Agricultural processing exemption for vegetable preparation held outside Business Auxiliary Service tax net.

Processing vegetables for clients by sorting, cleaning, boiling, freezing and packing was treated as an activity in relation to agriculture because the work did not alter the essential character of the agricultural produce. A departmental circular was relied on for the position that such client processing falls within the relevant exemption framework, and the revenue could not adopt a view contrary to that clarification. The activity was therefore not liable to service tax under Business Auxiliary Service, the impugned order was set aside, and the appeal was allowed.

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Issues: Whether the appellant's activity of processing vegetables for clients by sorting, cleaning, boiling, freezing and packing was liable to service tax under Business Auxiliary Service, or whether it was an activity in relation to agriculture and therefore outside the service tax net.

Analysis: The activity undertaken by the appellant involved processing of vegetables on behalf of clients. A departmental circular clarified that client processing which does not alter the essential character of the agricultural produce and is undertaken in relation to agriculture falls within the relevant exemption framework. The circular specifically treated processing activities of this nature as covered by the expression relating to agriculture. The authority held that revenue could not take a view contrary to the Board's clarification, and the processing done by the appellant retained its agricultural character.

Conclusion: The activity was held to be processing in relation to agriculture and not taxable under Business Auxiliary Service. The impugned order was set aside and the appeal was allowed.

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