2020 (5) TMI 217 - 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 Rasipuram 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 cooperative 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 auction conducted by the society are liable to pay tax on the basis of Reverse Charge Mechanism?

Analysis:
The cooperative society, registered under the Tamil Nadu Co-operative Societies Act, acts as an auctioneer for the agricultural produce of its member agriculturists. The society does not own the goods, merely facilitates the auction process, and does not issue tax invoices. It functions on a commission basis and does not collect or pay tax, as per the bylaws. The society reimburses sale proceeds to agriculturists and collects charges from merchants, which are not considered as sale consideration.

The applicant claims their services are exempted under specific notifications and that they act as a pure agent. They cite relevant case laws and government letters to support their contention. The society's role as an auctioneer is emphasized, and they argue they are not liable to pay tax under Reverse Charge Mechanism due to the exempted nature of their services.

During the proceedings, both State and Central Jurisdictional Authorities provided detailed comments. The State Authority concluded that the society provides "Auctioneering Services" and may not be classified as an agent. The Central Authority stated that the society is liable to pay GST under Reverse Charge Mechanism and merchants are not liable for reverse charge.

The application was further discussed in subsequent hearings, where the Central Authority mentioned ongoing investigations against the applicant. The Authority found that the application cannot be admitted as the issues raised were already pending before the Central Tax authorities at the time of filing.

Therefore, the ruling stated that the application is not admitted and rejected under the first proviso to Section 98(2) of the CGST/TNGST Act 2017, as the issues were already pending before the appropriate authority.