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Case Law Details

Case Name : In re Precision Camshafts Limited (GST AAAR Maharashtra)
Appeal Number : Advance Ruling No. MAH/AAAR/DS-RM/16/2022-23
Date of Judgement/Order : 20/01/2023
Related Assessment Year :
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In re Precision Camshafts Limited (GST AAAR Maharashtra)

The moot issues before us are as to whether activity of appellant is an intermediary service as held by the MAAR or as contended by the appellant, an activity of design and development of patterns/tools used for manufacturing of camshafts, for a overseas customer is a composite supply where the principal supply is supply of services.

As per submission made by appellant, it is appellant who prepares the drawing and designs of tool / pattern and also check feasibility of its manufacturing. The techno commercial offer is being made by the appellant to overseas OEM / Machinist. Overseas OEM / Machinist releases the purchase order, for specific number of units of tools, after approval of techno commercial offer. The appellant undertakes in-house drawing, design, modelling, simulation and documentation for manufacture of the tools. Whereas, it hires third party vendor for machining (manufacturing) the tool as per specification provided by the appellant. The third party vendors charge for the manufacture of tools, which is paid by the appellant. The third party vendor delivers the tool to appellant, of which appellant further raises supply invoice to overseas OEMs / Machinist specifying therein the description of goods (tools), quantity, rate per unit, etc. However, as industry practice in this sector appellant keeps such tools with it for further use in manufacture of camshaft.

The invoice raised by the appellant also exhibits that the tools of specific designs as per the specifications of overseas customer are supplied to them. Thus, form perusal of the purchase order placed by the overseas customers and supply invoice raised by appellant, it is clear that dominant intention of overseas customer is to get the supply of manufactured pattern/tools from the appellant as per specification provided by them.

From the facts of the case, it is clear that the appellant is making such supply of tools on his own against the consideration which is price for tools and hence, there is no issue of receiving commission from overseas customers. Appellant is not facilitating any supply between overseas entity and third party vendor. The impugned transaction is supply of goods i.e. tools from appellant to customer on principal to principal basis. Considering these facts of and definition of “intermediary” provided under section 2(13) of the IGST Act, 2017, it is very much clear that appellant is not an “intermediary”. Hence, the findings of the MAAR that the impugned activity is an intermediary service is erroneous and not acceptable.

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One Comment

  1. Sanjiv says:

    This remains the burning issue in Auto Industries. The department does not consider this export either as physical movement of goods did not happen and there is no shipping bill as evidence for export. The Exporter is neither able to claim any export incentive although remittance is received in foreign currency against supply. At the same time one end up paying GST also out of his own pocket.

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