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2022 (2) TMI 778 - AAR - GSTExemption from GST - seeds produced/ procured and processed, packed and sold by the Applicant as seeds for sowing are agricultural produce - Applicability of N/N. 12/2017- Central Tax (Rate) dated 28-06-2017 and 11/2017- Central Tax (Rate) dated 28-06-2017 - storage of the seeds in the leased storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the job worker on job work basis - Applicability of Sl.No.54(e) of the Notification No. 12/2017- Central Tax (Rate)dated 28-06 2017 and Sl.No.24(1)(e) of the Notification No. 11/2017- Central Tax (Ret)dated 28-06-2017 - processes, namely, cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the job worker on job work basis - Sl.No.54(c), (h) of the Notification No. 12/2017- Central Tax (Rate)dated 28-06-2017 read with the definition of agricultural produce there under and Sl.No.24(1)(c), (h) and (ill) of the Notification No. 11/2017- Central Tax (Rate)dated 28-06-2017 read with the definition of agricultural produce thereunder or any other entry/entries - transport of seeds from the farm lands to storage facility/godown of the applicant, transport of seeds from one storage facility/godown of the applicant to the other storage facility/godown of the applicant, transport of packed seeds from storage facility/godown of the applicant to the distributor and transport of sales-returns, if any, (heading No.9965 or 9967) - Sl.No. 21(a) of the Notification No. 12/2017- Central Tax (Rate)dated 20-06-2017 - processes undertaken by the applicant, namely, cleaning, drying, grading, treatment with chemicals and packing (heading No.9986), for himself - supply or not - HELD THAT - The applicant is supplying goods which are produce of cultivation of plants. However they are of seed quality and not grain, therefore further they are not meant for food, fibre, fuel or raw material for further processing. In the definition of agricultural produce, the word raw material is used which is a general word and is in the company of specific words i.e., food, fibre and fuel. These specific words indicate direct consumption by human or in industry but not in cultivation. The Hon ble Supreme Court of India in the case of GODFREY PHILLIPS INDIA LTD. AND ANOTHER VERSUS STATE OF UP. AND OTHERS (AND OTHER WRIT PETITIONS AND APPEALS) 2005 (1) TMI 391 - SUPREME COURT , held that when 2 or more words susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from and are qualified by each other, the meaning of the general word being restricted to a sense analogous to that of the less general. In this case, it was held that even in case of inclusive definition, principle of noscitur a sociis can be applicable - Applying this rule to the present facts, supply of seed does not fall under the definition of agricultural produce as the seed does not fulfill the utilities prescribed therein. The facts presented by the applicant clearly indicate that the processing done by them to turn grain into seed quality goods is different from the processing done by a cultivator or producer of grain for primary market i.e., agricultural mandi or agricultural market yard. Therefore even on this count, the seed quality goods produced by them cannot be treated as agricultural produce. The seeds produced by them do not qualify as agricultural produce and hence 1. Storage of seeds in the storage facility/godown, loading/unloading and packaging by job worker are not exempt under a. Serial No. 54E of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; b. Serial No. 24(i)(e) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. 2. Cleaning, drying, grading and treatment with chemicals carried out by a job worker or on job work basis are not exempt under a. Serial No. 54(c)(h) of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; b. Serial No. 24(i)(c) (h) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. 3. Transportation of seeds from farm to storage facility and then transportation of packed seed from storage facility to distributors is not exempt under a. Serial No. 21(a) of Notification No.12/2017, as this entry provides exemption on transportation services to agricultural produce and from the foregoing discussion it is established that seed is not agricultural produce in terms of the definition used in the notification, the transportation services engaged by a seed company are not exempt. 4. If processing is undertaken by an applicant himself for in house seed production, there is no supply and hence exempt.
Issues Involved:
1. Classification of seeds as agricultural produce. 2. GST exemption on storage, loading, unloading, and packing of seeds. 3. GST exemption on processes like cleaning, drying, grading, and chemical treatment of seeds. 4. GST exemption on transportation of seeds. 5. Taxability of processes undertaken by the applicant for self-use. Issue-wise Detailed Analysis: 1. Classification of Seeds as Agricultural Produce: The applicant, engaged in the production and sale of agricultural seeds, sought clarification on whether their seeds qualify as "agricultural produce" under Notification No. 12/2017 and 11/2017. The Seed Act, 1966 defines seeds used for sowing, but the GST law distinguishes between "seed" and "grain." Seeds are included in Serial No. 79 of Notification No. 02/2017, exempting "all goods of seed quality." However, the definition of "agricultural produce" under Notification No. 12/2017 requires that the produce must be for food, fibre, fuel, raw material, or similar products, and should not undergo further processing beyond what is typically done by a cultivator. The applicant's seeds, meant for sowing and not for food, fibre, or fuel, do not meet this definition. Therefore, the seeds produced by the applicant do not qualify as agricultural produce. 2. GST Exemption on Storage, Loading, Unloading, and Packing of Seeds: The applicant queried whether these activities, performed by job workers, are exempt under Serial No. 54(e) of Notification No. 12/2017 and Serial No. 24(1)(e) of Notification No. 11/2017. The ruling clarified that these entries pertain to services related to the cultivation of plants and rearing of animals for food, fibre, fuel, raw material, or agricultural produce. Since the applicant's seeds do not qualify as agricultural produce, the storage, loading, unloading, and packing services are not exempt from GST. 3. GST Exemption on Processes like Cleaning, Drying, Grading, and Chemical Treatment of Seeds: The applicant sought clarification on the exemption status of these processes under Serial No. 54(c), (h) of Notification No. 12/2017 and Serial No. 24(1)(c), (h) of Notification No. 11/2017. The ruling stated that these entries also pertain to services related to the cultivation of plants and rearing of animals for food, fibre, fuel, raw material, or agricultural produce. As the applicant's seeds do not qualify as agricultural produce, these processes are not exempt from GST. 4. GST Exemption on Transportation of Seeds: The applicant queried whether the transportation of seeds from farms to storage facilities, between storage facilities, to distributors, and for sales returns is exempt under Serial No. 21(a) of Notification No. 12/2017. The ruling clarified that this entry provides exemption for transportation services related to agricultural produce. Since the applicant's seeds do not meet the definition of agricultural produce, the transportation services are not exempt from GST. 5. Taxability of Processes Undertaken by the Applicant for Self-Use: The applicant sought clarification on whether processes like cleaning, drying, grading, chemical treatment, and packing, undertaken for self-use, constitute a taxable supply under Section 7(a) of the CGST Act, 2017. The ruling clarified that supply to oneself is not considered a taxable supply and is therefore exempt from GST. Summary of Rulings: 1. Seeds produced by the applicant do not qualify as agricultural produce. 2. Storage, loading, unloading, and packing of seeds by job workers are not exempt from GST. 3. Processes like cleaning, drying, grading, and chemical treatment of seeds by job workers are not exempt from GST. 4. Transportation of seeds is not exempt from GST. 5. Processes undertaken by the applicant for self-use are not considered taxable supplies and are exempt from GST.
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