Case Law Details
In re Halliburton Offshore Services Inc. (Drill Bits) (GST AAR Andhra Pradesh)
In view of the submission made by the applicant we find that the basic issue before us is whether the import of drill bits for supply to ONGC at its location in India on consumption basis involves two supplies namely, Import into India of drill bits; and Indigenous movement from the port of import to ONGC’s location; and If two supplies are involved in the abovementioned transaction then whether two Essentiality Certificates (‘EC7) are required to be issued for availing benefits with respect to concessional duties of IGST and CGST.
It is a self-asserted and admitted fact on record that the Applicant, under a contractual obligation, is required to import drill bits by themselves as an importer and undertake to supply drill bits to the delivery location of ONGC on consignment basis i.e. sale on approval basis. For the following reasons and the legal proposition, activity of import and subsequent supply of drill bits by the Applicant to ONGC does not qualify as one single supply.
In terms of Section 7(2) of the Integrated Goods and Services Tax Act, 2017, the supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-state trade or commerce. As per Section 2(4) of the Integrated Goods and Services Tax (IGST) Act, 2017, read with Section 2(11) of the Customs Act, 1962, “customs frontiers of India” means the limits of a customs area viz. the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities. Till clearance by the Customs Authorities i.e. issuance of Out of Charge, the supply of goods imported shall be treated to be ‘Inter-state supplies’ and in terms of proviso to Section 5 of the IGST Act, 2017, the integrated tax on goods imported shall be levied and collected in accordance with the provisions of Section-3 of the Customs Tariff Act, 1975- The levy and collection of Customs duties including the concessions/exemptions etc are as per the Customs Law, the Customs Tariff Act and the Notifications issued there under. It is a settled legal proposition that once the goods imported are cleared by the Customs authorities, all the provisions of the Customs Law (relates to imported goods) ceases to be applicable or extendable to such goods. It is therefore, clear that the activity of import of drill bits by the Applicant is a distinct activity of supply of goods in the course of inter-state trade or commerce.
The Applicant further undertakes to supply drill bits to the delivery location of ONGC on consignment basis i.e. sale on approval basis. In such supply or delivery’ of drill bits, the Applicant is responsible for transportation and insurance of drill bits till deliver at ONGC locations. This activity’ involves issuance of invoice and a consideration or payment – as per terms and conditions of the contract. The post import activity of the Applicant is therefore, clearly falls within the scope of inclusive portion of expression “supply” under Section-7(a) of the Central Goods and Services Act, 2017. Depending upon the nature of supply, such supply of drill bits done by the Applicant are taxable services and is leviable or chargeable to CGST or IGST under CGST Act, 2017 or IGST Act, 2017, as the case may be. Any exemption from the whole or part of the tax, either absolutely or subject to conditions as may be specified, is only through a Notification issued by the Government by virtue of power vested in Section 11 of the CGST Act, 2017 or Section-6 of the IGST Act, 2017, as the case may be.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
