TaxTMI 
TaxTMI 
2018 (12) TMI 651
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..../B-38 dated 23.05.2018 = 2018 (8) TMI 1073 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA BRIEF FACTS OF THE CASE A. M/s. Nutan Warehousing Company Pvt Ltd, 1379, Krishi Bhawan, Bhawani Peth, Pune, Maharashtra- 411002 (hereinafter referred to as appellant) is a company registered under GST vide registration No. 27AAACN7084L2ZZ. B. Appellant company was formed for the following main objective- a) To carry out the business of warehousing, cold storage and refrigeration in all its branches and activities and sphere. b) To carry out the business of storage of fertilizers, insecticides, quality seeds, agricultural and horticultural equipment, tools and machineries. c) To carry out the business of quality seeds and develop quality seeds, acquire suitable lands and carry on agriculture. d) To produce material and fertilisers and insecticides and to acquire agency in the above lines and act as commission agents. e) To act as clearing and godowns for proper and safe storing of valuable agricultural and horticultural produce and to provide goods and services of all kinds in connection therewith. f) To provide godowns and warehousing facilities for goods of all descrip....
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.... at the said warehouse. After packing, tea was exported to overseas countries. F. Appellant is of strong view that the tea, procured in bulk, either from public tea auctions or directly from manufacturers of tea is an agricultural produce as defined in clause 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.6.2017 because, it was not losing the essential characteristics of tea. G. Appellant claims that the storage and warehousing of tea is exempted vide Serial No 54(e) of Notification No. 12/2017- Central tax (rate). The said entry is reproduced as under- 54 Heading 9986 Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of - Nil Nil (a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; (b) supply of farm labour; (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curi....
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....oned facts & circumstances was/is exempted vide Serial No 54(e) of Notification No. 12/2017- Central tax (rate) or otherwise." L. The advance Ruling authority had passed their order vide order No. GST-ARA-30/201718/B-38, Mumbai dated 23.5.2018 = 2018 (8) TMI 1073 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA denying the benefit of Serial No. 54 of Exemption Notification No. 12/2017-CT (Rate). Aggrieved by the said order, appellant has preferred the present appeal. Grounds of Appeal 1. Appellant warehouse had been used for storage of the procured bulk tea in 50 Kg bags for most of the time and not the blended and packed tea. 2. The authorities had held that the appellant warehouse had been used for storing tea after blending and packing by M/s. Unilever. The said observation is factually incorrect. The appellant had clearly mentioned that M/s. Unilever was procuring the tea from public auction in bulk in 50 Kg bags. After procurement, bulk tea was stored for a long time. When order is received, blending and packing is done and the packed products are despatched within 7-10 days. Based on this observation, decision had been made. Thus, decision is made on the basis of wrong....
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....tivity of blending and processing of tea and export thereof, amounts to manufacture of tea or not for the purpose of Section 10A/10B of the Income Tax Act? The issue before the Tribunal was not whether tea is an agricultural produce or not? Hence, the case law relied by the authorities is clearly distinguishable. Therefore, order needs to be set aside. 9. The Supreme Court decision in case of COMMISSIONER OF SALES TAX, LUCKNOW vs. D.S. BIST & ORS = 1979 (9) TMI 168 - SUPREME COURT OF INDIA had settled the issue of tea as an agricultural produce. The Hon'ble Supreme Court in case of COMMISSIONER OF SALES TAX, LUCKNOW Vs. D. S. BIST & ORS., = 1979 (9) TMI 168 - SUPREME COURT OF INDIA while deciding issue under UP Sales Tax Act, 1948 had upheld that Tea leaves after drying and processing remained agricultural produce. Similar view had been expressed by the Hon'ble Uttaranchal High Court in case of Dehradun Tea Company Ltd. vs State Of Uttaranchal And Ors.[2006 148 STC 56 Uttra] = 2006 (6) TMI 474 - UTTARAKHAND HIGH COURT. 10. Relevant issue is not the ascertainment of Income viz. agricultural or business but the retention of essential characteristic of tea even after ....
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....t fit for the human consumption and it cannot be sold in the open market for human consumption. The raw tea leaves are withered by exposure in the shadow of the sun or by heating in trays until pliable. Thereafter the leaves are rolled by hand or machine in order to break the leaf cells and liberate the juices and enzymes. Finally, the leaves are completely dried either by further exposure to the sun, over fires, or in a current of hot air, then the tea leaves are fermented in baskets, glasses and in clothes. Thereafter the leaves were subjected to grading with sieves of various sizes. The said leaves are finally roasted with charcoal for obtaining suitable flavour and colour. Thereafter the said tea is packed in the packets. b. The processing of the tea makes it marketable by minimal process and they are made fit for human consumption. All the above processes are necessary for the purpose of saving the tea leaves from perishing. In case the above process is not carried out immediately, the entire tea leaves would be perished. The process, as indicated above, at no point of time crossed that limit and robbed the tea leaves of their character of being and continuing as such....
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....given in Tea (Marketing) Control Order, 2003. The term buyer is defined under Rule 2(m) of the Tea (Marketing) Control Order, 2003 as under- **"Buyer" means any person, firm, company, corporate body, cooperative society etc., including a consignee or commission agent, who receives tea by way of stock transfer from the manufacturer, with a place of business in tea in India, engaged in purchasing or procuring tea either from public tea auctions or directly from manufacturers of tea but excludes those who buy only instant tea and other value added products of tea viz., tea bags, packet tea, flavoured tea, quick brewing black tea etc., and also excludes the secondary buyers who do not source their teas either from auctions or from manufacturers ; According to the above definition buyer is a person, who is sourcing tea by way of stock transfer from the manufacturer, with a place of business in tea in India, engaged in purchasing or procuring tea either tea either from public tea auctions or directly from manufacturers of tea but excludes those who buy only instant tea and other value added products of tea viz., tea bags, packet tea, flavoured tea, quick brewing black tea etc., and....
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.....F. (D.R.) Order No. 1/2002-Service Tax, dated 1-8-2002 defining the agricultural produce and also specifically mentioning tea as an agricultural produce.. The said order is reproduced as under- In exercise of the powers conferred by sub-section (1) of section 95 of the Finance Act, 1994 (32 of 1994), (herein after referred to as the said Act), the Central Government hereby makes the following Order, namely :- 1. (1) This order may be called the Service Tax (Removal of Difficulty) Order, 2002. (2) This Order shall come into force on the 16th day of August, 2002. 2. (A) For the purposes of clause (87) of section 65 of the said Act, the expression 'agricultural produce" means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but make it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee....
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....us main part of definition prior to 1.7.2012 and definition from 1.7.2012 are practically the same. Further, another change was insertion of words marketable in primary market instead of marketable. As far as tea is concerned, this change again did not make any difference. 19. The definition of "agricultural produce" is reproduced as under- "agricultural produce" means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes al/ cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco." The above definition had three parts- a) Main part of definition b) Illustrative products by way of inclusion and c) Exclusion part The entries made in inclusive part of definition are only il....
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....s whether the tea leaves of the various qualities, which is precisely black tea, procured in bulk either from public tea auctions or directly from manufacturers of tea in 50 Kg bags, after undergoing various stages of the processing as detailed above, by the appellant's client i.e. Unilever, for storage in the warehouse owned by the appellant are agricultural produce or otherwise. 23. First, we set out to determine the essential character and the nature of the green tea leaves, which are plucked from the tea garden and those of the tea which are procured by Unilever for storage into the warehouses. It has repeatedly been submitted by the appellant that the green tea leaves which are plucked from the tea gardens are not suitable for human consumption due to the presence of bitter taste inhered into it. The appellant further submitted that it is made suitable for consumption by subjecting the same under the various stages of processing, which are enumerated hereinbelow: (a) Exposing of the tea leaves under the sun or heating of the tea leaves for drying up; (b) Rolling of the dried up tea leaves by hand or machines to break the leaf cells and extracting juices or enzy....
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....g the tea of the various qualities either from the public tea auctions or directly from the manufactures of tea. 24. Now, we have to determine whether this manufactured product i.e. the black tea can be construed as agricultural produce or not. For this, we reproduce the definition of the agricultural produce as provided in clause 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.6.2017 as under- "agricultural produce" means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; Now, we will examine the product in question i.e. black tea in light of the above definition of the agricultural produce to arrive at the conclusion regarding its status as agricultural produce or otherwise. We list out the following two characteristic parameters which will determine any goods to be the agricultural produce or otherwise. (i) It should be produ....
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....person other than the cultivator or producers, would have been exempted from GST. However, that is not the case. As the unprocessed green tea leaves are exempted, while the Tea, whether or not flavoured (other than unprocessed green leaves of tea) are exigible to 5% GST. 27. The above findings is also amply substantiated by the fact that the "unprocessed green leaves of tea" falling under heading 0902 is subject to Nil rate of duty as per the Notification No. 2/2017-C.T. (Rate) dated 28.06.2017, while the processed tea which include the black tea, the product in question, falling under the heading 0902 30 attract 5 % of GST(2.5% CGST + 2.5% SGST) in terms of its entry at Sr. 36 of the Schedule I to the Notification 1/2017-C.T.(Rate) dated 28.06.2017. On perusal of the list of the exempted goods notified by the Notification No. 2/2017-C.T. (Rate) dated 28.06.2017 and also the earlier notifications issued under the pre GST regime, it can adequately be deduced that it has never been the intention of the legislature to tax the primary agricultural produce on which no processing is done or such processing is done either by the cultivator or the producers which does not alter the esse....
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....at the case law of Union of India Vs Belgachit Tea Co = 2008 (5) TMI 4 - SUPREME COURT and Brook Bond Lipton India Ltd = 1997 (11) TMI 499 - KARNATAKA HIGH COURT, cited by the respondent is clearly distinguishable as the issue before the Apex court was not to decide whether tea is an agricultural produce or otherwise. In this regard, it is observed that though the issue was not to decide whether tea is an agricultural produce or otherwise, the Apex court had held that the activity of cultivation and sale of green tea leaves is falling under the agricultural activity and the activity of purchasing tea leaves and manufacture and sale of tea is falling under Business Activity for the purpose of computation of Income Tax under Income Tax Act. Thus, vide this judgement, the Apex court has clearly put the manufacturing activity in relation to the tea which include the various processes like drying, heating, fermentation, sieving etc. as discussed above, out of the ambit of the agricultural activity and recognised the same as business activity. This clearly exhibits that the manufactured tea is not agricultural produce. Thus, our findings in the present case is in consonance with this ver....