In Re: M/s. Merck Life Science Private Limited
GST
2018 (12) TMI 767 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 679 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 30-10-2018
GST-ARA- 62/2018-19/B-133
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
PROCEEDINGS
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act,
2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by Merck Life Science Private Limited, the applicant, seeking an advance ruling in respect of the following questions.
i. Whether applicant's direction to the seller (directed in agreement dated 21 June 2018) for direct transfer of BP business to MSPL and PM business to MPMPL, respectively would qualify as a 'supply betwe
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Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02 FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
A. STATEMENT OF FACTS HAVING A BEARING ON THE QUESTIONS RAISED
1. The Merck Life Science Private Limited (hereinafter referred to as 'the Applicant') has entered into business transfer agreement dated 21 June 2018 with Merck Limited (seller) wherein the seller has agreed to sell, transfer, convey, assign and deliver to the applicant or to any affiliates as directed by applicant for the BPL business which would be transferred as a slump sale on going concern basis. BPL business means BP business, LS Business and PM business as going concern as outlined in 'Definitions and Interpretations'. Refer Exhibit 1 for details of agreements. Pursuant to the above, another agreement executed between the seller and Merck Specialties Private Limited (hereinafter
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ed 21 June 2018. Refer copy of the said intimation in Exhb 3.
2. At outset, we would like to make it clear that the provisions of both CGST Act and MGST Act are 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 provision under the MGST Act. Further to the earlier, henceforth for the purpose of this advance ruling application, a reference to such a similar provision under the CGST Act/MGST Act would mentioned as being under the 'Goods and Service Act (GST Act).
C. APPLICANT'S INTERPRETATION OF LAW OR FACTS, AS THE CASE MAY BE
6. Applicants direction to the seller basis which the seller would make an independent third party sale does not qualify as an activity nor as a 'supply of service' between the applicant and the third party (MSPI./NIPMPL):
In the present case, the applicant and the seller entered business transfer agreement for transfer of BPL b
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business and LS business) as going concern on slump sale basis to its affiliates. As per Schedule 12 – Definition and Interpretation of business transfer agreement, the term 'Affiliates means in relation to any party, any subsidiary or any parent company of that party and any subsidiary of any such parent companies, in each case from time to time.
MSPL and MPMPL are fellow subsidiary (affiliates) of MLSPL, all three entities are subsidiaries of the Company's ultimate holding company, Merck KGaA, Darmstadt, Germany. Hence, in the present case, the applicant, MSPL and MPMPL qualifies as affiliates.
Further, the applicant vide agreement for transfer of BP and PM businesses has directed the seller to transfer, convey, assign, and deliver (as the case may be) BP business to MSPL and PM business to MPMPL as going concern on a slump sale basis. However, it is pertinent to note that the direction is given by the applicant to the seller and there is no activity between the applicant and its
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as 'supply between the applicant and MSPL/MPMPL.
In the present case, the board of directors of MSPL/MPMPL have independently evaluated the opportunity and valued the businesses. Basis their independent evaluations the acceptance has been given to the seller. The direction provided by the applicant has not resulted in any economic benefits or reduction in the consideration for the related parties (MSPL/ MPMPL). This further strengthen the above stand.
7. In absence of the element of 'supply' between the applicant' and 'MSPL/MPMPL', the evaluation of applicability of schedule 1 does not arise.
Further, as per above agreements there is no consideration paid by MSPL/MPMPL to the applicant for transfer of business as going concerns. Hence, in the instant case, it is relevant to analyses provision of schedule 1 of GST Act. In terms of section 7(1)(c) of the GST Act, activities specified in Schedule I to be treated as supply which are made or agreed to be made without a consideration as
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fy between the applicant' and 'MSPL/MPMPL' under GST Act.
8. Since full input tax credit is available to MSPL/MPMPL the notional consideration should be considered to be open market value.
Without prejudice to above, even for argument sake it is presumed that the above transaction qualifies as supply between the applicant and MSPL/MPMPL, both being related parties, the notional consideration (percentage of business transfer value) would be an academic discussion and the invest treated as open market value as per Rule 28 of GST Rule.
Notwithstanding above, in the present case, if supply' exists between the applicant and MSPL/MPMPL than value of being related parties may be determined under Rule 28 of GST Rules,
In the present case, MSPL and MPMPL are affiliates (fellow subsidiary) of applicant, all three entities being subsidiaries of the Company's ultimate holding company, Merck KGaA, Darmstadt, Germany hence, they are related parties.
Hence, in absence of any consideration betwe
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ety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person:
Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services.
In terms of section 16 of GST Act, every registered person entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the furtherance of his business. On perusal Of above provision, it is evident that in the present case also MSPL and MPMPL are registered person under GST Act in the state of Maharashtra. Further, the transaction would be used or is intended to be used in the course or furtherance of business by MSPL and MPMPL. Hence, both MSPL and MPMPL are eligible to claim input tax credit on GST charged by the applicant. Therefore, in view of above, the applicant may adopt to
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if it is treated as 'supply' then the value of the consideration would be academic and the invoice value would be considered as the open market value for all GST purposes. Hence, even if a percentage of sale is considered to be the value the same should be acceptable.
We shall be glad to furnish such additional information and relevant documents as the Authority may require for passing its decision where the application is admitted.
Prayer
In view of the above factual and legal position, it is most humbly prayed that this Hon'ble Authority may clarify that:
i. Whether applicant's direction to the seller (directed in agreement dated 21 June 2018) for direct transfer of BP business to MSPL and PM business to MPMPL respectively would qualify as a 'supply' between the applicant' and 'MSPL/ MPMPL'?
ii. If the answer to the above question is 'affirmative' then as the parties are related, even in absence of the actual consideration does the applicant have to attribute a notional conside
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te that the initial business transfer agreement between the seller and the applicant was executed on 21 June 2018 which authorizes the applicant or any of its affiliate to buy the BPL business on the closing date. On the very same date, another agreement was executed simultaneously between the seller, the appllant, MSPL and MPMPL for selling the respective business on a slump sale basis.
This clearly highlights that the applicant and its affiliates, as directed/ identified by the applicant, had the right to buy out the respective BPL business under the initial agreement which was respectively identified and sold business wise in the second agreement.
Hence, it is evident from above facts that the intention Was always to undertake the slump sale of BPL business to the applicant, MSPL and MPMPL independently. In the present case, a two- step approach was followed with regards to the documentation. It is also important to note that the entire transaction is between the group companies.
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For example, the Service Tax Guidelines dated June 2012 issued by the Central Board of Excise & Customs vide para 6.7.1 have clarified that when a person refrains from comptetion and received an anti- compete fee, then such abstinence is treated as deemed service as per Schedule-Il. The case of the applicant does not fit into it.
Activity of agreeing to the obligation to tolerate an act or a situation, or to do an act – As per dictionary meaning, 'tolerate' means 'accept or endure (someone or something unpleasant or disliked) with forbearance'. In our case, neither the applicant nor its affiliates are tolerating any act on behalf of each other. The entire transaction is happening between the seller and applicant independently without any aspect of tolerating an act or situation. An obligation to tolerate an act or a situation or to do an act flows from the contractual agreements between the parties. For example if A has taken a loan from the Bank and B has stood guarantor for the Sai
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to the Applicant in whatsoever form. Thus, no service provided by the applicant in the course or furtherance of business.
C. Slump sale is not in course or furtherance of business
Historically there were disputes as to whether the slump sale is goods or not. It was consistently held that the slump sale is not goods because it is not done in course of the business. In the case of M/s. Paradise Food Court, vs The State of Telangana, on 18 April, 2017 (2017-VIL-238-AP) = 2017 (5) TMI 127 – ANDHRA PRADESH HIGH COURT, the Hon'ble High Court of Andhra Pradesh held that slump sale if not goods and cannot be sold in the course of trade or business. Relevant extract is cited below for your reference;
“.. … As we have pointed out earlier, sale of business as a whole is not made taxable even now under the charging provision. It is only the sale of goods which is chargeable under Section 4(1). The definition of the expression sale would apply to a case only if the sale takes place in the co
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rtherance of business of the applicant.
Section 2(17) of CGST Act defines –
“business” includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar whether or not it is for a pecuniary benefit;
The Pecuniary benefit is nothing but the economic benefit accrued to the service provider immediately in exchange for the said service provided, directly or indirectly and is co-relatable with the service provided. There has to be a direct nexus between the service provided and the economic benefit accrued whether direct or indirect.
This means if the economic benefit is accrued in future and the said benefit is not co-relatable with the service provided, then the said economic benefit is not covered by the pecuniary benefit mentioned in the definition. In such a case, it would be treated as provision of service without any pecuniary benefit.
Hence if the economic benefit accrues in future and is not co-relatable with the service provided, th
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s not co-relatable with the service provided by the holding company.
In view of the above, if an economic benefit accrues in future and is not co-relatable with the service provided, then it would be treated as provision of service without any consideration. Such service if provided to a related person would qualify as supply of service without consideration in course or furtherance of business as per Sch.- I of the CGST Act.
In order to qualify any service as in course of business, the said service should be provided with the intention of deriving economic benefits. If the benefits are not immediate and direct and also not co-relatable, then apparently it looks like without consideration as per Schedule- l. There is no other situation when the service is provided without consideration in course of business. If the service is provided in course of business, then economic benefits must accrue. If it accrues immediately, directly or indirectly, then the same is treated as provision of
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ompanies is not for any economic benefits whatsoever, whether direct or indirect, immediate or in future or co-relatable or un-co-relatable. Department cannot prove that there is any economic benefit, whatsoever, attached to such relinquishing of the rights. Hence such activity of relinquishing the right is not in course of business. According said activity does not qualify as an activity mentioned in Schedule-I
If the intention of law was to include activities not in course or furtherance of business, then there would have been no mention of “in course or furtherance of business” in the definition of supply under section 7 of CGST Act. There is no legal construction to declare slump sale as supply of service by inferences or implications or indirect interpretation. That is not the object and purpose of the construct of Schedule-II. The settled rule of legal construction is to presume the legislature to have meant what they have actually expressed. The intent of the parliament must b
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. v. State of U.P., 2008 (225) E.L.T. 321 (S.C.) = 2008 (4) TMI 101 – SUPREME COURT, the Learned Counsel submitted that, when a commodity has been accepted to be of a particular nature by the Assessing Officer for a long time, it should remain to be classified as such without any change, and the common parlance test, or user test, cannot be said to be decisive in such a situation, and the onus would be on the Department to show, as to why, a different interpretation should be resorted to, when there is no change in the statutory provision, and if two views are possible, then, one, which is favorable to the assessee has to be adopted.
Also, the applicant and its affiliates (i.e. MSPL and MPMPL) are related person as per explanation to section 15 (5) of GST Act, relevant extract of which is reproduced as under;
“(a) persons shall be deemed to be “related persons” if-
(i) …….
(vi) Both of them are directly or indirectly controlled by a third person….”
Provided that gifts not e
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similar to saying that it is not for running the business but for growing the business. If the business itself does not exist it cannot be stated that it is in course of business or for furtherance of business.
The Government of India vide exemption Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 has exempted “Services by way of transfer of going concern. as a whole or independent part thereof.”
The above notification fails to have any relevance on taxability of slump sale because if there is no levy on slump sale, then it cannot be treated as taxable service. It is evident in law from a harmonious reading and interpretation of law and the context in which the Goods and Service Tax law is framed as apparent from the object and purpose of the legislation, that slump sale is neither goods nor services. In view of the above it may be stated that if the levy is not there, the question of exemption does not apply.
It is a cardinal principle of law that it has to be i
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law, still it can be stated that such slump sale is not in course or furtherance of business and will not qualify as supply of service.
Further, mere exclusion of present transaction and slump sale from “Schedule III – activities or transactions which shall be treated neither as a supply of goods nor a supply of services”, should not be construed as that the particular activity is under the ambit Of GST law.
In the proposed amendment to GST Act there was inclusion of multiple activities under Schedule III, which were earlier not part of the said schedule. However, this doesn't imply that these activities were earlier leviable to tax under GST law. GST law like any other tax law is an evolving law and accordingly there are always amendments to incorporate what was missing hitherto. Hence there is no exhaustive list of non-goods or non-service.
E. The applicant will not qualify as “Intermediary”
Without prejudice to above submissions, it may be stated that facilitation activity prov
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ntermediary' and not liable to pay tax.
F. Direction by the applicant for facilitation of any non-service (in the present case slump sale). will not qualify as supply of service.
It is arguable that slump sale is neither supply of goods nor supply of service. In the instant scenario also, the applicant's direction to its seller is neither '”supply of goods” nor will qualify as “supply of service” under GST Act. If the intention of legislature was to levy tax on facilitation of non-service (i.e. slump sale) then they would have made specific inclusion in the definition of “'Service”, “Supply” or Schedule II of GST Act.
In this regard, it may be mentioned that although security is excluded from the definition of 'service', facilitating or arranging transaction in securities is included in the definition of 'Service' through an explanation to section 2 (102) in the proposed amendment in the GST Act for the purpose of removal of doubts with retrospective effect from July 2017. Further,
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e has to be specific inclusion in the definition of service or in Schedule-II.
It is evident from the GST law that there is no specific inclusion of such facilitation service / activity in connection with slump sale, in the definition of Service or in Schedule-II. Hence such activity in connection with slump sale (which is a non-service) is also outside the purview of the definition of Service both in Section 2(102) and also in Schedule-II and accordingly non-taxable.
G. The present transaction would be revenue neutral in the hands of the government
Notwithstanding above, in case the above transaction gets taxable under GST in the hands of applicant the recipient (MSPL and MPMPL) would qualify for input tax credit. Hence, it will be a revenue neutral transaction.
H. Applicant's Understanding
AS discussed in above Para,
* the 'applicant' has directed to the 'seller' for transfer of business vide agreement for transfer of BP and PM business but there is no activity of supply of
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re registered under the Goods and Service Tax Act, 2017, vide the registration no. 27AACCM1226B1Z4.
This is with reference to final hearing for advance ruling vide application no. 62 dated 02nd August, 2018 attended on 19th September, 2018. In continuation to the additional submission made by us 19th September, 2018, we are hereby submitting summary of final discussion held before your goodself:-
* The applicant and its affiliates entered in two agreements with the seller for slump sale of BPL business. In the first agreement, 'the Applicant' has entered into business transfer agreement with seller wherein the seller has agreed to sell to the applicant or to any affiliates as directed by applicant as a slump sale on going concern basis. Second agreement, which was an extension to the first agreement, was entered on the same day immediately after the execution of first agreement. In the second agreement both the applicant and its affiliates (MSPL and MPMPL) were purchasers. Applicant
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of agreeing to the obligation to do an act” (i.e. qualify as a supply of service under schedule II of GST Act), then also in absence of consideration, GST should not be applicable. An obligation means a contractual obligation in legal parlance. In the present case, there is no contractual obligation between the applicant and its affiliates to do any act. Hence, the activity of giving a direction cannot be classified as an “activity of agreeing to the obligation to do an act”.
* Further, the applicant and its affiliates are related parties hence, there is a possibility that it may be considered as supply under schedule I of GST Act even without consideration. However, the direction by the MLSPL to Seller (i.e. Merck Limited) is not in the course or furtherance of business hence, it Will again not qualify as 'supply' under schedule I of GST Act.
Thus, based on the above discussions, it is evident that in substance direction of applicant to seller for slump sale of BPL business doesn'
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p;
BP and PM Transfer Agreement:
* Consideration payable by MSPL to Merck Limited under the BP and PM Transfer for the transfer of the BP Business: INR 6,781,500,000
* Consideration payable by MPMPL to Merck Limited under the BP and PM Transfer for the transfer of the PM Business: INR 808,400,000
* Stamp du ty payable:
Article reference under Schedule I of the Maharashtra Stamp Act
Description of head under which stamp duty is payable
Amount of stamp duty
Article 5(h)(A)(iv)(b)
Agreement which creates any obligation, right or interest and having monetary value above INR 1,000,000
0.2% of consideration paid under the BP and PM transfer agreement
= 0.2% of INR (6,781,500,000 + 808,400,000)
=0.2% of INR 7,589,900,000
= INR 15,179,800
Article 35
Indemnity provision
INR 3000 (INR 500 *6 sets of indemnities under the agreement)
Article 5(h)(B)
Arbitration provision (covered under the residuary provision)
INR 100
Total Stamp Duty Payable
INR 15,182,900
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t No. 4 at Para B i.e. Applicant's eligibility to file present Advance Ruling Application. In light of the facts as per (c), (e) and (g) of point No. 4 at Para B, applicant wishes to seek clarification on the following matters from the Authority for Advance Ruling established under GST Act:
1. Whether applicant's direction to the seller (directed in agreement dated 21 June 2018) for direct transfer of BP business to MSPL and PM business to MPMPL, respectively would qualify as a 'supply' between the 'applicant' and 'MSPL/MPML'?
2. If the answer to the above question is 'affirmative' then as the parties are related, even in absence of the actual consideration does the applicant have to attribute a notional consideration and charge GST in line with schedule 1 of GST Act to be compliant?
3. If the answer to both the questions are 'affirmative' then as the recipients (MSPL/MPMPL) are eligible to avail full input tax credit then the notional consideration (percentage of the business tra
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here is no consideration, subject to condition specified in ITC Section/ Rules.
04. HEARING
The case was taken up for Preliminary hearing on dt. 04.09.2018 when Sh. Gurudas Pai C.A. , Sh. Abhijit Saha, Advocate, Ms. Pooja Singh, C.A. along with Sh. Mangesh Wagle, Manager Indirect tax appeared and made oral and written submissions for admission of application. Jurisdictional Officer, Sh. B.S. Manat, Division – V, CGST, Navi Mumbai Commissionerate appeared and stated that they would be making submissions in due course.
The application was admitted and called for final hearing on 19.09.2018, Sh. Gurudas Pai C.A., Sh. Abhijit Saha, Advocate, Ms. Pooja Singh, C.A. along with Sh. Mangesh Wagle, Manager Indirect tax appeared and made oral and written contentions as per details given in their application. Jurisdictional Officer, Sh. M S A Khan, Supdt., Division – V,CGST, Navi Mumbai Commissionerate appeared and stated that they have made written submissions.
05. OBSERVATIONS
We have gon
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MPMPL by and from seller.
In respect of the above two agreements, the applicant has only directed the seller to transfer these above referred business to the affiliates of MSPL and MPMPL as required, as per the terms of the first agreement between the seller and the applicant referred above.
It is further stated that the applicant, vide the two agreements referred above has directed the seller to transfer the BP business to MSPL and PM business to MPMPL as going concern on slump sale basis. As a result only LS business is sold by the seller to the applicant.
It is further stated in the application that in terms of the above referred agreement, the seller could be receiving lump sum consideration for each slump sale of BP business, PM business and LS business, independently from MSPL, MPMPL and the applicant respectively and further it is stated that this lumpsum consideration received by the seller is exempt from GST vide Sr.No. 2 of Notification No. 12/2017- Central tax (Rate) date
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he 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;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule 1, made or agreed to be made without a consideration, and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.”
Here we are required to refer to Schedule-I and Schedule-Il as well attached to Section 7 to examine the question as raised by the applicant.
From the details submitted before us we find that in respect of transfer of BP business to MSPL and PM business to MPMPL by the seller apparently it is seen and also claimed in the application by the applicant is that the applicant is only directing t
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en the applicant and MSPL and MPMPL.
We find that the agreement dtd. 21.06.2018 between the applicant and seller provides as under:-
“This agreement is made on 21st June, 2018
PARTIES
(1) MERCK LTD., a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Godrej One, 8th floor, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai-400079 and corporate identity number L99999MH1967PLC013726 (hereinafter referred to as theSeller, which expression shall, unless the context otherwise requires, includes its successors and permitted assigns, and
(2) MERCK LIFE SCIENCE PVT. LTD., a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Godrej One, 8th floor, Pirojshanagar, Eastern Express 400079 with company identification number Highway, Vikhroli (East), Mumbai U24100MH2005PTC152680 (hereinafter referred to as the Purchaser, which expression shall, unless the context otherwise requi
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regate price for the BPL business is ten billion, five hundred twenty million rupees (INR 10,520,000,000) (BPL Business Price)
3.2 The BPL business Price has been determined based on the value of the BPL business as a whole and shall be paid as a lump sum consideration for transfer of the BPI- business by the Seller to the Purchaser on a going concern basis. No values have been assigned to and of the individual assets or Assumed Liabilities comprised in the BPL business. The Parties agree that the determination of the value of any asset for the purpose of payment of stamp duty, registration fees, or other similar Taxes shall not be regarded as assignment of values to individual assets.
7. PAYMENTS ON CLOSING
7.1 Purchaser Payments At closing, the Purchaser shall pay to the Seller in accordance with clause 22.1 (Payments made by the Purchaser)
(a) the BPL business price; plus
(b) the Determined VAT to the extent it is due as at closing.
8. TERMINATION
8.1 Seller and Purchaser opt
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r action by any Party.
8.3 Effect of Termination. If this Agreement terminates or is terminated pursuant to this clause 8 (Termination), neither the Seller nor the Purchaser (nor any of their Affiliates) shall have the claim, obligation or liability of any nature against any other Party (or any of its Affiliates) under this Agreement or under any of the Surviving Provisions; provided, that nothing herein shall relieve a defaulting or breaching Party from any liability or damages out of its Wilful Breach.
11. INDEMNIFICATION
11.1 Purchaser Indemnification Obligations. The Purchaser hereby undertakes that with effect from Closing, the Purchaser will indemnify on demand and hold harmless the Seller and its current and former Directors, officers, employees, and agents against and in respect of any and all:
(a) Liabilities actually suffered or incurred by any of them to the extent arising out of or resulting from any Assumed Liabilities; and
(b) Losses actually suffered or incurred by
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he central pillar of these slump sale business transfer agreement would also be clear from the relevant paras of the consequent agreement to the first agreement referred above. The consequent agreement i.e '”Agreement for transfer of the BP and PM businesses” is also dated 21.06.2018.
We reproduce the relevant paras of the same which are as under:-
AGREEMENTFOR THE TRANSFER OF THE BP AND PM BUSINESSES dated 21 June 2018
PARTIES:
(1) MERCK LTD., a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Godrej One, 8th floor, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai-400079 and corporate identity number L99999MH1967PLC013726 (Seller);
(2) MERCK LIFE SCIENCE PVT. LTD., a company incorporated under the provisions of the Companies Act, 1956, having its registered office at Godrej One, 8th floor, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai – 400079 with company identification number U33100MH198&ael
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or around the date hereof with the Seller (the Business transfer Agreement) under which Merck 1 will acquire the BPL Business from Seller.
WHEREAS under the Business Transfer Agreement, Merck 1 has the right to direct the Seller to transfer the BPL Business or part thereof to an affiliate of Merck 1.
WHEREAS the Parties have agreed that the BPI„ Business shall be transferred from Seller directly to Merck 2 upon the terms set out in this Agreement.
WHEREAS the Parties have agreed that the PM Business shall be transferred from Seller directly to Merck 3 upon the terms set out in this Agreement.
WHEREAS the LS Business will be transferred from Seller to Merck 1 pursuant to the terms of the Business Transfer Agreement.
IT IS AGREED
1. TRANSFER OF THE BP AND PM BUSINESSES
1.1 Subject to the terms and conditions set forth herein and in the Business Transfer Agreement and in consideration for the mutual covenants herein Merck 1 herby directs Seller, as permitted under the Busin
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paid by Merck 1, Merck 2 and Merck 3 as follows:-
(a) Merck 1 shall, pursuant to and in accordance with the Business Transfer Agreement, pay to the Seller the proportion Of the BPL Business Price (as defined in the Business Transfer Agreement) which relates to the LS Business, being two billion, nine hundred thirty million, one hundred thousand Rupees(INR 2,930,100,000) (the LS Business Price) together with the IS determined VAT to the extent it is due as at BTA Closing, it being understood that the LS Business Price has been determined based on the value of the LS Business as a whole and shall be paid to Seller as a lump sum consideration for transfer of the LS Business by Seller to Merck 1 on a going concern basis;
(b) Merck 2 shall pay to the Seller the proportion of the BPL Business Price (as defined in the Business Transfer Agreement) which relates to the BP Business, being six billion, seven hundred eighty one million, five hundred thousand rupees (INR 6,781,500,000) (the BP Bu
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may be terminated at any time prior to BTA Closing:
(a) by mutual written consent of Merck Parties;
(b) by ant Merck Party, if BTA Closing does not occur before the Long Stop Date;
(c) automatically in the event that the Business Transfer Agreement is terminated in accordance with its terms.
Thus from the details above, it is reiterated and clear that the role of the applicant is very crucial in respect of both the agreements as discussed above and without the directions of the applicant, the second agreement could not have materialized and further, in respect of all the terms of the second agreement as detailed above the applicant is an active party in the agreement as well and he and his directors have an active role in all aspects of the agreement, starting from terms relating to parties to agreement, transfer of the BP and PM business, Price and Termination which is very clear from these details of agreement reproduced above.
Thus we clearly find that this role of the applica
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sideration. In view of this in this case the value is to be determined in terms of Rule 28 of the CGST Rules, 2017.
Now we come to Question No. 3 as raised by the applicant which is as under:-
Question 3 :- If the answer to both the questions are ' affirmative' then as the recipients (B{SPL/MPMPL) are eligible to avail full input tax credit then the notional consideration (percentage Of the business transfer value) would be only academic and will the invoice value be considered as open market value?
In respect of this Question we find that the value is to be determined as per Rule 28 of the CGST Rules, 2017 and therefore there is no requirement on our part to answer this question.
05. In view of the extensive deliberations as held hereinabove, we pass an order as follows:
ORDER
(Under section 98 Of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA- 62/2018-19/B-133
Mumbai, dt.30.10.2018
For reasons as discussed in th
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