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TMI Blog2020 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... and SGST Act, 2017) by the Commissioner of Central Tax, Bangalore North Commissionerate, (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 87/2019 Dated: 26th sept 2019 = 2019 (10) TMI 1133 - AUTHORITY FOR ADVANCE RULING, KARNATAKA. Brief Facts of the case: 3. M/s. International Flower Auction Bangalore Limited, having GSTIN 29AABC12041M2ZI, (hereinafter referred to as 'Respondent Company') is a joint venture company of private and public shareholders established with a prime objective to auction high quality cut flowers of various flower crops on a daily basis. The respondent company is engaged in facilitating growers to auction their flowers at its platform and buyers would come in person and check quality and bid. The growers and the buyers are registered as members with the respondent company. The growers bring flowers to the premises of the respondent company and the same would be placed in lots and samples would be identified. The buyers would verify the lot and they would make their bids. The lowest rate at which the goods could be sold i.e. minimum price is fixed by the grower / supplier and the maximum price is fixed by the respondent comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being aggrieved by the said order, filed an appeal before us on the following grounds: 8.1. The respondent is a Public Ltd Company providing a platform for buying and selling of flowers for both seller and buyers through Auctions. The prime objective of the said company is to "auction" high quality cut-flowers of various flower crops, every day in both export and domestic flower market. The respondent company also showcases the flower potential through auctioning of all kinds of flowers and floral accessories and provides link to reputed Auction Centres of the World through e-auctioning of flowers. Basically the respondent provides a forum wherein the flowers and other floriculture produces are bought and sold by the member of the IFAB through the auction process and applicant collects a commission at 3.5% from growers/ sellers and 1.5% from buyers on the transaction value for the transaction carried on by way of auction at IFAB. Apart from auctioning of flowers, the activity of the respondent company also includes receiving of flowers, grading and quality check, cold storage facility, Auction management, flower packing and processing, dispatch of flowers. Therefore, the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epackaged and resold to end consumers or retail stores. The flowers are procured from the growers located in and around Bangalore and also from other states. Therefore, the Appellant submitted that the activity done by the respondent for sale and purchase of flowers including flower verification, cold room service and software service to the growers and also provision of Wi-fi software and flower display etc. for marketing in both domestic and international market does not constitute dealing of agriculture produce in primary market. 8.4. The Appellant further submitted that in terms of Section 2(5) of the CGST Act, 2017, an agent means a person, including a factor, broker, Commission Agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another:" As per Finance Act, 1994 "Commission Agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration and includes any person who, while acting on behalf of another person i) Deals with goods or services or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the principal, it shows that they act as a commission agent. They contend that SI.No 54(g) of Notification No 12/2017 CT (R) dated 28.06.2017 is a beneficial provision and has to be construed liberally on compliance with the conditions stipulated therein. 10.1. They submitted that they squarely fall within the ambit of "Principal Agent" relationship'; that they provide a platform for the growers of flowers to showcase their produce before the market using latest state of the art technology provided by them; that they provide the primary market space for the flower growers. They submitted that primary markets are those which are situated in the producing areas, commodities produced in the nearby surrounding areas are brought here and sold in these markets. The agricultural produce is purchased by intermediaries, which later they sell into wholesale markets. The very fact that more than 66.82% of the stakeholders are flower growers and balance held by the Govt of Karnataka show clearly the intention that the respondent company (IFAB) is created as a primary market and to exploit the state-of-the-art technology to showcase the flowers to a wide variety of market. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees. The grower should provide the land records for planting of flowers and a Grower's Certificate issued by the Horticulture Department. IFAB will make payments to the growers for the flowers supplied by them to IFAB after deducting the commission of 3.5% of the sale value of the flowers. The grower has the right to fix the minimum / base price for the flowers put up for auction while the maximum price is fixed by IFAB, considering the demand for flowers. 13. Every person/organization, who desires to purchase flowers and other floriculture products at IFAB by participating in the auction process, has to be registered with IFAB by paying the stipulated membership fees. Every person / organisation who has purchased flowers and other floriculture products at the IFAB auction, has to make the payment in cash at the cash counter for the purchase price and the commission at 1.5% of the purchase price and take the delivery of the flowers. 14. IFAB has deployed 'Dutch auction' system whereby the digital auction clock runs in decreasing order and the price per stem reduces from maximum to minimum. The auction process goes as follows: * Flowers are received from the growers located in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torage or warehousing of agricultural produce; (t) agricultural extension services; (g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce NIL NIL 16. The entry at Sl.No 54(g) refers to the services provided by any (a) Agricultural Produce Marketing Committee(APMC) or Board; and (b) a commission agent for sale or purchase of agricultural produce. It is not a case that IFAB is considered as an APMC or Board and hence what remains to be decided is whether IFAB is a 'commission agent' rendering services for the sale and purchase of 'agricultural produce'. 17. The term 'commission agent' has not been defined under the GST law. Rather, Section 2(5) of the CGST Act, 2017 defines 'agent' to include a commission agent. The said definition of 'agent' reads as under: "agent" means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. From the above definition it is clear that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AB, they do not merely cause the sale of goods on behalf of their clients, the flower growers/sellers. They undertake the complete process of auction of the flowers and upon completion of the auction, the sales consideration is received not by the sellers but by IFAB. Thereafter, IFAB will make payments to the growers for the flowers supplied to them after deduction of the commission. The payments are made to the growers/sellers on the day following the end of the calendar week. IFAB themselves issue delivery orders which enables the buyers to take delivery of the flowers from the auction house. They do the billing work and collection of sale proceeds on behalf of their clients. IFAB also invests a great deal in the system of sale through the clock. They offer dealers sophisticated facilities for online buying - remote buying. With the help of such services, IFAB is able to attract an increasing number of international buyers to the auction. It therefore appears to reason that this wide gamut of activities of IF AB would go far beyond the scope of a commission agent since the services rendered by them are not restricted only to sale of goods on behalf of the sellers for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the respondent company - IFAB does not deal with 'agricultural produce' as defined in para 2(d) of the Explanation to the Notification No 12/2017 CT (R) dt 28.06.2017 for the reason that the respondents are not traders or wholesalers in the primary market. We however, are not inclined to dwell on this aspect since we have already held that the respondent company- IFAB by virtue of providing Auctioneer service is not eligible for the benefit of the said Notification. Having so concluded, it is of no relevance whether they are dealing with 'agricultural produce' or not. 22. In view of the above, we pass the following order: ORDER We set aside the Advance Ruling No KAR/ADRG 87/2019 dated 26-09-2019 = 2019 (10) TMI 1133 - AUTHORITY FOR ADVANCE RULING, KARNATAKA and allow the appeal filed by the Commissioner of Central Tax, Bangalore North Commissionerate. The question on which the advance ruling was sought for is answered as follows: The commission earned from auctioning of flowers is not eligible for exemption under entry no. 54(g) of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 and entry no. 54(g) of Notification (12/2017) FD 48 CSL 2017 dated 29.06.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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