Case Title | Vallalar Borewells |
Court | Tamil Nadu Bench AAAR |
Honorable Judges | Member Thiru.G.V Krishna Rao & Member Thiru M.A. Siddique |
Citation | 2021 (6) GSTPanacea 58 HC Tamil Nadu TN/AAAR/14/2021(AR) A.R.APPEAL NO.03/2021/AAAR |
Judgement Date | 30-June-2021 |
Council for Petitioner | Tvl.Muthu Venkatraman |
Council for Respondent | NA |
Section | Section 100(1) |
In Favour of | In Favour of Respondent |
The Tamil Nadu Bench of Member Thiru.G.V Krishna Rao & Member Thiru M.A. Siddique has held that since the same equipment is used for the drilling activities, whether on agricultural lands or for industries, etc., it would not be possible for the tax administration to identify whether the driller is exclusively undertaking agricultural drilling only thereby leading to evasion of tax only.
FACTS OF THE CASE
The Appellant has stated that they are engaged in the activity of drilling borewell service to agriculturist. Water is a prime source for the agriculture of crops. Likewise, compressors which are let out by them to agriculturists enable the motor to function and discharge water as required for cultivation and allied agricultural uses. They also obtain a confirmation letter from the agriculturist that the borewell drilled in their land is used only for the agricultural purpose
The Appellant has sought Advance Ruling on the following questions:
Whether the following supply of service provided by the appellant are in relation to agricultural operations directly in connection with raising of agricultural produce:
Drilling of Borewells for supply of water for agricultural operations like cultivation including seeding, planting and ploughing.
Letting out compressors for pumping of water from the borewells to the agricultural fields.
If the answer to the above question is affirmative, whether the said service are covered by the entry SI.No.54 of Notification 12/2017-CT (Rate) dated 28.06.2017
The AAR pronounced the following rulings:
Drilling of Borewells for supply of water in agricultural land is not ‘Support Service for agriculture classifiable under ‘SAC 9986’ for the reasons stated in para 8.3
Letting out of compressors for pumping of water from the borewells to the agricultural field is not ‘Support Service for agriculture classifiable under ‘SAC 9986’ for the reasons stated in para 8.4
The above two activities of the applicant are not ‘Support service for agriculture’ classifiable under SAC 9986 and therefore the exemption at SI.No.54 of Notification No. 12/2017-C.T. (Rate) is not applicable to the above activities of the applicant.
Aggrieved by the above decision, the Appellant has filed the present appeal
COURT HELD
Considering the facts as recorded, held that Without going into the merits of the main argument of the appellant regarding the activity undertaken is by way of agricultural operations relating to production of any agricultural produce, etc., prima facie, in the scheme of things of GST, no two classifications can be adopted for a single activity based on end use or where it is rendered, etc.
Further since the same equipment is used for the drilling activities, whether on agricultural lands or for industries, etc., it would not be possible for the tax administration to identify whether the driller is exclusively undertaking agricultural drilling only thereby leading to evasion of tax only
Bench do not find any infirmity in the reasoning of the Advance Ruling Authority with regard to the impugned ruling, in the light of our additional reasoning as above. With regard to compressor also, bench do not differ from the AAR’s ruling
ANALYSIS OF THE JUGDEMENT
The letter of the then FM quoted and relied by the appellant was also discussed by the Fitment Committee and finds mention during the 28th GST council meeting vide Annexure IV to agenda item 7.
After deliberations, the council approved the proposal of Fitment Committee of not acceding to the demand of exemption for drilling of bore wells for agriculture from GST but required to study further. In the same table in Annexure IV pertaining to issues relating to services, against si.no.3 (page no.258 of Vol.I), the Fitment Committee while stating that the same issue was already raised in the service tax regime quoting the FM letter, further reasoned as ‘The services covered by the scope of Section 66D (d)(i) of the Finance Act, 1994 and si.no.25 (a) of the mega exemption notification 25/2012-ST are exempted in GST vide SI.No. 54, and 3 of notification 12/2017-CT(Rate).
Thus, the status quo has been maintained in GST vis-a-vis Service Tax regime’. It is clear from the above that as such no exemption was intended by the Government for borewell drilling for agricultural purposes and continues to be under its examination.
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