In Re : Indian Oil Corporation Ltd.
GST
2018 (9) TMI 1342 – AUTHORITY FOR ADVANCE RULING GOODS AND SERVICE TAX, WEST BENGAL – 2018 (17) G. S. T. L. 486 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING GOODS AND SERVICE TAX, WEST BENGAL – AAR
Dated:- 18-9-2018
17/WBAAR/2018-19
GST
MR VISHWANATH, Member, West Bengal Authority for Advance Ruling And MR PARTHA SARATHI DEY, Member, West Bengal Authority for Advance Ruling
For The Applicant's : Sri Sunil Kumar Gupta, Authorized Representative
1. Indian Oil Corporation Ltd, stated to be in the activity of refining crude petroleum oil into, inter alia, High Speed Diesel (HSD), Motor Spirit (petrol), and Aviation Turbine Fuel (ATF), no tax on supply of which is leviable date under the CGST/WBGST Acts, 2017, (hereinafter collectively referred to as “the GST Act”) is seeking a ruling on whether or not GST paid on the railway freight for transportation of the above goods from the its Haldia Refinery to the its export warehouse
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of West Bengal is 19AAACI1681G1ZM. For purpose of this Advance Ruling the West Bengal Unit of Indian Oil Corporation, holding GSTIN 19AAACI1681G1ZM, will be considered as the Applicant.
3. The Application states that:
a. The Applicant exports HSD, ATF and other refined petroleum products to Nepal under the terms and conditions laid down in an agreement dated 27/03/2017 (hereinafter referred to as “the Agreement”) between Indian Oil Corporation and Nepal Oil Corporation Ltd (hereinafter referred to as “NOC”). ATF, Motor Spirit and HSD, sourced from the Applicant's manufacturing unit (refinery) at Haldia in West Bengal are transported by Rail to the Indian Oil Corporation's warehouse at Raxaul in Bihar.
The supply from Haldia to Raxaul is made in accordance to the procedure laid down in Circular No. 581/18/2001-CX dated 29/06/2001 issued by CBEC. The receiving location at Raxaul provides Haldia Refinery CT-2 for a lump sum quantity. Haldia Refinery prepares ARE-3 on the basis of suc
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as interstate exempt supplies from Indian Oil Corporation's West Bengal Unit, and export of Indian Oil Corporation's Bihar Unit.
d. The Applicant has been paying GST on the input service of Railway Freight for the above transportation. As the freight is charged for booking and transportation from West Bengal, it is billed on the Applicant, as the place of supply of the input service is West Bengal.
4. The Application argues that the Applicant is eligible to claim credit of such GST paid on input services since the transportation from Haldia Refinery to Raxaul Depot is occasioned by an agreement for export of goods to Nepal. According to the Applicant, the goods are transferred to the export warehouse at Raxaul in terms of an export agreement with no scope of diversion for home consumption. It is export within the meaning of Section 5 of the CST Act. Supply to the Bihar unit of Indian Oil Corporation by the Applicant is, therefore, zero rated supply within the meaning of section 16(1
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r its Bihar Unit. GST paid on inward supplies of inputs and input services in Bihar can, therefore, be claimed by the Bihar Unit. But the GST paid on freight for transportation from Haldia Refinery to Raxaul Depot is billed on the Applicant, Indian Oil Corporation's West Bengal Unit, place of supply of the input service being located in West Bengal. The Applicant cannot claim credit of such GST on his exempt supplies to Indian Oil Corporation's Bihar Unit, since the transfer of goods from Haldia to Bihar is stock transfer of non GST goods and not export and, therefore, not zero rated supplies of the Applicant.
7. In the Applicant's reply to the submissions of the officer concerned it is argued that the officer has failed to appreciate the true nature of the transaction. Transfer of ATF and other non-taxable goods from Haldia Refinery to Raxaul Depot is not supply from the Applicant's Unit to the Bihar Unit of the same Company. Movement of goods for export commences from West Bengal an
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Applicant further says that the goods are moved based on the MOU between the Governments of India and Nepal followed by the Agreement between Indian Oil Corporation Limited and Nepal Oil Corporation Limited. Actual export occurs under the authentication by the Excise Authority and the Bihar Unit has no control to dispose of the goods otherwise.
It is, therefore, according to the Applicant, sale in course of export in terms of Section 5 of the CST Act.
8. The main issues which need to be considered in the Application can be briefly summarized as follows:
a. Whether or not the products transported and supplied by the Applicant are “non- GST products”, “non-taxable supplies” “exempt supplies” or “zero rated supply of goods”
b. Whether the transportation to Raxaul warehouse is to be considered to be for export of supply to Nepal or transfer of goods to Indian Oil Corporation's Bihar Unit for ultimate export to Nepal.
9. Art 366 of the Constitution has been amended by the 101st Amen
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a taxable person. Petroleum products, being non-taxable supplies, are, therefore, included in the turnover of the Applicant, who is a taxable person.
10. In the Central Sales Tax Act, 1956 the definition of goods has been amended by the Taxation laws (Amendment) Act, 2017 to exclude all moveable goods out of its ambit, except petroleum products and alcoholic liquor for human consumption. It has not been repealed and continues to be the statute for levying taxes on sales of petroleum products in course of inter-State trade or commerce. The Applicant is, therefore, entitled to claim benefit of export under the CST Act, if admissible.
However, unless the Applicant's transportation of non-taxable goods to the export warehouse at Raxaul is 'export of goods' within the meaning of section 2(5) of IGST Act, it cannot be treated as zero rated supply, and credit of GST paid on input services is not admissible. In the present context, therefore, discussion on export as defined under section 5 o
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lace of supply of goods exported from India shall be, under section 11(b) of the IGST Act, the location outside India. Clearly, export as defined under section 5(3) of the CST Act, is not relevant under the GST. The defining character of an export transaction both under section 5(1) of the CST Act and section 2(5) of the IGST Act is that it occasions movement of the goods to a place outside India.
12. In the present context, the question, therefore, boils down to whether movement of goods from Haldia Refinery terminates at Raxaul Depot in Bihar when it takes delivery from the Railways, or continues after trans-shipment to other modes of transport for taking it out of India to Nepal. The goods are supplied to the recipient (in this case the Bihar Unit) in India if the movement terminates at Raxaul. In such cases it will be an inter-state supply to a distinct person as defined under section 25(4) of the GST Act, and the place of supply shall be determined under section 10(1)(a) of the I
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e Agreement states that NOC shall furnish at least thirty days before commencement of each quarter, their month-wise, product-wise, location-wise requirement, so that the Applicant can keep the supply points well stocked to meet the requirement. NOC can depute an independent surveyor at the supply point to cross check, verify, inspect the quality and quantity of the goods.
14. Other than the Agreement the Applicant has submitted or referred to no specific export order. Obviously tankers loaded with ATF or HSD cannot move under a general agreement on terms and conditions of business. Such movement requires specific orders placed either by NOC or the Raxaul Depot. It is also clear from the above discussion that NOC places PDO only on the supply points like Raxaul Depot, which needs to be kept well stocked in line with the agreed allocation and communication from NOC. Raxaul Depot places order on Haldia Refinery to keep the supply at the optimum level.
15. The Applicant's submission tha
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in Form CT-2 indicating the details of the Bond executed by the exporter. The exporter fills up the relevant information in CT-2 and makes provisional debit in the Running Bond Account equivalent to the duty payable. The consignor (i.e. Haldia Refinery) prepares an application for removal in Form ARE-3, indicating the serial number of the corresponding CT-2. On receipt of the goods at Raxaul Depot the officerin- charge of the warehouse countersign the ARE-3 and dispatch it to the Haldia Range Excise Authority as proof of re-warehousing of the goods. At the exporter's end the provisional debit in the Running Bond Account is converted into actual debit.
If the goods received under ARE-3 are to be exported, an application for export in ARE-1 is to be prepared and submitted to the Customs Authority for endorsement. The Running Bond Account will be credited by an amount equivalent to the duty for the goods mentioned in ARE-1.
If the goods are cleared for home consumption, the exporter pay
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d before the appropriate Excise Authority at the export warehouse, failing which the exporter is liable to pay the duty with interest.
Removal without paying duty (under Bond) from Haldia Refinery to the export warehouse at Raxaul, therefore, does not as such amount to export.
Movement from the Applicant's factory at Haldia to the export warehouse at Raxaul is not, therefore, 'inextricably linked' to ultimate export to Nepal. The scope for diversion for home consumption, whether or not has actually been diverted, breaks the link and makes them separate supplies.
Movement from Haldia Refinery to the export warehouse at Raxaul is not a transit movement in course of export to Nepal. In fact, the Applicant has not claimed on such transportation from Haldia to Raxaul the benefit of exemption from paying GST, as available under serial no. 9B of Notification No. 30/2017 – CT (Rate) dated 29/09/2017 for services associated with transit cargo to Nepal, but has actually been charged and paid
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is no measure of actual export.
The Applicant himself is well aware of the anomaly and has not reported in his returns the transaction as export under section 5 of the CST Act either. Apparently, the Applicant's arguments are at variance with what he and the Bihar Unit have reported in their returns under both the CST Act and the GST Act.
19. The Applicant refers to a few judgments in support of his argument, which are discussed below.
In Nipha Export Pvt Ltd (8 VST 466), pursuant to an export order received at the Head Office in Kolkata, the branch office purchased goods in Haryana and sent them to Kolkata, which exported the goods outside the territory of India. The apex court concurs with the High Court that the movement of goods from Faridabad in Haryana to Kolkata was occasioned in the course of export out of India. The case, however, is of little help to the Applicant, as it is already discussed that the movement of goods from Haldia Refinery to Raxaul Depot is not occasioned
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of the Applicant, who are distinct persons in terms of section 25(4) of the GST Act.
21. Sections 16(1)(a) and 16(2) of the IGST Act are, therefore, not applicable. The Applicant cannot claim credit of the GST paid on the input services like railway freight on ATF and other non-taxable supplies from West Bengal to his Bihar Unit.
In view of the foregoing we rule as under
RULING
ATF and other non-taxable supplies from the Applicant's Haldia Refinery to the export warehouse of Indian Oil Corporation Ltd at Raxaul are not zero rated supplies. They are non-taxable supplies from the Applicant to the Bihar Unit of Indian Oil Corporation Ltd, who are distinct persons in terms of section 25(4) of the GST Act. The Applicant cannot claim credit of the GST paid on the railway freight for transportation of ATF and other non-taxable supplies from West Bengal to the Bihar Unit.
This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(
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