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TMI Blog2023 (2) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression 'GST Act' would mean the CGST Act and the WBGST Act both. 1.2 The applicant is a flour miller. The applicant submits that he has entered into an agreement with the State of West Bengal represented by the District Controller of Food & Supplies for conversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context in which it is being applied, namely, any proceedings pending or decided in the case of an applicant under the provisions of the CGST Act, it would only mean proceedings where the question raised in the application for advance ruling has already been decided or is pending decision. Therefore, inquiry or investigation which is not in the nature of any proceeding would not come within the ambit of the word "proceedings". It cannot be a bar under the first proviso to sub-section (2) of Section 98 of the CGST Act, 2017. The applicant further relied upon the decision of Hon'ble Allahabad High Court in the matter of G.K. Trading & Co. Vs. Union of India reported in [2021] 126 taxmann.com 211 (Allahabad), wherein the Hon'ble Court had specifically held that the subject matter in any proceeding has to be the same cause of action and the same dispute. If the cause of action in the subject matter is discrete, then each subject matter will be considered as separate and distinct. Furthermore, it has been held that inquiry is only a means to collect evidence and cannot be intermixed with the term "any proceeding". The applicant has also placed his reliance on the decision of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the ambit of the word 'proceedings'. On due consideration of the fact that no specific question or show cause notice has been issued by the DGGI, we are of the opinion that the instant application is not hit by the first proviso to section 98(2). 1.9 The application is, therefore, admitted. 2. Submission of the Applicant The submission of the applicant is that: 2.1 It has entered into a contract with the Governor of the State of West Bengal represented by the District Controller of Food & Supplies (hereinafter referred to as the State Government) for conversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System (for brevity, PDS), as entrusted under the Eleventh Schedule of the Constitution of India. 2.2 It has been selected for empanelment for crushing of wheat meal atta and fortify it by premixing of micro nutrients containing (i) Vitamin A-500 μg RE- 750 μg RE, (ii) Vitamin B12- 0.75 μg- 1.25 μg, (iii) Iron: Ferrous(II) Citrate:28mg-42.5mg or Sodium Iron (III) EDTA: 14 mg-21.5 mg, (iv) Folic Acid- 75μg- 125μg per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charges 10.00 Packing Charges 50.00 Transportation & Handling Charges 28.70 Total 179.48 2.9 The applicant will receive wheat from the State Government in gunny bags and the State Government will leave it with him for retention as well as non-monetary consideration. 2.10 The applicant will receive Rs 136.48 per quintal from the State Government after deduction of Rs 43/- for the 2 gunny bags, which is non-monetary consideration. 2.11 The applicant supplies services to the State Government by way of an activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. 2.12 Notification No. 2/2018- Central Tax (Rate) dated 25th January, 2018 prescribes composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment stipulates that the applicant will retain 1kg refraction and 4kgs bran for conversion of each 100 kgs wheat. As per the contract these bran and refraction are retained by the applicant and it is sold in the open market at the prevailing market rates which is generally around Rs 20/- per kg for bran and Re 1/- per kg for refraction. This rate was also confirmed by the memo issued by State Government of West Bengal, Department of Food and Supplies vide memo no. 569(3) - FS/Sectt/Food/4P-02/2016/2021 dated 18.02.2022. Further, as bran and refraction are to be included in the value of supply, the valuation shall be done in accordance with the subsequent paragraphs. 2.18 Since price is not the sole consideration for supply, the provision of Rule 27 would apply which govern the provisions of value of supply of goods or services where the consideration is not wholly in money. 2.19 Rule 27 is reproduced herein under for ease of reference: Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall, - (a) be the open market value of such supply; (b) if the open market value is not available under clause (a), be the sum total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays Rs 50/- towards packing charges and Rs 10/- towards fortification charges. The applicant also submits that if the result of the aforementioned calculation is less than 25%, exemption will be available as per Notification No. 12/2017. However, if the said calculation results in the ratio to be 25% or more, then the tax rate applicable is 5%. 2.28 The value of supply is Rs 260.48/- wherein the consideration for component of goods is received as packing charges and fortification charges received which amounts to Rs 60/-. Hence, the ratio comes to 60/260.48 x 100 = 23.03%. Since the component of goods in the composite supply does not exceed 25% of the value of supply, therefore, the supply shall be exempted from GST. 2.29 The Department of Food & Supplies of the Government of West Bengal, in its memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18.02.2022 explained that as the maximum value of involvement of goods in the composite supply is less than 25% of the total value of the said composite supply, it qualifies for exemption as per Entry 3A of Notification No. 12/2017- CT(Rate) dated 28.06.2017 read with State Notification No. 1136-FT dated 28.06.2017. 2.30 The applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/ distinct supply of goods in addition to the service of milling of wheat into flour as it is an integral part of the process of such conversion. It is just one step involved in the process of such conversion. 2.30.6 Without prejudice to the above, even if the fortification charges are considered to part of supply of goods, the value of supply of goods as a proportion to the value of the composite supply shall be 23.03% [i.e., 60/260.48 x 100]. Even in this case, the value of supply of goods does not exceed 25% of the value of the composite supply, therefore, the services provided by the applicant to the State Government shall be liable to exemption from GST. 3. Submission of the Revenue The officer concerned from the revenue has not expressed any view on the issue raised by the applicant. 4. Observations & Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorised representative of the applicant during the course of personal hearing. 4.2 The issue involved in the instant case, as we find, is to determine whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the West Bengal Urban Public Distribution System (Maintenance & Control) Order, 2013. In this context, we refer to Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that 'Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution.' Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. 4.7 The issue now left with us is to ascertain whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not. The applicant states that it will charge crushing charges from the State Government valued at Rs 179.48 per quintal. This rate was last notified by the Government of West Bengal, Food and Supplies Department vide memo no. 2583(3) - FS/Sectt/Food/4P-02/2016 dated 07.09.2018. The applicant further states it will receive wheat from the State Government in gunny bags and the State Government will leave it with them for retention as well as non-monetary consideration and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has been clarified that '...entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply.' 4.10 Thus, in the instant case, the applicant receives Rs.10/- and Rs. 50/- i.e., Rs. 60/- in total against fortification cost and packing charges respectively for crushing of 100 kgs of wheat which involves supply of goods. We have to determine whether such value exceeds 25% of the total value of supply or not. According to the applicant, total value of supply would be Rs 260.48/- which includes both cash and non-cash consideration. In this context, we find that in a similar kind of activity, the Appellate Authority for Advance Ruling (AAAR, for short), Andhra Pradesh in the matter of Sri Kanakadurga Rice and Flour Mill reported in [2020] 121 taxmann.com 121 (AA - GST - AP) held that 'it is clear that the value of by-products so retained by the appellant yielded during CMR milling, which were allowed to be retained by the appellant to meet the CMR activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges are considered to be a supply of goods, the value of supply of goods as a proportion to the value of the composite supply is 23.03% [i.e., 60/260.48 x 100].' 4.13 The contention of the applicant that the provisions of Rule 27(b) will be applicable for the instant case for the purpose of determination of value of supply has duly been considered. Rule 27 of the Central Goods and Services Tax Rules, 2017 and West Bengal Goods and Services Tax Rules, 2017 (collectively referred to as, the GST Rules) prescribes the manner of determination of value of supply where the consideration is not wholly in money. In terms of clause (b) of the said rule, the value of supply shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply. We like to reiterate that Department of Food & Supplies, Government of West Bengal vide memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 has explained that 'These bi-products are valued as per market price @ Rs.20/kg of Bran and Re 1/kg of Refractor. So, consideration from sale of 4kg Bran and 1kg refractor comes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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