2022 (11) TMI 898 - AAAR - GST

Levy of GST - agricultural produce - seeds received, processed, packed and returned by the Applicant, as job worker - storage of the seeds in the storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the applicant - job worker on job work basis - cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the applicant - date of the impugned order is 18.2.2022 and the appeal is filed on 4.3.2022 - whether the appeal is found to be in time? HELD THAT - In the present case, as per the written submission, the applicant takes organizing the production of agricultural seeds, storing the agricultural seeds, drying of maize cobs, it segregates part of the agriculture produce based on its quality and germination strength and undertakes preservation process such as clearing, drying, grading and chemical processing to make the seed fit for sowing purpose and to have better shelf life. The applicant has pleaded that till the chemical processing is taken up the seed retains the character of the agriculture produce on par with any agriculture produce and they are entitled for exemption in respect of services availed by them. Had the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant. The order passed by the lower authority is upheld - Appeal disposed off.

Issues Involved:
1. Definition and taxability of "agricultural produce" under GST.
2. Exemption eligibility for storage, loading, unloading, and packing services.
3. Exemption eligibility for processes like cleaning, drying, grading, and chemical treatment.
4. Exemption eligibility for transportation of seeds.

Detailed Analysis:

1. Definition and Taxability of "Agricultural Produce" Under GST:
The primary issue is whether the seeds processed by the appellant qualify as "agricultural produce" under Notification No. 12/2017 and 11/2017. The lower authority ruled that seeds do not qualify as agricultural produce because they undergo significant processing, including chemical treatment, which alters their essential characteristics. The appellant argued that seeds are a form of agricultural produce, citing a Supreme Court ruling that treated chemically processed seeds as agricultural produce. However, the appellate authority upheld the lower authority's decision, stating that the processing done by the appellant goes beyond what is typically done by a cultivator or producer and thus disqualifies the seeds from being considered agricultural produce.

2. Exemption Eligibility for Storage, Loading, Unloading, and Packing Services:
The appellant sought clarification on whether services related to the storage, loading, unloading, and packing of seeds are exempt from GST under Sl.No.54(e) of Notification No. 12/2017 and Sl.No.24(1)(e) of Notification No. 11/2017. The lower authority ruled that these services are not exempt because they are related to seeds, which do not qualify as agricultural produce. The appellate authority agreed, emphasizing that the exemption applies to services related to agricultural produce, which the seeds in question are not.

3. Exemption Eligibility for Processes Like Cleaning, Drying, Grading, and Chemical Treatment:
The appellant also sought exemption for processes such as cleaning, drying, grading, and chemical treatment under Sl.No.54(c) and (h) of Notification No. 12/2017 and Sl.No.24(1)(c), (h), and (iii) of Notification No. 11/2017. The lower authority ruled that these processes are not exempt as they are performed on seeds, not agricultural produce. The appellate authority upheld this ruling, noting that the processing done by the appellant, especially the chemical treatment, alters the essential characteristics of the produce, disqualifying it from being considered agricultural produce.

4. Exemption Eligibility for Transportation of Seeds:
The appellant argued that the transportation of seeds from farms to storage facilities, between storage facilities, and to distributors should be exempt under Sl.No.21(a) of Notification No. 12/2017. The lower authority ruled that this transportation is not exempt as it pertains to seeds, not agricultural produce. The appellate authority agreed, stating that the exemption applies to the transportation of agricultural produce, which the seeds are not.

Conclusion:
The appellate authority upheld the lower authority's decision, denying the appellant's claims for exemption under the specified notifications. The seeds processed by the appellant do not qualify as agricultural produce due to the extensive processing they undergo, including chemical treatment. Consequently, services related to storage, loading, unloading, packing, and transportation of these seeds are not exempt from GST. The appeal was disposed of accordingly.

← Previous Next →