9911796707
TMI Blog2024 (10) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... No. RAJ/AAR/2023-24/ dated 09.04.2024. BRIEF FACTS OF THE CASE The Appellant, M/s Hitesh Gwalani are a supplier of waste papers. The appellant proposed to initiate the business of buying & selling of various goods such as old & used Iron Scrap, used Lead Acid Batteries, used Aluminium utensils & other used Aluminium goods, used brass utensils, used steel utensils, used scrap of copper, used plastic bags & used plastic PET bottles and worn-out tyre tubes etc. All the above mentioned goods are to be purchased from unregistered suppliers. The appellant would subsequently sell them to various manufacturers and will charge GST on the difference between the selling price & purchase price of the above-mentioned goods in accordance with Rule 32 (5) of CGST Rules, 2017. The appellant applied for advance ruling for below mentioned Questions- 1. When the Applicant is operating under the Margin Scheme notified under Rule 32 (5) of the Central Goods and Service Tax Rules, 2017 ("CGST Rules, 2017") by selling the old used Iron Scrap, used Lead Acid Batteries, old used Aluminium utensils & other Aluminium Scrap, old used brass utensils and other scrap, used old steel utensils scrap, old use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following grounds:- 1. That the AAR has erred in law in dismissing the application of the appellant on the technical ground that the appellant is not covered under the definition of Second-Hand Goods. Relevant part of the Rule 32 of the CGST Rules, 2017 is reproduced as under :- Rule 32 (5) CGST Rules, 2017 provides that "where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored: Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced 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." The Notification No. 8/2018-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of inter-State supplies in terms of Rule 2 of Integrated Goods and Services Tax Rules, 2017 read with Section 20 of Integrated Goods and Services Tax Act, 2017 - Accordingly, margin scheme applicable to inter-State supplies also - Rule 32 (5) of Central Goods and Services Tax Rules, 2017. [para 5(III)] 4. That as per the AAR's interpretation in Para 5 of findings, analysis and conclusion, the definition of second-hand goods means any new or used property that has been sold, traded, exchanged, consigned, or otherwise disposed of by its original owner. The appellant would like to explain that the goods purchased by them clearly fall under the definition of second hand goods as explained by the AAR; that they also purchase goods from original owner who are unregistered and sell them to manufacturers without any process. That the AAR's assumption that all goods for which the Appellant applied for Advance Ruling, is Scrap, is totally without any explanation and grounds. 5. That the appellant proposed to initiate the business of selling of various type of second-hand goods such as old used iron scrap, second hand Lead Acid Batteries, second hand Aluminium utensils & other Aluminiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tica Gold Pvt. Ltd. both passed by AAR, Karnataka. In the case of M/s Aadhya Gold Pvt. Ltd., it has been held that:- - Valuation (GST) - Old and used jewellery purchased from unregistered individuals and sold as such after subjecting to cleaning and polishing without changing its nature and form - Applicability of Rule 32 (5) of Central Goods and Services Tax Rules, 2017 for valuation thereof Provisions of aforesaid Rule applicable only if assessee dealing in buying and selling of second hand goods, making taxable supplies but not availing input tax credit (ITC) on purchase of such goods - Supply of second-hand jewellery being taxable under Sl. No. 13 of Schedule V to Notification No. 1/2017-C.T. (Rate) and assessee having neither availed ITC on its purchase nor subjected to melting to convert it into bullion/new jewellery but undertaken only cleaning and polishing without changing its form and nature, provisions of Rule 32 (5) ibid would apply for determination of value of such supply-Section 15 of Central Goods and Services Tax Act, 2017. [Paras 9.1 to 9.5, 11] Further, in the case of M/s Attica Gold Pvt. Ltd., it has been held that:- Sale of second hand goods - Difference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , used old steel utensils scrap, old used scrap of copper, used waste plastic bags & used plastic PET bottles and second hand tyre tubes ete are used goods and no processing shall be done on such goods. 9. For the second question raised before the AAR, the Appellant submitted that- Rule 2 of the IGST Rules, 2017, read with Section 20 of the IGST Act, 2017 prescribes that certain provisions of CGST Act, 2017 shall mutatis mutandis apply in relation to IGST. The subject pertaining to 'time and value of supply' is also covered under Section 20 of IGST Act, 2017, hence the rules made under CGST Act in relation to valuation of a supply is applicable to IGST Act as well. Therefore, Rule 32 (5) of the CGST Rules, 2017 which provides for Margin Scheme in case of intra-state supplies shall also be applicable in case of inter-state supplies. Therefore, the Appellant are of the view that they are entitled to make inter-state supplies of old used Iron Scrap, used Lead Acid Batteries old used Aluminium utensils & other Aluminium Scrap, used old steel utensils scrap & old used scrap of copper used waste plastic bags, used plastic PET bottles while operating under the Margin Scheme. 10. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Further, The AAR, Rajasthan observed that the applicant is dealing with used Iron Scrap, used Lead Acid Batteries old used Aluminium utensils & other Aluminium Scrap, used old Steel utensils scrap & old used scrap of copper, old used Brass utensils and other scrap, used waste plastic bags & used plastic PET bottles, therefore it cannot be covered under the definition of Second Hand Goods as basically these items can be termed as scrap which are to be consumed/melted for manufacture of new item and thus the nature of goods is changed. 14.2 Further, the AAR, Rajasthan also mentioned that the Central Government issued Notification No.8 /2018 (Central Rate) dated 25.01.2018 in respect of Margin Scheme under Rule 32 (5) of CGST Act, 2017. The AAR concluded that benefit of Margin Scheme is available only with respect to Motor Vehicles only where as the items to be dealt with by the applicant such as used Iron Scrap, used Lead Acid Batteries old used Aluminium utensils & other Aluminium Scrap, used old Steel utensils scrap & old used scrap of copper, old used Brass utensils and other scrap, used waste plastic bags& used plastic PET bottles are different from Motor Vehicles. 14.3 Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Goods and Service Tax Rules, 2017." D) That the appellant contested that they purchase goods from original owner who are unregistered and sell them to manufacturers without any process and their goods qualify as second hand goods. E) That the appellant relied upon the Hon'ble High Court, Delhi in the case of M/s Max Healthcare Institute Ltd. vs Union of India (2024)16 Centax 177 (del.) wherein it was held that if reply of assessee is not taken into consideration while passing impugned Order than that is clear violation of Natural Justice. F) That the appellant contested that Rule 2 of the IGST Rules, 2017, read with Section 20 of the IGST Act, 2017 prescribes that certain provisions of CGST Act. 2017 shall mutatis mutandis apply in relation to IGST. The subject pertaining to 'time and value of supply' is also covered under Section 20 of IGST Act, 2017, hence the rules made under CGST Act in relation to valuation of a supply is applicable to IGST Act as well. Therefore, Rule 32 (5) of the CGST Rules, 2017 which provides for Margin Scheme in case of intra-state supplies shall also be applicable in case of inter-state supplies. 16. Before deciding as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced 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. Rule 32 (5) CGST Rules, 2017 specifies that where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored. 18. We note that the definition of second hand goods has not been defined in GST law but as per the common trade parlance, the same may be described as under:- Second-hand goods refer to items that have been previously owned and used by someone other than the manufacturer. The key aspect of second-hand goods is that they are still in usable condition and retain their original form and function. The value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable or intended for recycling as scrap. The recycling of metal scrap and used materials is a crucial aspect of sustainable manufacturing and environmental conservation. Metal scraps from various sources, while not usable in their original form, provide valuable raw material for manufacturers when recycled. This process conserves natural resources and reduces the carbon footprint associated with mining and processing new metals. Similarly, used metal utensils, plastic bags, and bottles, which have reached the end of their life cycle as consumer products are not discarded as waste but are collected and processed to reclaim the materials they contain. As already stated the reference to second hand goods in the margin money scheme is to such goods whose pre & post sale/disposal usage remains the same. For instance a second hand car shall be used in the same way as a new car. Used jewellery shall be worn the same way as new jewellery. Thus mere change of ownership is not sufficient to bring the term them as second hand goods & under the purview of Rule 32 (5) of the CGST Rules, 2017. There is one more requirement i.e. continuity of usage. The judgement & references relied upon the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
