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TMI Blog2024 (10) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... on which different GST rate are specifically notified by the Government vide Notification No. 8/2018-Central Tax (Rate) dated 25.01.2018. The intention of Government to issue notification No. 8/2018-Central Tax (Rate) dated 25.01.2018 is not to limit Motor Vehicles as second hand goods to cover under margin scheme rather to give separate rate on sale of such second hand motor vehicles. Thus, we hold that the benefit of margin scheme is not limited to second hand Motor vehicles only but it is available to all other goods as well subject to condition that subject goods qualify as second hand goods. Distinction between second-hand goods and scrap - HELD THAT:- 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. It is evident from the above that the key difference lies in the usability of the items; scrap requires processing to be useful again, whereas second hand goods are ready for immediate use by a new owner. Additionally, the value of scrap is generally determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GA, AND DR. RAVI KUMAR SURPUR, MEMBER Present for the Appellant : Sh. Prafful Gupta, CA, A/R for M/s. Hitesh Gwalani (Proceedings under Section 101 of the Central GST Act, 2017 read with Section 101 of the Rajasthan GST Act, 2017) At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are pari-materia barring a few exceptions. Therefore, unless a specific mention made to such dissimilar provisions, a reference to the Central GST Act, 2017 should also be read as a reference to corresponding provisions of Rajasthan GST Act, 2017. The present appeal has been filed under Section 100 of the Central Goods Service Tax Act, 2017 (hereinafter also referred to as the CGST Act ) read with Section 100 of the Rajasthan Goods Services Tax Act, 2017 (hereinafter also referred to as the RGST Act ) by the Appellant against AAR, Rajasthan Ruling Order 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 Alumi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to be consumed/melted for manufacturer of new items and thus the nature of goods changed. Further, the Authority for Advance Ruling stated in the impugned ruling that Central Government has issued Notification No.8/2018 -Central Tax (Rate) dated 25.01.2018 in respect of Margin Scheme under Rule 32 (5) of CGST Rules, 2017. The Authority for Advance Ruling opined that the Margin Scheme is available only with respect to Motor Vehicles. Furthermore, the second question was rejected by the AAR on the grounds that since the Appellant are not eligible to operate under Margin Scheme in term of Rule 32 (5) of Central Goods and Services Tax Rules, 2017, therefore, the benefit neither available for intra-state supply of goods nor inter-state supply of goods. GROUNDS OF APPEAL Being aggrieved with the AAR Order No. RAJ/AAR/2023-24/ dated 09.04.2024, the present appeal has been filed on 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, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AAR, Rajasthan in respect of M/s Shambhu Traders Pvt. Ltd., in which it has been held that- Margin Scheme under GST - Applicability - Supply of used lead acid batteries - Under said scheme, a dealer supplying second hand goods as such or after minor processing not altering nature of goods, is allowed to pay tax on the margin, i.e., difference between value of purchase and sale price, provided ITC is not availed - Instant case, applicant having procured second hand lead acid batteries from various unregistered suppliers and selling them without any further process, fully covered under said scheme - Rule 32 (5) of Central Goods and Services Tax Rules, 2017. [Para 5(1)] Margin scheme under GST Inter-State Supplies Time of Supply and Valuation Applicability of Central Goods and Services tax Rules, 2017 said Rules applicable to aforesaid matters in respect 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in GST Act, 2017 but from above Ruling and official Press Release of GST department, it proves that margin scheme prescribes the conditions for eligibility only that used goods can be of any category until and unless nature of goods does not get changed. Therefore, it is very aptly clear from above explanation that the appellant are eligible for Margin Scheme as per Rule 32 (5) of CGST rules, 2017, 7. That the AAR in Para No. 8 mentioned that Margin Scheme under Rule 32 (5) of CGST Rules, 2017 is available only to Motor Vehicles as per Notification No. 08/2018-Central Tax (Rate) dated 25.01.2018. However, the AAR before passing the impugned Order failed to take into consideration Advance Ruling No. KAR ADRG 35/2021 dated 9-7-2021 in respect of M/s Aadhya Gold Pvt. Ltd., KAR ADRG 15/2020 dated 23.03.2020 in respect of M/s Attica 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 Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Analysis, and Conclusion held that applicant is engaged in purchasing and selling Iron Scrap, used lead acid batteries old used aluminium utensils, used old steel utensils scrap and old used scrap of copper etc. However, they did not take the liberty in studying the AAR application filled by the Appellant reasonably which clearly stated that they are proposing to start selling used goods to manufacturers. The appellant did not mention in the application as well as in the hearing that they will sell used goods to manufacturers after processing. Instead, the Appellant clearly mentioned in Point B Para 5 of Interpretation and Understanding of Applicant on question raised (In Brief) that 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , old used brass utensils and other scrap, used old steel utensils scrap, old used scrap of copper, used waste plastic bags used plastic PET bottles etc. to manufacturers whether the goods when sold outside the state or when sold within the state of Rajasthan qualifies under the Margin Scheme. 14. We note that, for question No. 1, the AAR, Rajasthan held that the appellant are not covered under the Margin Scheme notified under Rule 32 (5) of the CGST Rules, 2017. The AAR, Rajasthan observed that though the definition of second hand goods is not prescribed under GST but as per the common trade parlance, the definition of same is as under- Second hand goods means any new or used property that has been sold, traded, exchanged, consigned or otherwise disposed of by its original owner. 14.1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies qualify to be second hand goods, Accordingly, the Applicant dealer is entitled to operate under the Margin Scheme in respect of the used lead acid batteries . C) Further, the appellant relied upon the Advance Ruling No. KAR ADRG 35/2021 dated 9-7-2021 in respect of M/s Aadhya Gold Pvt. Ltd., KAR ADRG 15/2020 dated 23.03.2020 in respect of M/s Attica Gold Pvt. Ltd. both passed by AAR, Karnataka. The AAR held in both cases that applicant dealing in second-hand goods and invoicing his supplies as second-hand goods , the valuation of supply of second-hand gold jewellery which are purchased from individuals who are not registered under GST and there is no change in the form and nature of such goods, can be made as prescribed under sub-rule (5) of Rule 32 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 17. Further, in order to ascertain whether any goods is covered under Margin Scheme or not, it is imperative to go through the relevant provisions, contained in Rule 32 (5) of the CGST Rules, 2017 as under :- (5) 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. 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. u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable for the reasons discussed as below:- We note that the appellant mentioned in the appeal that they proposed to initiate the business of selling of various types of second-hand goods to various manufacturers such as (i) old used Iron Scrap, (ii) used Lead Acid Batteries, (iii) old used Aluminium utensils other Aluminium Scrap, (iv) old used brass utensils and other scrap, (v) used old steel utensils scrap, (vi) old used scrap of copper, (vii) used waste plastic bags, (viii) used plastic PET bottles etc. In light of the appellant s intent to acquire goods from unregistered suppliers and subsequently supply these goods to various manufacturers, it becomes apparent that the goods in question are either unusable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input tax credit should not have been claimed on these goods. Since the appellant s goods do not meet the criteria of second-hand goods, they are not eligible for the benefits of the Margin Scheme for either intra-state or inter-state supply of goods. This interpretation is congruent with the provisions and the intent of the GST framework to facilitate a fair taxation process while avoiding undue tax burdens on the circulation of second-hand goods. We hold that since the appellant is not eligible to operate under margin scheme in term of Rule 32 (5) of the CGST Rules, 2017 with corresponding provisions of SGST Rules, 2017 as the goods are not qualified as second hand goods, thus the benefit is neither available for intra state supply of goods nor inter-state supply of goods. 22. In light of above, we pass the following order: ORDER 1) We hold that selling of 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 used scrap of copper, used waste plastic bags used plastic PET bottles etc are not covered under the Margin Scheme notified under Rule 32 (5) of the CGST R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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