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2020 (6) TMI 678 - AAAR - GSTDetermination of value of second hand goods - Applicability of Rule 32(5) of CGST Rules,2017 - sale of Paintings bought from individual collectors and connoisseur - Antique jewellery, watches and books - Collectibles and Memorabilia - interpretation of statute - scope of phrase 'where no input tax credit has been availed on the purchase of such goods' - challenge to AAR decision - HELD THAT - The only conclusion we can draw from the order of the AAR is that they seem to have been swayed by the fact that antique watches, painting and jewelry are valuable products which cannot be classified in the category of second-hand or used . Also the fact that there is a separate tariff heading for Antiques in the form of tariff heading code 97060000 covering Antiques exceeding 100 years seems to have influenced them. However, we wish to point out that the classification of the goods does not have anything to do with the application of rule 32 (5). The question of whether the rule will apply has to be decided independently of the fitment of the product. There is nothing in rule 32 (5) which says that it is not applicable to valuable or precious objects or objects having antique value. It is a settled principle of jurisprudence that when the words of a statute are unambiguous and only one reasonable meaning can be given to it, then the courts are bound to give effect to that meaning. Such words have to be interpreted in their natural and ordinary sense. Therefore, the term second-hand and used has to be given its ordinary meaning and nothing more is to be attributed to it especially when the legislature has not chosen to expand or contract its meaning. Antique pieces are also second-hand and used by people before they come in the market. The paintings are bought by the appellant from individual art collectors. It presupposes that the art collectors have bought it second-hand or used and then sold it to the appellant. It would be an entirely different thing if the appellant has bought the paintings from the artists themselves. However, this is not the fact before us and we go entirely by the submissions of the appellant that they have bought it from individual art collectors. If such is the case, then there are no grounds to say that they are not second-hand or used. All the categories- valuable paintings, antique watches, antique jewelry, though falling under the category of valuable goods, are at the same time also second hand or used goods and therefore they cannot be denied the benefit of rule 32(5). We feel that the term antique books is evocative enough to describe what it contains and the appellant can apply Rule 32(E) to it. The AAR has not given any ruling on collectibles/memorabilia and collectible books; the reason being given is that no specific details of such goods are given. In the grounds of appeal presented before the AAR, the appellant has described such goods as only collectibles and memorabilia and collectibles . They have not dwelt at length as to what commodities are covered in that category. The appellant has stated that collectibles and memorabilia encompasses clothing, support equipment, spectacles, accessories etc. The above description is of general nature. The appellant has not given any further description as to whether they are bought from individual art collectors or not. Also, the appellant has asked for separate ruling on collectible books and antique books. It is not known whether they are same or not. Also no specific explanation is given as to what is the difference between collectible books and antique books. The ruling of AAR has to be upheld.
Issues Involved:
1. Classification of goods. 2. Applicable GST rates on goods. 3. Applicability of Rule 32(5) of the CGST Rules, 2017 for valuation. Issue-Wise Detailed Analysis: 1. Classification of Goods: The Appellant, dealing in various goods such as paintings, vintage collectibles, sculptures, classic miniatures paintings, fine writing instruments, vintage timepieces, celebrity memorabilia, aristocratic jewellery, and vintage cars, sought advance ruling on the classification of these goods. The AAR classified these goods under specific HSN codes: - Paintings: HSN code 9701 - Old cars: HSN code 8703 - Old jewellery: HSN code 7113 - Antique jewellery: HSN code 9706 00 00 - Old watches: HSN code 9101, 9102 - Antique watches: HSN code 9706 00 00 For collectibles and collectible books, the AAR did not provide a classification due to the absence of specific details. 2. Applicable GST Rates: The AAR determined the applicable GST rates for the goods as follows: - Paintings: 12% - Old cars: 18% (subject to conditions in Notification No. 8/2018 - CT(R) dated 25.01.2018) - Old jewellery: As applicable to HSN code 7113 - Antique jewellery: 12% - Old watches: 18% - Antique watches: 12% For collectibles and collectible books, the AAR did not specify the applicable rates due to the lack of detailed information. 3. Applicability of Rule 32(5) of the CGST Rules, 2017: The primary contention of the Appellant was whether they could discharge tax liability on the difference between the sales and purchase price, considering the goods as second-hand under Rule 32(5) of the CGST Rules, 2017. The AAR's ruling on this matter was mixed: - Paintings: Rule 32(5) is not applicable. The Appellant must pay tax at 12% on the sale value. - Old cars: Rule 32(5) is applicable, subject to conditions in Notification No. 8/2018 dated 25.01.2018. - Old jewellery: Rule 32(5) is applicable. - Antique jewellery: Rule 32(5) is not applicable. The Appellant must pay tax at 12% on the sale value. - Old watches: Rule 32(5) is applicable. Tax will be paid on the difference between the sale price and purchase price. - Antique watches: Rule 32(5) is not applicable. The Appellant must pay tax at 12% on the sale value. - Collectibles and collectible books: The AAR did not answer due to the absence of specific details. Appellant's Arguments: The Appellant argued that the goods in question are "second-hand goods" as defined under Rule 32(5) of the CGST Rules, 2017, and thus, the value of such goods should be the difference between the sale price and the purchase price. They contended that the AAR's interpretation was incorrect and against the intent of the legislation, which aims to tax value addition rather than the full sale value. Respondent's Submissions: The Respondent supported the AAR's ruling, emphasizing that antique goods have inherent value and cannot be treated as second-hand goods. They argued that the specific class of antique goods has been incorporated in the GST schedule, and thus, Rule 32(5) is not applicable. Appellate Authority's Findings: The Appellate Authority examined the contentions and found that the terms "second-hand goods" and "used goods" are not defined in the CGST Act or Rules but should be understood in their common parlance meaning. The Authority concluded that: - The Appellant is eligible to take benefit of Rule 32(5) for paintings, antique jewellery, and antique watches, as they are second-hand or used goods. - For collectibles and collectible books, no ruling could be given due to the absence of specific details. Order: The Appellant is eligible to take benefit of Rule 32(5) for the specified goods except for collectibles and collectible books, where no ruling could be provided. The AAR's observations on these items were upheld.
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