2005 (7) TMI 612 - HC - VAT and Sales Tax

Tea Processing Doesn't Change Agricultural Classification

Commissioner of Sales Tax, UP., Lucknow Versus East Hope Town Co. Ltd.

The High Court determined that processed tea, even after grading and roasting, retains its classification as an agricultural product under the U.P. Sales ... - Issues:Whether processed tea is considered an agricultural product under the U.P. Sales Tax Act, 1948.Analysis:The High Court considered the question of law regarding the classification of processed tea as an agricultural product under the U.P. Sales Tax Act, 1948. The revisionist argued that since tea leaves undergo grading and roasting before sale, they should be classified as a manufactured product, making the assessee a dealer under the Act. However, referencing the Dehradun Tea Company case, the Court noted that unprocessed green tea leaves have no market value and must be graded and processed to prevent them from rotting. Therefore, even after grading and roasting, tea produced by a self-producing tea company is considered agricultural produce, and the company cannot be classified as a dealer under the Act.Furthermore, the Court relied on the principle established in the Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Travancore Rubber and Tea Co. case, which held that an agriculturist cannot be treated as a dealer for the purposes of the Sales Tax Act. The Court emphasized that tea, even after processing, remains tea and does not transform into a new item. Consequently, the Court found no error in the Sales Tax Tribunal's judgment and ruled in favor of the assessee, dismissing the revision accordingly.