TaxTMI 
TaxTMI 
2020 (6) TMI 678
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....2019 = 2019 (6) TMI 822 - AUTHORITY 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'....
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....SN 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 7113 Applicable Rates As applicable to the above HSN Code Whether Appellant can discharge the tax liability on difference between sales and purchase price considering old jewellery as second hand goods following Rule 32 (5) of the CGST Rules, 2017. Rule 32 (5) of the CGST Rules, 2017 is applicable 4. Antique Jewellery HSN code 9706 0....
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....art from buying paintings from individual art collectors, Appellant also procures paintings from other art dealers and directly from painters. Appellant has sought advance ruling on such items. Appellant also purchases paintings, collectibles, and antiques from other art dealers. Appellant pays full tax on sale value of such paintings, collectibles and antiques. Appellant neither sought advance ruling on such goods nor it is a subject matter of order of AAR. 12. Appellant sincerely thank Hon'ble AAR for very considered decision on certain issues relating to following goods. Ref. No. of the table given at point no. 10 Description of goods Remarks 2. Old cars Appellant accepts ruling of AAR on this point in toto i.e. HSN Code, Classification, Applicable Tax Rate, Valuation and Applicability of Notification No 8/2018-CT(R) dated 25.01.2018. 3. Old Jewellery Appellant accepts ruling of AAR on this point in toto i.e. HSN Code, Classification, Applicable Tax Rate, and applicability of Rule 32(5) of the CGST Rules. 5. Old Watches Appellant accepts ruling of AAR on this point in toto i.e. HSN Code, Classification, Applicable Tax Rate, and applicabilit....
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....on all these issues. GROUND OF APPEAL 14. On the facts of the case and in law, Advance Ruling Authority has erred in holding that Rule 32(5) of CGST Rules,2017 does not apply to sale of paintings, antique jewellery, antique watches, collectibles, other antiques bought from individual collectors and users and full sale value- of such goods is liable to tax. Detailed submissions: 15. Rule 32 (5) of Central Goods and Service Tax Rules,2017 ("CGST Rules") deals with determination of value of second hand goods. The relevant extract of Rule 32(5) of CGST Rules is as under: "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." 16. The term "second hand goods" for Rule 32(5) of CGST Rules would mean used goods as such or after such minor processing which does not change the nature of th....
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....es to sell it, such goods enters the secondary market as used goods or second hand goods. 23. Appellant is a player in the secondary market procuring second hand or used goods from the individual collector or users. 24. It seems that Hon'ble AAR perhaps felt that paintings are not "used goods" per se. There is a subtle difference between the term "used" and "consumed". Paintings are essentially a work of art made on a piece of paper or any other material. The person acquires paintings as his hobby or for social status. Individual collector or user usually displays the paintings at his home or office. It is a status symbol for the owner of painting. What is stated here, for paintings, applies to antiques, collectibles, memorabilia, etc. The main purpose and usage of such goods is to elevate the social status of the owner. There are fair chances that the individual selling these goods to the Appellant might have used the antique jewelry, watches, etc. on various occasions for personal use. Even if such goods are displayed, it is usage of such goods enhancing social status of such collector. Just because not all above items can be consumed, one cannot say that it is not "used". ....
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....ose of the GST legislation will be defeated as the tax is sought to be charged on value addition and not on the price addition of such goods. 28. It is settled principle of interpretation that if a statutory provision is open to more than one interpretation, one has to choose that interpretation which represents the true intention of the legislature. A statute is to be construed according to the intent of them that make it and the duty of judicature is to act upon the true intent of the legislature i.e. mens or sentential legis (Salmond: "Jurisprudence" 11th Edition). This principle of interpretation has been enshrined in various judicial pronouncements including the following: • Venkataswami Naidu, R vs Narasram Naraindas {AIR 1966 SC 361} = 1965 (4) TMI 122 - SUPREME COURT • District Mining Officer vs Tata Iron and Steel Co. (AIR 2001 SC 3134) = 2001 (7) TMI 1277 - SUPREME COURT • Bhatia International vs Bulk Trading SA (AIR 2002 SC 1432) = 2002 (3) TMI 824 - SUPREME COURT • South Asia Industries (Pvt) Ltd vs Sarup Singh (AIR 1966 SC 346) = 1965 (4) TMI 112 - SUPREME COURT • Kartar Singh vs State of Punjab [JT(19....
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....rs Owners Welfare Association [2004 (6) SCC 210] = 2004 (4) TMI 602 - SUPREME COURT In given case, Hon'ble AAR is reading certain words and phrase not there in the statute. Such an attempt is legally not tenable as it is contrary to all rules of construction to read words into an Act. 33. Rule 32 (5) is presumptive scheme of valuation. Such presumptive schemes are promulgated for trade facilitation or for convenience of tax administration. Once such valuation scheme is on the statue book, it is mandatory for assessee as well as tax authorities to follow it in letter and spirit, irrespective of revenue considerations. Once the goods are second hand or used goods, Rule 32(5) is applicable irrespective of value of such goods and irrespective of nature of such goods. 34. Hon'ble AAR is perhaps under misconception that as the value of paintings, antiques, collectibles, memorabilia etc. increases with the passage of time. Hence, such goods are not second hand goods entitled to benefit of Rule 32(5) of CGST Rules. Rule 32(5) of CGST Rules provides an option to a second hand goods dealer to pay tax on the margin of the selling price and purchase price if positive. It is clear from....
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....ally accepted the verdict of AAR on following goods: Ref. No. Description of goods Appellant contention in appeal proceedings. AAR HELD THAT: 1 Paintings bought from individual art collectors Appellant accepts ruling of AAR on this point as to HSN Code, Classification and Applicable Tax rate. However, Appellant respectfully disagrees with AAR ruling that Rule 32(5) of CGST Rules, 2017 is not applicable and Appellant is obliged to pay tax at 12% on sale value of such paintings. Appellant wish to contest that Rule 32(5) of CGST Rules, 2017 is applicable to sale of such paintings and Appellant is liable to discharge tax on difference between the sales prince and purchase price. The applicant has requested for valuation of paintings bought from individual art collectors. The Chapter 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 cov....
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....test that Rule 32(5) of CGST Rules, 2017 is applicable to sale of such books and Appellant is liable to discharge tax on difference between the sales prince and purchase price. Antique Books -Such articles will be covered under Tariff item 9706 00 00 only they are exceeding 100 years of age. If the antique books are under 100 years of age then they will be classified under the appropriate heading of the GST Tariff. Antique books of less than 100 years of age, if it is in the form of printed books, newspapers, pictures, etc, will fall under the various sub headings of Chapter 49 of the GST Tariff as the case may be. Since the specific details and description of 'collectibles (books)' has not been mentioned by the applicant, in the absence of specifics the question cannot be answered. 39. Whether Applicant is entitled to value following goods in accordance with Rule 32(5) of Central Goods and Service Tax Rules, 2017 (hereinafter referred to as "CGST Rules"): a) Paintings bought from individual collectors and connoisseur b) Antique jewellery, watches and books c) Collectibles and Memorabilia The Rule 32(5) of CGST Rules, 2017 reads as under....
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.... value of antiques is affected by many different factors. The Age, Quality of work and material rarity, condition, Market demand, or kiln mark or autograph of legend. Antiques that are highly wanted after but are scarce can usually command a better price. In individual situations another factor is the value attributed to a specific antique by its owner, and the price a collector is willing to pay to obtain it for his/her collection. In other words, this is dependent on the demand and supply situation on the antique market. Therefore, the actual value of an antique may never be the same at two points in time, or in two or more different sales locations. 42. The Antique goods are very special in character and have inherent value cannot be treated as second hand goods. These goods being antique in nature, attend to and represent the specific/ separate class of goods having separate identity, class, value, nature etc. 43. Moreover, the applicant cannot establish that the goods have been purchased by his vendor were Antique at some time and then used to treat it as second hand goods. Under GST ACT, 2017 the specific class of antique goods has been incorporated in schedule -II, Hen....
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....ce considering painting as second hand goods following Rule 32(5) of CGST Rules 2017 9101,9102 18% 32(5) Rule is applicable. Tax will be paid on the difference between the sale price and the purchase price. 5 Antique Watches 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 9706.00 00 12% Appellant to pay 12% on sale value of antique watches. Rule 32(5) is not applicable. Appellant 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 follo....
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....ing 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. 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....
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....ayers in the secondary market. A primary market refers to any goods when they come to the market for the first time. The appellant being an auctioneer dealer sells personal effects or such other goods in an auction which have not come in the market for the first time and therefore it is called a secondary market. 52. Rule 32(5) gives the benefit of the margin scheme to the second-hand or used goods and the 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 so....