2023 (12) TMI 155 - HC - GST

Exemption form GST - services rendered by the 2nd respondent in respect of wheat imported by the petitioner - Scope of Notification No.12 of 2017 Central Tax (Rate) dated 28.06.2017 in particular S.No.54(e) of the said notification - contract between the petitioner and the 2nd respondent for provision of the services - incidence of tax. HELD THAT - The petitioner's entitlement to exemption must be determined by testing whether the services of loading, unloading, packing, storage or warehousing is rendered to agricultural produce or other than agricultural produce and not on the basis of the process the agricultural produce is meant to be subject to in the hands of the petitioner/ importer. In other words if on applying the definition of agricultural produce to the wheat that is imported and if it qualifies as an agricultural produce , the mere fact that the buyer of agricultural produce intended to subject it to various other processes subsequently resulting in conversion of wheat into maida, atta and sooji would not take the services of loading, unloading, packing, storage and warehousing of the agricultural produce out of Serial No. 54(e) of the Exemption Notification. The reasoning in the impugned order of the 1st Respondent results in importing a condition as to the use to which the agricultural produce would be subject to in the hands of the service recipient. The above test is wholly alien to decide whether a commodity would fall within the definition of agricultural produce contained in the above Notification. The impugned Ruling thus suffers from the vice of arbitrariness inasmuch as it has taken into account aspects/ factors which are irrelevant. This Court also finds that the impugned order is flawed inasmuch as it results in adding conditions to exemption notification which is impermissible. Yet another reason the impugned order warrants interference is the fact that the expression marketable employed in the definition of agricultural produce has been misconceived. A reading of the above definition would show that it only indicates that the agricultural produce must be such that it is marketable i.e., capable of being marketed and it is not required of being actually marketed as such. The construction of the Notification in the impugned order of the 1st Respondent results in converting the expression marketable employed in the definition of agricultural produce into marketed , which is impermissible - Applying the above reasoning to the term marketable used in the definition of agricultural produce it would be clear that it only means that the goods in question in the instant case wheat must be capable of being marketed in the primary market and it is not necessary to show that it is actually marketed. This Court is of the view that the impugned order holding that services of loading, unloading, packing etc., rendered in relation to the wheat imported is not entitled to exemption in terms of S.No.54(e) of Notification No.12 of 2017 on the premise that the imported wheat is not meant for primary market as such but it is intended to be converted into maida, atta, sooji etc., in the hands of the recipient i.e., the petitioner herein is unsustainable. The impugned order is set aside - Petition allowed.

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Entitlement to exemption under Notification No.12/2017 for services rendered.

Summary:

1. Maintainability of the Writ Petition:
A preliminary objection was raised regarding the maintainability of the writ petition since the petitioner was not a party before the Advance Ruling Authority. The petitioner argued that the adverse civil consequences resulting from the impugned order, which would ultimately transfer the tax burden to the petitioner, justified the writ petition's maintainability. The Court found that the petitioner, as the service recipient, would indeed suffer direct financial impact, thus granting the petitioner locus standi to challenge the order. The Court cited precedents such as I.D.L. Chemicals Ltd. v. Union of India and M.Amrutham Petroleum Agency v. Additional Deputy Commercial Tax, Puducherry to support this view.

2. Entitlement to Exemption under Notification No.12/2017:
The core issue was whether the services of loading, unloading, packing, storage, or warehousing of imported wheat, which is processed into maida, atta, and sooji, qualify for exemption under S.No.54(e) of Notification No.12/2017. The petitioner argued that the Advance Ruling Authority erred by considering the intended use of the wheat, which is irrelevant to the exemption criteria. The petitioner maintained that the wheat qualifies as "agricultural produce" and is marketable in the primary market, thus meeting the exemption requirements.

The respondents contended that the exemption applies only to services rendered until the products reach the primary market, and since the wheat was intended for further processing, it did not qualify.

The Court found the respondents' interpretation flawed, emphasizing that the exemption should be determined based on whether the services are rendered to "agricultural produce" and not on the intended use of the commodity. The Court held that the impugned order added impermissible conditions to the exemption notification, which should be interpreted based on its clear and unambiguous wording. The Court referenced judgments such as CCE v. Favourite Industries and Commr. of Customs v. Rupa & Co. Ltd. to support this interpretation.

The Court also clarified that "marketable" means capable of being marketed, not necessarily actually marketed, as established in Hindustan Petroleum Corpn. Ltd. v. Union of India and other cases.

Conclusion:
The Court set aside the impugned order, ruling that the services rendered in relation to the imported wheat qualify for exemption under S.No.54(e) of Notification No.12/2017. The writ petition was disposed of on these terms, with no costs.