ORDER

At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act I RGST Act would be mentioned as being under the “GST Act”.

The issue raised by Mr. Tej Jain (hereinafter referred to as “applicant”), having his address at A-3, Ashok Vihar, Girdhar Marg. Malviya Nagar, Jaipur Rajasthan (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: –

(a) Classification of any goods or services or both:

Further, the applicant being an un-registered person as per the declaration given by him in Form (ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling.

A. SUBMISSION AN INTERPRETATION OF THE APPLICANT:

1. That the business model planned by the applicant involves firstly purchase of old and used cars mostly from the unregistered persons. However, the vehicle can be purchased from the corporates also who are registered under GST.

2. That for the purchase of old and used cars, the applicant will deploy an internal inspection team which will inspects the car and prepare the report which will become the basis of the acquisition cost as one of the component of the purchase price.

3. That registration Certificate (RC) will be a compulsory document required while purchasing the car. Since these vehicles are meant for resale hence no other formality under the provisions of the Motor Vehicle Act 1988 is required to be undertaken to secure transfer of title of the vehicle.

4 That with purchase of such car. considering its condition and with an intent to make it marketable to sell in the open market as “refurbished old/used car”, certain cost of refurbishment on said car will be incurred which will include (but will not be restricted to):-

a. Tyre change

b. Oil change

c. Denting

d. Painting

e. Change defective parts such as broken light, wheel cover, etc.

f. Wiper blade or rear wiper

g. Gas for air conditioning

h. Dry clean

i. Box for power steering

j. Wheel cap

k. Engine oil

I. Air filter

m. Coolant

n. Number Plate

o. Seal cover

p. Clutch cable

q. Monogram set

r. Car washing

5. That after undertaking such cost, the refurbished car will be ready for re- sale and shall be displayed for to the interested and prospective buyers .

6. That apart from such refurbishment cost, cost will also be incurred towards fuel (i.e. petrol and diesel) for the purpose of preparing refurbished old and used car. The said cost is incurred towards:-

a. Getting the car to the applicant’s premises, if inspection is done at consumer’s place.

b. Sending the car at mechanic’s place (for refurbishment) and getting it back to the applicant’s premises.

c. Sending the car to the parking yard (where car is parked till the time it is not sold).

d. Cost of 5 liters of fuel in the tank of the car, as it has been decided as a policy matter to fill the tank with 5 litres at the time of selling.

7. That considering condition of the car and the market force, in few cases, the applicant may also be able to sell the car without incurring any refurbishment cost. However, in such cases, the applicant is not expecting profit or may end up selling at negative margin.

8. That mostly individuals shall be prospective and target customers of the applicant however sales shall not be only restricted to them. The applicant will sell old and used refurbished car to the corporate customers if they are interested.

9. That since the applicant shall be in the business of selling old and used refurbished car hence its purchase and related cost of acquisition shall be treated as a profit and loss item from the perspective of accounting and inventory of such acquired old/used refurbished car shall not be treated as fixed asset in the books of accounts. But rather it shall be treated as an inventory / stock item and no depreciation under the provisions of Income Tax Act 1961 shall be charged in the books of accounts or in the Income Tax Return by the applicant.

10. That on the contrary, the applicant shall treat such cost of purchase and cost of refurbishment as “acquisition cost” of the inventory of the old and used refurbished car and will show it at the expense side grouped under “Purchases” in the Profit and loss Account.

11. That applicant does not intend to claim or avail Input Tax Credit of tax charged (if any) on inward supply of motor car (i.e. acquisition) or on refurbishment cost incurred by it.

12. That since the applicant shall be selling old and used refurbished car, hence for the purpose of discharge of Goods and Services Tax on its supply and will not claim any ITC. it is covered by the provisions of Notification No. 8/2018-CT (Rate) dated 25-012018 wherein for the purpose of levy of tax, the value is determined as margin. The copy of said notification is enclosed and marked as Annexure-3.

13. That in the Explanation to the said notification, where depreciation under the provisions of the Income Tax Act 1961 is not claimed, then the margin is required to be determined in accordance with the provisions of the Explanation (ii). The said explanation (ii) is read as under:-

(ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.

14. That thus the tax is leviable as per the said notification on the margin where in accordance with the explanation (supra) the margin is difference between the selling price and the purchase price.

15. That the question has been put up through the given application for Advance Ruling from the Authority for Advance Ruling in context of the aforesaid explanation (ii) to understand for the purpose of valuation whether the amount paid to the owner of the car and amount incurred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car to arrive as the margin for the purpose of levy of GST under notification no 8/2018-CT (Rate) dated 25.01.2018.

STATEMENT CONTAINING INTERPRETATION OF LAW & FACTS, IN RESPECT OF THE AFORESAID QUESTION

I. APPLICANT’S ELIGIBILITY TO FILE PRESENT ADVANCE RULING APPLICATION

1. That sub section (c) of section 95 of CGST Act 2017 defines the term ‘applicant’ as under:

(c) “applicant” means any person registered or desirous of obtaining registration under this Act.

2. That in the present matter, the applicant is unregistered under the provisions of CGST Act 2017 and SGST Act 2017 and hence covered under the definition of the term “applicant” for the purpose of presenting the application before the Advance Ruling Authority.

3. That further section 97(2) of the CGST Act specifies the issues for which an advance ruling can be sought. Section 97 of the said act reads as under:-

(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought.

(2) The question on which the advance ruling is sought under this Act. shall be in respect of,-

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both:

(d) admissibility of input tax credit of tax paid or deemed to have been paid:

(e) determination of the liability to pay tax on any goods or services or both:

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

4. The applicant submits that the questions for determination in the instant advance ruling application concerns (a) determination of time and value of supply of goods or services or both, which is covered under the said section.

5. Therefore, in the instant case the applicant is eligible to file the present advance ruling before the Authority for Advance Ruling.

II. APPLICANT’S INTERPRETATION

Legal Provisions as applicable

1. According to Section 7 of Central Goods and Services Tax Act. 2017

7. (1) For the purposes of this Act, the expression “supply” includes,-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business:

2. According to Section 9 of the Central Goods and Services Tax Act 2017 which is charging section for GST

9. (1) Subject to the provisions of sub-section (2). there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may he prescribed and shall be paid by the taxable person.

3. That rate of GST (CGST) on supply of motor car. which is covered by the definition of goods as given under Section 2(52) of the CGST Act 2017 is notified under Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017.

4. That however power to grant exemption from tax has been given under provisions of Section 11(1) of the CGST Act 2017. By invoking such power, the Central Government has issued notification no 8/2018-C.T. (Rate), dated 25-1-2018 wherein effective rates of CGST on old and used Motor vehicles has been notified. Such notification has already been enclosed and marked as Annexure-3.

5 That according to such notification if ITC is not claimed on the inward supplies of goods by a registered person and it is supplying (selling) old and used motor vehicles as classified under Chapter 87 of the First Schedule to the Customs Tariff Act, 1975, then CGST is payable at the rate of 6% or 9%, as the case maybe on the value represents margin of the supplier (i.e. registered person).

6. That further it is clarified at the initiation only that the cost incurred on the refurbishment of acquired old and used motor car does not change the nature of the motor car at all. It is in fact widely known as sold in the market as old and used refurbished motor car only. In fact, if such activity of refurbishment is not done (whose requirements and gravity changes from case to case basis), then the car would not be saleable at all in the market.

7. That in plethora of orders passed by various AARs also it has been held that activities of repairing or cleaning or polishing which does not change the nature of goods would be allowed and the goods sold shall remain used and old goods. Such goods are commonly known as “Second Hand Goods” also in the popular sense.

8. That in fact for valuation of sale of second hand goods under GST, there is specified Rule 32(5) of the CGST Rules 2017 which brings out that minor processing which does not change the nature of goods is carried out on used goods, then they shall remain Second hand goods. The said fact has been tested and affirmed in various AAR orders such as,-

a. Attica Gold Pvt Ltd 2020 (36) G.S.T.L. 445 (A.A.R. – GST – Kar.)

b. Shambhu Traders Pvt Ltd 2019 (23) G.S.T.L. 293 (A.A.R. – GST)

9. That also without prejudice to the above, the wordings used in the Table in Column (3) of Notification No. 08/2018-CT(Rate) dated 25-01-2018 are reiterated for the sake of reference

S.No.	Chapter, Heading, Sub-heading or Tariff item	Description of Goods	Rate
(1)	(2)	(3)	(4)
1.	8703	Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity of 1200 cc or more and of length of 4000 min or more. Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under.	18%
2	8703	Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under.	18%
3	8703	Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles. Explanation. – For the purposes of this entry, SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.	18%
4	87	All Old and used Vehicles other than those mentioned from S. No. 1 to S. No.3	12%

10. That on perusal of the above, it is evident that given notification is specifically applicable supply of old and used motor vehicle. In given case the applicant shall be only buying old and used motor vehicles as explained in the facts. The refurbishment shall only make used old and used motor vehicle saleable but it will not change the nature and the popular name or use of such vehicle. Hence sale of old or used motor vehicle as such or after refurbishment shall anyways keep the nature of motor vehicles as old and used (popularity known as second hand cars). Thus when the supplier will supply the same, if it satisfies the other conditions, it shall be able to claim benefit of given notification.

11. That also it is settled jurisprudence principle that when the words of a statute are clear, plain and unambiguous, i.e. they are reasonable susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. This rule of interpretation is followed in plethora of judgments. A few of the judgments are as under:-

a. Nelson Metis v. Union of India (AIR 1992 SC 1981)

b. Gurudevantt VKSSS Maryadit v. State of Maharashtra (AIR 2001 SC 1980)

c. Swedish Match AB v. Securities and Exchange Board of India (AIR 2004 SC 4219)

12. That now, since the explanation to the said notification defines margin in both the scenarios i.e. when depreciation under the IT Act 1961 has been claimed on the motor cars to be sold or when depreciation under the IT Act 1961 is not claimed on the motor cars to be sold, hence same needs to be referred in given case.

13. That it is pointed out that whether depreciation is to be claimed under the provision of Section 32 of the IT Act 1961 upon a motor vehicle is dependent upon the fact that whether such motor vehicle has been treated as a fixed asset or not by the person claiming the benefit of given notification.

14. That whether a motor vehicle is a fixed asset or not, depends upon the facts and circumstances of each case. Only in the cases where the motor vehicle has been acquired with an intention to use in the business but not to resale then in accordance with the accounting principles, the same motor vehicle is treated as a fixed asset, both in the books of accounts and also under the provisions of Section 32 of the IT Act 1961. In such a situation, depreciation at specified rate is claimed on such motor vehicle.

15. That an important point for given consideration is that when a motor vehicle is treated as fixed asset then the intention of its owner is to use such motor vehicle in the course of business for a reasonable duration of time which mostly extends up to the life of such motor vehicle. The motor vehicle is procured with an intention to possess and use it for a period of more than 1 year at least. The intention to procure such motor vehicle is never to earn profit by selling it in the market. Only when such asset is not of use or better alternative of same is available for the user at its replacement cost, then the said motor vehicle which is an asset, is sold or disposed off in the open market, either to another user or to those who are in the business of buying and subsequently selling such used and old motor vehicle.

16. That in aforesaid case, any cost incurred on the repair or refurbishment of such cars which are held as fixed asset and on which the depreciation is claimed is only to ensure that its use in the business is effective. However, such refurbishment is never undertaken to enhance the sale value of the such motor car as selling of such motor car is never an aim while procuring or repairing it. Hence the cost of repair or refurbishment has no relationship whatsoever with the further supply of such used motor car.

17. That in such cases, the motor car is being sold at nominal price or at written down cost to get rid of it. If the condition of the car is good, then the person may incidentally earn some gain or profit but it is never the targeted activity.

18. That on the other side, the case of the applicant does not fall in above category of users and it is not intending to acquire the motor vehicle to use it for running the business. Rather the applicant intends to procure the old and used motor vehicles and by applying its expertise and skills, would incur refurbishment cost at the time of procurement only with a view to sell it in the open market to earn profit from the same.

19. That for the applicant, the holding period of such asset is never anticipated and intended to be of more than a year. In fact, the applicant and other such players of the trade intend to possess the motor vehicle only for the purpose of display and as an inventory i.e. procurement and refurbishment for the purpose of selling it further and to earn margin.

20. That further the cost of refurbishment is directly related to the appreciation in the sale value and in turn margin of the applicant on which it is liable to pay the tax. The more and better the cost of refurbishment, the higher the margin and in turn higher the tax to the exchequer. It has already been stated in the facts of the advance ruling that applicant is required to undertake the various types of cost at the time of refurbishment and same will be done by the professional who analyses the requirement and components of the refurbishment.

21. That in fact the registered persons covered by the provisions of explanation (i) to the notification i.e. who claim depreciation under the IT Act 1961 on cost of motor vehicle generally supplies such used and old motor vehicle to the persons like the applicant in given case who only procure the used and old vehicle. That is why the margin for the purpose of given notification in case of applicant is governed by the provisions of explanation (ii) to the notification which is different from the situation covered under Explanation (i) where generally cars used as asset are sold.

22. That on perusal (ii) to the notification, it is clear that margin is identified as difference between the selling and the purchase price. However, on further perusal it is clear that meaning of word selling price and purchase price has not been given in the explanation or anywhere in the notification. Thus it becomes important to bring out the contextual meaning of the word selling price and purchase price used in the notification.

23. That in case of Maheshwari Fish Seed Farm vs T. Nadu Electricity Board And Anr on 16 April, 2004 it was by the Hon’ble Supreme Court that It is settled rule of interpretation that the words not defined in a statute are to be understood in their natural, ordinary’ or popular sense. According to Justice Frankfurter, “After all, legislation, when not expressed in technical terms, is addressed to common run of men, and is, therefore, to be understood according to sense of the thing, as the ordinary man has a right to rely on ordinary words addressed.” (Wilma E. Addison v. Holly Hill Fruit Products, 322 US 607, at p.618). In determining, therefore, whether a particular import is included within the ordinary meaning of a given word, one may have regard to the answer which everyone conversant with the word and the subject matter of statute and to whom the legislation is addressed, will give if the problem were put to him.

24 That however in case of CGT vs. Getti Chettiar [1971] 82 ITR 599(SC) it was held by the Hon’ble Supreme Court that

The dictionary gives various meanings for those words but those meanings do not help us. We have to understand the meaning of those words in the context in which they are used. Words in a section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve.

25 That on the basis of aforesaid principle laid down by the Hon’ble Apex Court of India it is clear that when meaning of a word is not given in the statue its contextual meaning needs to be understood to interpret the provision of the law.

26. That in this background, it is pointed out that there is an undisputed fact that applicant will be engaged in the business where it will procure old and used cars, refurbish it and then sell it as old and used second hand refurbished car. The refurbishment activity on the car is the essential ingredient of the business of the applicant. If it will not undertake the same or will not have competence to do so, then it cannot survive in the business at all. Further the cost of such refurbishment is not standard and will depend upon the condition of the car and the judgment of the applicant.

27. That further, when the car will be sold in the market to the customer, the said customer shall be made aware in advance the various types of the refurbishment activities which have been undertaken on such car. The customer will be made aware about necessary corrections and activities which have been undertaken to ensure the car is usable and the customer shall be able to reap its benefit while using the same. Hence in the open market it is very evident between the prospective customer and the applicant or other players that car which is being sold is not just and old or used car but certain refurbishment activities in form of goods and work has been undertaken.

28. That in fact during the course of refurbishment, the property of goods used in the undertaking such refurbishment for instance, replaced tyre, wiper, seat cover, paint etc also passes on to the customer as a part and parcel of the car only. The buyer will not be charged anything separately for such refurbishment. Hence all the cost of refurbishment is part and parcel of the cost of the old and used refurbished car.

29. That hence in this factual background it is brought on record that use of word “purchase price” in the explanation (ii) to the notification must be read in the context of old used and refurbished cars for which the term “sale price” used in the notification. Any amount which shall be charged by the applicant for supply of old and refurbished car to the customer will be sale price in given case. Hence for the purpose of deriving the margin, the total cost incurred by the applicant to procure the “refurbished old and used car” shall contextually become the “purchase price”.

30. That it is pointed out that since applicant shall not be just selling an old or used car but rather it shall be selling the refurbished old and used car hence all the necessary cost and prices paid by the applicant to receive goods or related services along with the car from the owner of car or otherwise shall become the “purchase price of such old and used refurbished car”.

31. That in case of State of Karnataka vs Sri Chamundaeswari Sugar Ltd reported in 2008 7 SCC 469 it was held by the Hon’ble Supreme Court that,-

15. The definition of “Sale” (in Section 2(1) of the Act) is relevant. It refers to transfer of the property in goods by one person to another in the course of trade or business “for cash or for deferred payment or other valuable consideration “. “Purchase price “ is well-known expression in commercial transactions. Every purchase involves a corresponding sale. The purchase money or purchase price for property is the price to be paid for it. Speaking technically, acquires by “words of purchase” and is a “purchaser” when he obtains title in any other mode than by descent or devolution of law.

17. In the Sale of goods Act and also in the Central Sales Tax Act or in any of the sales tax laws made in the several States, the definition includes the sale of goods, and not to the purchase of goods. That must be so because the sale of a commodity must include within its ambit the concept of sale as well as purchase. It is not possible to conceive of a sale of goods without a buyer.

32. That thus on basis of above it is evident that meaning of sale can be used as inference to arrive at meaning of purchase. In fact, normal meaning of the word ‘purchase’ is acquisition for money or for any consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings “buy, acquire”, another meaning given to the word “purchase” is “procure”. The word “procure” consists of much wider import than the word “purchase”. In the same dictionary, the word “procure” has been given the meaning as “obtained by care or effort acquire”.

33. That on reading of above, it is evident that purchase includes making an effort to bring goods to a location and condition where they are for use or for onward sale.

34. That in fact the given concept of sale price and purchase price also corroborates with the accounting principles and methodology to be followed by the applicant in its books of accounts which shall be in governed by the principles of the Accounting Standards as applicable in India.

35. That it has already been pointed out above that the old and used refurbished car shall not be a fixed asset for the applicant but rather it shall be an inventory item i.e. purchase of goods for the purpose of resale, hence its accounting shall be governed by the Ind AS 2 i.e. Indian Accounting Standard 2 which is for Inventories.

36. That the objective of said IND-AS 2 as set out by the law is read as under

The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised This Standard deals with the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories

37. That further as per para 6(a) of the said IND AS-2, notified under The Companies Act, 2013

The following terms are used in this Standard with the meanings specified: Inventories are assets:-

(a) held for sale in the ordinary course of business;

38. That most importantly, as per para 11 of the said IND AS-2, the cost of purchase of inventory is defined as under

The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.

The copy of said IND-AS 2 is enclosed and marked as Annexure-4.

39. That on perusal of said definition it is evident that directly attributable cost of the finished goods along with price paid is treated as cost of purchase of inventory. Hence it effectively implies that payments made to the vendors plus all the necessary cost incurred to bring goods to the current state which makes it saleable in nature of sale and used refurbished goods shall be treated as cost of purchase of used refurbished goods.

40. That after refurbishment all the necessary items which will be added or fitted to the motor car will form pan of the sale price of the motor car. In fact, the applicant shall not charge any thing over and above such sale price which shall be agreed with the customer. In reality such sale price shall include the price charged towards the car and directly attributable cost towards the preparing such car in a manner that it is purchased by the customer.

41. That now when as per explanation (ii) to the notification, difference is required to be taken between the sale price (which includes the recovery towards the car. refurbishment cost and margin), the comparable purchase price shall include the cost of car and the refurbishment cost. Then only in true and real sense the tax shall be payable on the margin.

42. That if only purchase cost of car is considered as purchase price for the purpose of calculating margin and whereas for calculating sale price the value of total amount including the refurbishment recovery is also considered then the margin derived from such method shall be faulty and will lead to double taxation.

43. That in fact recently in the case of The Commissioner of Central Excise, Customs and Service Tax, vs M/s Sai Service Station Ltd reported in 2017 (7) GSTL 17 it was held by the Kerala High Court that, in similar facts matrix, the Hon’ble High Court noted that

26. In its books of account, the dealer reflects the ‘refurbishment charges’ the expenses, that is, the cost of spares, labour, denting and painting work, etc.. incurred by the dealer for renovating the used car. Though it refurbishes both the True-Value and the Non-True-Value cars, the dealer refurbishes the True-Value vehicles as per the MSIL guidelines. It collects the refurbishment charges separately from the buyer, besides the cost of the used cars. In short, the selling price of the used car includes the cost of the used car. the refurbishment charges, the management fee, free service and warranty, besides business margin.

44. That the intention of given notification needs to be understood in correct perspective which is to avoid double taxation. Normally GST is charged on the transaction value of the goods. However, in respect of old and used goods, a person dealing is such goods is required to pay tax on the margin, i.e. the difference between the value at which the goods are supplied and the cost at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the supply and the economic supply chain.

45. That hence when applicant would incur the cost towards the procurement it would pay GST (as maybe applicable) and may also pay GST while incurring the refurbishment cost, it applicable. However, since ITC is not available under the given notification hence if deduction of refurbishment expenses is not given then it shall lead to a situation of double taxation and hence would defeat the whole purpose of the notification as such.

46. That in the case of M/S. Msco. Pvt. Ltd vs Union of India & Ors on 31 October 1984 was held by the Hon’ble Supreme Court that

But while construing a word which occurs in a statute or a statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject matter of the statute or statutory instrument understand it.

47. That by drawing inference from the same, concept of price is not prevalent under GST. However. the concept of ITC on inward supplies is prevalent and tax is based on the philosophy of value addition. Further the notification also clearly brings out that tax is payable on margin. Hence in given case, the margin to be earned by the applicant shall be fully reflected only when deduction of refurbishment cost is given along with other procurement cost from selling price. Hence in light of the spirit of given notification the cost of refurbishment is required to be included in the purchase price as mentioned in the notification.

48. That similar view has been held in case of Indian Oil Corporation vs State of Assam and Ors reported in 2007 11 SCC 693 where it was held that:-

A. Sales Tax “Double taxation” “Determination of” Resolution of Government dated 16-12-1977 requiring a dealer to sell products at prices fixed by Government which included “surcharge” to be collected from dealers and deposited in “oil pool account” “Appellant Company purchasing petroleum products from a refinery and paying sales tax on such products Vide government resolution Company had to sell its products at fixed prices inclusive of surcharge component Sales tax levied on c appellant at the first point of sale as the sale price charged exceeded 40% of the purchase price Appellant Company’s sales tax liability determined on the second sale or resale of tax-paid goods deeming it the first point of sale Appellant contending “sale price” for the purpose of the Act should be determined after reducing the amount of “surcharge” paid into “oil pool account” High Court held “surcharge was not statutory collection but was collected under executive instructions and cannot be excluded while d calculating the ‘sale price’ “ Whether amounting to double taxation Permissibility of Held, resale price in the instant case exceeded 40% of the purchase price, therefore, the resale price was deemed to be the first point sale S. 8(1) did not envisage double taxation in the same State Appellant Company having paid sales tax on purchase of petroleum products from BRPL the sales tax would be leviable only on the difference of the resale price and purchase price Appellant only under obligation to e pay sales tax only on the difference between purchase price and the entire sale price Directing the appellant Company to pay sales tax on the entire amount resold would amount to double taxation Assam General Sales Tax Act, 1993 (12 of 1993) S. 8(1)(a) Assam General Sales Tax Rules, 1993 R. 12 Taxation Double taxation Determination of.

49. That in addition to the above, the sale of old and used refurbished motor car is governed by the provisions of the Sales of Goods Act 1930. As per Section 16 of the said, following is relevant for understanding

16. Implied conditions as to quality or fitness. -Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows: –

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:

Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.

(2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.

(3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

(4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.

50. That in case of applicant, the quality of old and used refurbished car is governed by Section 16(3) of the aforesaid Act wherein the applicant shall be bound to make available and old and used by working car to the customer. In case the old and used car is not working properly then as per usage of trade, the customer may raise quality claim of non-working parts or features of the car (old and used) as promised. To ensure such compliance the applicant is required to undertake the refurbishment cost along with the car procured by it. Hence without same the sale may be treated as invalid in accordance with the provisions of the Sales of Goods Act 1930.

51. That on the basis of above the applicant is of the understanding that cost of refurbishment is includible in the purchase price for calculation of margin as specified under explanation (ii) to Notification No 8/2018-CT (Rate) dated 25-01-2018.

B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT

1. Whether the amount paid to the owner of the car and amount incurred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car to arrive as the margin for the purpose of valuation and levy under Notification No. 08/2018-CT(Rate) dated 25.01.2018?

C. PERSONAL HEARING

In the matter personal hearing was granted to the applicant on 25.08.2021 at Room no. 2.11 NCRB, Statue Circle, Jaipur. On behalf of the applicant Shri Yash Dadda, (CA) appeared for PH. During the PH, he reiterated the submissions already made in the application.

D. FINDINGS, ANALYSIS & CONCLUSION:

We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by the applicant and authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts.

1. At the outset, we would like to slate that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the RGST Act.

2. The application for advance ruling and the arguments made by the applicant and also the submissions made by the Learned Representative during the time of hearing were all verified and the issues that needs to be addressed is related to whether the amount paid to the owner of the car and amount incurred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car arrive as the margin for the purpose of valuation and levy under Notification No. 08/2018-CT(Rate) dated 25.01.2018.

Notification No. 8/2018-C.T, (Rate), dated 25-1-2018 reads as under: –

In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the central tax on intra-state supplies of goods, the description of which is specified in column (3) of the Table below, falling under the tariff item, sub-heading, heading or Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are given in corresponding entry in column (2), from so much tax as specified in Schedule IV of Notification No. 1/2017-Central Tax (Rate), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4), of the said Table, on the value that represent margin of the supplier, on supply of such goods.

S.No.	Chapter, Heading, Subheading or Tariff item	Description of Goods	Rate
(1)	(2)	(3)	(4)
1.	8703	Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity of 1200 cc or more and of length of 4000 mm or more. Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there- under.	9%
2.	8703	Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under.	9%
3.	8703	Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles. Explanation. – For the purposes of this entry. SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.	9%
4.	87	All Old and used Vehicles other than those mentioned from S. No. 1 to S. No. 3	6%

Explanation – For the purposes of this notification,-

(i) in case of a registered person who has claimed depreciation under section 32 of the Income-Tax Act, 1961 (43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored; and

(ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.

2. This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act. 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods.

3. The aforesaid Notification exempts the goods specified in column (3) falling under heading/Tariff Item as specified in column 2 from so much of tax as is in excess of amount calculated at the rate specified in the corresponding entry in column 4 of the table to the said notification on the value that represent margin of the supplier on supply of such goods. As per explanation -(ii), margin of supplier shall be the difference between the selling price and the purchase price.

4. Thus from the plain reading of the explanation-(ii) to the aforesaid Notification it is observed that the explanation (ii) undoubtedly/clearly used the word “purchase price” not the “purchase cost” of goods. It means only the amount paid by the applicant at the time of purchase of used cars can be considered as “purchase price” there is no provision in the said notification to include the cost of refurbishment in the purchase price. Therefore, we find that there is no reason to include cost of refurbishment in the purchase price for calculation of margin.

5. Further, it is settled jurisprudence principle that “when the words of a statute are clear, plain and unambiguous, i.e. they are reasonable susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense”.

6. The applicant has cited various case laws references viz. M/s. Maheshwari Fish Seed Farm. Sri Chamundeswari Sugar Ltd., M/s. Sai service station Ltd., etc is not tenable as the facts are quite different from the present application.

7. In view of the foregoing, we rule as follows: –

RULING

Q. Whether the amount paid to the owner of the car and amount incurred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car to arrive as the margin for the purpose of valuation and levy under Notification No. 08/2018-CT(Rate) dated 25.01.2018?

Ans. No.