Whether imported raw whole yellow peas are agricultural produce? If answer is yes than services by way of handling the imported raw whole yellow peas are eligible for exemption?

PJ/Case Law/2019-2020/3589

T. P. ROY CHOWDHURY & COMPANY PVT. LTD 2020 (32) G.S.T.L. 661 (App. A.A.R. - GST - W.B.)
Brief Facts:-The Applicant is stated to be acting as a stevedore and handles imported raw whole yellow peas. Being a stevedore, the Applicant supplies the service of loading and unloading of cargo in seagoing vessels.
AAR in this case ruled that the Applicant supplies the service of loading, unloading etc. after the cargo of yellow peas, imported from a foreign land, reaches the port of entry. Exemption under SI No. 54(e) of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 – FT dated 28/06/2017) is not applicable to the Applicant’s service. Aggrieved by their order, they appealed in AAAR.

Issue:-Whether imported raw whole yellow peas are agricultural produce? If answer is yes than services by way of handling the imported raw whole yellow peas are eligible for exemption?

Appellant’s Contention:-

The Appellant emphasized that its product is an agricultural produce and is exempted from taxation under the GST Act. Thus services associated in marketing such exempted product are also exempted under SI. No. 54(e) of the Exemption Notification.
The percentage of broken grain or split kernel compared to the consignment volume is minor and insignificant and is a result of natural handling of the consignment. The imported raw whole yellow peas were not subjected to any process by any machinery or mill and so the Exemption Notification will apply in case of Appellant’s service.
The WBAAR erred in interpreting the primary market as nowhere it is mentioned that the services covered under Si. No. 54(e) of the Exemption Notification is restricted to the primary market or the farm level.
The WBAAR erred in interpreting the meaning of “agricultural produce”. The conditions of being agricultural produce as defined under 2(d) of Notes to the Exemption Notification are mutually exclusive.
The AAR, Andhra Pradesh in the matter of M/s SSSVK Cold Storage Pvt. Ltd. in order no. AAR/AP/02(GST)/2018 dated 28.03.2018 observed that the benefits of exemption under the Exemption Notification is not person specific. It is equally applicable for agricultural produce in case of farmers as well as traders. Raw whole yellow peas fall under serial no. 45 of Notification No. 2/2017 — Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1126 FT dated 28.06.2017), as “dried leguminous vegetables, shelled, whether or not skinned or split” in the exempted category. So services related to exempted goods are also eligible for exemption.
No IGST is charged on the consignment as evident from the bill of entry justifying the imported goods to be agricultural produce and thus exempted from taxation.

Respondent’s Contention:-The Department officer argued that process done by assesses so that the essential characteristics of agricultural produce have been altered. Department has also refer the ruling in case of M/s. SSVK Cold Storage Pvt. Ltd.and said that the above ruling is not applicable in this case because traders were those purchased directly from the farmers. In the instant case the basic conditions of being “agricultural produce” and “primary market” were not adhered to.
The moot question is that whether the Appellant’s service is eligible for exemption under SI. No. 54(e) of the Exemption Notification.
There is no dispute that raw whole yellow peas are agricultural produce covered under serial no. 45 of the Rate Notification and are exempted goods. However, this particular consignment of raw whole yellow peas was harvested in foreign land and the concerned primary market or the farmers’ market is located in that foreign land. We observe from a combined reading of entry number 54 of the Exemption Notification and definition 2(d) of the Exemption Notification that all services and processes are excluded beyond the primary market. For the sake of clarity definition under 2(d) the Exemption Notification is reproduced here as following:
“agricultural produce” means any produce out of cultivation of plants and rearing of all life firms of animals, except the rearing of horses, .for .food, fibre, fuel, raw material or other similar products. on which either no further processing is done or such processing, is clone as is usually done by a cultivator or producer which does not alter its essential characteristics hut makes it marketable for primary market”.
The term primary market in common parlance refers to farmers’ market like “mandi” or “arhat” being a place where the farmers directly sell their product to the buyers like wholesalers, millers, food processing units etc. The spirit of the legislature was intended to boost the agricultural sector of the home country and not that of a foreign land. The primary market in the instant case being located in foreign shores does not conform to the definition as stated above. Further there is no evidence that the grains have not undergone any type of treatment before leaving the foreign country from where they have been imported into India.
In view of above discussion we find no infirmity in the ruling pronounced by the WBAAR. The appeal thus fails and stands disposed accordingly.
Ruling:- Disposed off
Prepared By- CA Mahesh Parmar

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PJ/Case Law/2019-2020/3589

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