Agricultural produce classification for processed tea leaves kept their essential character and escaped sales tax.

Tea leaves grown by the seller remained agricultural produce where the processing of withering, crushing, roasting, fermentation, grading and final roasting was only customary and sufficient to prevent deterioration, make the leaves marketable and fit for consumption. Because the treatment did not transform the leaves into a different commodity and their essential character remained unchanged, the sale proceeds were excluded from turnover under the proviso to section 2(i) of the U.P. Sales Tax Act, 1948. The sales were therefore not liable to sales tax.

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Issues: Whether tea leaves grown by the assessee and subjected to withering, crushing, roasting, fermentation, grading, and final roasting continued to be agricultural produce within the proviso to section 2(i) of the U.P. Sales Tax Act, 1948, so as to exclude the sale proceeds from turnover and sales tax.

Analysis: The exclusion in the proviso was intended to protect sales of agricultural produce grown by the seller himself. The decisive question was whether the processing applied merely preserved the produce, prevented deterioration, and made it fit for transport, marketing, and human consumption, or whether it transformed the leaves into a different commodity. The processing found in this case was held to be only minimal and customary for tea leaves, which are not marketable in the raw state. The leaves remained tea leaves throughout and did not change their essential substance or character into a different commodity.

Conclusion: The processed tea leaves remained agricultural produce, and the sales were not exigible to sales tax; the issue is decided in favour of the assessee.

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