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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 ..... ber 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. Whether the Government Timer Depot is an agent of the Appellant? - HELD THAT:- As per Section 182 of the Indian Contract Act, 1872, an agent is a person employed to do any act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the principal - In this case the Depots are set up by the State Government in terms of Section 104-A(5) of the Karnataka Forest Act for the purchase and sale of timber since the Act mandates that timber can only be purchased and sold by the State Government. The sale of the timber by the Depot is done by way of auction. The proceeds of the sale are remitted to the Appellant. Therefore, notwithstanding the fact that the Depot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e timber is sold by the Depot in the auction process. Further, the depot also does the measurement and classification of the timber received from the Appellant since the Depot also stores the timber belonging to the Govt and other private parties - The Depot officials also give lot numbers to the timber logs according to the classification. It is for this service that the Depot charges supervision charges . This service rendered is outside the scope of clause 3 of Schedule I and hence the consideration received by the depot in the form of supervisions charges are liable to tax as a supply of service. The decision of AAR upheld. - KAR/AAAR/Appeal-18/2019-20 - - - Dated:- 19-3-2020 - SHRI. D.P. NAGENDRA KUMAR, AND SHRI. M.S. SRIKAR, MEMBER Represented by: Shri. Ravi Raghavan, Advocate. PROCEEDINGS (Under Section 101 of the CGST Act, 2017 and the KGST Act, 2017) 1. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht by someone, the GTD purchases the timber from the Appellant and sells it to the bidder. It may so happen that only a portion of a lot of timber is sold in auction and the rest is unsold. In such cases, GTD only purchases that portion of the lot which is sold in auction and the rest will be kept in deposit and no amount is paid towards the timber not sold. It may so happen that date of deposit and the date of auction have a difference of six months, one year or more. In such cases, the Appellant will be in ambiguity about the time at which the timber will be sold and rate at which the timber will be sold. When the timber is sold in auction the GTD issues an invoice to bidder and collects the amount from them. After collecting the amount from bidder, GTD deducts an amount of 10% of the sale value towards Supervision charges (the charges for overseeing the timber from date of deposit to date of sale in auction) and pays the remaining to the Appellant. 5. In this connection the Appellant sought an advance ruling in respect of the following question: (a) Whether the legally binding and prescribed activity of depositing the timber / wood by the applicant with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f supply is the time of removal of timber/ wood by the applicant for supply to the depot. 5. The time of second supply involving timber i.e. by the depot (agent) to the third party does not have any impact on the value or time of supply of the first supply, i.e. supply of timber/ wood by the applicant to the depot for sale. 6. The activity of providing supervision services is not covered under the exceptions in entry 5 of Notification No.13/2017- Central Tax (Rate) dated 28.06.2017, the same is liable to tax under reverse charge and this is subject to the condition that the Government Timber Depots are Government Departments, the applicant is liable pay tax on the receipt of supervision services. In case the Government Timber Depots are not Government Department then the transaction would not be covered under Notification No.13/2017- Central Tax (Rate) dated 28.06.2017 and such reverse charge mechanism shall not be applicable and the Government Timber Depot shall collect the GST and issue invoice to the applicant. 7. Aggrieved by the above ruling, the appellant has filed this appeal on the following grounds. 7.1. The Appellant submitted that the lower Authority has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration named supervision charges . Part Two: Sale of timber from Appellant to GTD on the day of auction. For this sale of timber, the appellant receives sale amount as consideration. Part Three: Sale of timber from GTD to bidders. This leg of the transaction is not relevant to the Appellant. The Appellant submitted that the sale of timber to GTD on the date of auction is a supply within the meaning of Section 7 of the CGST Act; that the time of supply of the sale of timber to GTD on the day of auction is to be decided in accordance with the provisions of Section 12(2)(a) of the CGST Act wherein the time of supply of goods shall be the date of issue of issue of invoice by the supplier or the last date on which he is required to issue the invoice in terms of Section 31(1) of the said Act. They submitted that as per Section 31(1), they are required to issue the invoice before or at the time of removal for supply to the recipient; that in their case, the removal of timber for deposition is not removal for supply to the GTD; that removal happens only for the purpose of supervision/custody. Hence the time of supply would be the date of auction/sale to the bidder on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is supply and attracts tax; that the tax has to be discharged on the transaction value i.e the sale price, in accordance with the provisions of Section 15(1) of the CGST Act; that the time of supply is the date on which sale occurs and has to be determined in accordance with the provisions of Section 12(2)(a) read with Section 31(7) of the CGST Act. 7.6. The Appellant also sought for condonation of delay in filing the present appeal. They submitted that the impugned order was received by them on 21-10-2019; that as per Section 100(2) of the CGST Act, they are required to file the appeal within 30 days; that since they wanted to take proper legal advice, they could not file the appeal within the required time; the GST audit also led to the delay in filing the appeal. They requested that the delay in filing the appeal be condoned in terms of Section 100(2) in the interest of justice. PERSONAL HEARING: 8. The Appellants were called for a personal hearing on 31st January 2020 and were represented by Shri. Ravi Raghavan, Advocate who reiterated the submissions made in the grounds of appeal. They also made a detailed submission regarding the process involved towards extract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and ( 2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The term agent has been defined under sub-section (5) of section 2 of the CGST Act as follows: 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 In this case the Depots are set up by the State Government in terms of Section 104-A(5) of the Karnataka Forest Act for the purchase and sale of timber since the Act mandates that timber can only be purchased and sold by the State Government. The sale of the timber by the Depot is done by way of auction. The proceeds of the sale are remitted to the Appellant. Therefore, notwithstanding the fact that the Depot is set up under the aegis of a statute, it functions in the capacity of an agent. We draw reference to the CBIC Circular No 57/2018 dated 4-09-2018 wherein the scope of principal-agent relationship was explained. In terms of the said Circular, the key ingredient for determining the principal-agent relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or services of like kind and quality means any other supply of goods or services made under the same circumstances. Same circumstances mean that the supply is same in respect of the characteristics, quality, quantity, functional components, materials and reputation of the goods or services or both or closely or substantially resembles. If the value of supply is not determinable as per above points then the value of supply of goods or services will be calculated as per rules 30 or 31 15. As regards the time of supply, Section 12 of the CGST Act, lays down that the time of supply of goods would be the earliest of: Date of Issue of Invoice Due Date for Issue of Invoice Date of Receipt of Payment These provisions must be contemplated considering that where there is a movement of goods, the invoice must be issued on or before the time of removal of goods. Therefore, in this case, the time of supply will be the date of issue of invoice which will be at the time of removal of the timber by the Appellant to the Depot. 16. The Appellant has argued that if the act of depositing the timber at GTD is held to be a supply, then the question of charging supervis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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