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2020 (10) TMI 766
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....uilding, Ambattur Industrial Estate (hereinafter called the 'Applicant') is registered under the GST Vide GSTIN 33AAACS5514Q1Z5. They are engaged in providing various inspection, verification, testing and certification services in the agriculture and food production process in its laboratories set up in India. They have sought Advance Ruling on the following question: Whether the supply of "inspection and testing services" on fresh table grapes is classifiable under entry 9986 of Notification no. 11/2017-Central Tax Rate) dated June 28 2017- "Support services to agriculture, forestry, fishing, animal husbandry" chargeable to NIL rate of tax and Entry 54 (a) of exemption notification no.12/2017-Central Tax (rate) dated June 28,2017? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are a company incorporated under Companies Act 1956 and have their registered corporate office at Maharashtra. They are primarily engaged in the business of providi....
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....escription of goods and quantity for testing b) Place of inspection/ testing c) Scope of service d) Sampling Plan e) Method of testing f) Proposed fees and applicable taxes g) Miscellaneous charges h) Payment terms i) Reference to general conditions of service j) Offer acceptance details After the exporter customer provide their approval the applicant initiates the sampling procedure from the farms in accordance with the method of sampling laid down by APEDA in the procedures for export of Fresh Table Grapes in file no. QCT-2013-14-000011, Trade Notice no. Apeda/ Q/ 56/2018-19 dated October 10, 2018 (hereinafter referred to as 'Fresh Table Grapes export procedure'). The following is the procedure required to be followed by the applicant: * A schedule for drawl of samples is obtained from the farmers/exporters well in advance so as to plan sampling arrangements. * Samples, are drawn in the presence of the farmer and exporter's representative by an authorised representative of the applicant. * After the samples are drawn the applicant maintains a record of the same and also ....
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....'Laboratory testing' however, service tax was discharged and collected on the service of 'final random inspection' at the rate of 14%. They have stated that they are under the belief that fresh table grapes are cultivation of vitis plants and is therefore an agricultural produce, consequent to which the process relating to inspection and testing is exempt from Service Tax. Hence the applicant neither discharged nor collected service tax on its output service. 2.4 The applicant on their interpretation of law in respect of the question raised by them, has stated that the Central Government vide Entry 24 under Notification no. 11/2017-Central Tax (Rate) dated June 28, 2017 provides exemption for "Support services to agriculture" and as per Explanation (i)(a) of the said entry, Support services means... "services by way of agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing". The applicant has stated that to qualify for exemption under the above category of service, it is necessary to satisfy the following conditions: a) Support services are agricultural operations inclu....
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....ct and APEDA Rules; and c) A certificate is issued in the format prescribed by the APEDA under the APEDA Act and APEDA Rules Thus, they have stated that they fulfil all the conditions for an activity to qualify as an agricultural operation or testing activity as per the above Circular. The applicant has stated that the second condition to satisfy is whether fresh table grapes qualify as an 'agricultural produce'. They have referred to the Ruling GST ARA -30/2017-18/B-38 dated May 23,2018 by the Hon'ble Authority of Advance Ruling Maharashtra in the case of Nutan Warehousing Company private limited = 2018 (8) TMI 1073 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA, wherein the authority has identified three ingredients in the definition of agricultural produce under clause 2(d) of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017. These three ingredients are listed as under: a) The produce must emerge from cultivation of plants or rearing of all life forms of animals. b) Either no further processing is done or such processing is done as is usually done by a cultivator or producer of the said produce. c) The process undertaken does no....
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....ey have further stated that the scope of agricultural produce had developed and evolved during the service tax regime and was further widened with its transitioning under GST. As per the applicant's view analysing and understanding the intention of legislature towards inclusion of fruits within the purview of Agricultural produce is imperative in order to substantiate the facts in the present case. They have also referred to clause 65 (B) and Section 66D(iii) of Order No.1/2002 & 1/2012 -Service Tax and has stated that fresh table grapes being fruits are considered as agricultural produce. They have further relied on the definition in various dictionary and law lexicon and the following judgements to claim that cultivation of fruits would fall under the definition of agricultural produce: • The Hon'ble Ahmedabad Tribunal in the case of CCE & ST Ahmedabad -III vs Murlidhar Horticulture Pvt Ltd reported in 2019 (3) TMI 1435 • The Hon'ble Calcutta High Court in case of Sheikh Hidayat Ali vs Kumar Kalanand Singh 1913(17) CLJ 411 • Advance Ruling Authority Rajasthan in the case of Shubhlaxmi Cold storage and Ice Factory Limited -Ruling No. RAJ/AAR/....
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....included under Section 66D(d)(i) of the Finance Act and hence this testing service in relation to agricultural produce, provided by them would merit exemption from levy of GST also. The applicant has relied on the following decisions of various fora o Hon'ble Supreme Court in the case of District Mining Officer Vs. Tata Iron and Steel Co. [(2001)7 SCC 358] = 2001 (7) TMI 1277 - SUPREME COURT o Prakash and Ors Vs. Phulavati and Ors [(2016) 2 SCC 36) = 2015 (10) TMI 2761 - SUPREME COURT o R.M.D. Chamar baugwalla and Anr Vs. Union of India and Anr [AIR 1957 SC 628] = 1957 (4) TMI 56 - SUPREME COURT o Anandji Haridas and Company Private Limited Vs. Engineering Mazdoor Sangh and Anr.[(1975) 3 SCC 862] = 1975 (2) TMI 50 - SUPREME COURT o Kartar Singh Vs. State of Punjab [(1994) 3 SCC 569] = 1994 (3) TMI 379 - SUPREME COURT o Bhatia International Vs. Bulk Trading S.A. and Anr. [(2002) 4 SCC 105] = 2002 (3) TMI 824 - SUPREME COURT and stated that the settled principle in law is that a tax exemption statute or notification needs to be strictly interpreted, when words are clear, unambiguous and only one meaning can be inferred and in c....
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.... tending, pruning, cutting, harvesting, digging the soil around the growth, removal of undesirable undergrowths and all operations which foster the growth and preserve the same not only from insects and pests but also from depredation from outside and hence rendering the produce fit for the market • the principles which emerge from the case of C.I.T. v. Benoy Kumar (supra), has been laid down by the Hon'ble Supreme Court in the case of Maheshwari Fish Seed Farm v. T. Nadu Electricity Board and Ors. AIR 2004 SC 2341 = 2004 (4) TMI 632 - SUPREME COURT. (Para 10 of the order) • The Hon'ble High Court of Uttarakhand in Commissioner Central Excise and Customs and Ors. v. Dujodwala Resins and Terpenes Ltd. and Ors. Special Appeal Nos. 227 of 2011, 236, 237, 275, 276 & 354 of 2013, also interpreted the term 'agricultural production" as below: "72. 'Agriculture production" is a common and widely recognized phrase. Illustrations of Agriculture production are many. For instance horticulture production where systematic activity is carried on to produce fruits for commercial purposes, such as apple orchards. Another instance is of rubber plantations. Even in ....
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....ecessary for the purpose of effectively raising the produce from the land. They are operations to be performed after the produce sprouts from the land. The latter would all be agricultural operations when taken in conjunction with the basic operations above described, and it would be futile to urge that they are not agricultural operations at all • In the above findings, the Hon'ble Supreme Court has categorically recorded that only cultivation is the basic operation whereas harvesting, pruning, cutting, etc. are other operations are to be performed after the cultivation activity is completed. In this sense, only the cultivation activity would be treated as pre-production activity whereas other activities such as harvesting, threshing, testing, etc. would all be treated as post-production activity. Hence, the coverage for exemption has been extended to both activities. In view of this, assuming only the testing activity of the Applicant as post-production activity and harvesting, threshing, etc as pre-production activity and denying exemption on that basis, is not tenable in law and does not advance the scope of the exemption provided by the Government. 4. The appli....
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.... providing various support services including sampling, inspection, verification, testing and certification services on fresh table grapes and other agricultural produce. The applicant has sought ruling on Whether the supply of "inspection and testing services" on fresh table grapes is classifiable under entry 9986 of Notification no.11/2017-Central Tax Rate) dated June 28 2017- "Support services to agriculture, forestry, fishing, animal husbandry" chargeable to NIL rate of tax and Entry 54(a) of exemption notification no.12/2017-Central Tax (rate) dated June 28,2017? 7.1 The facts of the case as furnished by the applicant is that the applicant's exporter-customers in India, approach and contract with them for conducting sampling and testing of specific types of fresh table grapes grown/cultivated in India. The applicant approach the grape farms, draw samples, conducts test in their laboratory and issues certificates/reports of analysis to their exporter customers, who would consider the analysis in the report and take decision on their export orders. The applicant has stated to have sampling units in the State of Maharashtra at Nasik, Sangli Pune, etc It is stated that....
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.... on the service of 'laboratory testing' however service tax was discharged and collected on the service of 'Final random inspection' at the rate of 14%. The applicant has stated that the scope of service in relation to agricultural produce has been widened under the CGST Act and is unsure to continue the above tax position and has classified its services under the Heading 9983 - 'Other professional, technical and business services' and discharged GST at the rate of 18%. As a result of such change in tax position, the exporter-customers of the Applicant have expressed protest that the services provided by the Applicant continue to remain exempt in view of its coverage under Entry 54(a) of Exemption Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017. 7.2 On analysis, the following are observed: • Trade Notice No: Apeda/Q/56/2018-19 dated 10th October 2018 of Agricultural and Processed Food Products Export Development Authority(APEDA) provides the 'Procedures for Export of Fresh Table Grapes to the European Union' • The procedure in its scope states that the procedure is applicable to all the stake holders including farmers, producers and exp....
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....ed in Annexure -9 of APEDA trade Notice. Thus the 'testing' undertaken by the applicant is to detect residue of various chemicals in the cultivated grapes and can also be to grade the cultivated grapes as per the 'Criteria for Grade designation' given in Schedule-II of 'Fruits and Vegetables Grading and Marking Rules, 2004'. Further, it is seen that 'Fruits and Vegetables Grading and Marketing Rules 2004', apply to commercial varieties of Fruits and Vegetables; Rule 7 of the said rule states that 'Fruits and Vegetables may be graded and marked as per buyer requirements for exports provided the minimum requirements specified in the relevant schedule are met'; and Rule 8 states that: 'For domestic trade, Fruits and Vegetables shall comply with the residue levels of heavy metals, pesticides, aflatoxin and other food safety parameters as specified in Prevention of Food Adulteration Rules 1955.' In view of the foregoing, it is clear that, grading of fresh table grapes undertaken by the applicant is in accordance with the guidelines/provisions stipulated in the mentioned Trade notice of APEDA and the Fruits and Vegetables Grading and Marketing Rules and testing fo....
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....tion and fertilization of crops; spraying, including from the air; iv. pest control for agriculture; trimming of fruit trees and vines; transplanting and thinning of crops; harvesting; v. provision of agricultural machinery with crew and operators; operation of irrigation systems for agricultural purposes; vi. other services necessary for agricultural production; Crop production services on inputs owned by others like operation of a crop production unit on a fee or contract basis This service code does not include: - formation and clearance of agricultural land, cf. 995432 - services provided by agronomists and agricultural economists, cf. 998311 - other pest control services, cf. 998531 - water distribution services through mains (on a fee or contract basis), cf. 998633 998619 Other support services related to agriculture, hunting, forestry and fishing This service code includes other support services related to agriculture, hunting, forestry and fishing, n.e.c. On examining the above, we find that 998611 covers support services to crop production which includes grading of seeds to be mark....
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....ent Authority for Agricultural and Processed food products and the applicant lab is an authorized lab of Directorate of Marketing 86 Inspection which establishes that the activity of the applicant is a support service to the exporter-client of the applicant for marketing/export and is not a support service related to agriculture but is related ensure the agriculture produce has access to certain markets to earn a higher price. Even without these activities of the applicant, the crop is produced. Hence, the supply by the applicant is not classifiable under SAC 998619 also. The Explanatory Notes for Services states: 998346 Technical testing and analysis services This service code includes 1. testing and analysis of the chemical and biological properties of materials such as air, water, waste (municipal and industrial), fuels, metal, soil, minerals, food and chemicals; It is seen from the above that the testing for chemical residue, grading based on physical attributes of table grapes is classifiable under SAC 998346. 7.5 Entry at Sl. No 54 (a) of Notification 12/2017 C.T.(Rate) dated 28.06.2017 exempts inter-state services namely: S.No. Chapt....