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TMI Blog2020 (6) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... ndently of the fitment of the product. There is nothing in rule 32 (5) which says that it is not applicable to valuable or precious objects or objects having antique value. It is a settled principle of jurisprudence that when the words of a statute are unambiguous and only one reasonable meaning can be given to it, then the courts are bound to give effect to that meaning. Such words have to be interpreted in their natural and ordinary sense. Therefore, the term second-hand and used has to be given its ordinary meaning and nothing more is to be attributed to it especially when the legislature has not chosen to expand or contract its meaning. Antique pieces are also second-hand and used by people before they come in the market. The paintings are bought by the appellant from individual art collectors. It presupposes that the art collectors have bought it second-hand or used and then sold it to the appellant. It would be an entirely different thing if the appellant has bought the paintings from the artists themselves. However, this is not the fact before us and we go entirely by the submissions of the appellant that they have bought it from individual art collectors. If such is the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HORITY FOR ADVANCE RULING, MAHARASHTRA . BRIEF FACTS OF THE CASE 1. This Appeal is being filed by Safset Agencies Private Limited (Astaguru.com) against ruling no. GST-ARA-86/2018-19/B-7 dated 15.01.2019 = 2019 (6) TMI 822 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA pronounced by Maharashtra Authority for Advance Ruling ( AAR ). The said order was served to appellant on 14.06.2019 through email. 2. Applicant, having Good and Service Tax ( GST ) Registration No. 27AABCS9352H1Z4. 3. Appellant is a dealer dealing in various goods such as paintings, vintage collectibles, sculptures, classic miniatures paintings, fine writing instruments, vintage timepieces, celebrity memorabilia, aristocratic jewellery and vintage cars. 4. Appellant usually procures the abovementioned goods on approval basis from unregistered as well as registered persons ( sellers ). Appellant displays all such goods on its website and conducts the auction sale in respect of such goods. The goods are sold to the highest bidder in the auction. 5. The standard business process of Appellant is as under: i. Intending seller and Appellant sign an on approval contract wherein intending se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paintings bought from individual art collectors HSN code 9701 Applicable Rates 12% Whether Appellant can discharge the tax liability on difference between sales and purchase price considering painting as second hand goods following Rule32 (5) of the CGST Rules, 2017. Rule 32 (5) is not applicable. Appellant to pay tax at 12% on the sale value of the paintings. 2. Old cars HSN code 8703 Applicable Rates 18% provided conditions mentioned in Notification No. 8/2018 - CT(R) dated 25.01.2018 are complied with Whether Appellant can discharge the tax liability on difference between sales and purchase price considering old cars as second hand goods following Rule 32(5) of the CGST Rules, 2017. Rule 32(5) is applicable subject to the conditions of the Notification No. 8/2018 dated 25.01.2018 are complied with. 3. Old jewellery HSN Code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Rule 32(5) of the CGST Rules, 2017. 8. Collectible Books HSN Code If it is in the form of printed books, newspapers, pictures, etc., it will fall under various sub-headings of chapter 49 of GST Act. In absence of various details AAR did not answer to the query posed to them. Applicable Rates Whether Appellant can discharge the tax liability on difference between sales and purchase price considering Collectible Books as second hand goods following Rule 32(5) of the CGST Rules, 2017. 9. Antique Books HSN Code Antique Books under 100 years is dealt with by AAR will be classified under appropriate heads. In absence of specific details and description, AAR did not answer the query posed to them. Applicable Rates Whether Appellant can discharge the tax liability on difference between sales and purchase price considering Antique Books as second hand goods following Rule 32(5) of the CGST Rules, 2017. 11. Apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant accepts ruling of AAR on this point as to HSN Code, Classification, Applicable Tax Rate. However, Appellant respectfully disagrees with AAR ruling that Rule 32 (5) is not applicable and Appellant is obliged to pay tax at 12% of sale value of such goods. Appellant wish to contest that Rule 32(5) of CGST Rules, 2017 is applicable to sale of such goods and Appellant is liable to discharge tax on difference between the sales price and purchase price. 7 and 8 Collectibles (including books) purchased from individual collectors and users Hon ble AAR did not answer the question raised. Appellant does not wish to contend on points as to HSN Code, Classification and Applicable Tax Rate. However, the Appellant would like to contest further in respect of applicability of Rule 32(5) of the CGST Rules, 2017. 9 Antiques Books purchased from individual collectors and users. Appellant accepts ruling of AAR on this point as to HSN Code, Classification, Applicable Tax Rate. However, Appellant respectfully disagrees with AAR ruling that Rule 32 (5) is not applicable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch goods should be difference between the sale price and the purchase price. The tax is chargeable at applicable rate on such difference only and not on sale value/transaction value of such goods. 20. Rule 32(5) of CGST Rules applies to the second hand goods or used goods . The terms second hand goods and used goods are not defined in the CGST Act or CGST Rules. Even General Clauses Act does not defined these terms. Hence, one has to go by the dictionary meaning or common parlance meaning of the word second hand goods or used goods . 21. The meaning of the terms second hand goods and used goods as per various dictionaries are as under: Second Hand Goods: i. Second-hand things are not new and have been owned by someone else (Collins Dictionary) ii. having had a previous owner; not new (English Oxford Dictionary) iii. not new; having been used in the past by someone else {Cambridge English Dictionary) iv. acquired after being used by another {Merriam Webster) v. previously used or owned (Dictionary.com) Used Goods: i. already owned or put to a purpose by someone else; not new (Cambridge Dictionary) ii. that has endu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case) does not arise. In such case, dealer has not taken any credit of tax and hence Rule 32(5) clearly and squarely applies on sale of such goods. 26. One may tend to take a view that Rule 32(5) applies only to sale of goods, which are purchased on payment of GST and where credit of such tax is not availed. This interpretation will make Rule 32(5) redundant in majority of transactions as such second hand or used goods are normally purchased from individuals not liable to tax as such goods are not sold by them in course of business. 27. The question may arise in which circumstances the phrase where no input tax credit has been availed on the purchase of such goods shall apply. The purpose of this phrase seems to prevent the dealer purchasing second hand goods or used goods from registered person on payment of GST and availing dual benefit of paying the tax on margin and claiming input tax credit simultaneously. The GST is a value added tax and each person in the value addition chain is expected to pay tax on the value addition made by him in the transaction. The intention of promulgating Rule 32 (5) is to ensure that a dealer operating in unorganized sector (buying seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, etc. increases with time and hence cannot be treated as used goods under Rule 32(5) of CGST Rules. Simply because value of such goods increases with a passage of time, it cannot be said that it is not used goods. Classic example is that of flat in which one resides. The value of the flat increases with years passing by but one cannot say that flat is not used. 31. Moreover, there is no stipulation in the Rule that the goods whose value increases with the passage of time is not used or second hand goods . It is a settled jurisprudence that tax authorities cannot read any word or phrase into the legal provisions. 32. Appellant humbly submits that it is settled jurisprudence principle that when the words of a statue are clear, plain or unambiguous i.e. they are reasonable susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. This rule of interpretation is followed in plethora of judgements. Few of such judgments are as under: i. Nels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble AAR is absolutely contrary to the legal provisions. 36. Appellant is an auctioneer dealer mainly deals in old personal effects such as jewellery, paintings, antiques, memorabilia, collectibles etc. Most of these are articles used by the seller of the goods or previous owners of such goods. Appellant buys above goods. It does not perform any process on such goods, which changes its nature. Appellant does not claim input tax credit of tax paid on procurement of such goods. Rule 32(5) of CGST Rules clearly and unambiguously applies to person dealing in second hand goods. As stated in facts of case, Appellant is mainly dealing in old jewellery, paintings and antiques and hence same should apply to paintings, antiques, collectibles, memorabilia, etc. bought by Appellant from individual collectors or users. In light of above submissions, Appellant humbly submits that valuation of supply of paintings, antique jewelry, antique watches, other antiques, collectibles, memorabilia, etc should be done in accordance with Rule 32(5) of CGST Rules. Respondent s Submissions 37. The issues raised by the applicant have been decided by ARA vide order dated 15/01/2019 = 2019 (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sale value of such goods . Appellant wish to contest that Rule 32(5) of CGST Rules, 2017 is applicable to sale of such goods and Appellant is liable to discharge tax on difference between the sales prince and purchase price. Antique jewellery of age exceeding 100 years - HELD THAT:- Tariff item 9706 00 00 covers Antiques of an age exceeding 100 years . Antique jewellery of age exceeding 100 years will fall under this tariff item and will be liable to tax @ GST. The provisions of Rule 32(5) of CGST Rules will not be applicable to them in this case. Antique watches of age exceeding 100 years - HELD THAT:- Tariff item 9706 00 00 covers Antiques of an age exceeding 100 years . Antique watches of age exceeding 100 years will fall under this Tariff item and will be liable to tax @ 12% GST. The provisions of Rule 32(5) of CGST Rules will not be applicable to them in this case. 7 and 8 Collectibles (including books) purchased from individual collectors and users. Hon ble AAR did not answer the question raised. Appellant does not wish to contend on points as to HSN Code, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the value of such supply is negative, it shall be ignored. Paintings bought from individual collectors and connoisseur / Collectibles and Memorabilia:- The applicant has requested for valuation of paintings bought from individual art collectors. The Chapter Headings 9701 of the GST Tariff, 2017 covers Paintings, drawings and pastels, executed entirely by hand, other than drawings of heading 4906 and other than hand-painted or hand-decorated manufactured articles; collages and similar decorative plaques . If the said paintings as mentioned by the applicant answer the description of item mentioned in Heading 9701, then the goods will be covered under this Heading and will attract a rate of 12%. The Paintings cannot be treated as used and therefore the applicant must pay GST of 12% on the sale value, if their goods answer the description of Heading 9701. The applicant cannot establish that the paintings/ collectibles have been purchased by his vendor at some time and then used to treat it as second hand goods. 40. The nature of schedule entry and rate of tax prescribed under GST ACT, 2017, Schedule II - 6% S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the Rule 32(5) of CGST Rules, 2017 is not applicable. PERSONAL HEARING 44. A personal Hearing in the matter was conducted on 04.10.2019, which was attended by Shri Naresh Shah, C.A., representative of the Appellant, as well as by Shri V.V. Kulkarni, the Jurisdictional Officer and the respondent in the instant matter, who tendered oral submissions in support of their cases besides reiterating their respective written submissions filed before us. Discussions and Findings 45. We have examined the contention of the appellant. We have also gone through the written submission presented by them. We have also examined the contention of the jurisdictional officer. The issue raised in the Advance Ruling can be conceptualized in the following table:- Sr. No. Description of goods Advance ruling sought by the appellant on Ruling of AAR 1 Paintings bought from individual art collectors HSN Code 9701 Applicable rate 12% Whether appellant can disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant to pay tax at 12% on sale value of painting 6 Collectibles and Memorabilia HSN Code Applicable rate Whether appellant can discharge the tax liability on difference between sales price and purchase price considering painting as second hand goods following Rule 32(5) of CGST Rules 2017 Chapter 49 absence of In specific details AAR did not answer to the query posed by them Collectible Books HSN code Applicable rate Whether appellant can discharge the tax liability on difference between sales price and purchase price considering painting as second hand goods following Rule 32(5) of CGST Rules 2017 If it is the form of printed books, newspapers, pictures etc it will fall under various of sub-headings Chapter 49 of GST. In absence of specific details AAR did not answer to the query posed by them 7 Antique Books HSN Code Applicable rate Whether appellant can discharge the tax liability on difference betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession. 49. The contentions of the appellant can be summarized as follows:- 1) Paintings/Antique jewellery/Collectibles and emorabilia/Collectibles/Antique watches/Antique Books are used goods. It is coming for sale after being used by the seller or the earlier owners of such goods. The applicant does not perform any process on them. 2) The applicant is not claiming any ITC when such goods are procured from individual collectors or users as such sellers are URPs. 3) The terms used goods , second hand goods are not defined anywhere in the Act. 4) Just because the items are not consumed it cannot be said that they are not used. 5) The intention of promulgating Rule 32 (5) is to ensure that the dealer operating in the unorganized sector is not saddled with tax liability disproportionate to value addition done by him. 6) If paintings/antique jewellery are not interpreted to mean used goods then the whole purpose of GST legislation will be defeated as the tax is sought on value addition, 7) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rule is made up of the following parts:- The taxable supply is provided by a person dealing in buying and selling; of second-hand i.e. used goods; as such or after minor processing which does not changed the nature of goods; where no ITC has been availed on the purchases of such goods, A reading of the rule says that the value for tax purpose will be the difference between the selling price and purchase price. In the said case, the appellant fulfills all the conditions of the rule. 1) The appellant is a seller dealing in buying and selling second-hand goods. 2) The goods sold by them are, as per their contention, second-hand or used goods which have not come for sale for the first time in the market. 3) The appellant has sold the goods as such and has done no processing on them. 4) No ITC is availed by them on the purchase of those goods. 53. Therefore, if all the above conditions are fulfilled by the appellant there seems to be no reasons in denying them the benefit of the margin scheme contained in rule 32(5) of the CGST Rules. The AAR has given the benefit to old cars, old jewelry and old watches but have denied the benefit to paintings, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elry, though falling under the category of valuable goods, are at the same time also second hand or used goods and therefore they cannot be denied the benefit of rule 32(5). We feel that the term antique books is evocative enough to describe what it contains and the appellant can apply Rule 32(E) to it. 54. The AAR has not given any ruling on collectibles/memorabilia and collectible books; the reason being given is that no specific details of such goods are given. In the grounds of appeal presented before the AAR, the appellant has described such goods as only collectibles and memorabilia and collectibles . They have not dwelt at length as to what commodities are covered in that category. The appellant has stated that collectibles and memorabilia encompasses clothing, support equipment, spectacles, accessories etc. The above description is of general nature. The appellant has not given any further description as to whether they are bought from individual art collectors or not. Also, the appellant has asked for separate ruling on collectible books and antique books. It is not known whether they are same or not. Also no specific explanation is given as to what is the diff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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