Services for ‘agricultural produce’ by way of loading, unloading, packing, storage or warehousing are exempt from GST and writ petition is maintainable if any third party is aggrieved by an Advance Ruling
Introduction: In a significant ruling, the Hon’ble Madras High Court, in the case of Naga Ltd. v. Puducherry Authority for Advance Ruling [Writ Petition No. 2851 of 2021 dated November 10, 2023], clarified the GST exemption on services related to ‘agricultural produce.’ The court held that services involving loading, unloading, packing, storage, or warehousing of agricultural produce are exempt under the specified provision. Furthermore, the court allowed a writ petition from a third party, not involved in the Advance Ruling proceedings, on the grounds of adverse civil consequences.
The Hon’ble Madras High Court held that services rendered in relation to ‘agricultural produce’ by way of loading, unloading, packing, storage, or warehousing were exempt from GST under the SI. No. 54 (e) of Notification No. 12/2017 Central Tax (Rate) (“the Exemption Notification”), regardless of whether the produce was for the primary market. Thus, the writ petition filed by the aggrieved Petitioner who was not party to the Advance Ruing proceedings, was maintainable.
Facts:
Naga Ltd. (“the Petitioner”) was engaged in the business of milling wheat into wheat products such as maida, atta, sooji, bran etc. in Tamil Nadu. For milling purposes, the Petitioner imported wheat through various seaports. The Petitioner engaged service providers for clearing the imported wheat from seaports. The services included the activity of loading, unloading, packing, storage or warehousing of the imported wheat and its further clearance to the Petitioner’s factory.
The Petitioner sought an Advance Ruling under Section 97 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”), seeking clarification on whether the services rendered by the Supplier (“the Respondent”) in respect of wheat imported by the Petitioner is exempted under S. No.54(e) of the Exemption Notification. The application was rejected on the ground that only a supplier on whom the incidence of tax lies can seek an Advance Ruling as per Section 95(a) of the CGST Act. The Petitioner being a recipient cannot maintain the application under Section 97 of the CGST Act. Thereafter, Respondent filed an application for Advance Ruling in relation to the applicability of the above Exemption Notification with regard to the services rendered to the Petitioner.
The Tamil Nadu Advance Ruling Authority held that the above services were not entitled to exemption on the ground that the imported wheat with regard to which the services were rendered was not meant for the primary market but instead meant/intended to be used by the Petitioner at its factory for further processing of the wheat imported into atta, maida and sooji. (“the Impugned Ruling”).
Hence, aggrieved by the Impugned Ruling, the present writ petition was filed by the Petitioner.
Issue:
1. Whether the services rendered by the Supplier in respect of wheat imported by the Petitioner exempted under the Exemption Notification?
2. Whether the writ petition maintainable if the Petitioner is aggrieved by an Advance Ruling but was not party to it?
Held:
The Madras High Court in Writ Petition No. 2851 of 2021 held as under:
- Relied on the judgment, in the case of D.L. Chemicals Ltd. v. Union of India, (1996) 5 SCC 373 and M. Amrutham Petroleum Agency v. Additional Deputy Commercial Tax, Puducherry, 2016 VIL 254 MAD where ruled that results in the Petitioner suffering adverse civil consequences gives them the locus to challenge the same and maintain the present writ petition. Hence, the writ petition was maintainable.
- Relied on the judgments, in the case of CCE v. Favourite Industries, (2012) 7 SCC 153, of Customs v. Rupa & Co. Ltd. [(2004) 6 SCC 408] and Commr. of Customs (Preventive) v. Reliance Petroleum Ltd. [(2008) 7 SCC 220], wherein it was held that adding conditions to the Exemption Notification is impermissible. The Impugned Ruling was adding conditions to the Exemption Notification and hence held to be flawed.
- Relied on the judgments, in the case of Hindustan Petroleum Corpn. Ltd. v. Union of India, (2001) 10 SCC 157 wherein the term “marketable” is used in the definition of “agricultural produce” it is clear that it only means that the goods in question in the instant case wheat must be capable of being marketed in the primary market and it is not necessary to show that it is actually marketed. Hence, Impugned Ruling warranted interference in the fact that the expression “marketable” employed in the definition of “agricultural produce” was misconceived. Furthermore, the Hon’ble Supreme Court had reiterated the same view in the cases of Indian Cable Co. Ltd. v. Collector C.Ex, Calcutta – 1994 (74) E.L.T. 22 (SC), Commissioner of C. Ex and ST., Bangalore v. Karnataka Soaps and Detergents Ltd. – 2017 (355) E.L.T. 161 (S.C.) and Gujarat Narmada valley Fert. Co. Ltd. v. Collector of Ex. Cus.-2005 (18) E.L.T. 128 (S.C.)
- Held that, on a plain reading of the definition of “agricultural produce” in the Exemption Notification, which identifies the nature of the product including certain processes which does not alter the essential character as an “agricultural produce” but merely make it marketable for the primary market. Thus, the services rendered by Respondent are exempt from GST under Sl.No.54(e) of the Exemption Notification. Hence, Impugned Ruling in the hands of the Petitioner herein is unsustainable. Also, held that if any particular transaction is entitled to exemption, would require examination of individual imports by the appropriate authority. Thus, the writ petition was disposed of.
Conclusion: The Madras High Court’s ruling clarifies the exemption of GST on services related to agricultural produce, providing relief to entities like Naga Ltd. The court’s decision to allow a writ petition from a third party establishes the importance of addressing adverse civil consequences, even for non-parties to Advance Ruling proceedings. This case sets a precedent for ensuring fair and just outcomes in GST-related matters, emphasizing adherence to statutory provisions.
In conclusion, the detailed analysis of the Madras High Court’s decision highlights the nuances of the case and its broader implications for the interpretation of GST exemptions on services related to agricultural produce.
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