, on various grounds, the petitioner has
preferred the instant writ petition.
Submissions of the parties :
2. Mr. Kavin Gulati, learned senior Advocate appearing with Mr.
Raja Sharma & Mr. Abhishek Anand, learned counsel for the
petitioner, would submit that :
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WPT No.117 of 2022 the object of advance ruling sought for by the
petitioner has been defeated as divergent opinion has
been given by two members of AAAR.
learned counsel would submit that the petitioner, which
is a GTA, transports the goods with a contract and thus
entered into contract with the different recipients and
according to it, the vehicle was to be supplied by him
and the cost of fuel, which keeps on fluctuating would
be borne by the recipient. The said contract which was
proposed was sent for determination of tax as the diesel
i.e. fuel was not the part of the supply made or agreed
to be made;
learned counsel would also submit that the contract
would show that component of diesel was out of the
ambit of contract;
he would further submit that under these circumstances
by Annexure- P/8 advance ruling was sought for with
the specified question as under :
Whether diesel filled free of cost by the
service recipient in the engaged
chartered (dedicated) vehicles, would
form part of value of supply of service
charged by the applicant and whether
GST would be leviable on value of
diesel filled free of cost by the service
recipient or otherwise under GTA
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learned counsel would also submit that along with such
question for advance ruling the draft agreement was
also attached and as per the agreement, the fuel was to
be supplied by the recipient company and the
responsibility of the petitioner was only for the supply
of goods. Therefore, the scope of supply does not
include the cost of fuel;
learned counsel would submit that as per Section 9 of
the CGST the levy of tax is on ‘supplies’ of goods or
‘services’ or both on ‘value determined under Section
15‘ at the rates as may be notified;
according to the learned counsel, term of ‘supply’ is
not defined under the Act, but the term of ‘supplier’ is
defined in Section 2 (105) of the CGST as being a
person supplying goods or services or both; and
Section 7 deals with ‘scope of supply’ and Section 7(1)
(a) provides that the term of supply would include all
forms of supply made or agreed to be made for a
consideration;
learned counsel would submit that the expression
agreed to be made indicates that the mandate of the Act
is to see what are the services which are being agreed
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between the parties to be supplied;
he would therefore submit that Section 7(1)(a) has to
be read in conjunction with Section 15 which deals
with value of taxable supply;
he would further submit that perusal of Section 15(1)
would indicate that the value of supply shall be the
transaction value, which is the price actually paid or
payable and the words ‘said supply’ in conjunction
with the phrase ‘price actually paid or payable’ is
directly relatable to such supply agreed to be made;
learned counsel would submit that when the agreement
has been entered between the parties, the same cannot
be ignored while examining the tax liability. To
buttress his contention, learned counsel would place
upon the decision rendered by the Supreme Court in
the matter of Commissioner of Service Tax v
Bhayana Builders Private Limited 1 In the said case
examining the valuation provisions under the Service
Tax Act, it is held that free supplies made by the
service recipient cannot be added to the taxable value
of the service provider;
according to the learned counsel the AAR has taken
1 (2018) 3 SCC 782
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note of this fact but failed to interpret it correctly.
learned counsel would submit that the value of supply
would be a transaction value and price actually paid;
he would submit that while the initial draft was
prepared, legislation was conscious about such
consideration and when the final draft came, the free
supply was kept out of the legislation;
while placing reliance upon the decision rendered by
the Supreme Court in the matter of Union of India v
Mohit Minerals Private Limited through Director 2
learned counsel would submit that model GST though
prepared but eventually not included. With respect to
interpretation of fuel, it is not in consideration in the
agreement. Initially the authority came to a finding
that the fuel is a necessary ingredient and it cannot be
ignored, but the members of the appellate authority
deferred in their opinion;
he would submit that the taxable event under the GST
supply of service and scope of petitioners taxable
supply is to be determined by agreement and the GST,
which is a tax on value addition and is distinction
based tax on consumer so the bargain between the
2 (2022) 10 SCC 700
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parties cannot be ignored. In support of his contention,
learned counsel would place reliance upon the decision
rendered by the Supreme Court in the matter of Union
of India v VKC Footsteps India Private Limited3;
learned counsel would submit that to interpret certain
Section, the draft legislation history would be
important. What was sought to be included and the
free supply which was earlier part of included for
taxable income to be taken into consideration for
levying tax;
he would submit that the GTA is defined in para 2 (ze)
of notification No.12/2017-Central Tax (Rate) dated
28-6-20217, which means that person engaged in
relation to transport of goods by road and issues
consignment note, therefore, when the agreement is
entered into by the goods transport recipient and diesel
is supplied free it would not be an issue to be
determined to levy the tax;
learned counsel would submit that the tax regime prior
to GST whether can be included as a service was
decided by the Supreme Court in the matter of Union
of India v Intercontinental Consultants and
3 (2022) 2 SCC 603
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Technocrats Private Limited4 wherein it was held that
service tax can be imposed only on the value of the
service agreed to be provided and when there is no
service tax payable on the value of fuel it cannot be
subject matter of taxation in GST;
learned counsel would also submit that it is not a case
that tax is not being paid on the fuel and the fuel is
amenable to VAT (Value Added Tax) and 23% tax is
payable as a VAT in the State of Chhattisgarh and
whenever the legislature wanted it could have included
the same in Section 7(1)(c) read with Schedule-I,
which provides for supplies to be taxable even when
there is no consideration. Since the fuel is not included
in Schedule I, it cannot be amenable for addition of
tax;
he would submit that there is no effort on tax evasion;
the tax statute is to be interpreted by plain language of
the statute; and the intention cannot be gone into;
according to the learned counsel, the respondents
cannot insist recovery even if it is not supported by
statute. He would place reliance upon the decisions
rendered by the Supreme Court in the matters of Union
4 (2018) 4 SCC 669
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of India v Azadi Bachao Andolan and Another 5 and
Commissioner of Income Tax, Mumbai v Walfort
Share and Stock Brokers Private Limited6;
learned counsel would submit that with respect to the
valuation, the language used in Finance Act, 1994
(Service Tax) and the CGST was substantially similar
and Section 67 of the Finance Act, which deals with
the service tax was also similar. Reliance is placed on
(2018) 4 SCC 669 & (2018) 3 SCC 782.
he would submit that Section 101 (3) of the CGST is
manifestly arbitrary for the reason that when there is a
difference of opinion between the appellate members,
it would render the petitioner remediless except to file
a petition under Article 226 of the Constitution. Since
in the instant case because of difference of opinion in
the appellate stage, no decision is rendered under
Section 101 (3) as such the doctrine of merger will not
apply;
he would submit that availability of constitutional
remedy like Article 226 would not make the provision
of Section 101(3) of the CGST intra vires, as the
situation of like nature leaves the petitioner with no
5 (2004) 10 SCC 1
6 (2010) 8 SCC 137
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statutory redressal; and
learned counsel would next submit that when the basic
intent behind the advance ruling mechanism is to bring
about certainty and avoidance of dispute, a provision
like Section 101 (3) of the CGST defeats the same.
Therefore, it is manifestly arbitrary and the petition
deserves to be allowed.
3. Mr. Ramakant Mishra, learned Deputy Solicitor General
appearing with Ms Anmol Sharma & Ms Anuja Sharma, learned
counsel for the Union of India, would submit that :
as per definition under Section 2 (31) of the CGST, the
word ‘consideration’ in relation to supply of goods or
services or both include any payment made or to be
made
learned counsel would submit that any payment made
or to be made, whether in money or otherwise in
respect of or in response to or for the inducement of
supply of goods or services or both cannot escape
liability;
he would submit that as per Section 2 (93) the word
‘recipient’ has been said to be recipient of supply of
goods or services or both where a consideration is
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to whom would also include;
he would submit that Section 2 (105) defines the word
‘supplier’ in relation to any goods or services or both
and Section 2 (108) defines the words ‘taxable supply’,
which means a supply of goods or services or both
which is leviable to tax under this Act;
according to the learned counsel, as per Section 7 of
the CGST, the expression supply includes all forms of
supply of goods or services or both and Section 9
makes mandatory that tax would be payable on all intra
state supplies of goods or services or both;
learned counsel would submit that in order to agitate
the value of taxable supply, Section 15 would be
applicable and the value of supply of goods 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 and value of supply shall also
include;
he would also submit that the supplier is liable to pay
in relation to such supply but which has been incurred
by the recipient of the supply and included in the price
actually paid or payable for the goods or services or
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learned counsel would next submit that the language
used in Section 15(2)(b) “any amount that the supplier
is liable to pay in relation to such supply but which has
been incurred by the recipient of the supply and not
included in the price actually paid or payable for the
goods or services or both” would include the supply
of diesel and in the instant case the petitioner tried to
by-pass the object of legislation; and
learned counsel would lastly submit that the vehicle
cannot ply without diesel which is an important
component, therefore, the contract though has been
entered cannot override the plain language of GST
whereby the petitioner would be liable to pay on
inclusion of tax.
4. Mr. S.C. Verma, learned Advocate General appearing with Mr.
Vikram Sharma, learned Dy. Govt. Advocate for the State, would
submit that :
for diesel no GST is applicable and Section 7 of the
CGST would show all forms of supply of goods or
services or both are to be considered. Therefore, if the
diesel is supplied free of cost, which is essential for
plying the transport vehicle eventually for calculating
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WPT No.117 of 2022the value of supply the service rendered by the
transporter cannot be ignored without cost of diesel;
learned counsel would further submit that as per
Section 15 of the CGST the value of taxable supply is
required to be considered qua section 15 of CGST Act.
As per Section 15(2)(b) any amount of supply is liable
to pay the tax and Section 2(31) defines the word
‘consideration’, which otherwise include that when it is
liable to pay is also to be included in supply of goods;
and
learned counsel would lastly submit that the attempt
made by the petitioner would amount to tax evasion
and the petitioner cannot escape from the liability.
5. We have heard learned counsel appearing for the parties and have
perused the documents appended thereto.
Observations and order of the Court :
6. The petitioner is a GTA. It provides service to various companies
by issuing a consignment note and thereafter carrying the goods
and material from designated places specified by the service
recipient to other specified places of delivery for which the
petitioner charges the freight as its consideration and entered into
contract with the service recipient that the fuel would be outside
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the scope of service of the petitioner as it would be supplied FOC
by the recipient in the trucks deployed for transporting the goods.
7. The question falls for consideration is that
“whether diesel filled by the service recipient FoC
in the truck of the GTA can be added to value of
supply being rendered by the GTA for the purpose
of levy of GST under the CGST Act, 2017 ?”
8. In the matter of Mohit Minerals Private Limited (supra) the
Supreme Court held that in assessing the claim, the Court is bound
by a decision of the Constitution Bench of the Supreme Court
rendered in the matter of Mathuram Agrawal v State of Madhya
Pradesh7, which has identified three essential elements of taxation
i.e.
(i) the subject of the tax;
(ii) the person who is liable to pay the tax; and
(iii) the rate at which the tax is to be paid.
9. The aforesaid test was further elaborated by a two Judge Bench of
the Supreme Court in the matter of Messrs Govind Saran Ganga
Saran v Commissioner of Sales Tax and Others8 by further
requiring the designation of the measure or the value to which the
rate of the tax will be applied. Thus, the four canons of taxation
are as follows :
“(i) The taxable event;
7 (1999) 8 SCC 667
8 1985 (Supp) SCC 205 : AIR 1985 SC 1041
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(ii) The person on whom the levy is imposed;
(iii) The rate at which the levy is imposed; and
(iv) The measure or the value to which the rate
will be applied.”
10. In the case at hand since the diesel is supplied by the service
recipient FOC to the GTA the measure or the value to which the
rate of the tax is required to be assessed.
11. The petitioner who is a GTA under the CGST Act approached the
AAR to determine its tax liability in advance under the Advance
Ruling Mechanism in GST. The advance ruling mechanism is
introduced to help any assessee to its activities which are liable for
payment of GST, well in advance. It also brings certainty in
determining the tax liability, as the ruling given by the Authority
for Advance Ruling is binding on the applicant as well as
Government authorities. Further, it helps in avoiding long drawn
and expensive litigation at a later date. The object of seeking an
advance ruling is inexpensive and the procedure is simple and
expeditious.
12. Consequent thereto under Section 97 of the CGST the petitioner
applied for advance ruling by an application dated 4-8-2020
before the AAR. Along with the said application the draft
proposed agreement with the service recipient was also annexed.
The question which was required to be answered was framed as
quoted in the preceding para of this judgment.
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13. The AAR by its order dated 4-1-2021 held that the cost of fuel
though is not included in the scope of work of the petitioner and
the diesel is provided FOC by the service recipient would
nevertheless would be added to the value of taxable service for the
purpose of GST on application of Section 15 (1) read with Section
2 (31) of the CGST. It was further held that since fuel was an
essential ingredient without which the transport service cannot be
rendered, the cost of fuel cannot be ignored.
14. The petitioner having not satisfied with such ruling, filed an
appeal before the Appellate Authority i.e. AAAR wherein the
AAAR passed an order dated 28-2-2022. The Member of the
CGST (Central) upheld the view of the AAR and held that diesel,
which is filled FoC by the service recipient in the engaged
chartered (dedicated) vehicles as per the proposed draft agreement
would form part of value of supply of service charged by the
appellant and applicable rate of GST was to be leviable whereas
the SGST Member held that considering the provisions of Section
15(2)(b) which provides that any amount that the supplier is liable
to pay in relation to such supply but which has been incurred by
the recipient of the supply does not include FoC diesel for the
simple reason that the liability to pay for the diesel as per draft
contract is of service recipient.
15. In order to appreciate the rival submission of the parties, certain
provisions of the CGST Act, 2017 are relevant, which are quoted
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below :
2. Definitions.–In this Act, unless the context
otherwise requires,–
xxx xxx xxx
(31) “consideration” in relation to the supply of
goods or services or both includes–
(a) any payment made or to be made,
whether in money or otherwise, 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;
(b) the 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;
xxx xxx xxx
(93) “recipient” of supply of goods or services or
both, means–
(a) where a consideration is payable for the
supply of goods or services or both, the
person who is liable to pay that
consideration;
(b) where no consideration is payable for the
supply of goods, the person to whom the
goods are delivered or made available, or to
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given or made available; and
(c) where no consideration is payable for the
supply of a service, the person to whom the
service is rendered,and any reference to a person to whom a supply is
made shall be construed as a reference to the
recipient of the supply and shall include an agent
acting as such on behalf of the recipient in relation
to the goods or services or both supplied;
xxx xxx xxx
(105) “supplier” in relation to any goods or
services or both, shall mean the person supplying
the said goods or services or both and shall
include an agent acting as such on behalf of such
supplier in relation to the goods or services or
both supplied;
xxx xxx xxx
(108) “taxable supply” means a supply of goods
or services or both which is leviable to tax under
this Act;
7. Scope of supply.–(1) For the purposes of this
Act, the expression “supply” includes–
(a) all forms of supply of goods or services
or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal
made or agreed to be made for a
consideration by a person in the course or
furtherance of business;
(aa) the activities or transactions, by a
person, other than an individual, to its
members or constituents or vice-versa, for
cash, deferred payment or other valuable
consideration.
Explanation.–For the purposes of this clause, it is
hereby clarified that, notwithstanding anything
contained in any other law for the time being in
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force 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.
[(1A) where certain activities or transactions
constitute a supply in accordance with the
provisions of sub-section (1), they shall be treated
either as supply of goods or supply of services as
referred to in Schedule II.]
(2) Notwithstanding anything contained in sub-
section (1),–
(a) activities or transactions specified in
Schedule III; or
(b) such activities or transactions undertaken
by the Central Government, a State
Government or any local authority in which
they are engaged as public authorities, as
may be notified by the Government on the
recommendations of the Council,
shall be treated neither as a supply of goods nor a
supply of services.
(3) Subject to the provisions of [sub-sections (1),
(1A) and (2)], the Government may, on the
recommendations of the Council, specify, by
notification, the transactions that are to be treated
as–
(a) a supply of goods and not as a supply of
services; or
(b) a supply of services and not as a supply
of goods.
9. Levy and collection.–(1) Subject to the
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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.
(2) The central tax on the supply of petroleum
crude, high speed diesel, motor spirit (commonly
known as petrol), natural gas and aviation turbine
fuel shall be levied with effect from such date as
may be notified by the Government on the
recommendations of the Council.
(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 of such goods or
services or both and all the provisions of this Act
shall apply to such recipient as if he is the person
liable for paying the tax in relation to the supply
of such goods or services or both.
(4) The Government may, on the
recommendations of the Council, by notification,
specify a class of registered persons who shall, in
respect of supply of specified categories of goods
or services or both received from an unregistered
supplier, pay the tax on reverse charge basis as the
recipient of such supply of goods or services or
both, and all the provisions of this Act shall apply
to such recipient as if he is the person liable for
paying the tax in relation to such supply of goods
or services or both.
(5) The Government may, on the
recommendations of the Council, by notification,
specify categories of services the tax on intra-
State supplies of which shall be paid by the
electronic commerce operator if such services are
supplied through it, and all the provisions of this
Act shall apply to such electronic commerce
operator as if he is the supplier liable for paying
the tax in relation to the supply of such services:
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WPT No.117 of 2022Provided that where an electronic commerce
operator does not have a physical presence in the
taxable territory, any person representing such
electronic commerce operator for any purpose in
the taxable territory shall be liable to pay tax:
Provided further that where an electronic
commerce operator does not have a physical
presence in the taxable territory and also he does
not have a representative in the said territory, such
electronic commerce operator shall appoint a
person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay
tax.
15. Value of taxable supply.–(1) The value of a
supply of goods 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.
(2) The value of supply shall include–
(a) any taxes, duties, cesses, fees and charges
levied under any law for the time being in
force other than this Act, the State Goods
and Services Tax Act, the Union Territory
Goods and Services Tax Act and the Goods
and Services Tax (Compensation to States)
Act, if charged separately by the supplier;
(b) any amount that the supplier is liable to
pay in relation to such supply but which has
been incurred by the recipient of the supply
and not included in the price actually paid or
payable for the goods or services or both;
(c) incidental 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;
(d) interest or late fee or penalty for delayed
payment of any consideration for any supply;
and
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(e) subsidies directly linked to the price
excluding subsidies provided by the Central
Government and the State Governments.
Explanation.–For the purposes of this sub-
section, the amount of subsidy shall be included in
the value of supply of the supplier who receives
the subsidy.
(3) The value of the supply shall not include any
discount which is given–
(a) before or at the time of the supply if such
discount has been duly recorded in the
invoice issued in respect of such supply; and
(b) after the supply has been effected, if–
(i) such discount is established in terms
of an agreement entered into at or
before the time of such supply and
specifically linked to relevant invoices;
and
(ii) input tax credit as is attributable to
the discount on the basis of document
issued by the supplier has been reversed
by the recipient of the supply.
(4) Where the value of the supply of goods or
services or both cannot be determined under sub-
section (1), the same shall be determined in such
manner as may be prescribed.
(5) Notwithstanding anything contained in sub-
section (1) or sub-section (4), the value of such
supplies as may be notified by the Government on
the recommendations of the Council shall be
determined in such manner as may be prescribed.
Explanation–For the purposes of this Act,–
(a) persons shall be deemed to be related
persons if–
(i) such persons are officers or directors
of one another’s businesses;
(ii) such persons are legally recognised
partners in business;
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(iii) such persons are employer and
employee;
(iv) any person directly or indirectly
owns, controls or holds twenty-five per
cent or more of the outstanding voting
stock or shares of both of them;
(v) one of them directly or indirectly
controls the other;
(vi) both of them are directly or
indirectly controlled by a third person;
(vii) together they directly or indirectly
control a third person; or
(viii) they are members of the same
family;
(b) the term “person” also includes legal
persons;
(c) persons who are associated in the
business of one another in that one is the sole
agent or sole distributor or sole
concessionaire, howsoever described, of the
other, shall be deemed to be related.
16. The Supreme Court in the matter of VKC Footsteps India Private
Limited (supra) has defined the constitutional 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
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WPT No.117 of 2022paid 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 anterior stage of the supply
chain.
45. The State VAT legislation in India
represented a significant stage in the evaluation of
fiscal legislation based on the principle of value
addition. In All India Federation of Tax
Practitioners v. Union of India, this Court,
speaking through a two judge Bench, noted the
principle that VAT is a consumption tax as it is
borne by the consumer. The Court observed that
with its increasing importance in the economy, the
service sector is “occupying the centre stage of
the Indian economy”. As economists postulate,
there is no distinction between consumption of
goods and consumption of services both of which
satisfy human wants and needs. The Court
underscored that service tax is a destination-based
consumption tax, not a charge on business but on
the consumer of the service.
46. Though the erstwhile regime recognised the
principle of value addition-based consumption
taxes, there was an absence of a seamless flow of
credit, particularly between Central and State
levies. The background material antecedent to the
adoption of the constitutional and legal structure
underlying GST in the country indicates the
importance which was ascribed to developing a
tax regime which would achieve a continuous
chain of set-off from the original producer and
service provider’s point up to the retailer’s level
in the supply chain and eliminate the burden
of cascading tax effects. Thus, the first discussion
paper on GST in India published by the
Empowered Committee of State Finance
Ministers on 10-11-2009 emphasised that :
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WPT No.117 of 2022“1.14 … In the GST, both the cascading
effects of CENVAT and service tax are
removed with set-off, and a continuous chain
of set-off from the original producer’s point
and service provider’s point upto the
retailer’s level is established which reduces
the burden of all cascading effects. This is
the essence of GST, and this is why GST is
not simply VAT plus service tax but an
improvement over the previous system of
VAT and disjointed service tax.”
47. The Statement of Objects and Reasons
appended to the Constitution (One-Hundred and
Twenty-Second Amendment) Bill 2014 which
eventually became the Constitution (One Hundred
and First Amendment) Act 2016 postulates that
GST shall replace a number of indirect taxes
levied by the Union Government and the State
Governments. The object was to introduce a
goods and service tax which would fulfil two
fiscal priorities namely, (1) removing the
cascading effect of taxes; and (2) providing for a
common national market for goods and services.
An extract from the Statement of Objects and
Reasons is set out below:
“Statement of Objects and Reasons.–The
Constitution is proposed to be amended to
introduce the goods and services tax for
conferring concurrent taxing powers on the
Union as well as the States including Union
territory with Legislature to make laws for
levying goods and services tax on every
transaction of supply of goods or services or
both. The goods and services tax shall
replace a number of indirect taxes being
levied by the Union and the State
Governments and is intended to remove
cascading effect of taxes and provide for a
common national market for goods and
services. The proposed Central and State
goods and services tax will be levied on all
transactions involving supply of goods and
services, except those which are kept out of
the purview of the goods and services tax.”
17. The predominant object is for supply of goods and services,
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except those which are kept out of the purview of the goods and
services tax.
18. Indisputably, the petitioner is a Goods Transport Agency (GTA)
in terms of GST. In so far as the service of GTA is concerned, if
the services (of goods transportation) are provided by GTA to
specified class of persons, the tax liability falls on such recipients
under the reverse charge mechanism, In terms of Notification
dated 28.06.2017, the following services are exempt from GST :
(a) by road except the services of –
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.
19. As per section 65B(26) of the Finance Act, 1994, “Goods
Transport Agency” means any person who provides service in
relation to transport of goods by road and issues consignment
note, by whatever name called. The “Goods Transport Agency”
as is defined in clause 2(ze) of notification dated 28.06.2017 reads
as follows :
“(ze) “goods transport agency” means
any person who provides service in relation to
transport of goods by road and issues
consignment note, by whatever name called;”
Therefore in the Service Tax regime, issuance of consignment
note was integral and mandatory requirement before any road
transporter could be brought within the ambit of GTA. Under the
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GST law, the definition of Goods Transport Agency is provided in
Clause (ze) of Notification dated 28.06.2017, as supra. Therefore,
the issuance of consignment note is sine-qua-non for a supplier of
service to be considered as a Goods Transport Agency. If such a
consignment note is not issued by the transporter, the “service
provider” will not come within the ambit of goods transport
agency. If a consignment note is issued, it indicates that the lien
on goods has been transferred (to the transporter) and the
transporter becomes responsible for the goods till its safe delivery
to the consignee. Therefore, it is only the service of such GTA,
who assumes agency functions, that is being brought into the GST
net. The individual truck/tempo operators who do not issue any
consignment note are not covered within the meaning of the term
GTA.
20. (a) The ‘Consignment Note’ is neither defined in the Act nor in
the Notification dated 28.06.2017. The guidance is availed from
explanation to Rule 4B of Service Tax Rules, 1994. In terms of
the said rule, ‘consignment note’ means a document issued by a
goods-transport-agency against the receipt of goods for the
purpose of transport of goods by road in a goods carriage, which
is serially numbered, and contains the name of the consignor and
consignee, registration number of the goods carriage in which the
goods are transported, details of the goods transported, details of
the place of origin and destination, person liable for paying
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service tax whether consignor, consignee or the goods transport
agency.
20(b) The use of phrase “in relation to” has extended the
scope of the definition of GTA. It includes not only the actual
transportation of goods but any intermediate/ancillary service
provided in relation to such transportation, like loading or
unloading, packing or unpacking temporary warehousing etc. If
these services are not provided as independent activities but are
the means for successful provision of GTA service, then they are
also covered under GTA. Therefore, in respect of those who
provide agency services in transport, the liability is cast on
recipient in most of the cases or unless option to pay under
forward charge has been exercised by the GTA.
20(c) In the case in hand, as per the proposed
agreement/contract, the fuel (diesel) is not in the scope of the
service of the petitioner. The agreement purports that the fuel
would be free of cost basis for transportation of the goods and
fuel would be filled by the service recipient for transportation.
21. The very definition and existence of the petitioner
who is to provide transportation service, by plain and simple
interpretation would point out the entire business and survival is
premised and interdependent on the vehicles for transportation of
goods. The obvious factor would be the vehicle cannot run
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without fuel. Therefore, the design of the entire activity of GTA
is based on supply of fuel to the respective vehicles. In absence
of fuel, the the entire business activity would stand arrested to
provide service. Therefore, the need of fuel is glued for survival
of a GTA. If the GTA has stitched up to provide service by
obtaining fuel on FOC basis by contract with recipient
Company, this phenomenon would transcend the activity which
reflects a broader shift in name of contract, therefore, the
revenue has power to remove the lid to find out the object and
purpose.
22. In the instant case, the scope of supply as defined in section
7 of the GST Act purports “all forms of supply of services” made
or agreed to be made for consideration “in the course” or
“furtherance of business”. The words used in Section 7(1)(a), “in
course” or “furtherance of business” would point out about service
to be provided by the transporter as a GTA. The contention of
petitioner that the “consideration” is required to be confined as per
the terms of agreement cannot be given a literal interpretation.
Section 2(31) of the CGST 2017 mandates that “consideration” in
relation to supply of goods or services includes – (a) any payment
whether in money or otherwise made or to be made; (b) monetary
value of any act or forbearance for the inducement of supply of
goods or services. Reading of section 2(31) along with scope of
supply as defined u/s 7(1)(a) makes it clear that the petitioner who
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is a GTA wanted to transport the goods for recipient. The
recipient is not a GTA or engaged in business of transport.
Consequently it is the petitioner GTA “in course” or “furtherance
of business” has agreed to supply the goods or service for
consideration. When it is the primary business of the GTA, in
order to allow running the vehicles by fuel, it is a potential
combination. If that part of responsibility is delegated by way of
an agreement to the recipient, in such a case, the recipient would
step into the shoes of GTA as its component and would be playing
central role in setting narratives.
23. The petitioner has relied on a decision of Supreme Court in
Union of India Vs. Inter Continental Consultants and
Technocrats Pvt. Ltd. (2018) 4 SCC 669 and CST Versus
Bhayana Builders Pvt. Ltd (2018) 3 SCC 782 to submit that in
service tax regime, the gross amount charged by the service
provider, which is actually received, would be part of
consideration to arrive at a gross amount charged by the service
provider and it was further submitted that the tax is to be levied
with reference to the value of service and the value of service
which is actually rendered is to be ascertained. It was further
stated that if certain goods or material is supplied by recipient free
of cost and used for providing taxable service, only the gross
amount charged by the service provider is to be examined. Much
emphasis was placed on the wording “for such service provided”
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WPT No.117 of 2022and in the instant case, it is therefore stated that for such supply,
the nexus between the amount charged and the service provided
cannot be ignored. A careful reading of the aforesaid proposition
would show that the nature of services rendered in the above cases
were different. In the case of GTA, the centrality of the object
revolves around the service provided by GTA which is fully based
on supply of fuel. Section 7 of the Act explains that expression
“supply” would include all forms of supply made or agreed to be
made for consideration in furtherance of business by the supplier.
So the nature of business would be the decisive factor and if such
consideration is shifted by entering into agreement, it would be
encroaching upon turf of G.T.A., and would only be a collective
enthusiasm and that statutory liability cannot be evaded. As has
been laid down by the Supreme Court in CLP India Pvt. Ltd.
Versus Gujarat Urja Vikas Nigam (2020) 5 SCC 185 , the parties
by agreement cannot over-ride the statutory provisions in relation
to matter of tariff.
24. Section 9 GST deals with levy and collection. The petitioner
contended that section 9 of the CGST is a charging section and
collection of revenue is confined to levy of GST on the value
determined under Section 15 as may be notified. The word
‘supplier’ has been defined under Section 2 (105), which includes
the person who provides the service. In the case on hand, the GTA
is engaged in providing services of transportation of goods by road
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for which free diesel would be supplied by the service recipient.
Section 7 Scope of supply read with Sec. 15(2)(b)
25. Section 15(2)(b) says that the value of supply shall include
any amount that the supplier is liable to pay in relation to such
supply but it has been incurred by recipient of supply and not
included in the prices actually paid. This section imposes statutory
obligation. The very existence of petitioner as GTA is for goods
transport. Naturally, it would be the obligation for the GTA to run
the vehicles and this factor needs a merited attention. The
provision of Section 15(2)(b) has been tried to be by-passed by the
agreement wherein the diesel was agreed to be supplied FOC by
service recipient to the GTA. If we look into the facts by other
angle, the expenses to fill the diesel in vehicle in furtherance of
supply of service in normal condition was to be incurred by the
GTA and it was his liability to fulfill such supply. However, in
this issue, the expense of fuel has been agreed to be incurred by
the recipient by agreement and value of diesel is excluded to
evaluate the value of supply. The statutory provision of Section
15(2)(b) takes within its sweep to value, which is incurred by
recipient. Therefore even by agreement in between the GTA and
service recipient, this statutory liability cannot be sidelined and the
merited attention of the statute sets a red line. Therefore, in the
instant case, the value of service agreed to be provided necessarily
will depend on the nature of service and the nature of business.
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The petitioner who can survive to run the business of goods
transport on fuel therefore cannot claim that the diesel is supplied
by the service recipient free of cost, as such, it cannot be included
as the fuel is an integral part used in providing the Transportation
Service and is essential for GTA provider. Without fuel the entire
business of GTA cannot survive. Therefore, fuel being an integral
part cannot be bifurcated to over come a tax liability.
26. Another submission is made that the model GST law
proposed to include in Section 15(2)(b) of CGST Act “the value,
apportioned as appropriate, of such goods and/or services as are
supplied directly or indirectly by the recipient of the supply free of
charge or at reduced cost for use in connection with the supply of
goods and/or services being valued”. Therefore by such provision,
free supply was included to be valued. However, in the final GST
law, the provision of free supply by the service recipient was
excluded. It is contended that the transaction value was an
inclusive part in the proposed Model GST law under clause (b)
Section 15(2) of the CGST Act. The provision to be added as per
model GST Law in clause (b) of Section 15 (2) reads as under :
“(b) the value, apportioned as
appropriate, of such goods and/or services as
are supplied directly or indirectly by the
recipient of the supply free of charge or at
reduced cost for use in connection with the
supply of goods and/or being valued….”
The submission that free supply by the service recipient has been
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excluded as per final GST Law. Therefore, the legislative history
in the draft GST Law is required to be seen. It is contended that
there is a conscious omission by the Legislature to include value
of free supply by recipient to evaluate the entire supply. The
reference is made to case law reported in (2022) 10 SCC 700 –
Mohit Minerals Pvt. Ltd (supra).
27. However, when we examine the final GST Law, Section
15(2)(b) includes that any amount that the supplier is liable to pay
in relation to such supply but has been incurred by the service
recipient and not included in the prices paid or to be payable is to
be taken into account to value the service answers this query. The
Legislature has categorically enveloped such kind of supply within
the ambit unless exempted by any provision. Therefore, the
emphasis cannot be made at this stage while interpreting the
provisions of Section 15(2)(b) of the GST Act, 2017 with the
proposed GST Law specially taking into consideration the nature
of business by GTA, the service provider.
28. Another submission is made by the petitioner that the
purpose of advance ruling stands defeated and the section is
arbitrary. Another submission of the petitioner is that Circular
issued by the Government of India provides a free supply is not to
be added to the valuation of the service provider and therefore the
Circular issued u/s 168 of the CGST Act would prevail.
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29. A perusal of the said circular No.47/21/2018-GST would
show that it has been confined to specified subject material of
moulds and dies of Car manufacturing, which are being supplied
by the Original Equipment Manufacture OEM) to a Component
Manufacturer free of cost and the Circular purports that it would
constitute the supplier as there is no consideration involved.
30. Again when we examine the nature of business of the
petitioner, who is a GTA, the nucleus of survival of business
shows that the business of petitioner entirely survives on
transportation. Since the transportation inter-alia is an inter-
dependent on supply of fuel, it would be a crucial component to
run the business of GTA. If such integral part of survival of reins
are held by service recipient, in such a case, it would be actually
doing the substance addition of GTA survival. Therefore, the
Circular dated 8th June 2018 on which the petitioner tried to rely
upon would not be of any help especially considering the nature of
business and the provisions of Section 7(1)(a) and 15(2)(b) of
CGST Act.
31. The last submission which is made that since there is
divergent opinion between the two appellate authorities under the
GST AAAR against the finding of AAR, therefore, the petitioner
has been left with no remedy and this section is arbitrary and
defeats the very purpose of advance ruling. In this aspect, section
101 sub-section (3) of the CGST Act would be relevant which
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purports that where the members of the Appellate Authority differ
on any point or any points referred to in appeal or reference, it
shall be deemed that no advance ruling would be issued in respect
of question under appeal or reference. However, against such
finding u/s 101(3) an appeal is provided u/s 101-B to the National
Appellate Authority and the period of 30 days is provided. Till
the petition was filed, no National Appellate Authority was
notified. However, this Court cannot direct the State to legislate
on the doctrine of separation of powers. In view of the
observations made in foregoing paragraphs the initial order passed
by the AAR on 04.01.2021 shall revive and it is observed that
though the diesel was provided free of cost by the service
recipient, it would nevertheless be added to the value for the
purpose of GST.
32. In view of the foregoing discussion, no relief can be granted
in favour of the petitioner. Accordingly, the petition is dismissed.
Sd/- Sd/-
(Goutam Bhaduri) (Sachin Singh Rajput)
Judge Judge
Gowri / Rao
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