In re Mohammad Arif Mohammad Latif (GST AAR Madhya Pradesh)
Mere acceptance of joint custody of goods does not amount to supply
The AAR, Madhya Pradesh in the matter of M/S. Mohammad Arif Mohammad Latif (Advance Ruling Order No. 03/2021 dated June 17, 2021) held that, that mere acceptance of joint custody of goods without rights, privileges of ownership of goods does not amount to supply.
Facts:
M/s. Mohammad Arif Mohammad Latif (“the Applicant”) is engaged, inter alia, in purchase of Tendupatta (“the Goods”) from the MP State Minor Forest Produce (Trading and Development) Cooperative Federation Limited (“the Federation”) for the purpose of trading of the Goods and the Applicant is required to pay for the lots of the Goods in instalments and obtain the Goods from the Federation to complete the sale and till that time it was to be kept in the godown of the Federation in joint custody. Further, the Goods were insured by the Federation. The insurance was obtained at the cost of the successful bidder in the joint name of the Federation and the Applicant
Due to a fire in the godown of the Federation, the Goods stored were destroyed and could not ultimately be delivered to the Applicant. Upon the fire, the claim for insurance was filed and the insurance proceeds were received by the Federation.
Thereafter, the Federation directed the Applicant to pay for the subsequent installments for the Goods that was destroyed in the fire, after appropriating the security deposit and adjusting the claim received from the insurance company while computing the amount to be paid by the Applicant, the Federation added GST, treating the goods destroyed in the fire to have been supplied in terms of the Central Goods & Services Tax Act, 2017(“CGST Act”).
Issues:
1. Whether mere acceptance joint custody of the goods without the rights and privileges of ownership of the goods amounts to supply under the CGST Act?
2. Whether the Applicant is liable to pay GST, where the goods are destroyed by fire before being delivered under an agreement to sell?
Held:
The Hon’ble AAR, Madhya Pradesh in Advance Ruling Order No. 03/2021 dated June 17, 2021 held as under:
