Processed tobacco under exemption notification led to partial pre-deposit, with complete waiver of recovery denied pending appeal.

Processing of unmanufactured tobacco by threshing, separation of lamina and stem, segregation, redrying and packing was treated on a prima facie basis as resulting in processed tobacco for purposes of the exemption notification. As a result, the applicant was not granted complete waiver of pre-deposit against the confirmed service tax demand arising from denial of exemption under Notification No. 13/2003-ST as amended. The stay was limited to the balance after partial deposit, and recovery was stayed only to that extent pending disposal of the appeals.

---

---

Issues: Whether the applicant had made out a prima facie case for total waiver of the pre-deposit and stay of recovery in respect of the service tax demands confirmed by denying exemption under Notification No. 13/2003-ST as amended.

Analysis: The applicant purchased unmanufactured tobacco from growers and carried out processes such as threshing, separation of lamina and stem, segregation, redrying and packing. On a prima facie view, these activities resulted in processed tobacco for the purpose of the exemption notification, notwithstanding the contention based on the excise treatment of the product and the Board circular relied upon by the applicant. In that view, the applicant was not found entitled to complete waiver of the dues pending appeal.

Conclusion: Total waiver was declined, and the applicant was directed to deposit 50% of the demand in each case; the balance was stayed pending disposal of the appeals.

---