2024 (2) TMI 552 - AAAR - GST

Exemption from GST - items imported and the services rendered by the applicant is in relation to loading, unloading, packing, storage and warehousing of agricultural produce or not - Sl No. 54 (e) of the Notification No. 12/2017-Central Tax (Rate), Sl. No. 24 of notification No. 11/2017-Central Tax (Rate) both dated 28.06.2017 - applicability of circular No. 16/16/2017 GST dated 15.11.2017 - HELD THAT - It is evident from a conjoint reading of the definition and explanation provided in the notifications and circular referred above, that in order to determine whether a product qualifies as agricultural produce, a correlation must be established between the stipulations outlined in the aforementioned circular and notifications. Rather than examining each of these stipulations separately, a holistic approach is required for such ascertainment. It can therefore be concluded that agricultural produce denotes any produce out of cultivation (emphasis added) of plants for food, fibre, raw material on which either no further processing is done or such processing is done as is usually done by a cultivator or producer (emphasis added) which does not alter its essential characteristics but makes it marketable for primary market. Additionally, Circular No. 16/16/2017-GST dated 15.11.2017 clarifies that dehusked or spilt pulses are not agricultural produce. The activities of loading/unloading/storage by the cultivator/producer of such agricultural produce have been granted exemption from the levy of tax in the cited notifications. Further, it is observed that there is an absence of substantiating evidence suggesting that the products had not been altered or had not undergone any changes in the overseas, by any entity other than the producers or cultivators, prior to their importation into India. It, therefore, is evident that when products are imported, their primary market is situated on foreign shores. However, after enduring multiple value additions and sales, the goods when imported into India, forfeits the quality to be considered as marketable for primary market . Consequently, these goods become no longer eligible to be treated as Agricultural Produce in terms of the afore-mentioned notifications and circular.

Issues Involved:
1. Tax exemption on loading and unloading services for imported unprocessed agricultural produce.
2. Classification of imported unprocessed pulses as agricultural produce under relevant GST notifications and circulars.

Summary:

Issue 1: Tax Exemption on Loading and Unloading Services
The appellant, M/s. Sona Ship Management Pvt. Ltd, sought an advance ruling on whether the service of loading and unloading of imported unprocessed 'toor' and 'whole pulses' and 'black matpe' is exempt under Sl No. 54(e) of Notification No. 12/2017-Central Tax (Rate) and Sl. No. 24 of Notification No. 11/2017-Central Tax (Rate), both dated 28.06.2017. The West Bengal Authority for Advance Ruling (WBAAR) concluded that these services do not qualify for the exemption because the primary market for such imported products is located in foreign shores, not fitting the definition of a primary market, which refers to a place where farmers directly sell to buyers.

Issue 2: Classification as Agricultural Produce
The appellant also questioned whether the imported unprocessed pulses qualify as agricultural produce under Circular No. 16/16/2017-GST dated 15.11.2017. The WBAAR ruled that since the process of de-husking or splitting of pulses is usually not carried out by farmers but by pulse millers, de-husked or split pulses are not considered agricultural produce. The authority did not proceed to pronounce any ruling on this issue, deeming it outside the scope of matters covered under Section 97 of the GST Act.

Appellant's Grounds of Appeal:
1. The appellant argued that the impugned order incorrectly imposed taxes on agricultural produce, violating the principles of natural justice and the true spirit of the relevant GST notifications.
2. The appellant contended that the authority acted illegally and exceeded its jurisdiction by not conducting a physical verification of samples of imported items, which is essential to determine the exact taxability or exemption.
3. The appellant claimed that the authority erred in interpreting the term "agricultural produce" and failed to consider that unprocessed 'toor,' 'whole pulses,' and 'black matpe' fall under this category. The appellant emphasized that the term 'primary market' does not discriminate based on the land of production.
4. The appellant submitted samples and analysis reports of the pulses, arguing that these are unprocessed and unhusked, and hence should be considered agricultural produce.

Appellate Authority's Findings:
1. The authority noted that the term 'agricultural produce' requires the product to be cultivated and processed in a manner that does not alter its essential characteristics but makes it marketable for the primary market.
2. It was observed that imported pulses undergo various processing procedures and value additions before importation, which disqualifies them from being considered agricultural produce.
3. The authority found that the samples submitted by the appellant were not representative and did not follow proper procedures for collection and verification.
4. The authority concluded that the primary market for imported products is on foreign shores, and after multiple value additions, these goods no longer qualify as agricultural produce.

Ruling:
1. The service of loading and unloading of imported unprocessed 'toor,' 'whole pulses,' and 'black matpe' is not exempt under Sl. No. 54(e) of the Exemption Notification GST notification No. 11/2017-Central Tax (Rate) and Sl. No. 24 and notification No. 12/2017-Central Tax (Rate), both dated 28.06.2017.
2. The services in relation to loading and unloading of imported unprocessed 'toor,' 'whole pulses,' and 'black matpe' are not considered agricultural produce and are not covered under Circular No. 16/16/2017-GST dated 15.11.2017.

Conclusion:
The appeal was dismissed, and the ruling of the West Bengal Authority for Advance Ruling was upheld. The services of loading and unloading of the specified imported pulses do not qualify for tax exemption under the relevant GST notifications.

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