TaxTMI 
TaxTMI 
2018 (11) TMI 449
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....applicable on tobacco leaves procured at tobacco 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 (....
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.... rotten within few days of time unless cured. The tobacco leaves are cured (technical name for drying) in various forms or styles viz., Sun curing, Air curing, Flue Curing etc. 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 t....
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....e applicant will normally sell the tobacco leaves to tobacco exporters or manufacturers. The tobacco leaves will be subject to a process called Threshing and Redrying at GLT plants. Threshing is a process of separating 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....
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....are very tender, delicate and very high in moisture. In this stage they will get damaged and rotten within few days of time unless cured. The tobacco leaves are cured (technical name for drying) in different forms or styles viz., Sun curing, 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 tob....
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....cco leaves and unmanufactured tobacco (other than tobacco leaves) are not defined, the meaning of the words shall be drawn having regard to the legal precedents, rules of interpretation and the meaning those words have in their common parlance. c) The dictionary meaning of the term Tobacco is a. any of several plants belonging to 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....
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....finition given to the term 'tobacco leaves', shall be under stood in its natural and commercial meaning. i) There are many other agricultural commodities, whose principal utility is also in the form of leaves. To cite a few, Tendu leaves, Bidi Leaves, Biryani Leaves etc., All these products of leaves are also dried to meet them intended usage and without drying there is 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. 03....
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....be supplier and who shall be recipient. While notification 4/2017 CGST (R) notifies the cases where the RCM (reverse charge Mechanism) shall be applied, it is silent as to the rate. Thus as long as the product remains the same, it does not matter whether the same is procured from an agriculturist or an unregistered dealer, or registered dealer. The application of RCM is only to prescribe as to who shall pay the tax and it 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 o....
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....mmed 2401 60 Tobacco for manufactures of Chewing tobacco 2401 10 70 Tobacco for manufactures of cigar and cherrot 2401 80 Tobacco for manufactures of Hokkah tobacco 2401 90 Other 2401 20 Tobacco partly or wholly stemmed or stripped. 2401 20 Flue Cured Virgina Tobacco 2401 20 20 Sun cured Country (Natu) Tobacco 2401 20 30 Sun cured Virgina Tobacco 2401 20 40 Burley Tobacco 2401 20 50 Tobacco for manufactures of Bidis, not stemmed 2401 20 60 Tobacco for manufactures of Chewing tobacco 2401 20 70 Tobacco 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% G....
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....ST - 14% and SGST 14%). And there is an entry of 'tobacco leaves under Reverse charge mechanism also as explained above. The commodity "tobacco leaves" shall be interpreted in the light of the entry 109, the entry no 3 inserted under the notification issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e, 2401. It is to note that though there are different entries with respect to tobacco, there is a specific entry in schedule I of Notification 1/2017 (CGST Rate) as tobacco leaves , and for the same the liability was brought under reverse charge mechanism. Hence 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 240....