The Maharashtra Appellate Authority for Advance Ruling ( MAAAR ) ruled that the supply of assistance in the design and development of patterns used for the manufacture of camshafts is the supply of goods.
Precision Camshafts Limited (the ‘Appellant’ or ‘PCL’) is engaged in the business of manufacturing camshafts. Camshafts are rotating shafts mounted in a 4-stroke engine. The Appellant sells these manufactured camshafts to domestic as well as overseas customers.
The overseas customers may be original equipment manufacturers (“OEMs”) and use the camshafts for manufacturing engines such as Ford, General Motors do Brasil LTDA etc. or maybe machinists such as Musashi who would further supply the same to OEMs (“Machinist”).
The camshaft is used for manufacturing engines and contributes to controlling engine power, emissions and fuel consumption. The camshafts are critical components as a small amount of error or misalignment will either result in leakage of fuel through the exhaust route or insufficient power stroke. So, each camshaft is unique and made as per the precise specification of the respective engine.
The Appellant themselves undertake the designing and process planning for the development of tools, which constitutes for the majority of the supply. However, the Appellant hires a third-party vendor for machining the tools as per the specification provided by the Appellant.
The appellant has sought an advance ruling on whether the supply of assistance in the design and development of a pattern used for manufacture or camshaft to a customer is a composite supply of services, the principal supply being a supply of services.
Upon considering the submissions made by both parties, the MAAR (Maharashtra Authority for Advance Ruling) observed that the activity of design and development of patterns used for manufacturing of camshaft for a customer is a supply of service in the form of intermediary service.
The Two Member Bench of the Tribunal consisting that Rajeev Kumar Mital and Dr D K Srinivas observed that “the impugned transaction is composite supply where the principal supply is the supply of services is not valid. In view of the above discussion, we hold that the impugned transaction is the supply of goods i.e. pattern/tool of specified specifications.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
