While generating the e-Way Bill, in the ‘Item Details’ section, in the column of ‘Product Name’, ‘Arecanut’ or ‘Dried Arecanut’ has to be mentioned: Common Letter to all the Transporters
(T. No. 1107/2021-22 – sent through e-mails)
Government of Karnataka
Department of Commercial Taxes
Office of the Deputy Commissioner of Commercial Taxes,
Enforcement, Udupi,
Vanijya Terige Bhavan, Vivekananda Nagar, 4th Cross Road,
Ajjarakadu, Udupi – 576101
24-02-2022
To
The transporter or the seller or the buyer of arecanut (betelnut / supari)
Gentleman / Lady,
The undersigned has brought to your notice, and has also issued a warning, as under: –
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That you have transported or sold or purchased arecanut (betelnut / supari) in the past, which has passed through the Dakshina Kannada and Udupi Districts, and the Bhatkal Taluk of the Uttara Kannada District, of the State of Karnataka, over which the undersigned has territorial jurisdiction to enforce the provisions of the CGST, KGST and IGST Acts vide the Order ADCOM (I &C) / JDN
/ CR-36 / 2017-18 dated 30-08-2017 issued by the Commissioner of Commercial Taxes in Karnataka, Bengaluru.
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That according to Section 31(1) and Rule 46(h), the ‘description’ of the goods needs to be mentioned in the invoice. The law dictionary definition of the word ‘description’ includes – “the combination of qualities or features that marks out or describes a particular class, hence, a sort, kind or ”
The website of The CAMPCO Limited, Mangaluru, the market leader in the trade of arecanut, mentions as under: –
“The Arecanut or Supari, what we call as Bazar stock, will have to be graded into several varieties to suit the consumer taste. The Bazar stock is first garbled by hand picking and classified into different varieties like Mora, Moti, Vachras, Jamnagar, Jini, Lindi, etc. Other varieties like fators are classified as an inferior quality used for cutting items. Each variety has got its own market and is consumed by people from different parts of India and outside.”
If the accompanying document does not describe the goods as it is recognized / identified / traded / dealt-with in the market, then there is contravention of section 31(1) and rule 46(h).
The different varieties of arecanut such as Moti, Mora, Jam, Sevardhan, Vachras, Fatora, Jamnagar, Jini, Lindi, etc. are not “locally known trade names” but are well recognized varieties in arecanut markets throughout India and are dealt with / traded as such. As mentioned above, the website of The CAMPCO Limited, the market leader in the trading of arecanut, substantiates this fact. Every variety / sub-variety of arecanut traded in the market commands a particular price at a particular time.
Another evidence that the undersigned wishes to bring to light is the existence of at least four groups in the social-messaging application, ‘Telegram’, whose links are listed below, in which thousands of participants based out of different locations in India regularly advertise / offer their arecanut for sale with pictures and videos of the goods, and discuss the market of, and trading in, arecanut. The undersigned has been a participant (as a mute spectator) in these groups since sometime and he wishes to inform the sellers in this case that the trading of arecanut happens based on the commercially recognized varieties / sub-varieties, and not as ‘arecanut’ simpliciter. The links to the groups are:
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me/lawafarm
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me/supari_beetalnut_buying_selling
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me/gujaratsupari23
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me/sopariarecanut
Section 31(1) and rule 46(h) mandate the description of the goods in the invoice. The general description of goods against the HSN Codes are for grouping the goods into different slabs of tax- rates / customs-duties / excise-duties and are, therefore, not sufficient to make the invoices, which mention only such general descriptions, valid.
For example, an invoice for the sale of a mobile phone is not a valid invoice when it mentions only the general description of goods against the HSN Code 8517. It is a valid invoice only when the commercial description of the goods, as recognized in the trade or in the market, is mentioned. For example, an expensive iPhone 13 Pro Max and an inexpensive Oppo A16, both under the same HSN code, have different market prices and the GST leviable on both are in proportion to their sale-prices,
which are obviously different, despite the sales of both attracting the same rate of GST.
If the argument that the description of the goods against the HSN Code is sufficient to make the invoice valid is accepted, then it will lead to mayhem in the sphere of goods-taxation because the proper market price / commercial price / sale price of the goods may be camouflaged to evade payment of proper GST, especially when there is a wide range of goods of different market prices covered under the same HSN Code.
The transactions in this case are business-to-business transactions. When the actual identities / varieties / qualities of arecanut are masked in the invoice issued by the petitioner with a common description and a common price, the purchaser will also be enabled to mask the identities / varieties
/ qualities of arecanut to be further sold by him, violating section 31(1) and rule 46(h); and with a common / an average price in his purchase-invoice, the purchaser will also undervalue his sales with a common / an average prices with intention to evade payment of GST on the differential. This is a chain-reaction and highlights the systemic, systematic, and organized evasion of GST in the trade of arecanut.
The only reason of under-valuation of goods cannot be a ground to take punitive action under the KGST Act considering section 15 of the Act. But if the accompanying documents do not describe the goods as it is recognized / identified / traded / dealt-with in the market, then there is contravention of section 31(1) and rule 46(h). And, when there is also substantial underpricing of the goods, along with contravention of section 31(1) and rule 46(h), then the intention to evade tax becomes apparent. The undervaluation of the goods helps in making the goods competitive in terms of pricing as the GST on the difference between the market price and the invoice price is evaded. The under-pricing also has beneficial implications in the matter of Income Tax payable by the parties involved in the transactions and leads to evasion of Income Tax as well.
The consignment is peeled / deskinned areca nut bagged / packaged according to the different varieties / sub-varieties which can & have been obtained only after the process of garbling. The common contention of the sellers that they have sold whatever were purchased from local agriculturists cannot be believed because the local agriculturists will not have the infrastructure to garble raw areca nut into large quantities of peeled / deskinned areca nut.
Once the general mass of arecanut with skin is peeled / deskinned and then ‘garbled’ into different sizes / qualities / varieties, the goods acquire different commercial identities as recognized and traded in the market. In fact, the process of garbling adds value to the general mass of arecanut. Therefore, the same sold for an average price with the invoice mentioning the goods as ‘arecanut’ simpliciter is violative of section 31(1) and rule 46(h) despite the claim of the sellers that they have sold various varieties / sub-varieties of arecanut “in sets”. The system of GST is based upon taxation
at every stage of value-addition with set-off of the tax paid for the input at the earlier stage. Therefore, the sale for an average / a common price covering the different varieties of arecanut causes escapement of tax on the value-addition which has happened by the process of garbling.
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That the undersigned has been informed by reliable sources that the varieties are mentioned only in the invoices and not in the e-Way Bills and that after the consignments are delivered, the invoices are replaced with the invoices which do not mention the varieties. That this is a fraudulent act and that severe penal action will be taken, if and when such acts come to the notice of the undersigned, in cooperation with other authorities, both within and outside the State of Karnataka, and from both the Centre and the In brief, the varieties of arecanut must be mentioned BOTH in the invoice and the e-Way Bill, and not just in the invoice. If the warning is not adhered to, then penal consequences will follow if and when your consignment is intercepted by the undersigned.
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While generating the e-Way Bill, in the ‘Item Details’ section, in the column of ‘Product Name’, ‘Arecanut’ or ‘Dried Arecanut’ has to be In the column beside ‘Product Name’, there is another column ‘Description’ in which the variety has to be mentioned. In the case of multiple varieties, click on the ‘+’ sign to add more product names and descriptions.
