TMI Blog2022 (6) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... ic (whole), which is supplied by the farmers in the APMC by availing the services of the Appellant, who acts as an authorised commission agent in the sale/purchase of the impugned commodity in the APMC, Sangli. It is seen that the turmeric is harvested from the farm land in the form of raw turmeric. It is to be noted that the fresh turmeric contains moisture, and is blackish in colour, which renders the fresh or raw turmeric perishable and unsustainable. Therefore, to make it more sustainable and marketable, the raw turmeric is subjected to post-harvesting operation, like, boiling, drying and polishing, which are carried out by the farmers themselves on their farm land. Thus, it is clear that the impugned product, i.e., dried turmeric (whole) is a produce out of cultivation of plant, which is subjected to certain post-harvesting processes. Whether these post-harvesting processes on the raw turmeric are usually carried out by the cultivator or producer? - HELD THAT:- On perusal of the affidavit and the declaration made by the said organisation to the effect that various processes, such as, boiling, drying and polishing of fresh harvested turmeric are carried out by farmers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned product, i.e., dried turmeric(whole) will get classified under the Heading 0910 30 20 bearing description as Dried Turmeric (Curcuma) , attracting the GST at the rate of 5%. Whether the services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017? - HELD THAT:- On perusal of the entry at SI. No. 54 of the exemption notification, in the facts of the present case, it is observed that the services provided by the Appellant in the capacity of the commission agent for sale or purchase of impugned product, i.e., dried turmeric(whole), which has been held as an agricultural produce hereinabove, will not be subject to levy of GST. Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-I? If yes, under which section of the GST Act, he is required to be registered? - HELD THAT:- The Appellant, who is undertaking the supplies of agricultural produce purely as a commission agent for the farmer, are not liable for compuls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural Produce and Marketing (Development and Regulation) Act, 1963 (The APMC Act), the Maharashtra Agricultural Produce and Marketing (Regulation) Rules, 1967 (The APMC Rules) and the Byelaws of the APMC Sangli. 3.4 Services of the Appellant as a commission agent are regulated by APMC Rules and Byelaws of the APMC Sangli. Based on the tender / auction, if farmer and buyer mutually agree to sale and purchase, the Appellant, being a commission agent, facilitates activities ancillary to supply of turmeric in APMC Sangli. The Appellant gets a fixed commission @ 3% of the sale vale of the turmeric as per APMC Rules and Byelaws of the APMC Sangli. 3.5 In a situation where the Appellant is selling the turmeric in capacity of the trader , there is no dispute regarding applicability of GST on turmeric. 3.6 However, in a situation where the Appellant is engaged in selling the turmeric on behalf of the farmers in APMC markets as the commission agent there is no clarity about the GST liability of the Appellant as the supply of turmeric by farmers is not liable to GST. Application for Advance Ruling and the Advance Ruling Order 3.7 As there was no clarity, the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance Ruling Order before the Appellate Authority for Advance Ruling is 30 days from the date of communication of the AR Order. Thus, in consideration of above, the Appellant was supposed to file this Appeal on or before 20.01.2022. 3.12 Whereas the Hon ble Supreme Court of India vide order dated 10.01.2022 in Miscellaneous Application No. 21 of 2022 / No. 665 of 2021 and in suo motu writ petition No. 3 of 2020, directed that the period from 15.03.2020 to 28.02.2022, is to be excluded for calculation of the limitation period on account of the pandemic situation caused by Covid-19. 3.13 In view of the aforementioned order of the Hon ble Supreme Court, the Appellant submits that the limitation period will start from 28.02.2022. Hence, there is no delay in filing of this Appeal. 3.14 Without prejudice to above, with regards to the question of condonation of delay the Appellant submits that the proviso to sub section (2) of section 100 of the Central/ State Goods and Services Tax Act also grants power to the Appellate Authority to condone the delay in filing the appeal. Considering the Covid-19 pandemic situation the Appellant prays and requests to condone the delay in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the help of farm tractor, polishing is effected by abrasion of the surface against each other as they roll inside the drum. vii Farmers generally carry out the polishing of the turmeric to improve the appearance and thereby to increases the marketability. However, due to limitations of polishing process as explained hereinabove, the rough appearance continues to some extent and dull I pale blackish yellow colour is acquired to dried turmeric rhizomes / fingers / bulbs. This polishing process is carried out by farmers at the farm level only. Thereafter, such turmeric is packed in gunny bags and brought by farmers to the APMC markets for sale. 4.2 Whereas, the ultimate consumption of the turmeric in spices, in medicinal use or in industrial use is in the form of powder or pest and not in the whole form of turmeric as sold by farmers. Therefore, depending upon the end use and requirements of the consumers, the traders carry out further polishing and other process after purchasing the turmeric from the farmers in order to avoid black soil particles and achieve bright and vibrant yellow colour. Legal Provisions under the APMC Laws: 4.3 Provision of APMC Law relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be levied a tar called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. ......... .................. Section 22. Persons liable for registration.- (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees Section 23. Persons not liable for registration . (1) Following persons shall not be liable to registration, namely:- (a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act: (b) an agriculturist, to the extent of supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural produce means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; 4.6 On perusal of above provisions, it appears that the meaning of the term agricultural produce has been defined under theses notifications, and is independent of HSN codes attached to agricultural produce /commodity. Therefore, the same will be applicable for supply of services (in the present case, supply of commission agent services ). 4.7 In the light of the aforesaid definition, an agricultural produce will have following criteria:- (i) Any produce out of cultivation of plants and rearing of all life forms of animals. (ii) Such produce does not require any further processing to make it marketable and where any processing is done, the same is usually carried out by the cultivator or producer. (iii) Such processing does not alter the essential cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f agricultural produce also mentions that such processing is done as is usually done by a cultivator or producer. The term usually denotes ordinary or normal practice followed by farmers. 4.13 As a normal and ordinary practice, farmers never sale the turmeric in fresh form to traders in APMC markets. In order to make the produce sustainable and to improve its appearance to get good prices, farmers carry out various processes such as boiling, drying and polishing on fresh harvested turmeric to make it marketable. Therefore, it is usual practice followed by farmers across India to sell turmeric in processed form and not in fresh form. 4.14 Sangli is one of the biggest markets for turmeric in Maharashtra. Apart from the market in Sangli, various other markets in Nanded, Vasmat in Hingoli, and Wai in Satara are also big markets for turmeric in Maharashtra, where the similar practice is followed by farmers while bringing the turmeric for sale in APMC markets. 4.15 The MAAR Order also mentions in para 5.4 that the said processed turmeric is suitable for sale directly to the consumer. This conclusion in the AR Order is irrelevant, baseless and not supported by facts. Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turmeric directly to traders in wholesale markets located in cities. Fanners mostly sell the turmeric to traders through commission agents in nearby APMC Markets. 4.22 In view of above, it is clear that the sale of such turmeric as processed by farmers through commission agents in APMC markets is covered as services provided by a commission agent for sale or purchase of agricultural produce as prescribed under the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and the Notification No. 12/2017 C.T. (Rate) dated 28.06.2017. 4.23 The Appellant also relying upon the following Advance Rulings wherein it is held that the processed turmeric sold by farmers is covered as agricultural produce and services provided by commission agent, are exempted from GST. As the same ratio is applicable in the present context. (i) LAWRENCE AGRO STORAGE PVT. LTD. 2021 (48) G.S.T.L 47 (A.A.R. - GST- Haryana) .......... ............. 20. The term primary market for agricultural produce can be understood to mean the agricultural produce markets where the cultivator or the producer can make first sale of their produce. The agricultural produce on which certain process has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to warehousing all items under clarification appears to have been processed subsequently post sale by farmers or commission agents, i.e., appears to have been found processed by industrialists and not by agriculturist. Applicants understanding that the same is not required to be registered under the CGST Act, 2017 for activities carried out as commission agent relating to sale of turmeric 4.26 The Appellant has asked the third question as below. Whether the Appellant is required to be registered under the CGST Act, 2017 for his activities specified under Annexure-I? If yes, under which section of the GST Act, he is required to be registered? There are two aspects of this question as below.- i GST liability of the Appellant for supply of commission agent services to farmers relating to sale of turmeric (i.e., GST on supply of services). ii GST liability of the Applicant for sale of turmeric on behalf of farmers (i.e., GST on supply of goods on behalf of principal). 4.27 While giving the answer, the MAAR has replied as under: - The applicant is required to be registered under the relevant provisions of the CGST Act, 2017 for his impugned activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid by the taxable person . Whereas, in terms of section 2 (107) of the CGST Act, a taxable person means a person who is registered or liable to be registered under section 22 or section 24 of the CGST Act. 4.34 Every supplier shall be liable to get registered under the CGST Act in terms of section 22 of the CGST Act subject to threshold exemption. Whereas the commission agent is covered as an agent in terms of section 2(5) of the CGST Act. Further, in terms of section 2(105) of the CGST Act, the supplier shall include an agent acting on behalf of supplier. 4.35 In the present case, the Appellant is supplying the turmeric on behalf of farmers in APMC markets. Thereby, one cannot jump to the conclusion that the Appellant is covered as supplier being agent of farmers and thereby liable to get registered under section 22(1) of the CGST Act. In this connection, mere provisions of section 22 of the CGST Act cannot be considered in isolation but provisions of section 23 and 24 of the CGST Act must also be referred to understand whether an agent of an agriculturist is liable to be registered under the CGST Act, or otherwise. 4.36 In terms of section 23(1)(b) of the CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or agent has been specifically covered under section 24(vii) of the CGST Act, saying it already covered under section 22(1) of the CGST Act would make the provisions of section 24(vii) of the CGST Act as redundant. Hence, one must interpret harmoniously to give effect to all provisions of the CGST Act. Therefore, in the present case, provisions of section 22, 23 and 24 of the CGST Act have to be read together and then the GST liability of an agent of agriculturist needs to be decided. 4.42 In view of this, provision of section 24 of the CGST Act needs to be understood in proper perspective. Accordingly, in terms of clause (vi i) of section 24 of the CGST Act, a person making taxable supply of goods or services on behalf of other taxable persons as an agent or otherwise is liable for mandatory registration. Therefore, the requirement of compulsory registration for commission agent, under the said clause shall arise only when both the following conditions are satisfied:- i. the principal should be a taxable person; and ii. the supplies made by the commission agent should be taxable 4.43 Whereas the turmeric is the produce out of cultivation of land and farmers produci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent should be taxable. Generally, a commission agent under APMC Act makes supplies on behalf of an agriculturist. Further, as per provisions of clause (b) of subsection (1) of section 23 of the CGST Act an agriculturist who supplies produce out of cultivation of land is not liable for registration and therefore does not fall within the ambit of the term taxable person . Thus a commission agent who is making supplies on behalf of such an agriculturist, who is not a taxable person, is not liable for compulsory registration under clause (vii) of section 24 of the CGST Act. However, where a commission agent is liable to pay tax under reverse charge, such an agent will be required to get registered compulsorily under section 24(iii) of the CGST Act.] * Amended and corrected vide C.B.I.C. Corrigendum F. No. CBEC/20/16/04/2018-GST, dated 05.11.2018 4.46 As the CBIC has issued the clarification in terms of powers conferred under section 168(1) of the CGST Act, the same is having legal force. Further, it is specifically clarified that the commission agent of agriculturist is not liable to get registered under GST law except in case of RCM liability. Hence, the intention of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be Agent under schedule I to the MGST Act 2017 and liable to be registered in terms of sub-section (1) of section 22 of MGST Act with regard to supply of goods to the buyer on behalf of the principals. The same issue has been discussed by the Hon., Advance ruling Authority, Karnataka state in case of Morigeri traders. Advance Ruling No. KAR ADRG 23/2019 DATED 12.09.2019. ADDITIONAL SUBMISSION DT. 05.04.2022 BY THE APPELLANT 6.1 That the Respondent, vide their submission dt. 14.03.2022, have accepted that the farmers are carrying out post-harvest activities such as curing, boiling, drying and polishing before selling the turmeric in APMC market or to traders. This fact itself makes clear that the observations and findings of MAAR at para. 5.4 of MAAR Order dt. 22.12.2021 are incorrect. In view of this, it is established that the farmers are carrying out post-harvest operations on turmeric on his own in his land to make it marketable. 6.2 The Respondent has also relied upon the Advance Ruling No. KAR ADRG 23/2019 dated 12.09.2019 issued by the Advance Ruling Authority, Karnataka State in case of Morigeri Traders. The Appellant submits that the reliance placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that all provisions of the law have to be read and understood in harmonies way so that the specific provisions does not become redundant: and the intention of law makers behind the same is honored. Whereas the Central and State-Government GST Departments have specifically clarified that the agent is also not liable to get registered, where the principal is not liable to get registered. As the said AR Order has failed to understand, explain and refer the legal provisions and the clarifications as mentioned hereinabove, the conclusion is also not justifiable, not applicable and cannot be relied upon. In this connection, the Appellant has already made detailed submissions in Ground No. 11 of the appeal. PERSONAL HEARING DT. 07.04.2022 7.1 The personal hearing in the matter was conducted on 07.04.2022 in virtual mode via Video Conferencing, which was attended by Shri Deepak Naik, Shri S.K. Patil, and Shri Sunil Javalekar on behalf of the Appellant, wherein the Appellant reiterated their earlier submissions made while filing the Appeal under consideration. 7.2 Shri Naik, in the aforesaid hearing, contended that the Appellant, besides being a trader of the impugned p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2019 issued by the Karnataka Advance Ruling Authority in the case of Morigeri Traders, it was argued that the said Advance Ruling referred by the jurisdictional officer is misplaced, and is not applicable in the facts and circumstances of the present case as the impugned product in the cited case is dry chilly, and not dry turmeric, which is the impugned product in the case under consideration. 7.3 Shri Naik also sought to file additional submissions with respect to a query raised by the Bench as to how the question of the taxability attributable to the trading of the impugned product undertaken by the Appellant as a commission agent to the farmers would get covered under the set of questions asked by the Appellant before the Authority for Advance Ruling at the time of filing Advance Ruling Application. ADDITIONAL SUBMISSION DT. 08.04.2022 BY THE APPELLANT POST P.H. 8.1 The Appellant holds 2 separate licenses (1.) as a Trader (2.) as a Commission Agent (Artiya/Adatya) issued by the APMC Authority concerned. As a Trader, Appellant has no dispute regarding registration and paying GST on the sale of Turmeric. However, Appellant had doubts and no clarity about applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; 9.2 On perusal of the aforesaid definition of the term agricultural produce , it is observed that agricultural produce definition contains the expansion term any before the term produce , which clearly imparts a very wide connotation to the term agricultural produce under the GST law. The only constraint for any produce, to qualify for the agricultural produce , is that, either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. 9.3 In the instant case, the impugned product is Turmeric (whole), which is supplied by the farmers in the APMC by availing the services of the Appellant, who acts as an authorised commission agent in the sale/purchase of the impugned commodity in the APMC, Sangli. It has been submitted by the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avit and the declaration made by the said organisation to the effect that various processes, such as, boiling, drying and polishing of fresh harvested turmeric are carried out by farmers in their farms to make the turmeric marketable, it is established beyond any doubt that the post-harvesting processes are carried out by the farmers or producers themselves on their farm. 9.5 Now, next thing, which is to be ascertained is, as to whether the said post-harvesting processes carried out by the farmers alter the essential characteristics of the turmeric or not. In this regard, the Appellant has submitted that the said post-harvesting processes carried out on the raw turmeric do not alter the essential characteristics of the turmeric. In order to support their contention, they have furnished a Laboratory Test Reports in respect of the tests performed on the samples of raw turmeric and dry turmeric. On perusal of the said Test Reports, it is observed that there is no difference between the essential characteristics of the raw turmeric and the dried turmeric as oil content and the curcuminoid content are invariably present in both the samples, though in different concentration. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %). 10.1 Now, we proceed to decide the second issue as to whether the services rendered by the Appellant as a Commission Agent in APMC, Sangli, are liable to GST in terms of SI. 54 Heading 9986 of Notification No. 12/2017 CT(R) dated 28.06.2017 read with SI. No. 24 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017. For this, we would first like to refer to the relevant entry of the Notification No. 12/2017 CT(R) dated 28.06.2017 as well as that of the Notification No.11/2017-C.T. (Rate) dated 28.06.2017. The relevant entry of the exemption notification no. 12/2017-C.T. (Rate) dated 28.06.2017 is being reproduced hereinafter for ease of reference: SI.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Service Rate (per cent.) Condition 54 Heading 9986 Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of (a)........... To (e) .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e F.No. CBEC/20/16/04-GST dated 05.11.2018. The relevant extract of the aforesaid corrigendum is being reproduced hereinunder for the sake of reference: Further, according to clause (vii) of section 24 of the CGST Act, a person is liable for mandatory registration if he makes taxable supply of goods or services or both on behalf of other taxable persons. Accordingly, the requirement of compulsory registration for commission agent, under the said clause, shall arise when both the following conditions are satisfied, namely:- (a) the principal should be a taxable person; and (b) the supplies made by the commission agent should be taxable; Generally, a commission agent under APMC Act makes supplies on behalf of an agriculturist. Further, as per clause (b) of sub-section (1) of section 23 of the CGST Act, an agriculturist who supplies produce out of cultivation of land is not liable for registration and therefore does not fall within the ambit of the term taxable person . Thus, a commission agent, who is making supplies on behalf of such an agriculturist, who is not a taxable person, is not liable for compulsory registration under clause (vii) of section 24 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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