Liability of cooperative marketing society under Reverse Charge Mechanism rejected due to ongoing investigations

The application regarding the liability of a cooperative marketing society for tax under Reverse Charge Mechanism as an auctioneer for agricultural produce was rejected. The society argued its services were exempt and acted as a pure agent, citing relevant laws. State authorities viewed the society as an auctioneer, while the central authority held it liable for GST under Reverse Charge Mechanism. Ongoing investigations against the society were mentioned, and the application was not admitted due to pending issues before the tax authorities. The rejection was based on the first proviso to Section 98(2) of the CGST/TNGST Act 2017.

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Issues:
1) Whether there is any purchase/sale involved in the process of auction of agricultural produce (cotton) conducted by the cooperative marketing societyRs.
2) Whether the society is liable to pay tax under Reverse Charge Mechanism as an auctioneerRs.
3) Whether service tax is payable on receipt of Commission, Godown rent, Interest, in respect of service provided to agricultural produceRs.
4) Whether the merchants who directly purchase cotton from the agriculturist through the auction conducted by the society are liable to pay tax on the basis of Reverse Charge MechanismRs.

Analysis:
The cooperative society, registered under the Tamil Nadu Co-operative Societies Act, acts as an auctioneer for the agricultural produce of its member agriculturists. The society does not own the goods, merely facilitates the auction process, and does not issue tax invoices. It functions on a commission basis and does not collect or pay tax, as per the bylaws. The society reimburses sale proceeds to agriculturists and collects charges from merchants, which are not considered as sale consideration.

The applicant claims their services are exempted under specific notifications and that they act as a pure agent. They cite relevant case laws and government letters to support their contention. The society's role as an auctioneer is emphasized, and they argue they are not liable to pay tax under Reverse Charge Mechanism due to the exempted nature of their services.

During the proceedings, both State and Central Jurisdictional Authorities provided detailed comments. The State Authority concluded that the society provides "Auctioneering Services" and may not be classified as an agent. The Central Authority stated that the society is liable to pay GST under Reverse Charge Mechanism and merchants are not liable for reverse charge.

The application was further discussed in subsequent hearings, where the Central Authority mentioned ongoing investigations against the applicant. The Authority found that the application cannot be admitted as the issues raised were already pending before the Central Tax authorities at the time of filing.

Therefore, the ruling stated that the application is not admitted and rejected under the first proviso to Section 98(2) of the CGST/TNGST Act 2017, as the issues were already pending before the appropriate authority.

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