2020 (1) TMI 139 - AAAR - GST

Agricultural produce or not - raw whole yellow peas - services by way of handling the imported raw whole yellow peas - whether the service exempt under Sl. No. 54(e) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1136 FT dated 28.06.2017), as amended from time to time - challenge to AAR decision - HELD THAT - There is no dispute that raw whole yellow peas are agricultural produce covered under serial no. 45 of the Rate Notification and are exempted goods. However, this particular consignment of raw whole yellow peas was harvested in foreign land and the concerned primary market or the farmers' market is located in that foreign land - it is observed from a combined reading of entry number 54 of the Exemption Notification and definition 2(d) of the Exemption Notification that all services and processes are excluded beyond the primary market. The term primary market in common parlance refers to farmers market like mandi or arhat being a place where the farmers directly sell their product to the buyers like wholesalers. millers. food processing units, etc. The spirit of the legislature was intended to boost the agricultural sector of the home country and not that of a foreign land - The primary market in the instant case being located in foreign shores does not conform to the definition as stated above. Further there is no evidence that the grains have not undergone any type of treatment before leaving the foreign country from where they have been imported into India. There are no infirmity in the ruling pronounced by the WBAAR - appeal fails.

Summary

Issues:
1. Whether imported raw whole yellow peas are agricultural produce?
2. Whether services by way of handling the imported raw whole yellow peas are eligible for exemption under the Exemption Notification?

Analysis:
1. The Appellant, a stevedore, sought an advance ruling on whether imported raw whole yellow peas are agricultural produce and eligible for exemption under the GST Act. The WBAAR ruled that the Exemption Notification does not apply to the Appellant's service after the cargo of yellow peas reaches the port of entry.

2. The Appellant appealed the ruling on various grounds, including the minor percentage of broken grain in the consignment, interpretation of the primary market, and the definition of agricultural produce. They cited a judgment from AAR, Andhra Pradesh, stating that services related to exempted goods are eligible for exemption.

3. During the hearing, the Appellant provided a test report showing broken grain and split kernel percentages, arguing that the product is exempted from taxation under the GST Act. They emphasized that services associated with marketing such exempted products should also be exempted.

4. The Respondent argued that the percentage of split kernel was significant, altering the essential characteristics of agricultural produce. They contended that the AAR judgment from Andhra Pradesh was not applicable in this case.

5. The Appellate Authority examined the submissions and found that while raw whole yellow peas are agricultural produce, the primary market for the consignment was in a foreign land, not conforming to the definition under the Exemption Notification. As no evidence showed the grains had not undergone treatment before import, the appeal was dismissed.

Conclusion:
The Appellate Authority upheld the ruling that the Appellant's service is not eligible for exemption under the Exemption Notification due to the location of the primary market and lack of evidence regarding treatment of the imported goods. The appeal was dismissed, and the order was sent to both parties for information.