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TMI Blog2020 (5) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumara Park West, Bangalore 560020 (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 99/2019 dated 27th Sept 2019 = 2019 (10) TMI 943 - AUTHORITY FOR ADVANCE RULING, KARNATAKA. Brief Facts of the case: 3. The Appellant is a part of the Tata Group of Companies and is engaged in the business of Coffee /Tea / Pepper plantation. In the plantation, certain trees are grown for the purpose of "shade" of coffee crop. Shade trees are absolutely necessary for the protection of coffee bushes. It is not possible to grow coffee in India without the necessary shade trees. However, excessive shade trees are also not suitable for coffee growing. The Appellant identifies such trees as part of its shade management policy and the same is cut down to protect the coffee bushes surrounding them. Such trees other than silver oak timber, along with dead standing/ wind fallen trees and Rose wood will be transported to Government Auction Depots as mandated by the provision of the Forest Act for its disposal. 4. The Appellant supplies the Rosewood and Jungle timber (hereinafter collectively called "Timber / wood") to the Government Timber Depots (GTD) at Thithimathi and Kusha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the full amount by the auctioneer i.e. Government Depot, will be the complete discharge of liability in the hands of the applicant and hence the applicant is not required to charge any GST while depositing as well as receiving the net consideration from the auctioneer? (d) If the transaction is supply in the hands of the applicant, what is the time of supply of timber? (e) If the transaction is considered as "supply* in the hands of the applicant when consideration is not fixed / known at the time of supply, when would be the time of supply and when the applicant has to remit the tax on what value? This is especially where the Government Timber Depot decides the time of auction and the applicant does not have any control on this process. (f) Should GST be paid by the applicant on supervision charges collected by the Government Timber Depot under Reverse Charge as per the SI.No.5 of Notification No.13/2017? 6. The Karnataka Authority for Advance Ruling vide ruling No KAR ADRG NO 99/2019 dated 27-09-2019 = 2019 (10) TMI 943 - AUTHORITY FOR ADVANCE RULING, KARNATAKA held as follows: 1. The transaction of depositing timber with the Government Timber depot for disposal would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Appellants except to sell to the GTD. When the Karnataka Forest Act, 1963 has a very specific restriction that the timber cannot be sold to anyone else than GTD, the sale of timber is made by the Appellant to GTD and not to the bidders in the auction. In such cases, the method adopted by GTD to sell the timber is of no relevance to determine the nature of relationship between Appellant and the GTD; that GTD is not an auctioneer acting on behalf of the Appellant but is a seller by himself What method GTD adopts to sell cannot have a bearing on the principal to principal relationship between the GTD and the Appellant. 7.2. They submitted that GTD charges an amount of 10% of the sale value of the timber as supervision charges towards supervising the goods or keeping the safe custody of the goods from the date of deposit to the date of sale. If the supply/sale happens on the date of deposit, there would be no need to charge the supervision charges as GTD will be supervising their own goods. However, it is because the sale/supply doesn't occur till the date of auction/sale to the bidder, the GTD is charging a fee for overseeing the goods. Thus they contended that GTD neither ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the 90% of the price charged by GTD can also not be decided as at the time of deposition, even GTD does not know the price at which it will sell. They submitted that the ruling does not explain how value has to be determined as per Rule 30 Or 31 of the CGST Rules. Rule 30 puts up a method of valuation wherein 110% of the cost of production will be considered as value of supply; that in the present case, the cost of production cannot be measured reliably. Even if can be measured reliably, the said cost will be very negligible amount when considered in the light of the sale value as in order to produce that timber, the Appellant would have only incurred the cost of planting, cost of saplings and cost of cutting down the tree. The value addition in tree happens when it grows and for that the Appellant would not have incurred cost. Hence there will be a big difference between the value of supply determined at the time of deposition and amount received at the time of sale on the day of auction. They argued that the ruling of the lower Authority does not address this difference. Further, they submitted that the ruling does not specify what is the reasonableness for determining the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 30.09.2019 was received by the Appellant on 21.10.2019. In terms of Section 100(2) of the CGST Act, every appeal to this Authority should be filed within a period of 30 days from the date on which the Advance Ruling order is communicated to the aggrieved party. The proviso to Section 100(2) empowers this Authority to condone the delay in filing the appeal by another period of 30 days. In this case, the due date for filing the appeal was 21-11-2019 but the Appellant has filed the appeal on the 19th December 2019 after a delay of 29 days from the due date for filing appeal. The Appellant has stated that the delay had occurred since they wanted to take proper legal advice before filing the appeal and that they were busy with the GST audit. Considering the submissions made by the Appellant, the delay in filing the appeal is hereby condoned in exercise of the power vested in terms of the proviso to Section 100(2) of the CGST Act. 11. We now take up the main issues in appeal. The primary point which has to be decided is whether the activity of depositing the timber by the Appellant to the Government Timber Depot is a 'supply' in terms of Section 7 of the CGST Act. Under GST, Supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above circumstances are accomplished by (at least) the two persons involved in the transactions, then it can be inferred that the activity is a 'supply' under GST law and thereby chargeable to GST. In the instant case, there is a transaction in goods in as much as timber is being deposited by the Appellant to the GTD. This transaction is mandated by a statute i.e the Karnataka Forest Act, 1963 whereby the purchase and sale of timber is restricted to only the State Government. Further, the activity of felling the timber trees is part of the shade management policy of the Appellant in the course of their business of Coffee/Tea/Pepper plantations. However, the activity of depositing the timber into the GTD does not result in realisation of consideration immediately. The timber is deposited at GTD for which a Deposit Receipt is given by GTD. Where the consideration is not extant in a transaction, such a transaction does not fall within the ambit of supply. But, in certain scenarios, as elucidated in Schedule I of the CGST Act, the key element of consideration is not required to be present for treating certain activities as supply. One such activity which has been detailed in para 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me the purchaser will pay the balance dues. Once the material is lifted by the Purchaser after payment of the sale value plus taxes, the concerned Range Forest Officer will raise a bill which will be forwarded to the Deputy Conservator of Forest (DCF). The DCF will prepare a separate bill and send the same to the Chief Conservator of Forests (CCF) who will issue the letter of credit (LOC). The LOC will be forwarded to the treasury who will issue the cheque to the DCF and the DCF will issue the same to the Appellant. Therefore, it is observed that the sale of timber happens through the GTD and not to the GTD as claimed by the Appellant. The proceeds of the timber sold through the auction process by the GTD is given to the Appellant on completion of the auction process. As such, the GTD acts in the capacity of agent of the Appellant and this transaction of depositing of timber by the Appellant in the GTD amounts to a supply in terms of clause 3 of Schedule I of the CGST Act. 14. The Appellant has also sought a ruling on what will be the value of supply if the activity of depositing timber to the GTD is held to be a 'supply'. Section 15 of CGST Act, 2017 provides the provisions for d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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