TMI Blog2022 (4) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable supply of jewellery. They are dealing in buying the jewellery from the individuals as seen from the document furnished. To substantiate that the so purchased jewellery was subjected to only minor process which do not change the nature of the goods, the applicant has not furnished any documentary evidence, though the same was specifically called for during the hearing. The applicant has submitted a sample invoice no. ARA/07/2021-2022 dt. 01.12.2021 mentioning `sale of Used Gold Ornament issued to Mrs. Aarthi Abinaya, for the gold ornaments namely stud with jimikki and ring. However, Purchase receipt number/grammage for such purchase is not indicated in the said sale invoice. Also, in the purchase invoice submitted the ornaments said to have purchased do not include the Stud with Jimikki and ring and hence from the furnished documents, we are constrained to verify the claim of the applicant that he undertakes sale of used goods. Advance ruling is a facility extended and the person seeking the same has to furnish the details as required by this authority to verify and pronounce the ruling - In the instant case, from the documents furnished, there is no clear cut link ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They are also having branches across Tamil Nadu. They have stated that the used/second hand gold ornaments are sold in the same form in which they are purchased to another registered or unregistered person, except for some minor processing in the form of cleaning and polishing but without altering the nature of such ornament/jewellery. They have stated that as they have purchased old/used/second hand gold jewellery/ornament from the unregistered persons there is no scope for availment of Input tax credit as per Section 16 of the CGST Act for them as such unregistered person will not charge GST. They have stated that presently they are charging GST at 3% [CGST-1.50% ; TNGST -1.50%] on the entire consideration received from the customers on account of sale of such old/used/second hand gold jewellery/ornament. In view of the above facts, the applicant is seeking the authority to determine the value of supply as per Section 15 (5) of CGST act read with Rule 32(5) of CGST Rules, 2017. 2.2 On interpretation of law the applicant has stated that Section 15 of CGST Act deals with the value of Supply of goods or services. But in case of used / secondhand goods, the value of supply will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more can be necessary than to explicate those words in their natural and ordinary sense. The applicant has referred to the following case laws where the above rule of interpretation has been followed: Nelson Motisv. Union of India (AIR 1992 SC 1981) = 1992 (9) TMI 355 -SUPREME COURT Gurudevantt VKSSS Maryadit v. State of Maharashtra (AIR 2001 SC 1980) =2001 (3) TMI 976 - SUPREME COURT Swedish Match AB v. Securities and Exchange Board of India (AIR 2004 SC 4219) = 2004 (8) TMI 389 - SUPREME COURT Government of Andhra Pradesh v. Road Rollers Owners Welfare Association [2004 (6) SCC 210) - 2004 (4) TMI 602 - SUPREME COURT Hence, the applicant has submitted that, since they are engaged in the business of buying and selling of old/used/second-hand ornaments / jewellery under HSN Code 7113, they are very much eligible to avail the benefit of Margin Scheme for determination of value of supply as per Rule 32 (5) of CGST Rules read with Notification No. 10/2017- Central Tax (Rate) dated 28.06.2017. 2.4 The applicant has also submitted that they have complied with all the conditions specified in Rule 32(5) of CGST Rules which are discussed as below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the dealers in second hand goods will not be entitled to take valuation as prescribed under Rule 32(5) of the CGST Rules. Moreover, the second-hand goods when it is purchased for the first time from primary market it would suffer the levy of indirect tax i.e. VAT, GST, etc. It therefore means that when the tax is paid on margin on sale of second-hand goods, these goods have suffered full tax. The question may arise in which circumstances the phrase used in Rule 32(5) where no input tax credit has been availed on the purchase of such goods shall apply. The purpose of this phrase used in Rule 32(5) seems to prevent the dealer purchasing second hand goods or used goods from registered person on payment of GST and availing dual benefit of paying the tax on margin and claiming input tax credit simultaneously. 2.6 The applicant has stated that the GST is a value added tax and each person in the value addition chain is expected to pay tax on the value addition made by him in the transaction. The intention of promulgating Rule 32(5) is to ensure that a dealer operating in unorganized sector (buying second hand or used goods from unregistered persons or non-business entities) is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. If there is no margin, no GST is charged for such supply. They have referred to the following case laws to substantiate their contentions for the instant case. M/s. Attica Gold Private Limited -[2020 (4) TMI 690 -AAR, Karnataka/KAR ADRG 15/2020 M/ s. Aadhya Gold Private Limited - (2021 (7) TMI 548 - AAR, Karnataka)-KAR ADRG 35/2021 M/s. Safset Agencies Private Limited - (2019 (6) TMI 822 - AAR, Maharashtra) - GST-ARA-86/2018-19/B-07 M/s. Safset Agencies Private Limited - (2020 (6) TMI 678 - AAAR, Maharashtra) - GST-AAAR-SS-RJ/08/2019-20 3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 20.01.2022. The Authorised Representative CA. Balasubramanian appeared for the hearing and reiterated the submissions in detail. He explained the relevance of the rulings of AAAR/AAR relied upon by them. He stated that the old gold will be purchased through a voucher, polishing and cleaning of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce old Gold/Jewels in the form of the Bangles, Necklace, Ring, etc. are purchased after completing the above formalities the same will be subject to the processing of cleaning which involves the process of manually cleaning the Old Gold / Jewels with Soap Oil and polishing with Brush Puffing. But in no case the process will alter / change the form of the Old Gold / Jewel Ornaments, the activity involves only the simple cleaning activity and Bangle will remain the same Bangle and Ring remains the same ring and so on. The above cleaning activities are being undergone in regional office at Chennai, Madurai, Coimbatore, Theni, Trichy, Salem, Erode, Villupuram, Cuddalore, Sivagangai, Tanjore etc., and also we got melting centres in Chennai, Coimbatore and Trichy for conversion of old gold in to bullion. The old ornaments purchased in different locations send to the various regional headquarters as above, and there it will be graded for second sales and the balance which will not fit for second sales will be sent to melting centres for conversion of bullion The flow chart showing the process commencing from purchase of old gold to sale of old gold is given below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant has purchased used/second hand gold jewellery or ornaments from persons who are not registered under GST and that at the time of sale of such goods there is no change in the form/nature of such goods and ITC will also not be availed on such purchase, if so the case, whether GST is to be paid only on the difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017? The question pertains to determination of value of the goods supplied and the liability to pay tax on such goods sold by the applicant. As the question is falling under the purview of Section 97 (2) of the CGST ACT, 2017 same is admitted and is taken up for consideration on merits. 7.1 The question for ruling is whether the applicant is eligible to avail Rule 32(5) of the CGST Rules 2017 in as much as they are involved in selling the used/second hand gold jewelry and ornaments. The relevant rule is reproduced below:- Rule 32. Determination of value in respect of certain supplies.- (1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the documents provided (vii) Technical evaluation of old gold and estimation of weight and quality (viii) Payment of consideration through Cash/ cheque/ NEFT/ RTGs etc after issuing the purchase receipt. They have stated that the purchased jewellery will be subject to the process of cleaning which involves the process of manual cleaning with soap oil and polishing with brush puffing (not substantiated with documentary proof). Applicant has stated that in no case the process will alter/change the form of old gold/Jewel/ornaments and the ornaments/jewels so purchased say as bangle will remain as bangle and ring will remain as ring and so on. Thus the applicant has submitted that the processing undertaken does not change the nature of goods, though not substantiated with documentary evidences. 7.5 The third condition mentioned in the rule is that no input tax credit should have been availed on such goods. In this respect, applicant has furnished that they predominantly buy such old/used gold jewel /ornaments only from unregistered individuals and hence there is no scope for availing Input Tax Credit as such suppliers will not charge GST on their bills. From the cop ..... 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