TMI Blog2023 (5) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... by of identification of the person to whom the services have been rendered. Furthermore, the definition also brings the agent within the ambit of recipient where he/she is acting on the behalf of the recipient in relation to the goods or services supplied - As per clause (94) of section 2 of the CGST Act, registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number. So any person who has obtained registration under section 25 of the CGST Act shall be covered by the said definition. As per clause (5) of section (2) of the CGST Act, 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. The definition of agent includes an arhatia and further postulates that he/she should carry on business of supply or receipt of goods or services on behalf of another. So, in the issue under consideration, the Kacha Arhtiya shall fall within the definition of an agent provided he/she carries on business on the behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cotton primarily for trading and hence is having much higher level of business volume and turn over. This also logically leads to fixing the liability of GST on Pakka Arhtiya in terms of sub-section (3) of Section 9 of CGST Act. Appeal dismissed. - SH. RAJESH PURI, AND SH. KAMAL KISHOR YADAV, IAS, MEMBER Represented By : Sh. Rishab Singla, Advocate PROCEEDINGS At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act, 2017 and the Punjab Goods and Services Tax Act, 2017, (hereinafter referred to as, CGST Act and PGST Act ) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the corresponding similar provisions under the PGST Act. A. Facts of the Case: M/s. Bansal Industries, as detailed in the table above and hereinafter referred to as appellant is a partnership firm engaged in the business of ginning and pressing of cotton as well as crushing of oil seeds (Cotton Seeds obtained in the ginning of raw cotton (narma)). The appellant had requested an advance ruling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrated above. On being asked, whether Kacha Arhtiya or the farmer is raising any invoice on the appellant to which he replied that there is no separate invoice being raised by the Kacha Arhtiya or the farmer but the bill of Kacha Arhtiya is itself an invoice. (v) The cotton is eventually purchased by the Kacha Arhtiya and payment is made to the farmer. The advocate submitted that Kacha Arhtiya is an agent of farmer. He pleaded that similar dispute had come up before the Appellate Authority for Advance Ruling, Haryana in the case of M/s. Bhaktawar Mal Kamra and Sons and the said authority vide order dated 30th of August, 2018 had held that the commission agent is liable to be registered under the CGST Act, 2017. (vi) The appellate authority desired to know as to whether farmer advices Kacha Arhtiya to sell the cotton not below a particular price, for which the advocate replied that the farmer is not present during the bidding process and Kacha Arhtiya sells the goods as per the prevailing market prices. D. Discussion and Findings: 1. The primary issue that emerges from the appeal filed by the appellant is regarding the interpretation and the applicability of the Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification so that a clarity can be developed regarding the identification of the person liable to pay tax on RCM. S.No. Tariff item, sub-heading, heading or Chapter Description of supply of Goods Supplier of goods Recipient of supply 4A 5201 Raw Cotton Agriculturist Any registered Person 5. Before delving into the discussion on the matter, it is noted that the said entry was inserted in the Notification No. 4/2017-Central Tax (Rate) dated 28th June, 2017 only with effect from 15th of November, 2017 which implies that the transactions effected before the said date were not falling within the purview of the said entry. 6. Now, looking at the said entry there are certain points that are required to be considered in order to have a comprehensive view of the said entry as well as the issue under consideration. The amplitude of said entry is limited to the Raw Cotton where the supplier of goods is the Agriculturist and the recipient of supply is any registered pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied 11. The point to be noted here is that the definition of recipient is primarily attributed to the payment of consideration and the person who is liable to pay such consideration. Where the element of consideration does not come into play, the definition ventures into the aspect of identification of the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available, In the case of services, the same is effected by of identification of the person to whom the services have been rendered. Furthermore, the definition also brings the agent within the ambit of recipient where he/she is acting on the behalf of the recipient in relation to the goods or services supplied. 12. As per clause (94) of section 2 of the CGST Act, registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number. So any person who has obtained registration under section 25 of the CGST Act shall be covered by the said definition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying goods or receiving goods on behalf of the person. The aspect of on behalf of has been examined in the Circular No. 57/31/2018-GST dated 04th September, 2018. The said circular draws inspiration from the Indian Contract Act, 1872 which is the font and source of the principal-agent relationship and discusses the said relationship in the context of para no. 3 of the Schedule I of the CGST Act wherein the supply or receipt of goods by an agent on behalf of the principal without consideration has been deemed to be a supply. The said circular lays down an important parameter for determination of said supply in para 7 which is reproduced hereunder: It may be noted that the crucial factor is how to determine whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal. Since in the commercial world, there are various factors that might influence this relationship, it would be more prudent that an objective criteria is used to determine whether a particular principal-agent relationship falls within the ambit of the said entry or not Thus, the key ingredient for determining relationship under GST would be whether the invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he logic as an agent is working in the capacity of having authority to act on behalf of principal. In other words, an agent enters into the shoes of principal. Thus, for the purpose of the said notification, the expression agriculturist would include the agent who acts on the behalf of the said person. 19. The contention of the appellant is that the Kacha Arhtiya is an agent of the agriculturist within the scope of circular No. 57/31/2018 dated 04th of September, 2018 and is therefore, the recipient of goods from the agriculturist and liable to pay GST under reverse charge mechanism. It needs to be comprehended that the said Circular only clarifies as to whether agent is required to be registered or not under the CGST Act. The crucial factor has been clarified in the last line of para 7 is whether the agent has authority to pass on or receive the title of goods on behalf of principal . ln cases where agent issues the invoices on behalf of buyer, he gets a authority to pass on title on behalf of principal and therefore, he is covered under the definition of agent for the purpose of schedule 1 but in the cases where the agent does not get any authority to pass on title of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich he receives from the agriculturist without getting any title over the raw cotton. Therefore, in terms of above entry of Schedule Il, this transfer is deemed as supply of services for the purpose of CGST Act, 2017. 21. This brings us to the RCM Notification No. 4/2017-CT dated 28th June, 2017 as reproduced in para 4 of the order. As is abundantly clear from the notification, RCM liability is in respect of supply of goods and not in respect of services in connection with goods. Hence, as discussed above, the transaction between an agriculturist and that of Kaccha Arhtiya is a transaction involving supply of services and therefore, by no stretch of imagination, it could be covered under RCM Notification No. 4/2017-CT dated 28th June, 2017 as reproduced in para 4 of this order. 22. Even, for the sake of argument, if the contention of the appellant is given credence, then it would emerge that an agent who is acting on behalf of principal, would be liable for the GST liability which would perforce imply that the principal i.e. the agriculturist is responsible for discharge of GST liability, This will defeat the very purpose of reverse charge mechanism as provided under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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