GUJARAT APPELLATE AUTHORITY FOR ADVANCE RULING
GOODS AND SERVICES TAX
D/5, RAJYA KAR BHAVAN, ASHRAM ROAD,
AHMEDABAD - 380 009.
(IN APPLICATION NO. Advance Ruling/SGST & CGST /2020/AR/13)
Airports Authority of India,N.H. 8B,
Porbandar Airport, Porbandar,
Gujarat-360575.
The appellant, M/s.Global Vectra Helicorp Limited (GVHL), employs a fleet of around 30 helicopters (aircrafts) for providing services classifiable under Service Accounting Code 996603 (i.e. Rental services of aircraft including passenger aircrafts, freight aircrafts and the like with or without operator) in terms of Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The appellant has submitted that they are responsible for providing rental services of aircraft (with or without operator) and in respect of Aviation Turbine fuel (ATF), it was agreed that provision of the same for the purpose of flying of aircrafts would be the responsibility of the customers; that at locations where the customers are unable to provide the fuel, in order to ensure continuity of flying, the contract requires GVHL to procure the fuel on behalf of the customers and subsequently the cost of the fuel is reimbursed by customers at actual (without charging any mark-up); that GVHL undertakes the activity of procurement of fuel as a 'pure agent' on behalf of the customers.
2. The appellant has filed their submission along with the appeal filed on 21.08.2020 against Advance Ruling Order No. GUJ/GAAR/R/21/2020 dated 14.07.2020 passed by the Gujarat Advance Ruling Authority (herein after referred to as the 'GAAR'). In their submissions, the appellant has mentioned that the relevant clauses of Contract No. ONG/COL/HMM/C SR/AL/CH/HELICOPTER/CREWCHANGE/09/2014/P76BC4008-GR-1 dated 31.07.2015 with M/s. Oil and Natural Gas Corporation Ltd.(ONGC) are as under:-
> Clause 10 - PROVISIONS OF SERVICES AND FUEL
- Clause 10.2 - By Charterer
- Clause 10.2.1(iii)
"ATF shall be provided as free supply item by ONGC at Mumbai and Offshore. For other locations, ATF charges shall be reimbursed as per actuals on production of original vouchers from the ATF supplier of the concerned Airport.
In case due to any reason ONGC is unable to supply ATF at Mumbai, operator has to make arrangements for the ATF. ATF charges shall be reimbursed as per actual on production of original vouchers from the ATF supplier in Mumbai.
- Clause 11.2 - Flying Hour Charge (FHC) (per helicopter)
- Clause 11.2.1 states as follows:
"Charterer shall in respect of the chartered helicopter pay Contractor the corresponding hourly flying charges per hour and pro-rata basis for the flying hours of each such helicopter(s) as per following rates:
The FHC is excluding of ATF price. The hourly charge is all inclusive airport charges, customs duty, insurance charges etc.
ATF shall be provided as free supply item by ONGC at Mumbai and Offshore. For other locations, ATF charges shall be reimbursed as per actual on production of original vouchers from the ATF supplier of the concerned airport."
3. The appellant has stated that from the reading of the clauses of the aforementioned contract, it is clearly evident that:-
> Appellant is not responsible for provision of ATF and the consideration for rental services is suitably agreed with customer.
> Customer is responsible to provide ATF to appellant for provision of services at agreed locations on free of cost basis.
> In case, due to any reason, customer is unable to supply ATF at Mumbai, the appellant has to make arrangements for the ATF and ATF charges are reimbursed as per actual on production of original vouchers from the ATF supplier. Further, the cost of the fuel is not included in the Flying Hour Charges.
4. Based on the above facts, the appellant had filed an application with the GAAR for determination of question whether in terms of the valuation provisions under the GST legislation, amount recovered as reimbursement (at actual) by the appellant from the customer, for the fuel procured on behalf of the customer is required to be included in the value of services provided by the appellant.
5. The GAAR, vide Advance Ruling No. GUJ/GAAR/R/21/2020 dated 02.07.2020, held that in terms of the valuation provisions under the GST legislation, amount recovered (at actual) by the appellant from the customer, for the fuel procured on behalf of the customer, is required to be included in the value of services provided by the appellant.
6. Aggrieved with the aforementioned order, the appellant has filed the present appeal.
7. The appellant has referred to the various provisions of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017 and the GGST Act, 2017 respectively and the GST Acts, 2017 collectively) and the Central Goods and Services Tax Rules, 2017 and the Gujarat Goods and Services Tax Rules, 2017 (herein after referred to as the CGST Rules, 2017 and the GGST Rules, 2017 respectively and GST Rules, 2017 collectively). The appellant has referred to section 2(31) of the GST Acts, 2017 providing the definition of consideration, section 9 and section 15 of the GST Acts, 2017 and rule 33 of the GST Rules, 2017.
8. The appellant has inter-alia submitted that in the instant case, it was agreed between the appellant and the customer that (only) Rental services would be provided, and the consideration for the same would be fixed as monthly charges and flying hourly charges; that it was also contractually agreed between the parties that ATF would be provided by the Customer to the appellant on free of cost basis. It was never agreed between the parties that ATF would be supplied by the appellant to the customer. This is clearly emerging from the clause 10.2.1 (iii) and clause 11.2.1 of the Rental agreement. The appellant has submitted that as the amount charged for ATF (reimbursed by the customer) is not a consideration for supply of rental services provided or agreed to be provided by the appellant to the customer, the reimbursements for ATF cannot be subjected to GST. Inclusion of the same on the value of supply is clearly untenable and contrary to the provisions.
9. The appellant has submitted that the term 'supply' includes within its meaning supply of goods/services made or agreed to be made for a consideration by a person in the course or furtherance of business and GST is payable on taxable supply. Even the definition of the term 'consideration' fortifies the view that only the payment (in money or otherwise, by recipient or any other person) in respect of, in response to or for the inducement of the supply of services shall qualify as 'consideration; that in the instant case, the appellant agreed to provide only rental services to customer (provision of ATF on free of cost basis was the responsibility of the customer) and the consideration for the same was in the form of fixed monthly charges and flying hourly charges. The ATF cost, which was merely a reimbursement by customer for something (ATF) that could not be provided by it, cannot by any stretch of imagination be interpreted to mean consideration for rental services provided by the appellant.
10. The appellant has submitted that it is the primary responsibility of the customer to provide fuel at agreed locations and only at locations where the customer is unable to provide fuel, the same is procured by the appellant and the cost is reimbursed by the customers on an actual basis; hence it is not consideration for the services provided by the appellant. It has been submitted that the arrangement of fuel by appellant as per rental agreement, was for administrative convenience and debit notes raised by them for recovery of fuel cost, do not have any direct nexus with the rental services of aircrafts, therefore GST is not payable on debit notes raised for recovery of ATF cost.
11. The appellant has submitted that the accounting policies followed by it for recording transactions related to fuel reimbursements from customers have been audited by the statutory auditors of the appellant and such reimbursements have not been treated as service income; that fuel purchased by appellant are not debited to the P&L account as the same are not expenses of the appellant, are treated as receivables from the customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables; that the books of accounts have been prepared and audited as per accounting standards as required under the Companies Act, 2013.
12. The appellant has submitted that as per section 15(2)(b) of the GST Acts, 2017, where it is agreed between two contracting parties that certain amounts would be incurred by the service recipient in relation to the service to be provided by the service provider, the same cannot be included in the value of services provided. They relied upon the decision in the matter of Rolex Logistics [2009 (13) STR. 147 (Tri-Bang)] in this regard.
13. The appellant has referred to Section 67 of the Finance Act, 1994 and has submitted that the principles of determining value of taxable service are similar under the Finance Act, 1994 and the under the GST Acts, 2017 and therefore the principles of determining value of taxable service under the pre-GST regime can also be applied for determining the value of taxable supply under the GST regime. The assessee has placed reliance on the judgement of Hon'ble Supreme Court in the case of UOI and Anr. V M/s. Intercontinental Consultants and Technocrats Pvt. Ltd.(Civil Appeal No. 2013 of 2014 and on the decision in the case of Text Hundred India (P) Ltd. v. Commissioner of Service Tax, Delhi [(2018) 94 taxmann.com 170 (CESTAT)].
14. The appellant has submitted that No benefit/profit was derived by appellant from the value of the fuel reimbursed by customer in terms of the rental agreement.
15. The appellant has submitted that it is settled position that where it is agreed between a service provider and service recipient that the service recipient shall provide certain goods to the service provider on free of cost basis, which are to be used by the service provider for provision of services, the value of the said goods cannot be included in the value of services provided/agreed to be provided by the service provider. In this regard, reliance is place on Circular No. 47/21/2018-GST dated 8.6.2018. They also placed reliance on the following decisions -
(a) M/s. Nash Industries Pvt Ltd. [2019(3) TMI 435 AAAR, Karnataka],
(b) M/s.Lear Automotive India Pvt. Ltd. [2018(12) TMI 766-AAR, Maharashtra],
(c) Heliga Charters Pvt. Ltd. v. CST, Mumbai VI, [2020(4) TMI 182-CESTAT Mumbai],
(d) Commissioner of Service Tax Vs. Bhayana Builders(P) Ltd. [2018(10)GSTL.118(SC)],
(e) Petronet LNG Limited Vs. Principal Commissioner of Service tax, Delhi-I (Service Tax Appeal No.52946 of 2016),
(f) Inox Air Products Limited Vs. CCE, Nagpur [2015(38) STR.90(Tri.-Mum)],
(g) Naresh Kumar & Co. Pvt. Ltd. Vs. UOI[2014(35)STR 506(Cal.)].
(h) Millennium Constructions Pvt. Ltd. Vs. CST, New Delhi [2015(39)STR 477(Tri.-Del.)].
(i) Ahluwalia Contracts(India) Ltd. Vs. CST, New Delhi[2015(38)STR 38 (Tri.-Del.)].
(j) Gurmehar Construction Vs. CCE, Raipur [2014(36) STR 545(Tri.-Del.)].
(k) CCE, Bhopal Vs. Sonali India [2014(34)STR47(Tri.-Del.)].
(l) Dholu Construction and Projects Ltd. Vs. CCE, Jaipur-II [2013(32)STR245(Tri.-del.)].
(m) Gulf Oil Corporation Ltd. Vs. CST, Hyderabad [2010(20)STR.830(Tri.Bang.)].
(n) Era Infra Engineering Ltd. Vs. UOI [2008(11)STR3(Del.)].
The appellant has submitted that the provisions of Section 67 of the Finance Act, 1994 are pari materia with Section 15 of the GST Acts, 2017 hence, the ratio laid down in these decisions is applicable in the present case.
16. The appellant has submitted that the value of goods supplied by the service recipient is includable in the taxable value only in specific situations covered under Section 15(2)(b), as follows -
i. Where any amount is required to be incurred by the supplier in relation to a Supply.
ii. However, the same is incurred by the recipient of the supply and
iii. The said amount is not included in the price actually paid or payable for supply of goods/services or both.
The appellant has submitted that in the instant case, the cost of ATF was always required to be borne by the customer. Further, the arranging of ATF was not in relation to the rental services agreed to be provided by the appellant. Thus the essential condition (i) specified above is not fulfilled. Further, the amount of reimbursements charged by the appellant for ATF is not in respect of supply of services that were agreed to be provided to customer in terms of the rental agreement. Accordingly, in terms of Section 15(2)(b) of the GST Acts, 2017 also, the value of ATF cost reimbursed by customer cannot be included in the value of rental services provided by the appellant.
17. The appellant has referred to Section 15(1) of the GST Acts, 2017 and has submitted that in respect of services, value of the supply of service is the price actually paid or payable for the services supplied i.e. made or agreed to be made for a consideration. It has been submitted that as the amount charged for ATF is not price paid/payable for the rental services agreed to be provided by the appellant to the customer, the reimbursements for ATF cost cannot be subjected to GST.
18. The appellant has submitted that the GAAR has gone beyond their warrant to question the sanctity of the rental agreement; that in terms of the settled principles for interpretation of contracts, the Hon'ble Supreme Court has held time and again that the Tax Authorities cannot question the commercial wisdom of the parties entering into an agreement and must proceed on the basis that what is stated in the contract reflects the true nature of the intent and transactions. The appellant has relied upon the following judgements in this regard.-
(a) Union of India v. Mahindra and Mahindra (1995(76)ELT 481 (SC)]
(b) Mirah Exports pvt.ltd. v. Collector of Customs [1998(98)ELT3(SC)]
19. The appellant has referred to the provisions of Section 15(2)(c) of the GST Acts, 2017 and has submitted that ATF cost is not an incidental expense in respect of rental services agreed to be provided by the appellant.
20. The appellant has further submitted that it is acting as "pure agent" of the customer, accordingly, reimbursement of fuel cost cannot be subjected to GST, as the expenditure or costs incurred by a supplier as 'pure agent' of the recipient of supply are excluded from the value of taxable supply for computation of GST in terms of Rule 33 of the GST Rules, 2017.
21. The appellant, vide their additional submission, has submitted that in cases where ONGC is unable to supply ATF fuel and the appellant has to procure the fuel, the appellant has raised debit notes on the customer ONGC for claiming the cost of fuel as reimbursement, charging GST on the same, but ONGC has not paid GST on ATF costs considering the same as reimbursement of costs only.
22. The appellant has submitted that before proceeding to ascertain the value of supply, what is supply is required to be determined. It has been submitted that the supply in the present case is renting of helicopters and the obligation to procure fuel is of ONGC. The reliance is placed on the decision of House of Lords in the case of Customs and Excise Comrs v. British Telecommunications plc. [1999] 1 WLR 1376.
23. The appellant has submitted that the GAAR has assumed that each time the helicopter flies, the supply takes place. The appellant has further submitted that the supply in the present case is renting of helicopters and not transportation service, therefore, the supply takes place when the helicopters are made available to ONGC. Thus any amount charged by way of reimbursement for ATF made available after the supply of services by way of renting of helicopters is made, is not includible in the value of supply.
24. The appellant has further submitted that as per Section 9(2) of the GST Acts, 2017, no tax is leviable on supply of aviation turbine fuel. It will be levied from a date to be notified by the Government on the recommendation of the Council. Once there is no levy under the charging section on ATF, tax cannot be levied indirectly by including it in the value of supply. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CCE, Pondicherry v. Acer India Ltd. [2004 (172) ELT 289 (SC)] wherein the decision of PSI Data Systems Ltd. v. Collector of Central Excise [1997 (89) ELT 3(SC)] was relied upon. The appellant also referred to the judgement in the case of CCE, Indore v. Grasim Industries Ltd. [2018(360) ELT 769 (SC)].
25. The appellant has also referred to Section 7(1)(c) and paragraph 3 of Schedule I of the GST Acts, 2017 and has submitted that the supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal is a supply. In the present case, the appellant is acting as an agent for ONGC and the fuel is procured on behalf of ONGC and for the purpose of GST Acts, 2017 such procurement is treated as a supply. Further, there is no OR cannot be any allegation that the value of the supply of service has been diverted to the reimbursement claimed for fuel as the appellant procures the fuel only in certain cases where ONGC is unable to procure at such location. The appellant has submitted that such supply cannot be a mixed supply as the amount is shown separately in the invoice/debit note and it cannot be a composite supply as it is a settled business practice in aviation industry that aircrafts/helicopters are provided on a charter basis with operator and without fuel. Thus the supply of fuel in the contract of this type cannot be said to be naturally bundled in the ordinary course of business. Since the supply of fuel is not leviable to GST as per Section 9(2) of the GST Acts, 2017, no tax is payable whether as an independent supply or as including it into the value of the supply.
26. The appellant has also referred to the definition of 'sale price' provided under the Central Sales Tax Act, 1956 and Value Added Tax Acts of various states, relied upon the decision of Hon'ble Allahabad High Court in case of Aruna Trading Co. vs. Commissioner, Sales Tax UP reported in [1984(55)STC236(All)] and has submitted that applying the ratio of the said decision to the present case, the cost of ATF is reimbursed by ONGC to the appellant and the appellant have not 'charged' the cost of ATF to ONGC which can be included in the value of the supply under Section 15(2)(c) of the GST Acts, 2017.
27. The appellant has submitted that the appellant is providing services of hire of helicopters with operator to ONGC which cannot be used for any other person/other supply by the appellant. When the appellant procures ATF on behalf of the ONGC, then it provides the helicopter registration number to the ATF supplier. This clearly indicates that the ATF procured by the appellant is on behalf of the ONGC and will be used in that particular helicopter which is given on hire to ONGC. This satisfies the conditions of Rule 33 of the GST Rules, 2017 and therefore, the cost of ATF cannot be included in the value of supply provided by the appellant.
28. The appellant has also placed reliance on HMRC Guidelines (VAT Notice 700) on costs or reimbursements passed to customers under the UK VAT law and has referred to the decision of the House of Lords in the case of Neil Gwynn House Maintenance Fund Trustees v. Customs and Excise Commissioner [(1999) STC 79] and in the case of De Danske Bilimporter v. Skatterministeriet [(2006)ECR 1-4945].
29. The appellant has submitted that the fuel procured on behalf and for the account of ONGC is not an expense incurred by the appellant nor is it necessary/essential element for providing its own supply of renting of helicopters. Thus the amount of reimbursement claimed is as a pure agent of ONGC and accordingly the amount is not includible in the value of supply. On the basis of the above submissions, the appellant has requested to allow their appeal with consequential relief.
FINDINGS
30. We have considered the submissions made by the appellant in the appeal filed by them, their contentions during the course of personal hearing, the additional submission given by the appellant as well as evidences available on record. We have also gone through the Ruling given by the GAAR.
31. The issue involved in this case is whether the amount towards fuel is required to be included in the value of services provided by the appellant or otherwise.
32. The appellant has entered into a contract with ONGC for supply of Helicopters classifiable under Service Accounting Code 9966 i.e. "Rental services of aircraft including passenger aircrafts, freight aircrafts and the like with or without operator".
33. The appellant has submitted that it procures 'ATF fuel' on behalf of its customer as 'Pure Agent' and claims the said amount as reimbursement from the customer.
34.1 The value of taxable supply is required to be determined in accordance with the provisions of Section 15 of the GST Acts, 2017. The clauses (b) and (c) of sub-section (2) of Section 15 of the GST Acts, 2017 reads as follows -
SECTION 15. Value of taxable supply.- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(2) The value of supply shall include,-
(a) ........................
(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
(d) ......... ....................
(e) ........ .........................
Explanation. ...................
34.2 Regarding the contention of the appellant that from section 15(2)(b), it emerges that where it is agreed between two contracting parties that certain amounts would be incurred by the service recipient in relation to the service to be provided by the service provider, the same cannot be included in the value of services provided', we find that the appellant has misread or misinterpreted Section 15(2)(b) of the GST Acts, 2017. In respect of "Rental service of aircraft", as per the terms of the contract, the appellant is required to make arrangements for fuel, except at Mumbai and Offshore, where the ONGC would provide fuel as free supply. Even at Mumbai, as per the terms of the contract, it is the responsibility of the appellant to arrange for the fuel where the ONGC is unable to provide fuel. It is, thus apparent that it is the appellant who is primarily liable to arrange for fuel at all the places, which is required for flying of Helicopters in respect of which appellant would get consideration in the form of 'Monthly Charges' and 'Flying Hour Charges'. As such, in the cases where ONGC, as recipient of "rental service of aircraft" provides fuel as free supply, the amount of such fuel not included in the price actually paid or payable for the 'rental service of aircraft' is required to be included in the value of supply, in terms of clause (b) of sub-section (2) of section 15 of the CGST Act, 2017.
34.3 Further, on going through the provisions of Section 15 of the GST Acts, 2017, we find that the amount charged by the appellant from their customer in the form of reimbursement of ATF fuel will actually be covered under Section 15(2)(c) which reads as 'incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount chargedfor anything done by the supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or supply of services. In the instant case, the appellant has charged the amount spent by them towards arrangement/providing of ATF for flying of Helicopter in respect of supply of rental service of helicopter provided to the ONGC. The appellant has collected the said amount in the form of reimbursement from their customer / recipient of supply of service and the said reimbursement is in respect of the arrangement/providing of ATF made by them, at the time of / before the delivery of supply of services to their customer/recipient. Thus, in terms of Section 15(2)(c) of the GST Acts, 2017, the arrangement of ATF/providing of ATF in the helicopters/aircrafts is the activity done by the appellant at the time of OR before the supply of services to their customer AND the appellant is charging the amount spent in respect of the said ATF, from the customer in the form of reimbursement. Hence, the conditions of Section 15(2)(c) have been fulfilled and accordingly, the amount charged by the appellant (in respect of the arrangement/provision of ATF made by them for supply of "Rental service of Helicopter") from their customer in the form of reimbursement, is undoubtedly includible in the value of supply of services of 'Rental services of aircrafts' in the instant case.
34.4 The appellant has referred to Section 15(2)(c) of the GST Acts, 2017 which reads as 'incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount chargedfor anything done by the supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or supply of services ', and comparing the same to the issue in hand has stated that the reimbursement of fuel cost by the customer to the appellant is not covered under 'incidental expenses' as fuel costs are not incidental expenses; that it is also not covered under 'any amount charged for anything done by the supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or supply of services; that in the impugned order, it has been held as "in the instant case, the applicant is filling ATFfuel in the aircraft before the supply of services to the customer i.e. "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator " and the amount of the ATF fuel is being charged from the customer, which the applicant is receiving in the form of consideration, which has been received by them as reimbursement. This act of the applicant would be considered as 'any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services' and would, therefore, form part of the value. Therefore, the contention of the assessee that the recovery offuel cost does not represent an amount charged for anything done by the applicant in respect of supply of rental services provided by them does not hold water"; that with regard to the above observation, the GAAR has failed to appreciate the fact that in terms of Section 15(2)(c), amount that is charged for anything done 'in respect of supply' is to be included in the taxable value. In this regard, we find that the activity done by the appellant of arranging for / providing for the ATF in the aircrafts/helicopters is an activity done 'in respect of supply' of 'Rental services of aircrafts' provided by them, as discussed in the earlier para. We further find that the appellant has charged/collected the amount spent by them towards ATF, in the form of reimbursement, from their customer/recipient of supply of service and the said reimbursement is in respect of the arrangement for/ provision of ATF used for supply of "rental service of aircraft / helicopter" made by them, at the time of/before the delivery of supply of services to their customer/recipient. Thus, in terms of Section 15(2)(c) of the GST Acts, 2017, the arranging of/provision of ATF in the helicopters/ aircrafts is the activity done by the appellant at the time of OR before the supply of services to their customer AND the appellant is charging the amount spent in respect of the said ATF, from their customer in the form of reimbursement. Hence, the conditions of Section 15(2)(c) of the GST Acts, 2017 have been fulfilled and accordingly, the amount charged by the appellant (in respect of the ATF fuel) from their customer in the form of reimbursement, is undoubtedly includable in the value of supply of services of 'Rental services of aircrafts' in the instant case.
34.5 The appellant has further submitted that as per Section 15(1) of the GST Acts, 2017, the value of supply of goods or services or both shall be the transaction value i.e. the price actually paid or payable for the said supply of goods or services or both where the supplier and recipient are not related; that in the instant case, only rental services are provided and consideration for the same is in the nature of fixed monthly charges plus flying hourly charges and that the amount of reimbursements charged by the appellant for ATF is not in respect of supply of services that were agreed to be provided to the customer in terms of the rental agreement. In this regard, we find that the supply of services provided by the appellant are 'rental services of aircrafts' and for providing this supply of services, the appellant is being paid monthly rental charges and flying hourly charges by the customer. As per the contract, the helicopters of the appellant are required to carry passengers/and or cargo of the customers to various destinations in India. These aircrafts/helicopters cannot fly to the various required destinations without ATF filled in them. In short, it is impossible for the appellant to provide the supply of 'rental services of aircrafts' without ATF being filled in the aircrafts and therefore, the appellant's contention that the amount of reimbursements charged by them for ATF is not in respect of supply of services is unacceptable as even a layman can make out that aircrafts cannot fly without fuel. Further, we also do not agree with the contention of the appellant when he states that 'the impugned order has gone beyond the tenor of the agreement to defy the nature of supplies that were agreed to be provided by the appellant to the customer and the contention of the AAR that provision of ATF is a part of appellant's scope of service is misplaced', simply because of the fact that the supply or provision of ATF either by the customer (ONGC) or the appellant is very much a part of the agreement/contract signed by the appellant and the customer. Further, the said agreement/contract is regarding provision of supply of 'Rental services of aircrafts' and both the clauses 10 and 11 falling under the 'Scope of work' in the contract contains specific mention regarding supply/provision of ATF. Hence, we find that the GAAR was right when they stated the provision of ATF is part of the appellant's service.
35. The definition of 'Consideration' as per Section 2(31) of the GST Acts, 2017 reads as under:-
"(31) "consideration " in relation to the supply of goods or services or both includes,-
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;"
The above definition of 'consideration' clearly includes any payment made or to be made, in respect of supply of goods or services or both by the recipient or by any other person. It also includes the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person. In the instant case, the payment made or to be made by the recipient includes payment towards the services rendered by the appellant as well as the payment towards ATF, which has been arranged for by the appellant and filled in the aircrafts. This means that payment made or to be made by the recipient to the appellant would not only include the payment for the supply of services i.e. "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator" but would also include the amount for the ATF (fuel) filled in the aircraft by the appellant. Therefore, the amount of ATF, which is received as reimbursement by the appellant will undoubtedly form a part of the 'consideration' i.e. the value of the services provided by the appellant and GST is liable on the same.
36. From a plain reading of the clauses 10.2.1. and 11 of the contract/agreement in Schedule-A (under the head 'Scope of Work & 'Special Conditions of Contract'), it is observed that although it has been agreed upon by ONGC that they will provide ATF as free supply at Mumbai and offshore, condition of clause 10.2.1.(iii) specifically mentions that in case of any reason, ONGC is unable to supply ATF at Mumbai also, operator has to make arrangement for ATF. Further, as per the agreement/contract, ONGC will supply fuel free of cost only at 2 locations as mentioned above, whereas in all other locations of India, the supplier has to arrange for ATF and even in cases, where ONGC is not in a position to arrange for ATF at Mumbai, it is the appellant's responsibility to arrange for the same. It therefore, emerges from the conditions of the contract, that ultimately, it is by and large, the responsibility of the appellant to arrange for ATF for the customer i.e. ONGC. Therefore, the contention of the appellant that the responsibility of supply or arrangement of ATF is that of the customer only, is far from the truth and simply unacceptable. Moreover, whether the appellant has derived any benefit in the form of mark-up or otherwise from the reimbursement of fuel from the customer, is not the sole factor for determination of valuation of supply of "rental service of helicopter" under the provisions of the GST Acts, 2017 and the rules frame there under . Further, the appellant stating that it cannot be contended that fuel was an essential component of the services provided by the appellant, is wrong and completely out of context since without supply of ATF, the helicopters of the appellant would not fly and there would be no supply of 'Rental services of aircraft' by the appellant in the instant case.
37.1 As per Rule 33 of the GST Rules, 2017, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply needs to be excluded from the value of supply, if the conditions mentioned in the said rule are satisfied. The said Rule 33 reads as follows -
"RULE 33. Value of supply of services in case of pure agent.-
Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely, -
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;
(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and
(iii) the supplies procured by the pure agentfrom the thirdparty as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.
Explanation. - For the purposes of this rule, the expression "pure agent " means a person who -
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.
Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A's recovery of such expenses is a disbursement and not part of the value of supply made by A to B. "
37.2 The said rule contains three conditions (i) to (iii) and also contains an Explanation for 'Pure agent' which contains condition (a) to (d). Therefore, in terms of the provisions of Rule 33, the amount received as reimbursement by the appellant would be excluded from the value of supply, if and only if, it satisfies all the aforementioned conditions envisaged in Rule 33. This fact has also been clearly emphasized in the E-flyer issued by the Board (CBIC) for 'Pure Agent' (referred to by the appellant) which clearly states that 'the valuation rules provide that expenditure incurred as pure agent will be excluded from the value of supply and thus also from aggregate turnover. However, such exclusion of expenditure incurred as pure agent is possible only and only if, all the conditions required to be considered as a pure agent and further conditions stipulated in the rules are satisfied by the supplier in each case ' It therefore, follows that, whatever grounds the appellant may cite to state that the reimbursement received by them from their customers towards the ATF procured by them are excludable from the value of supply, the reimbursement received will undoubtedly be included in the value of supply even if any one of the conditions envisaged in Rule 33 above are not fulfilled.
38. We have considered the contention of the appellant vis-a-vis the views held by the GAAR with respect to each of the three conditions to be fulfilled for claiming exclusion of amount of expenditure or cost incurred by the supplier as 'pure agent' and each of the four conditions for a supplier to be termed as 'pure agent'.
39. As per Explanation to Rule 33 of the CGST Rules, 2017, the following conditions are needed to be satisfied to qualify as a 'pure agent' and therefore the same are also needed to be examined in light of the contentions of the appellant vis-a-vis the views held by the GAAR. We find as under:
As per Clause 10.2.1.(iii) of Schedule-A of the contract dated 31.07.2015 of the appellant with ONGC (customer) dated 31.07.2015, it is apparently clear that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Thus, it is very much clear that it is by and large, the responsibility of the appellant only to arrange for the ATF for their customer. It is also apparent that the appellant has entered into a contractual agreement with the recipient of supply to incur expenditure or costs in the course of supply of goods or services or both.
We do not agree with the contention of the appellant since it is apparently clear from the conditions of the contract that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Furthermore, the ATF arranged by the appellant or provided by the customer as free supply at Mumbai and Offshore, is used as fuel by the helicopter while providing 'rental service of helicopter'. In fact, the ATF is not supplied to the recipient of the service. Thus, the condition that the appellant neither intends to hold nor holds any title to the goods (ATF) so procured or supplied as pure agent of the recipient of supply, cannot be said to be fulfilled in this case. Also, there is no doubt about the fact that the fuel procured by the appellant is with the intention to enable them to supply the agreed service, since only the ATF filled in the fuel tank of the aircraft would enable it to fly, thus enabling the appellant to supply the 'rental services of aircrafts'. Further, as per clause-7 in Schedule-A of the contract/agreement, the aircrafts/helicopters of the appellant can remain grounded only for maximum two days in a month i.e. the downtime permissible for scheduled and unscheduled maintenance of the aircrafts/helicopters. Therefore the contention of the appellant that once the helicopter was provided to the customer, fixed monthly charges would have been charged by the appellant irrespective of whether the helicopter was used by customer or not or whether or not ATF was filled in the aircraft or not OR that the provision of Rental services by the appellant was not dependent upon provision of ATF, is unacceptable and does not hold water since the aircrafts can fly only if ATF is filled in their fuel tank and even a layman can make out that no customer would pay monthly rental charges for grounded aircrafts.
We therefore find and conclude that only the ATF procured by the appellant and filled in the fuel tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the "Rental services of aircraft" to their customer. Thus, the fuel so procured by the appellant is with the intention to enable him to supply the aforementioned service. Therefore, it cannot be said that the appellant neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. Thus, the said condition is also not satisfied.
(c) does not use for his own interest such goods or services so procured;
Although we agree with the contention of the appellant that the aircrafts were to be flown as per the directions/schedule provided by the customer, we do not agree with their contention that ATF for flying the aircraft was the responsibility of the customer i.e. ONGC. It is apparently clear from the conditions of the contract that ONGC will arrange for the ATF fuel only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Thus, it is very much clear that it is by and large, the responsibility of the appellant only to arrange for the ATF for their customer. We also do not agree with the contention of the appellant when they say that 'the scope of Charter Hire Services does not include provision of fuel and it has been abundantly established that renting of aircraft services(with pilots) was never dependent upon provision of ATF as appellant would have received the fixed monthly charges even if the aircraft was not in use, although the rentals were also partly chargeable based on the flying hours of the aircraft ', since the terms of the conditions of the contract, especially Clause 10 and 11 of Schedule-A of the contract of the appellant with ONGC (customer) specifically mentions about the supply/provision of ATF for the aircrafts/helicopters and therefore supply/provision of ATF forms a crucial part of the contract. Also, there is no doubt about the fact that only the ATF procured and filled by the appellant in the fuel tank of the aircraft would enable it to fly, thus enabling the appellant to supply the 'rental services of aircrafts'. Further, as per clause-7 in Schedule-A of the contract/agreement, the aircrafts/helicopters of the appellant can remain grounded only for maximum two days in a month i.e. the downtime permissible for scheduled and unscheduled maintenance of the aircrafts/helicopters. Therefore the contention of the appellant that once the helicopter was provided to the customer, fixed monthly charges would have been charged by the appellant irrespective of whether the helicopter was used by customer or not or whether or not ATF was filled in the aircraft or not OR that the provision of Rental services by the appellant was not dependent upon provision of ATF, is unacceptable and does not hold water since the aircrafts can fly only if ATF is filled in their fuel tank and even a layman can make out that no customer would pay monthly charges for grounded aircrafts. Therefore, the ATF procured by the appellant is undoubtedly for his own interests only i.e. for enabling the appellant to provide the supply of 'Rental services of aircrafts' to their customer.
We therefore find and conclude that in the instant case, the fuel is procured by the appellant for the aircraft through which he is providing "Rental services of aircraft". Only the ATF fuel filled in the fuel tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the aforementioned service to their customers. Therefore, there is no doubt about the fact that the ATF so procured by the appellant is used for his own interest i.e. to enable the appellant to fly their aircrafts and in the process to provide the aforementioned service to their customer. Thus the said condition is also not satisfied.
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply, he provides on his own account.:
Although the appellant have mentioned about the accounting method followed by them stating that they have only been reimbursed the actual amount without markup from their customers, they have not produced the relevant evidence/documents to prove this point.
40. We therefore, find that since none of the conditions envisaged in the provisions of Rule 33 of the GST Rules, 2017 for being a 'Pure Agent' have been fulfilled/satisfied by the appellant, they cannot be said to be 'pure agent' in this case and therefore the amount of reimbursement received by the appellant will undoubtedly be included in the value of supply of 'Rental Services of Aircraft' provided by them.
41. We may also examine whether the conditions mentioned in Rule 33 of the CGST Rules, 2017 have been satisfied in the present case in respect of the expenditure or costs incurred by the appellant in respect of ATF so that the said expenditure or cost may be excluded from the value of supply.
As already mentioned herein above, the appellant does not act as a 'pure agent' in the present case. When the appellant arranges for ATF, his own interest of supply of 'rental service of helicopter' is involved and the appellant does not act as an agent or a pure agent of the recipient of the supply of ATF. Furthermore, in terms of the conditions of the contract, especially Clause 10.2.1.(iii) of Schedule-A of the contract of the appellant with ONGC (customer) dated 31.07.2015, it is apparently clear that ONGC will arrange for the ATF only on 2 locations i.e. at Mumbai and offshore whereas at all other locations in India, it is the responsibility of the appellant to arrange for ATF. Also in case of failure of ONGC to arrange for ATF for any reasons in Mumbai, the appellant has to arrange for it. Thus, it is very much clear, that it is by and large, the responsibility of the appellant only to arrange for the ATF for their customer.
(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service;
In this regard, the appellant have submitted that the cost of the fuel incurred on behalf of customers was not included in the taxable value indicated in the invoices issued by them to their customers i.e. ONGC for the supply of 'rental services of aircrafts', but the same were charged through separate debit notes raised on Customers by them. Though the Debit Notes may not be strictly considered as invoices, it may be said that the payment made for ATF has been separately indicated by the appellant.
(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account:
In the instant case, the supplies procured by the appellant from the third party is that of ATF, which they procure and fill in the aircrafts which are used to provide "Rental services of aircraft". Thus, the supplies of ATF procured by the appellant from the third parties are in relation to or in order to provide 'rental services of aircraft' and cannot be said to be in addition to the services being supplied by the appellant on his own account. As per the contention of the appellant, it has already been abundantly established that renting of aircraft services (with pilots) was never dependent upon provision of ATF as appellant would have received the fixed monthly charges even if the aircraft was not in use, although the rentals were also partly chargeable based on the flying hours of the aircraft. However, we fail to understand how the appellant would be able to provide the supply of 'Rental services of Aircrafts' without filling the ATF in their aircrafts/helicopters or as to how the renting of aircraft services can be considered as never dependent upon the provision of ATF. We also do not agree with the contention of the appellant when they say that 'ATF was procured by the appellant from the vendors as a pure agent of the customers and are in addition to the rental of aircraft services ' since the terms of the conditions of the contract, especially Clause 10 and 11 of Schedule-A of the contract of the appellant with ONGC (customer) specifically mentions about the supply/provision of ATF for the aircrafts/helicopters and forms a crucial part of the contract and is certainly not in addition to the rental of aircraft services as contended by the appellant. We, therefore, conclude that the ATF procured by the appellant for the aircraft is not in addition to the services they supply on their own account, but is an extremely crucial part of the above service since only the ATF fuel filled in the fuel tank of the aircraft would enable the aircraft to fly and thus enable the appellant to provide the aforementioned service to their customer. Hence this condition is also not satisfied.
42. As the conditions mentioned in Rule 33 of the GST Rules, 2017 have not been satisfied in the present case, the expenditure or costs incurred by the appellant in respect of ATF cannot be excluded from the value of supply.
43. As regards the several decisions relied upon by the appellant, we find that the cases of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. (Civil Appeal No. 2013 of 2014), Rolex Logistics as well as Text Hundred India (P) Ltd., pertains to the pre-GST era. Further, the case law of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. pertains to the period prior to 14th May, 2015, when the legislative amendments were not brought out in the Finance Act, 1994. But, this is not the case in GST law, since these provisions are already part of the GST Acts itself. 'Consideration' has been clearly defined in Section 2(31) of the GST Acts, 2017. Section 15 of the GST Acts, 2017 elaborates in great detail, the things/items that are required to be included in the value of supply. Subsection (2) of Section 15 itself starts with the words "The value of supply shall include
" and goes on to elaborate the items/things required to be included in the value of supply. Sub-section (3) of Section 15 specifies the items/things which are not to be included in the value of supply. Thus, all the aspects of valuation of supply have been covered in the GST Acts itself which was not the case with Section 67 of the Finance Act, 1994 which contained a more general description of valuation of services. Further, the provisions of Rule 33 of the GST Rules, 2017 specifically states that the reimbursements received by the supplier as a 'Pure Agent' will be included in the value of supply if the conditions specified in the said Rule are not satisfied. Hence, the aforesaid judgements cannot be made applicable to the issues in the GST regime.
44.1 The appellant has placed reliance upon Circular No. 47/21/2018-GST dated 8.6.2018 stating that it is a settled position that where it is agreed between a service provider and service recipient that the service recipient shall provide certain goods to the service provider on free of cost basis, which are to be used by the service provider for provision of services, the value of the said goods cannot be included in the value of services provided/agreed to be provided by the service provider; that the above clarification squarely covers the issue on hand, as (in the instant case) customer is responsible to provide ATF on free of cost basis to the appellant and only in cases where the recipient is unable to provide the ATF, the appellant is required to procure the fuel and cost of ATF is merely reimbursed by customer at actual. A separate debit note is raised by the appellant for recovering this cost of ATF, which does not form part of the consideration paid for rendering rental services and accordingly, no GST is payable on same; that reliance is placed on M/s. Nash Industries Pvt. Ltd. [2019(3) TMI 435 AAAR], Karnataka and M/s. Lear Automotive India Pvt. Ltd. [2018(12) TMI 766-AAR], Maharashtra, wherein the above Circular dated 8.6.2018 has been followed and it has been held that the amortised value of tools supplied free of cost by the recipient of the supply is not liable to be included in the taxable value.
44.2 The issue mentioned in Circular No. 47/21/2018-GST dated 8.6.2018 pertains to provision of moulds and dies owned by the Original equipment manufacturer (recipient) to the equipment manufacturer (supplier of goods) free of cost and the inclusion/exclusion therein of the value of the said items in the value of supply. Such moulds and dies are in fact, used by the equipment manufacturer for the manufacture of other goods. However, this circular cannot be made applicable to the instant case for the simple reason that the issue cited in the circular pertains to manufacture of goods using equipments such as moulds and dies whereas the present case involves the inclusion OR exclusion of the amount of reimbursement received by the supplier from the recipient (for arrangement of ATF by the appellant on behalf of their customer) which is different from the issue cited in the aforementioned circular. It therefore follows that the decisions/judgements of M/s. Nash Industries Pvt. Ltd. of AAAR, Karnataka and M/s. Lear Automotive India Pvt. Ltd. of AAR, Maharashtra, both based on the aforementioned circular, are also not applicable to the instant case. We also find that the above decisions relied upon are rulings of Advance Ruling Authorities. Decisions of Advance Ruling Authorities cannot be relied upon by the appellant, since, as per the provisions of Section 103 of the GST Acts, 2017, the Advance Ruling pronounced by the Advance Ruling Authority or the Appellate Authority shall be binding only on the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant.
45.1 The appellant has also submitted that an identical issue in service tax regime has been settled in favour of the assessee in the case of Heligo Charters Pvt. Ltd. vs. CST, Mumbai-VI, [2020(4)TMI 182-CESTAT-Mumbai] wherein it was held by Tribunal that value of ATF supplied by service recipient to assessee was not liable to be included in taxable value of Rental services of aircrafts and that the Tribunal has relied upon the landmark judgements of CST vs. Bhayana Builders (P) Ltd. [2018(10)GSTL 118(SC)] and UOI vs. Intercontinental Consultants & Technocrats Pvt. Ltd., [2018(10)GSTL401(SC)] wherein law has been laid down in the context of Section 67 of the Finance Act, 1994. The appellant has placed reliance on the Mumbai Tribunal judgement in the case of Inox Air Products ltd. vs. CCE, Nagpur [2015(38)STR.20(Tri.Mum)] wherein the air separation plant owned by the appellant and lying in Customer's premises was leased to their customer, and by a separate agreement, the appellant undertakes the operation and maintenance of the air separation plant at the customer's place, receives service charges for the same and no separate charges are paid by the appellant for the electricity used for the operation of the air separation plant. In the above case, the adjudicating authority held that the value of electricity should be included for determining the taxable value for purpose of service tax in terms of Section 67 of the Act read with Rule 3 of the Valuation rules on the ground that electricity is essential for the operation of the plant and is therefore integral to the service of operation and maintenance provided to the customer. However, the Mumbai Tribunal did not agree with the above view of the adjudicating authority and held that electricity cannot be considered as an input for providing the services of operation of air separation plant, it cannot be considered as an additional consideration flowing to the appellant from their client for providing the service of operation of plant and cannot be considered as part of the gross amount charged for the service of operation of the plant. The appellant has further stated that similarly in the instant case, value of fuel cannot be considered as additional consideration received by the appellant from customer towards 'Rental service of aircrafts' and hence in view of above judgements, no GST is payable on the value of ATF supplied free of cost by customer to the appellant OR on the ATF costs reimbursed by customer to the appellant from vendors on behalf of customers. Appellant has also relied on the following judgements to support their contention:-
(a) Naresh Kumar & Co. pvt.ltd. vs. UOI[2014(35)STR 506(Cal.)].
(b) Millennium Constructions pvt.ltd. vs. CST, New Delhi [2015(39)STR 477(Tri.-Del.)].
(c) Ahluwalia Contracts(India)ltd. vs. CST, New Delhi[2015(38)STR 38 (Tri.-Del.)].
(d) Gurmehar Construction vs. CCE, Raipur[2014(36) STR 545(Tri.-Del.)].
(e) CCE, Bhopal vs. Sonali India [2014(34)STR47(Tri.-Del.)].
(f) Dholu construction and Projects ltd. vs. CCE, Jaipur-II[2013(32)STR245(Tri.-del.)].
(g) Gulf Oil Corporation ltd. vs. CST, Hyderabad [2010(20)STR.830(Tri.Bang.)].
(h) Era Infra Engineering ltd. vs. UOI[2008(11)STR3(Del.)].
45.2 The appellant has further submitted that provisions of Section 67 of the Finance Act, 1994 are pari mataria with Section 15 of the GST Acts, as in the Service tax regime, Service Tax was payable on gross amount charged whereas in the GST regime, value to be considered is transaction value i.e. the price actually paid or payable, hence the ratio laid down in above decision is applicable in the present case.
45.3 In this regards, we find that all the above judgements referred to by the appellant are pertaining to the pre-GST era and based on interpretation of Section 67 of the Finance Act, 1994. As discussed earlier, Section 15 is the section for determination of value of supply in the GST era, which is different from Section 67 of the Finance Act, 1994 as it elaborates in great detail the items/things that are required to be included in the value of supply. Sub-section (2) of Section 15 itself starts with the words "The value of supply shall include-------- " and goes on to elaborate the items/things required to be included in the value of supply. Sub-section (3) of Section 15 specifies the items/things which are not to be included in the value of supply. Thus, all the aspects of valuation of supply have been covered in the GST Acts, 2017 itself which is not the case with Section 67 of the Finance Act, 1994 which contains a more general description of valuation of services. Also, 'consideration' has been clearly defined in Section 2(31) of the GST Acts, 2017 and it has already been discussed in details in above para that the amount received as reimbursement by the appellant from their customer i.e. ONGC (towards arrangement/provision of ATF to their customer) is covered under the definition of 'consideration'. Further, as discussed earlier, this issue pertains to the inclusion of reimbursement of ATF in the value of supply wherein the aspect of 'Pure Agent' comes into play. In such instances, such reimbursements can be excluded from the value of supply of 'Rental services of aircrafts' if and only if, all the conditions envisaged in the provisions of Rule 33 of the GST Rules, 2017 are fulfilled/satisfied, since Rule 33 itself begins with the words ' Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a Pure Agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely----------- Thus, the provisions of Rule 33 of the GST Rules, 2017 specifically states that the reimbursements received by the supplier as a 'Pure Agent' will be included in the value of supply if the conditions specified in the said Rule are not satisfied. Hence, the aforesaid judgements cannot be made applicable to the issues in the GST regime.
46. The appellant has submitted that in the present case, the preliminary step before proceeding to ascertain value of supply is to determine what is supply which is renting of helicopters. The appellant has placed reliance on the decision of House of Lords in the case of Customs and Excise Commissioners vs. British Telecommunication plc. [1999] 1 WLR 1376 wherein the above party had received inward supply of simply a car or a delivered car and in case of a delivered car, the party was eligible for input tax credit even on the component part relating to delivery. In this context, we find that the issue in the above case relates to VAT. Further, since the above case pertains to UK which is a country having a different set of laws in comparison to India and also since the said matter relates to VAT, the same cannot be made applicable to the instant case.
47.1 The appellant has further submitted that GST is not leviable on ATF since as per Section 9(2) of the CGST Act, no GST is leviable on ATF and once there is no levy under the charging section on ATF, tax cannot be levied indirectly by including it in the value of supply. The appellant has placed reliance on the decision of Hon'ble Supreme Court in the case of CCE, Pondicherry vs. ACER India Ltd.-2004(172)ELT 289(SC). The issue before the Hon'ble Court was whether the value of computer manufactured, for the purpose of levy of Excise duty, will include the operational software sold along with the computer. Software was exempted from levy of excise duty whereas computer was taxable at the rate of 16%. The Department argued that the computer cannot effectively function without software and that the definition of 'Transaction value' in Section 4 of the Central Excise Act, 1944 includes any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of sale or at any other time. The Hon'ble Court relying on the decision of PSI Data Systems ltd. v. Collector of Central Excise - 1997 (89) ELT 3(SC) held that although a computer may not be capable of effective functioning unless loaded with software, the same would not tantamount to bringing them within the purview of the part of the computer so as to hold that if they are sold along with the computer their value must form part of the assessable value thereof for the purpose of excise duty and when an exemption has been granted from levy of excise duty on software, excise duty cannot be levied on it by including it indirectly in the value of supply. Accordingly, the Court decided in favour of the assessee. The appellant has submitted that applying the above ratio in the present case, what is taxable is hiring of helicopters by the appellants to ONGC, that ATF is not covered within the purview of GST as of now and adding the value of ATF in the value of hiring of helicopters services provided by the appellant is indirect attempt to tax what is not covered within the tax net. Therefore, the observation made by Hon'ble Court as referred above, directly applies to the facts of the present case; that the above decision has been affirmed by the Constitution Bench of the Supreme Court in the case of Constitution Bench in CCE, Indore v. Grasim Industries ltd. - 2018(360) ELT 769 (SC). Thus, in the present case, the supply of ATF is not leviable to GST, the same cannot be made taxable indirectly by including it as a part of value of supply.
47.2 We have gone through the above case of CCE, Pondicherry vs. ACER India ltd. relied upon by the appellant and find that in the said case, the software installed in the computer was exempt from excise duty whereas computer was liable to Central Excise duty at 16%; that the Department argued that computer cannot effectively function without software and included it in the value of the computer under Section 4 of the Central Excise Act, 1944. However, the aforementioned case or the case of CCE, Indore vs. Grasim Industries Ltd. (which affirms the above view as stated by the appellant) cannot be made applicable to the present case for two reasons: (i) the matter pertains to the pre-GST era where aspects of valuation were different from that of the GST era wherein the aspect of valuation of supply is governed by and clearly defined in Section 15 of the GST Acts, 2017. (ii) the instant case involves issue of reimbursement of the amount of ATF (arranged/provided by the appellant to their customer) from their customer i.e. ONGC wherein the aspect of 'PURE AGENT' comes into play and the appellant is required to satisfy/fulfill all the conditions of a 'PURE AGENT' as envisaged in Rule 33 of the GST Rules, 2017 for the reimbursed amount to be excluded from the 'Value of supply'.
48. The appellant has also relied upon the decision of Allahabad High Court in the case of Aruna Trading Co. vs. Commissioner of Sales Tax, UP reported in 1984(55)STC236(All.). The facts of the case were that the assessee was a contractor and supplier of stone ballasts to Northern Railway. Along with the supply of ballasts, the assessee also charged transport and other charges from the Railways. The assessing officer assessed that the assessee is liable to pay sales tax on entire amount (including transport and other charges) received from the Railways. Hon'ble Court considering the facts of the case observed, where the assessee is being paid price for the ballast separately and is being separately paid for the transport and other charges, the assessee cannot be taxed on anything other than the price of the ballast than he has been paid which had necessarily to be included in his turnover. The appellant has stated that applying the ratio of the above decision to the present case, the cost of ATF is reimbursed by ONGC to the appellant and the appellant have not 'charged' the cost of ATF to ONGC which can be included in the value of the supply under Section 15(2)(c) of the GST Acts, 2017. However, we find that the issue mentioned in the above case pertains to VAT and pertains to the pre-GST era and therefore cannot be made applicable to issues in the GST era where value of supply is governed by the provisions of Section 15 of the GST Acts, 2017 which elaborately discusses the valuation aspect of supply. Further, it has already been discussed in the foregoing paras, that the activity of reimbursement of amount of ATF received by the appellant from their customer, is aptly covered under Section 15(2)(c) of the CGST Act, 2017 and therefore the contention of the appellant that they have not 'charged' the cost of ATF to ONGC is not acceptable and does not hold water.
49. We also find that the appellant has placed reliance on HMRC guidelines (VAT notice 700) under the UK VAT Law as well as on the House of Lords in the case of Nell Gwynn House Maintenance Fund Trustees vs. Customs and Excise Commissioner [(1999)STC79]. We find that both the matters pertain to the United Kingdom which is a separate country governed by a different set of laws and rules as compared to India. Further, the matters pertain to VAT laws also. Hence the aforementioned cases cannot be made applicable to the issue in hand. The appellant has also relied upon the case of De Danske Bilimporter vs. Skaterministeriet [2006]ECR 1-4945 decided by the European Court of Justice in support of their contention. However, as discussed above, such cases which pertain to a country other than that of India which is governed by a different set of Laws and Rules cannot be made applicable to issues pertaining to this country.
50. The appellant vide their additional submission has submitted that they have raised debit notes on ONGC for reimbursement of actual cost of ATF incurred by them and have charged GST on the same but ONGC has not paid GST on the same considering the procurement of ATF by the appellant as reimbursement of expenses. We find that on the one hand, the appellant is protesting the inclusion of amount of reimbursement received by them (in respect of the ATF procured by the appellant for their customer) in the value of supply, by filing an appeal against the order of GAAR, while, on the other hand, the appellant is charging GST on the amount of reimbursement received by them, from ONGC. It, therefore, appears that the appellant is very much aware about the fact that they are required to include the amount received by them as reimbursement (in respect of ATF procured by them for their customer) from ONGC, in the value of supply of services provided by them and pay GST on it, but has decided to protest simply because ONGC is not paying the GST leviable on the amount paid by them as reimbursement to the appellant.
51. Further, although the appellant have stated that fuel reimbursements from customers are not liable to GST as they are not debited to the P&L, are treated as receivables from customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables and that books maintained are as per accounting standards, the fact remains that the value of supply needs to be determined in accordance with the statutory provisions of the GST Acts, 2017 and rules framed there under, which have been elaborately discussed hereinabove, and the valuation of supply is not dependent on the accounting treatment given to any expenditure or cost, hence their contention cannot be accepted.
52. In view of the foregoing, we confirm the Advance Ruling No. GUJ/GAAR/R/21/2020 dated 02.07.2020 to the extent it has been appealed before us and hold that -
In terms of the valuation provisions under GST legislation, amount recovered as reimbursement by the appellant M/s. Global Vectra Helicorp Ltd. from the customer, for the fuel procured for use in the helicopter provided on rent to customer is required to be included in the value of services provided by the Appellant.
53. The appeal filed by M/s.Global Vectra Helicorp limited, Airports Authority of India, 8B, Porbandar Airport, Porbandar, Gujarat-360575, is rejected.