Case Title | Stovec Industries Ltd |
Court | Gujarat AAAR |
Honorable Judges | Member P.Gupta & Member Seema Arora |
Citation | 2021 (11) GSTPanacea 73 HC Gujarat GUJ/GAAAR/APPEAL/2021/32 |
Judgement Date | 02-November-2021 |
Council for Petitioner | Kumar Parekh |
Council for Respondent | NA |
Section | Section 2(30) |
In Favour of | Partly in Favour of Assessee |
The Gujarat Bench of Member J.P.Gupta & Member Seema Arora has held that bench modify the Advance Ruling No. respect of Ruling No. 2 and 3. Bench find force in their argument and in present case SPA is paying consideration to the appellant for the service provided to the Indian customer. Therefore, Bench hold that in present case SPA is recipient of supply of service in terms of the consideration paid to the appellant and not Indian customer. Customer. Further in respect to Ruling No. 3, in view of the clarification given by the board (CBIC) vide Circular No. 159/15/2021-GST dated 20.09.2021, it is ruled that the appellant is not an ‘intermediary’ in terms of provisions of Section 2(13) of IGST Act, 2017 Since there is no performance of service by SPA and actual services are performed by the appellant itself they are outside the purview of the definition of ‘intermediary’.
FACTS OF THE CASE
The applicant M/s. Stovec Industries Ltd. filed an application for advance ruling before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’). The applicant has submitted that they are engaged in manufacturing Rotary screen printing machine, installation and servicing of the machines, and also offers products for conventional and digital engraving methods. They have entered into a contract with SPG Prints Austria GMBH (herein after referred as ‘SPA’) to provide particular services to customers of SPA in India, as per SPA’s instruction. Such services shall include installation / up-gradation of machines sold by SPA, training at SPA’s customers’ site etc. The relevant extract from the contract relating to scope of service
The Applicant has submitted that they had sought Advance Ruling
Question 1. Whether, in the facts and circumstances, the specified transaction of the Applicant should be categorized as individual supply or composite supply of service as per the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017?
Answer : The specified transaction of the Applicant is a composite supply of service as per the Central Goods and Services Tax Act, 2017 in view of the discussion herein above.
Question 2. Whether, in the facts and circumstances, the specified transaction of the Applicant is to be reckoned as being provided to SPA or to the customers of SPA located in India?
Ans. The person i.e. Indian customer to whom service is supplied in India in terms of the above discussion.
Question 3. Whether, in the facts and circumstances, the specified transaction of the Applicant could be categorized as that of an “intermediary” as per Section 2(13) of The Integrated Goods and Service Tax Act, 2017?
Ans. The specified transaction of the Applicant is categorized as an “intermediary” as per Section 2(13) of The Integrated Goods and Service Tax Act, 2017.
Question 4. Whether, in the facts and circumstances, the specified transaction qualifies to be “Export of service” as per Section 2(6) of The Integrated Goods and Services Tax Act, 2017?
Ans. Negative as per the above discussion
Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal on 03.11.2020. During the course of personal hearing held on 22.01.2021, the appellant reiterated the submissions made in the appeal.
The appellant in the ground of appeal has submitted that the advance ruling issued by GAAR has failed to appreciate the facts, legal provisions and rules of interpretation of law.
The appellant has contended that the observation of the GAAR that conditions specified for composite supply in Section 2(30) of the CGST Act, 2017 are fulfilled in respect of the specified transactions are not correct
The contention of the Appellant that ruling pronounced by GAAR that the services i.e. travelling, regular work or overtime are naturally bundled and supplied in conjunction with each other in the ordinary course of business is against the basic understanding of contract as there are no more than one service is provided at one time
The Appellant has submitted that GAAR has failed to understand the definition of ‘recipient’ completely and the punctuations used in definition are ignored
COURT HELD
Considering the facts as recorded, held that Bench confirm the Advance Ruling Ruling No. 1 and 4 and reject the appeal filed by the appellant M/s. Stovec Industries Ltd. to that extent as discussed above in respect of said Ruling.
Bench modify the Advance Ruling No. respect of Ruling No. 2 and 3. Bench do not agree with the view of the GAAR ruling in respect of Question No.2 bench find force in their argument and in present case SPA is paying consideration to the appellant for the service provided to the Indian customer. Therefore, bench hold that in present case SPA is recipient of supply of service in terms of the consideration paid to the appellant and not Indian customer.
Customer. Further in respect to Ruling No. 3, in view of the clarification given by the board (CBIC) vide Circular No. 159/15/2021-GST dated 20.09.2021, it is ruled that the appellant is not an ‘intermediary’ in terms of provisions of Section 2(13) of IGST Act, 2017 Since there is no performance of service by SPA and actual services are performed by the appellant itself they are outside the purview of the definition of ‘intermediary’.
ANALYSIS OF THE JUDGEMENT
The appellant may received the one consolidated charges for their service provided to customer considering it as one supply and not more than one. However, in the contract held between appellant and SPA hourly rate is fixed for each work i.e. working hours, travelling hours and overtime hours. Therefore, bench hold that the appellant is providing more than two services and contention of the appellant that they are providing only one service is not correct
without travelling and overtime how would appellant provide the service of installation/ up-gradation of machine and training. Therefore, bench are of the opinion that service of installation/up-gradation or training and travelling, regular work or overtime are naturally bundled service Hence bench hold that the appellant services get covered under the definition of “composite supply”
The payment received from SPA is in the nature of consideration paid by the manufacturer to the Appellant for carrying out the service
The supply of service by the appellant where it has been subcontracted to it by the recipient will fall under the exclusion part of the definition of ‘intermediary’ as per the provisions of Section 2(13) of the IGST Act 2017.
The aforesaid clause of the agreement clearly states that Stovec (appellant) shall provide the service at SPA’s customer site i.e. in India. This clearly shows that the appellant service is performance based as such the appellant can perform service only at SPA’s customer in India and not outside India. Bench strongly hold that the contention of the assessee that their service is recipient base is baseless and against the law.
Hence in view of above discussion the specified transaction do not qualifies the export of service because all the conditions which are stipulated under Section 2(6) of IGST Act, 2017 are not fulfilled which is the foremost condition for any transaction to be qualified “Export of Service
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