TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 449
X X X X Extracts X X X X
X X X X Extracts X X X X
....auction platforms or directly from farmers, which are cured and dried by farmers themselves? * If the applicant purchases tobacco leaves from other dealers who have purchased them farmers, for the purpose of trading what will be the applicable rate of tax? * If the applicant segregates the tobacco into grades depending upon their size (width), colour/shade, length, texture of the lear etc., and sells such graded tobacco leaf what is the applicable rate of tax? * If the tobacco leaves are butted and sold to other dealers what will be the applicable rate of tax? * If the applicant gets the tobacco leaves re dried without getting them threshed what is the applicable rate or tax? * If the applicant gets the tobacco threshed and re-dried on job work basis at GLT plants and then sells such threshed and re dried tobacco leaves what is the applicable rate of tax? 1. The applicant is a trader in tobacco in all varieties and form of tobacco available. Guntur and Prakasam Districts are famous for tobacco leaf and various verities of Tobacco, mainly FCV as well as Natu tobacco (Non-FCV) are widely available in these regions. 2. The applicant is registered with The Tobacco Board as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... whereby the leaves are dried and the moisture levels are reduced. f. The farmers cure the tobacco at their farm fields itself and after curing the tobacco leaves will be packed as bales and brought to the Tobacco Auction platforms or for supply to dealers. No tobacco leaves can be brought for sale without curing by farmers, as the green leaf will get damaged within two to three days, if not cured immediately after plucking. 4. It is submitted that the dealer intends to engage in the tobacco business which involves the following activities:- a) The dealer purchases the cured tobacco leaves brought by by tobacco farmers at the Tobacco Auction Platforms in case of FCV variety or directly from farmers in case of Non-FCV Variety of tobacco and sells them to other dealers, or exporters or manufacturers of tobacco. b) The dealer also purchases the tobacco leaves from other dealers. c) In most of the cases, the applicant trades in tobacco leaves as they are purchased without rendering any process on them what so ever. However in certain special circumstances the applicant may undertake the following minimal process on the tobacco before supplying as per the requirement of the dealer.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eparating the stem or the Mid-rib of the leaves and the leaves portion without stem is called 'Lamina'. The threshing is undertaken on certain plant and machinery, normally referred to as Green Leaf Threshing Plants (GLTs). In GLTs, the lamina and stem are separated and the Lamina is redried to ensure uniform and homogenized moisture throughout the lot. e) The Tobacco after threshing and redrying is also referred in the trade parlance as tobacco leaf only. The essential characteristic of the tobacco leaves remain unaltered and they are not commercially different product from the tobacco leaf. There will not be any change in the tobacco except that the stem is separated and the leaves are broken into pieces during the process. f) The applicant do not own a GLT Plant and hence he cannot undertake the threshing or redrying process on his own. However if the buyers so order, he may get the tobacco leaves threshed and redried at GLT plant on job work basis and supply the same to the buyer. 5. The applicant hereby submits the following facts of the case while seeking this advance ruling a) Tobacco being an agricultural plant and leaves being the prominent utility, plucking of the tob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring, Air curing, Flue Curing etc.(any one method) whereby the leaves are dried and the moisture levels are reduced Air curing will be adopted for lighter / thin type of leaves. Sun curing involves exposing the leaves under sun, in inverted positions. Sun cures enable more dryness than air curing Flue curing involves transmitting heat through ducts and this will result in more uniform and consistent curing of the tobacco leaves. All three of curing will be undertaken by farmers at the field level. Cured tobacco Leaf Bundled for Trading Optional Process (Grading) Optional Process (Butting) The cured tobacco leaves with Iow-moisture due to curing will be first tradable commodity (Primary marketable product) The cured tobacco leaves will be bundles into bales and brought to the auction platform in case of FCV (Flue Cured Virginia Tobacco) and to market in case of Non-FCV tobacco. Grading involves manual separation of tobacco leaves into various classes depending upon color, length etc., for better market prices. Butting means cutting the butt (small terminal portion leaves) portion of the leaf for better adoptability to the machinery. Butting is optional and is carried very....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the genus Nicotiana, of the night shade famiy, especially one of those species, as N. tabacum, whose leaves are prepared for smoking or chewing or as snuff b. the prepared leaves, as used in cigarettes, cigars, and pipes c. any product or products made from such leaves. d) In the absence of any definition given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted as held in the case of Oswal Agro Mills Ltd vs. CCE, [1993 (66) E.L.T. 37 (S.C.) = 1993 (4) TMI 73 - SUPREME COURT OF INDIA. e) In the case of IdupulapatiSesha Rao, Karedu Vs State of AP (13 APSTJ 44), the Honourable Sales Tax Appellate Tribunal of AP, Hyderabad held that in the classification of commodities, the meaning of the article should be understood according to the common commercial understanding and not in their scientific and technical sense. f) It is also a well settled law that and held in various celebrated cases like M/s. D.s. Bist & sons Nainital 1979 (004) SCC - 0741 = 1979 (9) TMI 168 - SUPREME COURT OF INDIA that "It should be remembered that almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agricultu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no way that these products can be used or even preserved. Thus depending upon the intrinsic nature of the product, drying will become an essential and inevitable process without which the product itself cannot exist. a) When the words tobacco leaves are used without any qualifying adjectives, it can only mean that tobacco leaves in a widest possible import. Had the legislature intended it to qualify the same, it could have employed specified words to that effect, as can be found from the same notification, in many other instances. To cite a few. .... Fish:- Taxable fish: Exempt Fish 3. 0305 Fish, dried, salted or in brine; smoked fish, whether or not cooked before or during the smoking process; flours, meals and pellets of fish, fit for human consumption Sch. I------ 2.5%' 19. 0301 Live fish. 20. 0302 Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 0304 21. 0304 Fish fillets and other fish meat (whether or not minced), fresh or chilled.' Tea leaves Taxable Tea leaves '36. 0902 Tea, whether or not flavored [other than unprocessed green leaves of tea]-2.5% Sch.l' Exempt tea leaves '61. 0902 Unprocessed green leaves of tea' Nuts Taxa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had no bearing on the applicability of the rate of GST. 7. The applicant has sought for the following clarifications. i. What is the rate of GST applicable on tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves? ii. If the applicant purchases tobacco leaves form other dealers who have purchased them farmers, for the purpose of trading what wilt be the applicable rate of tax? iii. If the applicant segregates the tobacco into grades depending upon their size (width), colour/shade, length, texture of the leaf etc and sells such graded tobacco leaf what is the applicable rate of tax? iv. If the tobacco leaves are butted and sold to other dealers what will be the applicable rate of tax? v. If the applicant gets the tobacco leaves redried without getting them threshed what is the applicable rate of tax? vi. If the applicant gets the tobacco threshed and redried on job work basis at GLT plants and then sells such threshed and redried tobacco leaves what is the applicable rate of tax? The Authorised representative Sri. G. Sivarama Prasad C.A., have appeared before the authority and explained the process of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for manufactures of cigar and cherrot 2401 20 80 Tobacco for manufactures of Hokkah tobacco 2401 20 90 Other 2402 Cigars, Cheroots, Cigarillos And Cigarettes, Of Tobacco Or Of Tobacco Substitutes 2403 Other manufactured tobacco and manufactured tobacco substitutes; "homogenized" or "reconstituted" tobacco; tobacco extracts and essences [including biris] 4. As per the Circular of Tax Research Unit, vide F. No. 332/2/2017, Government of India Ministry of Finance Department of Revenue Tax Research Unit, Dec 2017, question no. 42 "Tobacco leaves falling under heading 2401 attracts 5% GST on reverse charge basis in respect of supply by an agriculturist. What is the meaning of tobacco leaves? "it has been answered that "For GST rate of 5% tobacco leaves means, leaves of tobacco as such or broken tobacco leaves or tobacco leaves stems" WE have gone through the facts of the case presented by the applicant and the material of evidence i.e, copies of invoices raised by the applicant and the relevant legal position. As seen from the above it is felt that the transactions of tobacco from auction platform to the supply made to the exporter are to be interpreted in the light of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is clear that there is a distinction from the commodity 'tobacco leaves' with other entries. From the respective GST tariff entries in the light of HSN codes mentioned against them It is observed that the two entries Sl.No 109, of Schedule I 'tobacco leaves' and entry no 13 of IV schedule 'Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves)' in the notification No 1/2017 (CGST Rate)Central Tax are only falling under the same HSN code 2401 .. On detailed examination of the description of the commodity under the head 2401, 2401.10 : represents the commodities of 'Tobacco not stemmed or stripped,' and 2410.20 represents the commodity' Tobacco partly or wholly stemmed or stripped'. Further, the entries 2402, speaks about the finished product, and 2403 describes about the other products made out of tobacco. Hence the other two are not relevant for the present case. Therefore, a clear distinction shall be drawn between the 'tobacco leaves and the unmanufactured tobacco'. As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the first transacti....