Page 190 - GSTL_23rd July 2020_Vol 38_Part 4

556 GST LAW TIMES [ Vol. 38
106. Also, as per Section 16(3) of the CGST Act, 2017, “Every registered
person shall, subject to such conditions and restrictions as may be prescribed and
in the manner specified in Section 49, be entitled to take credit of input tax
charged on any supply of goods or services or both to him which are used or in-
tended to be used in the course or furtherance of his business and the said
amount shall be credited to the electronic credit ledger of such person.”
Thus, Input Tax Credit in relation to LPG cylinders that are re-filled for
use in industrial canteen should be allowed as per amended Section 17(5)(b) &
16(1) of the CGST Act, 2017.
107. Here, we would like to refer to our earlier observation made in re-
spect of the question 1(d) of the Advance Ruling application, wherein we held
that the Appellant’s activities of the supply of Food and beverages at the indus-
trial canteen inside the factory premises would attract NIL rate of GST, that is the
said supply was held to be exempt supply in terms of Sr. No. 6 of the Notifica-
tion No. 12/2017-Central Tax (Rate), dated 28-6-2017. Since the subject supply
has been held to be exempt supply by the Appellant, the ITC in respect of the
LPG cylinders used in the factory canteen of the Appellant will not be available
in terms of Section 17(2) of the CGST Act, 2017.
108. Now, let us examine the question 6 of the advance ruling applica-
tion, wherein the Appellant has asked as to whether proportionate Input Tax
Credit has to be reversed in cases where lesser payment is made to the supplier
due to deduction on account of liquidated damages from supplier’s dues. As re-
gards this issue, the AAR Maharashtra firstly inter alia ruled that Ordnance Fac-
tory Bhandara shall have to pay GST on Liquidated Damages deducted from the
payments to its suppliers. AAR further ruled that ultimately Ordnance Factory
Bhandara would be paying a lesser amount to their suppliers against supply of
goods received, which would result in lesser payment being made by the suppli-
er towards GST.”
109. The Appellant has challenged the aforesaid AAR ruling by argu-
ing that since they are Central Government as have been contended by them
throughout the submissions made in the subject appeal, they are not liable to pay
GST on the liquidated damages deducted from the payment made to the suppli-
ers in terms of the provision of Sr. No. 62 of the Notification No. 12/2017-C.T.
(Rate), dated 28-6-2017. They further submitted that the impugned ruling under
question, wherein the AAR has held that ultimately Ordnance Factory Bhandara
would be paying a lesser amount to their suppliers against supply of goods re-
ceived, which would result in lesser payment being made by the supplier to-
wards GST, is factually incorrect attributable to the following reasons :-
(i) Lesser payment in respect of L.D cases is made due to deduction of
L.D from supplier’s payment. Deduction of L.D is an act of tolerat-
ing non-performance of supplier on account of delay in delivery of
goods or services and is as such a manner of compensating the sup-
plier for his dues and not lesser payment against supply of
goods/services received.
(ii) It was submitted that Ordnance Factory Bhandara does not make
lesser payment of taxable amount and GST amount to the supplier
in L.D cases. They have substantiated this claim with the illustration
by two sample invoices and the corresponding entries in their books
of account. By the said illustration of these sample invoices, and the

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