TMI Blog2020 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... lowers from the auction house. They do the billing work and collection of sale proceeds on behalf of their clients. IFAB also invests a great deal in the system of sale through the clock. They offer dealers sophisticated facilities for online buying - remote buying. With the help of such services, IFAB is able to attract an increasing number of international buyers to the auction. It therefore appears to reason that this wide gamut of activities of IF AB would go far beyond the scope of a commission agent since the services rendered by them are not restricted only to sale of goods on behalf of the sellers for consideration, which is the main edifice of the definition of commission agent. We are of the view that the activities of the respondent company - IFAB are more appropriately classifiable as Auctioneer service . Benefit of exemption under SI.No 54(g) of Notf No. 12/2017 CT (R) dated 28.06.2017 - HELD THAT:- The Notification, as it is worded, grants exemption to the services provided by a commission agent. Even if the absence of a definition of commission agent in the notification or in the GST statute causes some ambiguity, the notification s applicability to a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng flowers to the premises of the respondent company and the same would be placed in lots and samples would be identified. The buyers would verify the lot and they would make their bids. The lowest rate at which the goods could be sold i.e. minimum price is fixed by the grower / supplier and the maximum price is fixed by the respondent company considering the demand for flowers. 4. The respondent company has deployed Dutch Auction System in which the Digital Auction Clock runs in the decreasing order and the price per stem reduces from maximum to minimum. The unsold flowers would be re-auctioned on the next day after completing the auction of that day s flowers. Even after this, if they are unsold, they would be sent back to the growers with the delivery challan. The respondent company charges 3.5% from growers and 1.5% from buyers as commission for the services rendered, i.e. auctioning of flowers, which is the mainstream revenue. Other incomes earned or accrued include interest, packing charges, registration charges, etc. 5. The respondent company filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 in respect of the following question: Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lers and 1.5% from buyers on the transaction value for the transaction carried on by way of auction at IFAB. Apart from auctioning of flowers, the activity of the respondent company also includes receiving of flowers, grading and quality check, cold storage facility, Auction management, flower packing and processing, dispatch of flowers. Therefore, the respondent provides a host of services to the sellers and buyers of flowers viz., storage, packing, transport which are ancillary and incidental to the main service i.e, Auction service. They also submitted that the service rendered by the respondent does not fit into any of the categories specified in SI. No. 54 of the Notification No 12/2017 CT(R) dt 28.06.2017, because the respondent company does not cultivate plants; does not supply farm labour; does not carry out the processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations; does not rent or lease agro machinery or land; does not offer services of loading, unloading, storage, etc.; does not offer agricultural extens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the business of supply or receipt of goods or services or both on behalf of another: As per Finance Act, 1994 Commission Agent means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration and includes any person who, while acting on behalf of another person i) Deals with goods or services or documents of title to such goods or services; or ii) Collects payment of sale price of such goods or services; or iii) Guarantees for collection or payment for such goods or services; or iv) Undertakes any activities relating to such sale or purchase of such goods or services. It is submitted that in this case the respondent does not act on behalf of another person for auctioning the goods, but is acting only as a mediator between the buyer and seller of the products and for offering these facilities a percentage of the sale value is received as Auction fees. Therefore, the services provided by them falls under the category of Auctioneer Service and they do not get covered under Commission Agent. 8.5. They submitted that since the respondent company is not a Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkets. The agricultural produce is purchased by intermediaries, which later they sell into wholesale markets. The very fact that more than 66.82% of the stakeholders are flower growers and balance held by the Govt of Karnataka show clearly the intention that the respondent company (IFAB) is created as a primary market and to exploit the state-of-the-art technology to showcase the flowers to a wide variety of market. Therefore, the Appellant s contention that they are not a primary market is incorrect. 10.2. They submitted that the exemption from levy of GTS on services provided by Agricultural Produce Marketing Committee or Board or services by a commission agent for sale or purchase of agricultural produce also includes the services provided by an auctioneer. The basic ingredient, whether the services are provided as factor, broker, commission agent, arhatia, del-credere agent, an auctioneer or any other mercantile agent is the principal agency relationship. The words used in the second leg of the definition of agent under Section 2(5) of the CGST Act - by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floriculture products at the IFAB auction, has to make the payment in cash at the cash counter for the purchase price and the commission at 1.5% of the purchase price and take the delivery of the flowers. 14. IFAB has deployed Dutch auction system whereby the digital auction clock runs in decreasing order and the price per stem reduces from maximum to minimum. The auction process goes as follows: Flowers are received from the growers located in and around Bangalore and also different parts of South India Flowers are checked by the IFAB supervisor and a serial number is allotted, and the details are entered into the system. After inspection, flowers are stored in the cold storage room of IFAB. Flowers received between 10.30 am and 5.30 pm on a day are auctioned on the next day. Flowers received between 7.30am to 8.30 am on a day are auctioned on the same day. Flowers are purchased through bidding for which each buyer is given a bidding mobile to use to bid for the flowers. Once the auction is completed, the flowers are sent immediately to the distribution hall. The buyers should pay the amount in cash once they bid for the flowers, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission agent rendering services for the sale and purchase of agricultural produce . 17. The term commission agent has not been defined under the GST law. Rather, Section 2(5) of the CGST Act, 2017 defines agent to include a commission agent. The said definition of agent reads as under: agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. From the above definition it is clear that there are several kinds of mercantile agents, such as broker, factor, commission agent, Auctioneer, del creder agent, arhatia etc. The common factor is that all the above types of mercantile agents carry on the business of supply or receipt of goods and services on behalf of another person. However, the nature of activities done by each of the above-mentioned agents is different as mentioned below: Broker : A broker is a mercantile agent who has been appointed to negotiate and enter into a contract for sale or purchase of goods while the possession and contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch enables the buyers to take delivery of the flowers from the auction house. They do the billing work and collection of sale proceeds on behalf of their clients. IFAB also invests a great deal in the system of sale through the clock. They offer dealers sophisticated facilities for online buying - remote buying. With the help of such services, IFAB is able to attract an increasing number of international buyers to the auction. It therefore appears to reason that this wide gamut of activities of IF AB would go far beyond the scope of a commission agent since the services rendered by them are not restricted only to sale of goods on behalf of the sellers for consideration, which is the main edifice of the definition of commission agent. We are of the view that the activities of the respondent company - IFAB are more appropriately classifiable as Auctioneer service . 20. As regards the eligibility to the exemption under SI.No 54(g) of Notf No. 12/2017 CT (R) dated 28.06.2017, it is seen that the exemption is available to the services provided by a commission agent for sale or purchase of agricultural produce. The respondent company have argued that the words auctioneer and commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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