1. In terms of Section 102 of the Telangana Goods and Services Tax Act, 2017 (TGST Act, 2017 or the Act), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.
2. Under Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only
(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling;
(b) On the concerned officer or the jurisdictional officer in respect of the applicant.
3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.
4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.
Subject: GST – Appeal filed by M/s. Narsimha Reddy & Sons., Flat No. 201, Pragathi Chambers, Basheerbagh, Hyderabad – 500001, Telangana State under Section 100 (1) of TGST Act, 2017 Against Advance Ruling TSAAR Order No.04/2022, dated 11.2.2022 passed by the Telangana State Authority for Advance Ruling – Order-in- Appeal passed – Regarding.
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1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Narsimha Reddy & Sons., Flat No. 201, Pragathi Chambers, Basheerbagh, Hyderabad, Telangana – 500029 (hereinafter referred in short as “the appellant”).
2. The appellant is registered under GST having GSTIN number 36 AAACG3220D1ZB. M/s Narsimha Reddy & Sons are primarily engaged in production and processing of agricultural seeds. In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seed in various facilities after processing them. In the process they also transport the seeds by engaging a GTA. The appeal is filed against the Order No.04/2022 dated 11.2.2022 (“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and services Tax) (“Advance Ruling Authority” / “AAR” / “lower Authority”).
Brief Facts:
3. The applicant has sought clarification before the lower authority in respect of following activities vis a vis their taxability under Goods and Services Tax Act:
4. The lower authority, after following the due process of law, has inter alia, held that as under:
5. Based on the above observations, the lower authority has ruled as under:
Questions | Ruling |
1) Whether the seeds received, processed, packed and returned by the Applicant, as job worker, as seeds for sowing are ‘agricultural produce’ in terms of the definition under the Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017 and 11/2017- Central Tax (Rate) dated 28-06-2017. | Seed is not an agricultural produce in terms of the definition in the said notifications. |
2) Whether the storage of the seeds in the storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the applicant – job worker on job work basis are exempt from payment of GST in terms of Sl.No.54(e) of the Notification No. 12/2017- Central Tax (Rate) dated 28-06 2017 and Sl.No.24(1)(e) of the Notification No. 11/2017- Central Tax (Ret) dated 28-06-2017 or any other entry/entries of the above notifications. | Not exempt as discussed above. |
3) Whether the processes, namely, cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the applicant – job worker on job work basis, are exempt from payment of GST in terms of Sl.No.54(c) and (h) of the Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017 read with the definition of “agricultural produce” there under and Sl.No.24(1)(c), (h) and (iii) of the Notification No. 11/2017- Central Tax (Rate)dated 28-06-2017 read with the definition of “agricultural produce” there under or any other entry/entries of the above notifications. | Not exempt as discussed above. |
6. Aggrieved by the above rulings, the appellant is before this Authority. The grounds of appeal on which the appellant relies, interalia, are as under:
Whether the appeal filed in time
7. As per the application, the date of the impugned order is 18.2.2022 and the appeal is filed on 4.3.2022. Hence, the appeal is found to be in time.
Personal Hearing:
8. A personal hearing was held on 19.9.2022. Shri V. Bhaskar Reddy, Advocate and Shri D. Bhanu Pratap, Advocate & Authorised Representative appeared for the personal hearing. The Ld. Advocates reiterated the written submissions made and requested to consider the same.
Discussions & Findings
9. This authority has carefully gone through the case records and submissions made by the appellant.
10. As brought out above, the appellants are in the business of production and sale of agricultural seeds. In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seeds in various facilities after processing them. In the process they also transport the seeds by engaging a GTA. The applicant filed an application before the lower authority for a ruling on their activities with reference to exemption/taxability under Goods and Services Tax Act. Since, the ruling of the lower authority was pronounced against the interests of the applicant, they filed the present appeal before this authority.
11. This authority observes that the whole gamut of dispute is around exemption contained in the two Notifications i.e No. 11/2017-CT(R), dt. 28.6.2017 and No. 12/2017-CT(R), dt. 28.6 2017. Both the notifications have defined “agriculture produce” as 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.
12. The appellant contends that their activities falls under the definition of ‘agriculture produce’, and hence, they are eligible for exemption under above two notifications. As against this contention, the lower authority held that the activities are outside the purview of definition of ‘agriculture produce’ and hence, no exemption is available to the applicant.
13. Hence, it becomes imperative to analyse the definition of ‘agriculture produce’. The primary factory which needs to be understood is that to get into the bracket of agriculture produce for claiming exemption, the main condition is that either no processing is done on the produce 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.
14. In the present case, as per the written submission, the applicant takes organizing the production of agricultural seeds, storing the agricultural seeds, drying of maize cobs, it segregates part of the agriculture produce based on its quality and germination strength and undertakes preservation process such as clearing, drying, grading and chemical processing to make the seed fit for sowing purpose and to have better shelf life. The applicant has pleaded that till the chemical processing is taken up the seed retains the character of the agriculture produce on par with any agriculture produce and they are entitled for exemption in respect of services availed by them. Had the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant.
15. Further, the case law relied by them is not applicable on hand in as much as the issue dealt therein was relating to supply of milk and the issue in the present case is services with relation to seed.
16. In view of the above, we pass the following order.
ORDER
The order passed by the lower authority is upheld. The subject appeal is disposed accordingly.