2020 (5) TMI 216 - AAR - GST

Maintainability of application - question raised in the application is already pending before the Jurisdictional Authority - Auction of agricultural produce (cotton) conducted by the Tiruchengode Agricultural Producers Co-operative Marketing Society - Purchase or Sale involved in the process or not - reverse charge mechanism in the capacity of being an auctioneer - levy of service tax on receipt of Commission, Godown rent, Interest, in respect of service provided to agricultural produce - levy of tax on reverse charge basis on merchants (Registered person) who directly purchase cotton from the agriculturist through auction conducted by the society. HELD THAT - As per the first proviso to Section 98(2) of CGST/TNGST Act 2017 the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act - In the case at hand, it is established that on the issues raised by the applicant before this authority, the Central Tax authorities have initiated proceedings and the same is pending before the Jurisdictional authority at the time of filing of this application - The applicant has also accepted this fact during the personal hearing, though they have not mentioned the same in the application (S1.No. 17). The application is not admitted and rejected under first proviso to Section 98 (2) of the CGST/TNGST Act 2017, as the issues on which Advance Ruling is sought by the applicant is already pending before the appropriate authority.

Summary

Issues:
1) Whether there is any purchase/sale involved in the process of auction of agricultural produce (cotton) conducted by the Tiruchengode Agricultural Producers Co-operative Marketing Society?
2) Whether the Society is liable to pay tax under Reverse Charge Mechanism as an auctioneer?
3) Whether service tax is payable on receipt of Commission, Godown rent, Interest, in respect of service provided to agricultural produce?
4) Whether the merchants who directly purchase cotton from the agriculturist through the society are liable to pay tax on the basis of Reverse Charge Mechanism?

Analysis:

Issue 1:
The Tiruchengode Agricultural Producers Co-operative Marketing Society acts as an agent or auctioneer for the auction of agricultural produce. The society does not engage in buying or selling cotton but facilitates the auction process. The society does not have ownership rights over the goods and only acts as a middleman between the seller and buyer. The society's role is limited to conducting bids and bringing together the parties involved in the transaction. Therefore, there is no purchase/sale involved in the auction process conducted by the society.

Issue 2:
The society, functioning as an auctioneer, is not liable to pay tax under the Reverse Charge Mechanism. They operate on a commission basis and do not issue tax invoices as per the CGST/SGST Act. The society's services are exempted from tax under specific notifications, and they are considered as a pure agent under Rule 33 of CGST Rules 2017. The merchants who directly purchase cotton from the agriculturist through the auction are responsible for tax payment under the Reverse Charge Mechanism.

Issue 3:
Regarding the payment of service tax on commission, godown rent, interest, etc., the society is not liable as they are not involved in direct sales or purchases of goods. The collections made by the society from merchants are not considered as sale considerations but as reimbursements for services provided. The society's activities fall under the category of conducting auctions on a commission basis as per their bylaws.

Issue 4:
The merchants who purchase cotton directly from the agriculturist through the society are responsible for tax payment under the Reverse Charge Mechanism. The society's role is limited to facilitating the auction process, and they are not considered as principal buyers or sellers. The society's registration under GST does not make them liable for tax under the Reverse Charge Mechanism.

The Advance Ruling Authority rejected the application as the issues raised were already pending before the appropriate authority, as per the provisions of the CGST/TNGST Act 2017. The application was not admitted due to the ongoing proceedings initiated by the Central Tax authorities, rendering the ruling unnecessary at that time.