Order date - 20 January 2023

Facts:

• The appellant, M/s Precision Camshafts Limited, sells these manufactured camshafts to domestic as well as overseas custom overseas customers may be original equipment manufacturers ("OEM's") and use the Camsnarts for manufacturing engines such as Ford, General Motors do Brasil LTLDA ec. or lay on machinist such as Musashi who would further supply the same to OEMs ("Machinist).
• The appellant in the present case, have two output activities (a) Supply of finished goods i.e. camshafts and (b) assistance in designing and development of patterns and tools used for manufacture of camshaft which are being provided by the Appellant to the OEMs/Machinist contractually on principle to principle basis.

Issue -

• Whether the supply of "assistance in design and development patterns used for manufacture or canmshaft" to a customer is a composite supply of services, the principal Supply being supply of services ?

Order –

• The authorities observed that, the moot issue is 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, fora overseas customer is a composite supply where the principal supply is supply of services.
• 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 1GST 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.
• The appellant first manufactures the tool as per the requirements and specification given by the customer. This tool is retained by the appellant and used for the manufacture and supply of camshafts. The appellant raises the tax invoice for this tool in the name of overseas customer in convertible foreign exchange though the tool is not physically exported to the customer. The ownership of the tools remains with the overseas customers. Thus, it is amply clear that impugned transaction between appellant and overseas customer is of supply of goods i.e. pattern/tool of specified specifications.
• The impugned transaction between appellant and overseas customer is of supply of goods i.e. pattern/tool of specified specifications. Hence, contentions of the appellant that impugned transaction is composite supply where the principal supply is supply of services is not valid. In view of the above discussion, the authorities hold that the impugned transaction is supply of goods i.e. pattern/tool of specified specifications.
• The authorities modified the Advance Ruling Order by holding that the impugned transaction between appellant and overseas customer is supply of goods.