No GST on Dried and Polished Turmeric, Classifiable as ‘Agricultural Produce’: AAAR

The Appellate Authority for Advance Rulings (AAAR), Maharashtra has held that GST cannot be levied on dried and polished turmeric.

Earlier, the Maharashtra’s Authority for Advance Ruling (MAAR) has ruled that dried and polished turmeric was not covered under the definition of agricultural produce and would attract 5 per cent GST. Aggrieved by this ruling, the appellant, a commission agent in the APMC Mandi, moved the MAAAR, which set aside the ruling by MAAR.

The Applicant, Nitin Bapusheb Patil has been a registered person under GST Act, 2017, as a ‘Commission Agent’ in APMC, Sangli, Maharashtra, renders his services to the farmers in relation to the supply of Turmeric’ (Whole Turmeric Not in powder form) to traders in APMC, Sangli. Applicant is also registered as a ‘Commission Agent’ under the APMC Rules and Regulation. Based on the tender/auction, if farmer and buyer mutually agree to sale and purchase, the Applicant, as a commission agent, facilitates activities ancillary to supply of agriculture product Turmeric in APMC, for which he gets a fixed commission at the rate of 3% as per APMC regulations. Applicant does not do any sort of trading of turmeric.

On appeal, the appellate authority observed that fresh turmeric contains moisture, and is blackish in color, which renders the fresh produce perishable and unsustainable. To make it more marketable, the raw turmeric is subjected to post-harvesting operations including boiling, drying and polishing, which are carried out by the farmers on their farms, Thus, it is clear that the impugned product i.e., dried turmeric (whole) is a produce of the cultivation of a plant, which is subjected to post-harvesting processes.

The bench relied on laboratory test reports which certified that there is no difference between the essential characteristics of raw turmeric and dried turmeric and both samples had oil and curcuminoid content, though in different concentrations.

Based on these arguments, authority declared that the said product satisfied all the conditions required to qualify as ‘agriculture produce.’ Accordingly, though the applicable rate for turmeric (in whole form and not in powder form) is 5 per cent,“the first supply (in whole form-not in powder form) by farmers, being supply by non-taxable persons on the Agriculture Produce and Marketing Committee (APMC), is not liable to GST.”

Law does not mandate Written Agreement to Prove Commission Expenses: ITAT deletes Disallowance

The Income Tax Appellate Tribunal (ITAT) Delhi bench, while deleting an order disallowing expenses, has held that there is no law that mandates a written agreement to prove the commission expenses under the provisions of the Income Tax Act, 1961.

The assessee, Mr. Kapil Jhalani is engaged in the business of distribution in wholesale of machine tools of various types. The Assessing Officer asked the assessee to furnish copies of the agreements with the parties with terms and conditions and details with evidence of services provided and also the TDS deducted. The Assessing Officer disallowed the commission expenses by observing that the assessee provided the details with names, addresses, and date of commission paid, but the assessee did not provide any agreement or any other relevant document in support of the commission.

A bench of Shri Shamim Yayha, Accountant Member and Ms. Astha Chandra, Judicial Member has observed that the entire details including the address of the parties and rate of commission was before the Assessing Officer.

“There is no adverse inference that TDS has not been deducted. The view of the authorities below that there has to be a written agreement for the commission is not legally sustainable. The observations of the ld. CIT (Appeals) that there was no onus upon the Assessing Officer to issue notice to the concerned parties is also devoid of any legal backing. When the address of the parties is before the Assessing Officer and it is not the case that the parties are bogus, the Assessing Officer cannot insist that the assessee should produce these parties, and otherwise Assessing Officer shall take adverse inference.”

Allowing the claim of the assessee, the Tribunal held that “the emphasis of the Revenue authorities in providing e-mail and correspondence is also uncalled for. As per the rate of the commission noted it is a very small amount and by no stretch of imagination can be said to be exorbitant. In our considered opinion when the commission paid is of a normal amount, the names and addresses of the parties have been duly mentioned, and the persons who have appeared have also acknowledged the receipt of commission, then the disallowance is solely based upon surmises and conjectures. No law provides that commission expense will be allowed only if there is a written agreement. The insistence of the Assessing Officer for the assessee to produce the party is also un-called for. No case has been made that the percentage of expenditure does not compare well with earlier years which the Revenue has accepted. Hence, in our considered opinion, this disallowance is based on surmise and conjecture and hence not sustainable in law.”

Goods attracting Nil Rate of GST Compensation Cess shall be treated as ‘Exempted’ to compute

While upholding an order granting GST refund, the Calcutta High Court has held that the goods attracting nil rate of cess shall be treated as ‘exempted’ for the purpose of adjusted total turnover under Rule 89(4) of the Central GST Rules.

Justice Md. Nizamuddin was considering an appeal by the department wherein the main issuewas whether for the purpose of computing refund of credit of compensation cess to be made under Section 54 (3) of the CGST Act read with Rule 89 (4) of the CGST Rules as applicable mutatis mutandis to the Cess Act, the domestic turnover of final products which are not taxable under the Cess Act, could be excluded to arrive at the adjusted total turnover under Rule 89(4) of the CGST Rules having regard to the definition of ‘Adjusted Total Turnover” contained in Clause (E) of the said Rule.

Assessee company, Electrosteel Castings Limited alleged that the CGST authorities concerned have ignored the expression ‘mutatis mutandis” appearing in Section 2 (2) of Cess Act and have not given any justification as to why domestic supply of finished goods which are subject to nil rate of Compensation Cess cannot be construed as exempted supplies.

Analyzing the legislative scheme of the Cess Act, the Court observed that the cess is an impost to counterbalance the loss of revenue of the States on account of subsumption of various taxes commencement of the GST regime. Hence, cess is a levy which partakes the character of all the levies, which now are subsumed in GST.

Applying the ratio of a catena of judgments, the Court held that goods which are subject to nil rate of cess would be construed as exempt supplies for purposes of the formula prescribed Rule 89 (4) of the CGST Rules and therefore, deserves to be excluded from the calculation of adjusted total turnover.

The Court upheld the order of the appellate authority observing that the authority while passing the impugned order has neither committed any procedural irregularity nor any jurisdictional error nor any violation of principles of natural justice and theimpugned order is based on cogent reasons and is speaking one

Quashing the impugned order denying refund to the assessee company, the Court held that the “action of withholding of the petitioner/assessee’s claim of refund in question by the respondent CGST authority and not refunding the same to the petitioner in spite of the order of the Appellate authority dated 5th February, 2021, holding such claim in favour of the assessee company/petitioner, is arbitrary and unjustified and accordingly respondent CGST authorities concerned are directed to refund the amount as per the aforesaid order of the Appellate authority dated 5th February, 2021, along with applicable interest till the date of such payment, within eight weeks from the date of communication of this order.”