2018 (8) TMI 1073 - AAR - GST

Processed tea not agricultural produce per tax law, no exemption granted.

In Re: Nutan Warehousing Company Private Limited

The authority concluded that the processed tea stored by the company does not qualify as agricultural produce under the defined criteria, thus ruling that ... Warehouse services - claim of benefit of exemption - agricultural produce or not - Serial No.54 of Notification No.12/2017 Central Tax (Rate) - Whether the supply of warehouse services used for packing & storage of tea, was/is exempted vide Serial No 54(e) of Notification No. 12/2017- Central tax (rate) or otherwise? - Held that:- Even if we assume that in the beginning they are bringing raw tea leaves or may be semi processed tea leaves which they have not clearly specified to the godown, they are under taking further processing and manufacturing of the same as per processes given above and are finally storing manufactured tea as per details given by them self above which finally culminates into packing of Lipton Pure and Simple 100s tea bags. This activity of M/s. Unilever of processing of raw tea leaves into tea results in emergence of a new product having distinct name i.e. Tea, which has distinct name, character and use i.e. Lipton Pure and Simple 100s Tea bags. As such the impugned activity is a 'manufacture' as defined in clause (72) of section 2 of the GST Act - The final product considering various processes undertaken by M/s. Unilever cannot be considered as Agricultural Produce. The assessees who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B of the Act. Further, assessees who are in the business of blending and processing of tea in respect of undertakings in free trade zones are manufacturer/producer of tea for the purpose of claiming exemption u/s. 10A of the Act. The goods being stored in the applicant's godown are not agricultural produce as per definition given in Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 and the same is reiterated by Board Circular No. 16/16/2017-GST issued under F No. 354/173/2017-TRU dated 15.11.2017. Ruling:- Exemption provided in serial no. 54 to Notification No, 12/2017 Central Tax (Rate) is not applicable to the activity carried by the company. Issues Involved:1. Whether the exemption provided in serial no. 54 to Notification No. 12/2017-Central Tax (Rate) is applicable to the activity carried out by the companyRs.Detailed Analysis:1. Whether the exemption provided in serial no. 54 to Notification No. 12/2017-Central Tax (Rate) is applicable to the activity carried out by the companyRs.The applicant, Nutan Warehousing Company Pvt Ltd, is engaged in providing warehousing services, including storage of tea for M/s. Unilever India Exports Ltd. The applicant sought an advance ruling on whether their services qualify for exemption under serial no. 54(e) of Notification No. 12/2017-Central Tax (Rate), which exempts services related to the storage or warehousing of agricultural produce.Applicant's Contentions:- The applicant argued that tea, procured in bulk either from public tea auctions or directly from manufacturers, is an agricultural produce as defined in clause 2(d) of the Notification No. 12/2017-CT (Rate).- They claimed that the storage and warehousing of tea should be exempt under serial no. 54(e) of the Notification No. 12/2017-CT (Rate).- The applicant provided detailed processes involved in making tea marketable, asserting that these processes do not alter the essential characteristics of the tea leaves, thereby qualifying it as an agricultural produce.Jurisdictional Officer's Contentions:- The officer referred to Circular No. 16/16/2017-GST dated 15.11.2017, which clarified that processed products like tea do not fall within the definition of agricultural produce.- It was highlighted that the applicant is storing manufactured tea, which involves significant processing, thereby disqualifying it as agricultural produce.- The officer also noted that the applicant had obtained service tax registration for providing warehousing services and was receiving consideration for warehousing charges, service charges, lease rent, and other charges from M/s. Unilever India Exports Ltd.Authority's Observations:- The authority examined the definition of 'agricultural produce' under Notification No. 12/2017-Central Tax (Rate), which includes produce on which either no further processing is done or such processing is done as is usually done by a cultivator or producer and does not alter its essential characteristics but makes it marketable for the primary market.- Based on the detailed manufacturing process provided by M/s. Unilever, it was evident that the tea stored in the applicant's warehouse undergoes significant processing, including blending, packing, and other activities, resulting in a new product with distinct characteristics.- The authority referred to the decision of the Income Tax Appellate Tribunal, Kolkata, which classified the business of blending and processing of tea as manufacturing, thus supporting the view that processed tea is not agricultural produce.- The authority also considered the judgments cited by both parties but found that the decisions cited by the applicant were not applicable to the facts of the case.Conclusion:- The authority concluded that the goods being stored in the applicant's warehouse, i.e., processed tea, do not qualify as agricultural produce under the definition provided in Notification No. 12/2017-Central Tax (Rate).- Consequently, the exemption provided in serial no. 54 to Notification No. 12/2017-Central Tax (Rate) is not applicable to the activities carried out by the applicant.Order:- The question of whether the exemption provided in serial no. 54 to Notification No. 12/2017-Central Tax (Rate) is applicable to the activity carried out by the company was answered in the negative.