Partly allowed

MAH/AAAR/DS-RM/02/2023-24 dt. 05.06.2023. of M/s Chep India Private Limited

GST AAAR5 Jun 2023MAH/AAAR/DS-RM/02/2023-24 dt. 05.06.2023.

Case brief

AI extract

What is this about?

The Appellate AAR held that for inter-branch leasing supplies where recipients are eligible for full input tax credit, the invoice value is deemed the value of supply per Rule 28. The court also clarified that inter-branch equipment movement constitutes a taxable supply of services, though documentation questions remain outside the advance ruling jurisdiction.

What did the court decide?

Modified the impugned order on Question 2 to hold that invoice value is the value of supply per Rule 28; rejected machinery for Questions 3, 4, 5 on jurisdiction grounds except clarifying taxability i

MAH/AAAR/DS-RM/02/2023-24 dt. 05.06.2023. of M/s Chep… — GST and Indirect Tax | GST AAAR (2023)

¶1

THE MAHARASHTRA APPELLATE AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX

¶2

(Constituted under Section 99 of the Maharashtra Goods and Services Tax Act, 2017) ORDER NO. MAHIAAAR/DS-RM/n) /2023-24 Date- 0S06.

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Date- 0S06. O2?

¶4

BEFORE THE BENCH OF (1) Dr. D.K. Srinivas, MEMBER (Central Tax)

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(2) Shri. Rajeev Kumar Mital, MEMBER (State Tax)

¶6

Name and Address of the	M/sCHEPIndia PrivateLimited,
Appellant:	3rdFloor,AverPlaza,Plot- B13,OppositeCitiMall, NewLinkRoad,Andheri(West),Mumbai- 400053
GSTINNumber:	27AADCC3230AIZF
Clause(s)ofSection97,under whichthequestion(s)raised:	Section97(c)&(g).
DateofPersonalHearing:	21.03.2023
PresentfortheAppellant:	(i)Shri.SachinAgarwal,CA (ii))Shri.SarveshSaraogi,CA
Detailsofappeal:	Appeal No. MAHGST-AAAR/11/2022-23 dated 06.01.2023againstAdvanceRulingNo. GST-ARA 82/2020-21/B-11ldated01.12.2022.
Jurisdictional Officer:	Range-1,Division-III,CGST&C.Ex,MumbaiWest.

¶7

Proceedings under Section 101l of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

¶8

At the outset, we would like to make it clear that the provisions of both the CGST Act

¶9

and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.

¶10

2 The present appeal has been filed under Section l00 of the Central Goods and Services Tax Act. 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter

¶11

referred to as "CGST Act" and "MGST Act"] by M/s. CHEP India Private

¶12

Page 1 of 16

¶13

Limited,^{situatedat3rdFloor.AverPlaza,Plot -B13.OppositeCitiMall,NewLink} Road,^{Andheri (West),Mumbai �400053. (hereinafter referredtoas �Appellant")} GST-ARA-82/2020-2^{1/B-1|| dated01.12.2022,} against the^{AdvanceRulingNo.} pronounced by^{theMaharashtra Authorityfor AdvanceRuling(hereinafter referred to} as �MAAR").

¶14

BRIEF^{FACTSOFTHECASE}

¶15

CHEP^{India PrivateLimited(hereinafterreferredtoas"theAppellant",'CIPL'orthe} Company') is a^{company registeredunder the provisions of Companies Act,1956 and has} its^{registeredofficesituatedat3rdFloor,AverPlaza,Plot-B13,OppositeCitiMall,} New Link^{Road,Andheri(West),Mumbai-400053.TheCompanyisengagedinthe} business of^{leasingof pallets.cratesandcontainersandisregisteredundertheGSTlaw} bearing^{registration number -27AADCC3230A1ZF.}

¶16

4.^{CIPLiscontemplating certainchangesinitsexistingbusiness model.The broadbusiness}

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mechanics of the^{proposedbusiness modelwouldbe as follows:}

¶18

a CIPL Would^{beconsolidating theownership ofall the equipment intothe state} of^{Maharashtra. Currently,whilemajorityof theprocurements / manufacture} happen in^{Maharashtra.Someof theprocurementsarealso done from other} states.

¶19

b. As the^{ownership of equipment wouldbewithCIPL,Maharashtra,it would be} entering into^{the arrangementwiththecustomers andwithall the other CIPL} units (located^{inotherStates) forleasingtheequipment tothemattheagreed} leasing or hiring charges.

¶20

C. CIPL,^{MaharashtrawouldthereafterleasetheequipmenttoitsotherCIPL} units based^{ontheir demand requirement. CIPL, Maharashtra wouldbe} sending the^{equipment to the other unit of CIPL(Say CIPL,Karnataka)under} the cover^{ofthedeliverychallan.CIPL,Maharashtra wouldberaising} periodical invoices^{forleasecharges(basedonnumberof daysof usage)to} CIPL. Karnataka.

¶21

d. CIPL,^{Karnatakawouldthereafterbeissuingtheequipmenttoitscustomers} who would be^{usingitformovement of their goodsthroughthesupply chain.} CIPL, Karnataka^{wouldbechargingtheleasechargestoitscustomersbased} on the period^{forwhichthe equipment wouldbeusedby the customers.}

¶22

e. Also, there^{arechancesthatotherunits of CIPL,(SayCIPL,TamilNadu)may} require certain^{equipmentfrom CIPLMaharashtrawhichareavailablewith} CIPL,Karnataka (under lease from CIPL Maharashtra). In such a case, on the Page 2 of 16

¶23

basis of instructions from CIPL, Maharashtra, CIPL, Karnataka would transfer the equipment to CIPL, Tamil Nadu. In such a case, the moment equipment reaches CIPL Tamil Nadu, CIPL, Maharashtra would stop charging CIPL, Karnataka and start charging CIPL, Tamil Nadu towards lease charges (basis number of days of usage). Further, CIPL, Karnataka would charge CIPL, Maharashtra a consideration for facilitation / arrangement of movement of equipment to CIPL, Tamil Nadu basis the instruction.

¶24

The diagrammatic representation is provided below

¶25

CIPL Customer
MH) ABC (MH)
a. Lease of
Equipment &
billing for lease
b &C.
Lease of charges
Equipment
& Billing
for lease d. Lease of
charges Equipment &
billing for lease
charges
CIPL Customer
e. Lease of (Kar) XYZ (Kar)
Equipment &
Billing for
lease charges
e. Shipping of Equipment
on instruction of CIPL
(MH)
CIPL
TN)

¶26

In^{light of the abovefactsandintermsof theprovisionsof Section97 of CentralGoods} &^{ServicestaxAct,2017(CGSTAct"),theCompanyhadfiledanadvanceruling} application on the^{GSTcommonportalon17March2021bearingARNno.} AD270321032563G wherein^{thefollowing questions were raisedby the Appellant:}

¶27

Question 1 -^{Whetherthepallets,cratesandcontainers(hereinafterreferredas}

¶28

*equipment") leased^{by the Appellant located andregisteredinMaharashtra to its other}

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Page 3 of 16

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GST^{registrationslocatedacrossIndia(sayCIPLKarnataka),wouldbeconsideredas} lease transaction^{and accordinglytaxable assupplyofservicesintermsof Section7 of} the Central^{GoodsandServicesTaxAct,2017(""CGSTAct")andMaharashtraGoods} and Services^{TaxAct,2017(*"MGSTAct")?}

¶31

Question 2 � If the^{answertoQuestionI isYes,whatisthevalueonwhichGSThas} to be charged^{i.e.whetheritshouldbeleasechargesorthevalueof equipmentinterms} of Section 15^{ofthe CGST Act andMGSTActreadwithrelevant Rules?}

¶32

Question 3 �^{Whatarethedocumentsthatshouldaccompanythemovementofthe} goods from CIPL^{Maharashtra toCIPLKarnataka?}

¶33

Question 4 �^{Whethermovementofequipment fromCIPLKarnataka to CIPL Tamil} Nadu on the^{instructionof CIPL Maharashtracanbesaidtobemeremovenmentof} goods not^{amountingto asupplyintermsof Section7 of theCGST ActandMGST} Act, and^{thereby not liable to GST?}

¶34

Question 5 � With^{reference to Question 4 above, what are the documents that should} accompany the^{movement of the goods fromCIPL Karnataka to CIPLTamil Nadu?}

¶35

A^{preliminaryhearingopportunityfortheaforesaidapplicationwasgrantedtothe} Appellant post^{whichitwasheldthatquestions3and5 cannotbeadmittedbythe} Authorities since the^{samerelatetodocumentationandisthus,beyond the powersof} Advance Ruling^{Authorities.Apartfromthesaidtwoquestions,otherquestionswere} admitted by the Authorities.

¶36

7.^{Subsequently,a finalhearingopportunitywithrespecttotheadmittedquestionstook} place on 14^{June2022and15November 2022whereindetailedsubmissionsweremade} by the^{Appellant ontheirinterpretationonthequestionsasked.Additionalsubmissions,} as required^{by the Authorities were also made by the Appellant.}

¶37

Post^{theaforesaidfinalhearing,orderno.GST-ARA-82/2020-21/B-111dated01} December 2021 has^{passed wherein the following is held for the questions admitted:}

¶38

Question 1 -^{Thetransaction betweenCIPLMaharashtra and CIPL other locations}

¶39

may be treated^{as supply of leasing services.}

¶40

Question 2 -^{Value on which GSTis tobecharged shouldbethe valuewhichis} charged by the^{recipientbranchtotheultimatecustomerintheotherStateorsuch} other normal^{value which wouldbederivedafter taking intoconsiderationtherate}

¶41

which is equal to^{suchrate whichisnormally charged to customers}

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Page 4 of 16

¶43

. Ouestion 4 � The sites of the transaction in question is not within the State of Maharashtra and hence. the Authority does not have jurisdiction over the transaction

¶44

Aggrieved by the ruling rendered by the Authorities with respect to Question 2 and 4 above and by non-admission of Questions 3 and 5 above. the Appellant is filing the present appeal on the^{grounds mentionedbelow.}

¶45

Grounds of Appeal

¶46

At the outset we would like to make it clear that the provisions of CGST Act and MGST Act are pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding^{similar provisionsintheMGSTAct.}

¶47

Submissions with respect to Question 2 10.1. It is submitted^{thattheHon'bleMaharashtraAuthorityforAdvanceRulingin the} impugncd order has^{heldthatthetransactionbetweenCIPLMaharashtraandother} registrations shall be^{considereda supplyofleasingservices.Further,thevalueof} supply of such^{leasingservicesby CIPLMaharashtratootherregistrationsshouldbe} the value which^{ischargedbytherecipientbranchtotheultimate customerintheother} State or such^{othernormal value whichwouldbe derived after takinginto consideration} the rate which^{is equaltosuchratewhichisnormallychargedtocustomers.}

¶48

10.2. In this^{regard.theAppellanthumbly wishestostatethatthevaluationmechanism} suggested by the^{Hon'bleAdvanceRulingAuthoritiesisbasedon presumptionsand} surmises without^{having dueregardto the applicablelegalprovisionsofGST law.The} valuation^{mechanism suggestedisnot derivedaccordingto therelevantvaluation rules} prescribed under^{GSTandhence.cannotbeadoptedforvaluingtheunderly ing} transaction in the present case.

¶49

10.3. It is^{submittedthatsincethetransactionof leasingservicesinthepresentcaseis} between different^{GSTINSof thesameentity,thevaluationshallbegovernedasper} Rule 28 of the^{CGSTRuleswhich dealswithvaluationincase of supply of goods or} serv ices^{betweendistinctpersonasspecifiedinsub-section(4) and(5) of section 25of} the CGST Act or related persons.

¶50

10.4.^{According to the said rule 28.thevalueofsupply shall be equal to the followingvalue:}

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(a be the^{open market value of such supply.} fbi if the^{open market value is not vailable.bethevalue of supplyofgoods or services of} like kind and qualty:

¶52

if the value is^{notdeterminableunder clause(a)or (b),bethevalueasdetermined by}

¶53

¶54

Provided that where the^{goodsareintended forfurthersupplyassuchbythe}

¶55

recipient, the value shall,^{attheoptionof thesupplier,beanamountequivalentto} ninety percent of^{the price charged forthesupply of goods of likekind and qualityby} the recipient to his^{customer notbeing arelatedperson:}

¶56

Provided further that^{wheretherecipientiseligible for fullinputtaxcredit,the} value declared in^{theinvoiceshallbedeemnedtobetheopenmarketvalueof the} goods or services.

¶57

[Emphasis supplied]

¶58

10.5. From a^{plainreadingof thesecondprovisotoRule28,itisclear thatincase of supply} between distinct^{entitiesi.e.differentGSTINSof thesameentity, theinvoicevalue} shall be deemed^{tobetheopenmarketvalueorthetransactionvalueforlevyof GST} where the recipient^{GSTINisentitled tofull input tax credit.}

¶59

10.6. It is^{submittedthatinthepresentcase,CIPLMaharashtrawouldbeenteringintoa} Memorandum of^{Understanding(MoU)withotherregistrationsof theCompany(say,} CIPL^{Karnataka)toprovideequipmentonleasebasisforwhichtheconsideration} would be charged^{ata rateagreedintheMoU determinedonthebasis of lease charges} or rental^{per daydependingonnumberof daysof usageof equipment.Invoiceinthis} regard would^{beraisedbyCIPLMaharashtraperiodicallyontheother CIPLbranches} for the^{equipment taken onlease by them.}

¶60

10.7. Since the^{recipientCIPLregistrationswouldbeeligibleforfullinputtaxcredit,itis} submitted that as per^{theproviso toRule 28,theinvoicevalue determined as above can} be deemed as^{openmarketvalueor thetransactionvalueforthepurpose of GST1levy.} Accordingly, the^{valuationmechanismheldbytheAdvance Ruling Authorityisbad in} law.

¶61

10.8. It is^{submittedthatasimilarvaluationpositionhasbeentakenbyadvanceruling} authorities in other cases such as:

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M/s BG^{Shirke Construction TechnologyPvt.Ltd.[2021(9)TMI 949 �Authority}

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for Advance Ruling Maharashtra]

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b. M/s Kansai^{NerolacPaintsLtd.[2019(6) TMI1108-AuthorityforAdvance} Ruling Maharashtra]

¶65

C. M/s^{SpecsmakersOpticiansPrivateLimited(2020(1)TMI 63-Appellate} Authority For Advance^{Ruling, Tamil Nadu).} Page 6 of 16

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10.9. Further. it is submitted that in the Appellant's own case and in similar fact pattern, the Advance Ruling Authority. Karnataka had held that in such scenarios, the invoice value adopted by the Appellant can be considered as the transaction value for the purpose of GST levy. The order is reported in (2021 (7) TMI 973] and is attached as Annexure 4 of this appeal for ease of reference.

¶67

10.10. The Appellant also wishes to submit that adoption of the mechanism suggested in the advance ruling may not be commercially feasible for the entities due to the business dynamics and operations.

¶68

10.11. In view of the above, it is submitted that the ruling rendered by the Advance Ruling Authority is bad in law since it has not considered the applicable legal provisions and the precedents with respect to the said issue.

¶69

10.12. Hence, in terms of Section 10I of CGST Act, it is humbly prayed that the impugned order dated 01 December 2022 passed by the advance ruling authority be modified to the above extent for the ruling rendered for Question 2 in the advance ruling application.

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Submission with respect to non-admission of Question 4

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11.1. At the outset. it is submitted that post the preliminary hearing opportunity offered by the Advance Ruling Authorities. Question no. 4 was admitted by the Ld. Authority. However. the said question has not been answered by them on account of lack of jurisdiction. In this regard, it must be noted that once the question has been admitted by the Authority, it is understood that it is well within the jurisdiction and powers of the Authority under Section 97 of CGST Act to provide a ruling for the said question.

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11.2. Further, it is submitted that in a similar fact pattern, in the Appellant's own case, the question was answered by the Advance Ruling Authority, Karnataka (supra).

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11.3. In view of the above, it is prayed that the said question be examined on merits by the Appellate Advance Ruling Authority. The Appellant has herein provided the transaction mechanics and their interpretation for analysis:

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Transaction mechanics: (Transaction with respect to leg (e) in the aforesaid diagrammatic representation) The chronological sequence of the transaction is explained below for ease of understanding

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Initially, the equipment shall be leased out by the Applicant to the Company's GSTIN in another State say, CIPL Karmataka. The Applicant shall raise periodic tax invoice for lease charges on CIPL Karnataka along with appropriate GST (Step (b) and (c) of the aforesaid diagrammatic representation).

¶76

Let us assume that the ultimate customer in Karnataka (XYZ' as per the aforesaid

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diagrammatic representation) has completed the use of the equipment as per its

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Page 7 of 16

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requirement and after^{use,ithas returnedthesamebacktoCIPLKarnataka.Nowat} this stage.^{theequipmentislyingwithCIPLKarnataka.SinceCIPLKarnatakaisstill} in the^{possessionof theequipment,theApplicantshall continuetoraiseinvoicefor} recovery of lease^{charges fromCIPL Karnataka.}

¶80

It may so^{happenthattheCompany'sregistrationinanotherState(say,CIPLTamil} Nadu) requires the^{equipment whicharelyingwithClPLKarnataka.Insucha scenario} the Applicant i.e.^{CIPLMaharashtrashallenterintoa lease arrangementwithCIPL} Tamil Nadu for the^{saidequipmentandinstructCIPLKarnatakatosendthegoodsto} CIPL Tamil Nadu.

¶81

It must be noted^{thattheresponsibilitywithrespecttogeneratingdeliverychallan,e} waybill etc. for the^{purposeof movingtheequipment toCIPLTamil Nadushallbethat} of CIPL Karnataka and not the Applicant. For facilitating the movement of equipment, CIPL Karnataka may^{chargea considerationfromtheApplicantandraisea taxinvoice} along with GST for recovering the said amount.

¶82

Once the equipment reaches CIPL Tamil Nadu, the Applicant shall stop invoicing CIPL Karnataka for lease rentals and start invoicing CIPL Tamil Nadu for the lease charges on the basis of the new arrangement with it.

¶83

Appellant's interpretation: interpretation:

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b. Appellant's interpretation: interpretation: The scope of^{supplyunderSection7(1)(a)ofCGSTActincludessale,transfer,} exchange, license etc. within its ambit. It must be noted that all forms of supply enumerated therein either involves vesting or divesting of rights or creation of an interest or right in property or a thing. Accordingly, in order to constitute supply, the person transferring the^{goodswouldberequired totransfer itsspecifiedinterest/rightin} property to the^{recipient of such goods.}

¶85

In the present case,^{theequipmentownedbytheApplicantisoriginallyleasedtoCIPL} Karnataka in pursuance of a lease agreement between such registrations. The equipment shall move to CIPL Tamil Nadu from CIPL Karnataka on the basis of instructions received from the Applicant. Such movement to CIPL Tamil Nadu is in incidence of the obligation as a lessee under the lease agreement entered between the Applicant and CIPL Karnataka. There is no transfer of interest of any kind in goods between CIPL Karnataka and CIPL Tamil Nadu in respect of the equipment. Hence, it cannot be said that there is a supply between CIPL Karnataka and CIPL Tamil Nadu in case of such movement. It must rather be noted that in such a case. CIPL Karnataka is supplying a service to the Applicant by facilitating the movement of equipment to CIPL Tamil Nadu.

¶86

Page 8 of 16

¶87

Accordingly, such service of facilitating the movement of' cquipment would be taxable in the hands of CIPL Karnataka.

¶88

Submission with respect to non-admission of Question 3 and 5

¶89

12.1. In the impugned order, the Advance Ruling Authority has not admitted question 3 and 5 of the application on the ground that the same is related to documentation which is outside the purview of Section 97 of CGST Act.

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12.2. In this regard, it is humbly submitted that the documents required are intricately linked to the other questions on which ruling is sought by the Appellant. Further, the said questions were also answered by Advance Ruling Authority, Karnataka in the Appellant's own case (supra).

¶91

12.3. In the Appellant's view, since the underlying movement of goods under both the scenarios is for reasons other than supply of goods, a delivery challan shall be required to be issued in terms of Rule 55 of CGST Rules. No tax invoice shall be required for movement.

¶92

Accordingly, it is humbly prayed before your goodself to examine the said questions on merits and render a ruling thereof.

¶93

PERSONAL HEARING

¶94

The personal hearing in the matter was conducted on 21.03.2023 which was attended by Shri. (i) Shri. Sachin Agarwal, CA & Shri. Sarvesh Saraogi, CA on behalf of the Appellant. During the^{personalhearingtheAppellantreiteratedtheirearliersubmissions} made while filing the^{Appealunder consideration.}

¶95

JURISDICTIONAL OFFICERS COMMENTS

¶96

The^{Jurisdictional Officer videtheiremail dated09.02.2023havesubmittedthefollowing} submissions against the^{questions askedfromtheappellate authority;} Question No. 2:

¶97

(i) The^{departmentsubmittedthatCIPL,MaharashtraandanyofthebranchesofCIPL} located outside^{MaharashtraarehavingseparateGSTregistrationsandaretwoentities} deemed to be^{distinctpersons.Thus,thevaluationinsuchcaseshall begovernedasper} sub-section (4) and^{(5)ofsection 25ofthe CGST Act,2017 readwithsecondproviso to} Rule 28 of^{theCGSTRulesandaccordinglytheinvoicevalueshallbedeemedtobe} open market^{valueorthetransactionvalueforlevyof GST,wheretherecipientis} entitled to full^{input tax credit. Since. the recipient branch of CIPL Would availinput tax} credit as per^{theleasevaluechargedbythesupplierbranchof CIPL,if therecipient} branch^{charges nmorevalue totheultimate customer at the time of further supply of said} equipment, they^{wouldpaymore tax onsaidvalue addition after setting off the input tax} credit avàiled^{by themat thetimeofreceipt of such supply.}

¶98

Page 9 of 16

¶99

Question No. 3 & 5:

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(ii) The^{departmentstatedthatthemovementof goodsinrespectof anysupplybyCIPL,} Maharashtra to its^{branch hastobecoveredbyanInvoice as envisagedunder Section31} of CGST Act,^{2017 ande-waybillasperRule138ofCGST Rules,2017.Since,CIPL,}

¶101

Maharashtra being^{supplierhastodischargetaxliabilityonthesaidsupply of services,} it is^{essentialforthemtoraise a taxinvoice andunless thesaidtransactionis reflectedin} GSTR-I filed by^{themandtaxispaid,therecipientbranchof CIPLmaynotbeable or}

¶102

entitled to avail^{input tax credit inrespect of saidsupplyinview of Section16ofCGST} Act, 2017

¶103

Question No. 4

¶104

(iii)The^{departmentsubmittedthattheapplicantsofarhascontendedthatCIPL,} Maharashtra will be^{the owner of theequipment and they willsupply said equipment to} their branches^{onleaseandhencetheyarenotconsideringthevalueof equipmentfor} payment of tax^{andultimately theywill be paying tax on theamount of service charged} for the said^{leasing.Onceitis accepted that taxispayable onservice portionfor leasing} of^{equipmentbyCIPL,Maharashtra to any"Xbranchof CIPLlocatedinanother state,} the same^{analogy applies when the said equipmnent moves fromthesaid'X'branch to Y"} branch of^{CIPLlocatedinthird stateaspertheinstructionsof CIPL,Maharashtra.In} such case, if^{themovement of said equipment isinpursuanceof anagreementbetween} CIPL.^{Maharashtraandsaid"Y'branchofCIPL, thenthevaluationanddocumentation}

¶105

as^{discussedinthe aboveparas has tobefollowedby CIPL,Maharashtra.Inthis regard,} the CIPL,^{Maharashtra willpay applicable tax andraise taxableinvoice to"Ybranchof} CIPL^{whereas,theX'branchof CIPLwheretheequipmentislyingmerelyfacilitate} movement of said^{equipment fromthelocation of 'X branch to the locationof'Ybranch} under cover^{ofdelivery challan, asper Rule 55ofCGST Rules 2017.}

¶106

DISCUSSIONS AND FINDINGS

¶107

We^{havecarefullygonethroughtheentireappealmemorandumcontainingthe} submissions made^{bytheAppellantvis-a-vis theAdvance Rulingpassedby theMAAR,} wherein the^{MAAR has heldthat thetransaction betweenstate of Maharashtra andState} of^{Karnataka wouldbe considered aslease transactionandaccordingly taxable assupply} of^{servicesintermsof Section7 of theCGSTandMGSTAct,2017.Secondly,MAAR} didn't^{answerquestioninrespectof taxabilityof theaforesaidtransactionsincethe}

¶108

business model^{isnotoperational.Thirdly,inquestionrelatedtodocumentationforthe} movement of^{goods,thequestionhasnotbeenadmitted.Inanswer toquestionno.4 in} relation to^{movementof goodsbyMaharashtratoKarnatakaandinturntoTamilNadu} will^{amount to supply, thesame hasnotbeen answered.Inrelation to Question No.5 for}

¶109

Page 10 of 16

¶110

the documentation in relation to scenario of question no. 4, the same has not been admitted. The appellant is contending the ruling passed in respect to Question no. 2 and 4, as well as the no admission of the Question No. 3 and 5.

¶111

It is clear from the MAAR order that the transfer of such equipment on lease as per the agreement entered to between CIPL, Maharashtra and CIPL, Karnataka would amount to lease or renting of the goods for a consideration and hence would be a transaction of supply of' services, as it for a certain period of time and the same has not be challenged by the appellant alsO.

¶112

Since in the Appellant's own case, Karnataka Advance Ruling authority vide order dated 16.07.2021 passed the ruling in their favour, the same is being relied upon to analyse the

¶113

case in the present scenario.

¶114

Question No. 2

¶115

In answer to question no. 2, MAAR held that the value of supply of leasing services by CIPL Maharashtra to other registration should be the value which is charged by the recipient branch to the ultimate customer in the other states. The relevant provisions in relation to the valuation is as under

¶116

18.1. Section 15(1) which is related to the transaction value being considered as the value of supply & reads as under:

¶117

") 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 or both where the supplier and the recipient of supply are not related and the price is the sole consideration for the supply. "

¶118

From the above, it can be noted that the transaction value which is the price actually paid cannot be treated as the value of supply as the supplies are between the related persons i.e the branches of the same company. Hence, we proceed to examine the following provisions of the Act.

¶119

"15(4) Where the value of supply of goods or services or both cannot be determined under sub-section(l), the same shall be determnined in such manner as may be prescribed. 15/5)^{Notwithstanding anything contained insub-section(1) or sub-section(4)the value}

¶120

of such supplies^{asmaybenotifiedbytheGovernmentontherecommendationsof the} Council shall be determined in such manner as may be prescribed.

¶121

Hence, the rules in relation to valuation needs to be examined which are as under:

¶122

"Rule 28: Value of supply of goods or services or both between distinct persons as

¶123

specified in sub-section (4) and (5) of Section 25 or where the supplier and recipient are related, other that where the supply is made through an agent, shall

¶124

(a) Be the open market value of such supply Page 11 of 16

¶125

serices of^{likekand at qcaa}

¶126

¶127

Provided that where^{thegos areisenkd for frther s4ppnhas sak by th recipient} n amoNnt^{equivalent to rien Rr} the cad shall at the optson^{of thesiappdar.} of the^{prce chargrd forspplsof goodsofiike kini ad qaalirby therecipen to his} customer rot be rig rellcd pero Provded furtier^{tat whretixrecupentisciag:ble or fullinput taxCNdtthevu} áreed to N th^{opxnmarketvalueof thegNZSor} dcc lrcd^{inthximoce sial!}

¶128

Ihus, from thc^{atc, t n clcarthattherox ipicnt,ClPLKarnataka,whois recipicnt of} s s^{cltgitictoefullinputta ctedt on thetransation betwccnthc} thc^lcaangscrv asplcant and thc^{CIPL,Aafnataka andhehccthevalucdec lared intheinvoicewould} be thc^{valucofgds oscvces orbothasperthesccond provisoto Rule28and} hen,c^{auld be trcated asthevalucof suchsupply. The aforcsaid obseration has boen} aftino^{bAARMaharashtrainthecascofMsBGShirke Coastruction} Authority for^{AdvanceRuting} TechsoBogy Pt.^{Ltd.|2021(9)TMI949-} we agree^{withthecotent son of the} Maharashtra]. a^{hereinithasbecnheld that} at that thy^{mresort to valuation under Rule28of theCGST Rulenin respeet} of^{transataosith relateddistin t persons wo are eligiblefor fall input tuztcredt as} pr thx^{second proviso to Rule 28of the (GST Rules20!". Further. the applicant has} M's Kansai^{NerolacPaintsLtd.(2019(6)TMI I108-} relied upn^therulingsof Autbority for^{AdvanceRulingMaharashtralandMsSpecsmakersOpticians} Private^{Limited(2020 (1)TMI 63-AppellateAuthority ForAdvanceRuling.} Tami^{Nadu).Whereinsimilarstand wastakenbytherulingauthoritySimilarstand} 2s^{taåcnupbytheapplicant'sowncascbyadv ance rulingauthorityof Karnataka} (2021 (7)^{TMI 973/.Thus,we cocurwiththevicwscxpressotintheaforesaid} jadgment^{accordingtyhold that the valuation in the prescnt case will be governed as per} the^{second pruviso to Rule 28 of CGSTRules,2017 read with Section15 of the CGST}

¶129

and^{MGST Act. 2017.}

¶130

Qecstiop No, J and5 21.^{The third and fifthquestontssn relaton to the doxuments that shouid he acoompanied} for the^{transactáon in gucstionThe aforesaid questicnswere not admited bMAAR on}

¶131

the ground that the same is related to documentation which is outside the purview of Section 97 of CGST Act, 2017. The same has been reproduced as under: (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought under this Act, shall be in respect of, (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; () whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

¶132

The appellant contends that the documents required are intricately linked to the other questions on which ruling is sought by the Appellant and the said questions were answered by Advance Ruling Authority, Karnataka in the Appellant's own case. However, we find that the question raised by the applicant doesn't fall in any of the categories mentioned under the provisions of Section 97(2) of CGST Act, 2017. Also, the present application has been done under the provisions of Section 97(2)\c) and 97(2)(g) of CGST Act, 2017. The question sought by the applicant doesn't fall in either of the categories and hence cannot be answered. Further, it is on record that no supply of goods or services in the scenario explained by the appellant has been undertaken.

¶133

Question No. 4

¶134

The fourth^{questionis"Whethermovementof equipmentfromCIPLKarnatakatoCIPL} Tamil Nadu on the instruction of CIPL Maharashtra can be said to be mere movement of goods not^{amountingtosupplyintermsof Section7 of theCGSTActandMGSTAct,} and thereby^{notliabletoGST?"Thus,thesameisrelatedtomovementof goodsfrom} CIPL, Karnataka^{toCIPL,Tamil Naduonthe instruction of CIPL,Maharashtra.}

¶135

Page 13 of 16

¶136

We notice that though the CIPL, Karnataka is in the possession of the goods, it is CIPL, Maharashtra who is the owner of the goods. The CIPL, Karnataka is a lessee of the goods and they have to^{givetheg0odsbackontheterminationof theContractof leasebetween} CIPL, Karnataka and CIPL, Maharashtra.

¶137

In case^{CIPL.Maharashtrainstructs CIPL,Karnataka,ontermination of contractbetween} them, to transfer the^{goodstoCIPL,TamilNadu.CIPL,Karnatakainsucha situation,} under the instruction of CIPL, Maharashtra arranges / facilitates to transport the goods to CIPL, Tamil Nadu,^{andthustheCIPLKarnataka actsasanagentof CIPL,Maharashtrain} the said facilitation^{andnotinindependentcapacity.Once,theCIPLMaharashtraissued} instructions to CIPL,^{Karnataka,thecontractof leaseenteredbetweentheminrespectof} the said goods^{endsandthegoodsnowheldbyCIPL,Karnatakaasthebaileeof CIPL,} Maharashtra. Hence,^{CIPL,Karnatakawouldbeactingintwocapacities,firstasan} independent entity^{undertheCGSTActfortheleasedgoodswhiletheleasecontract of} the specific^{goodsisinforceandnextasa baileeof CIPL,Maharashtra.Oncethelease} contract is over,^{theCIPL,Maharashtra should enter intolease transactionwith the CIPL,} Tamil Nadu for^{the specific goodswhicharegivenonlease or rent andin effectit would}

¶138

amount to CIPL,^{Maharashtra picking the goods and sending to CIPL, Tamil Nadu.}

¶139

In such a^{case, thegoodsinmovementisa consequence of thelease contract between the} CIPL,^{Maharashtra andCIPL,TamilNaduwhichisa supplybyCIPL, Maharashtra. The} transaction is nothing^{but thecombination of thetransactions of returningback thegoods} on lease by^{CIPL,Karnataka to CIPL,Maharashtra andagainsending thesame goods on} a new^{lease contractby CIPL,Maharashtra toCIPL,Tamil Nadu.Thus,it cannot besaid} that the^{goodsaremovingnotasa resultof supplyunderSection7 of theCGSTAct,} 2017. It^{cannotbetermedasa meremovenmentwithoutanyinvolvementof supplyand} the said^{transactionof supplyof goodsonrentalorleasebasisbyCIPL,Maharashtrato} CIPL. Tamil^{Naduisliable totaxinthehands of CIPL,Maharashtra as the transactionis} between CIPL,^{MaharashtraandCIPL,TamilNadu.Further,theservicesprovidedby} CIPL,^{Karnataka to CIPL, Maharashtra in facilitating the transportation of goods to CIPL,} Tamil Nadu^{are exigible toGST.}

¶140

As^{regardsquestionno.3 and5 regardingthedocumentsrequiredtobecarriedwiththe} goods under^{movement,weconcur with the observations expressedby MAAR whereinit} was^{stated that thesaid questions arenot coveredunder the ambit of the AdvanceRuling} in terms^{of section 97ofthe CGST Act, 2017.}

¶141

In^{view of the above discussions andfindings,wepass the following order:}

¶142

Page 14 of 16

¶143

Order

¶144

We, hereby, modify the advance ruling pronounced by the MAAR, and hold as under in respect of the question no. (2), (3). (4) and (5):

¶145

Question 2 - If the answer to Question I is Yes, what is the value on which GST has to be charged ie. whether it should be lease charges or the value of equipment in terms of Section 15 of the CGST Act and MGST Act read with relevant Rules?

¶146

Answer: The value declared in the invoice issued by the appellant would be the value on which GST has^{tobechargedintermsof Section15of theCGSTAct,2017read} with second proviso^{toRule28ofthe CGSTRules,2017.}

¶147

Question 3 � What are the documents that should accompany the movement of the goods from CIPL^{MaharashtratoCIPLKarnataka?}

¶148

Answer: The aforesaid^{questioncannotbeansweredasthesameisnotcoveredwithin} the ambit of^{advance rulinginterms of section97of the CGSTAct,2017.}

¶149

Question 4 �^{Whethermovementof equipmentfromCIPLKarnatakatoCIPLTamil} Nadu on the^{instructionof CIPLMaharashtracanbesaidtobemeremovementof} goods not^{amountingto a supplyintermsof Section7 of theCGSTActandMGST} Act, and thereby not liable to GST?

¶150

Answer: Movement^{of equipmentfromCIPLKarnatakatoCIPLTamil Naduonthe} instruction of CIPL^{Maharashtracannotbesaidtobemeremovementof goods not} amounting to a^{supplyin termsof Section7of theCGSTAct,2017asthe said} transaction would^{fallunder the ambit of supply of services interms of section 7 of the} CGST Act, 2017.^{The said supplyofservices involvedin the transaction under question} is being^{providedbyCIPLKarnataka toCIPLMaharashtrainthe capacity of bailee of} CIPL^{MaharashtraforwhichCIPLKarnatakaischargingfacilitationfeealongwith} applicable GST^{fromtheAppellant,ie.,CIPLMaharashtraaspertheInter-unit} Memorandum of^{Understanding enteredbetween the Appellant and other stateunits. It} is further^{clarified here that the said movement of goods fromCIPL Karnataka to CIPL} Tamil Nadu^{aspertheinstructionreceivedfromCIPLMaharashtra,theownerof} goods, will^{againbetreatedassupply of leaserentalservicesbyCIPLMaharashtra to} CIPL Tamil^{Nadu as ruledbythe MAAR.} Question 5 �^{WithreferencetoQuestion4 above,what arethe documents thatshould} accompany the^{movement of the goods fromCIPLKarnataka to CIPL TamilNadu?} Answer: The^{aforesaid question cannotbeansweredasthesame is not covered within} the ambit^{of advance ruling interms of section 97ofthe CGST Act, 2017.}