2020 (5) TMI 218 - 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 Namakkal 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 society?
2) Whether the society is liable to pay tax under Reverse Charge Mechanism as an auctioneer?
3) Whether service tax is payable on commission, godown rent, interest, in respect of services 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:
1) The cooperative society, acting as an auctioneer, facilitates the auction of agricultural produce owned by agriculturists. The society does not have ownership rights over the goods and only acts as an intermediary between the seller and buyer. The society does not issue tax invoices and does not have the power to pass a valid title over the goods. Merchants directly purchasing goods through the auction are liable for tax under Reverse Charge Mechanism.

2) The society, as per its bylaws, functions as an auctioneer on a commission basis and does not engage in direct buying or selling of cotton. The society's transactions are related to the supply of exempted services to agricultural produce. They claim to act as a pure agent under Rule 33 of CGST Rules 2017. The society is exempted from levy of tax on commission, handling charges, godown rent, insurance, and interest on late payments.

3) During the hearing, the State Jurisdictional Authority classified the society as providing "Auctioneering Services" under SAC 9961, while the Central Jurisdictional Authority stated that the society is liable to pay GST under Reverse Charge Mechanism. The investigations by tax authorities are ongoing, and the society's status as an agent or auctioneer is under scrutiny.

4) The application seeking an advance ruling was not admitted by the Authority as the issues raised were already pending before the appropriate tax authorities. As per Section 98(2) of the GST Act, the Authority cannot admit an application when the questions raised are already under consideration in ongoing proceedings. Therefore, the application was rejected without delving into the merits of the case.

Conclusion:
The Authority rejected the application for advance ruling as the issues were already being examined by the Central Tax authorities. The cooperative society's status as an auctioneer, liability under Reverse Charge Mechanism, and tax obligations on services provided to agricultural produce remain subject to the ongoing investigations by the tax authorities.