TaxTMI 
TaxTMI 
2023 (3) TMI 786
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....from the main stem & left on the open ground for natural drying & curing process; • Once completely dry, the harvest is then collected & stored in a suitable dry location, wherein the bigger stems, the suckered leaves & the main harvest is stored separately; • This whole leaf or the broken leaf [formed during the course of bundling in gunny/jute bags] are thereafter procured from the farmer/agriculturist by the applicant; the broken leaf is also known as 'Bhukko' in common trade parlance; • This is primarily used in bin manufacturing or chewing tobacco manufacturing. 4. It is the applicant's contention that they sell some part of this goods/product, so procured from the farmer/agriculturist, on as it is basis, without any further process. 5. The applicant further contends that they also carry out certain process on the whole leaf/broken leaf, so procured from the farmer/agriculturist viz:- • process of sorting & cleaning; • removing unwanted substances like small stones, earth particles, cleaning out any residual smaller sized stem pieces; • thereafter cutting and grading of leaves is do....
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....ng ie coating on tobacco broken leaves to the registered person. 12% [d] supply [sales] of coated tobacco broken leaves in gunny bag. 28% 10. In view of the foregoing, the applicant is before us raising the following question for advance ruling viz,- (i) Whether for the purchase of raw tobacco from farmer [including naturally broken tobacco known as 'tobacco leaves or tobacco bhukko'] is covered under reverse charge mechanism? (ii) What would be the rate of tax in case of coating process is done on unmanufactured tobacco. If the applicant carried out the process of coating on the tobacco belonging to other person [job work basis] whether registered or otherwise. 11. Personal hearing was granted on 9.2.2023 wherein Shri Jigar Parikh, CA, Shri Gautam Patel (Director), and Shri Jagdishbhai Patel (Director), appeared and reiterated the facts as stated in the application. It was further submitted that their product would fall under 2401; that as far as job work was concerned, it will be for registered persons only. They further sought a week's time to submit additional submissions & case laws. 12. Vide letter dated 15.2.2023, the applic....
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.... 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be. apply to the interpretation of this notification 17. Before moving on to decide the issue, it would be prudent to reproduce the relevant notification, chapter notes, HSN notes, etc., viz • (A) [Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017] Rate of Tax (Schedules) for specified goods under CGST - Schedules I to VI In exercise of the powers conferred by sub-section (I) of section 9 of the Central Goods and Services Tax Act. 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the rate of the central tax of - (i) 2.5 per cent, in respect of goods specified in Schedule I, (ii) 6 per cent, in respect of goods specified in Schedule II. (iii) 9 per cent, in respect of goods specified in Schedule III, (iv) 14 per cent, in respect of goods specified in Schedule IV, (v) 1.5 per cent, in respect of goods specified in Schedule V, and (vi) 0.125 per cent, in respect of goods specified in Schedule VI ....
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....appended to this notification, that shall be levied on the intra-State supplies or interstate supplies of such goods, the description of which is specified in the corresponding entry in column (3) and falling under the tariff item, sub-heading, heading or Chapter, as the case may be. as specified in the corresponding entry in column (2) of the said Schedule. SCHEDULE S.No. Chapter/ Heading/ Subheading/ Tariff item Description of Goods Rate of goods and services tax compensation cess 5. 2401 Unmanufactured tobacco (without lime tube) - bearing a brand name 71% 6. 2401 Unmanufactured tobacco (with lime tube) -bearing a brand name 65% 7. 2401 30 00 Tobacco refuse, bearing a brand name 61% (3) For the purposes of this notification, the phrase "brand name" means brand name or trade name, whether registered or not. that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or....
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....erial number 26, in column (3), after item (ia) and the entries relating thereto in columns (3), (4) and (5), the following shall be inserted, namely :- (3) (4) (5) "(ib) Services by way of job work in relation to diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act. 1975 (51 of 1975); 0.75 - (ic) Services by way of job work in relation to bus body building; 9 - (id) Services by way of job work other than (i), (ia), (ib) and (ic) above; 6 -"; • (G) Circular No. 126/45/2019-GST issued by CB1C dealing with clarification on scope of the notification entry at item (id), related to job work, under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017, states as follows :- 3. Job work has been defined in CGST Act as under. "Job work means any treatment or processing undertaken by a person on goods belonging to another registered person and the expression job worker' shall be construed accordingly. " 4, in view of die above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of ....
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....f Schedule I, subject to the condition that they are engaged in trading of tobacco leaves/bhukko, procured from agriculturist, on as such basis i.e. without undertaking any further process on the same. 20. The applicant has thereafter sought a ruling on the question of rate of GST in case of sale/supply of coated tobacco broken leaves in gunny bag. The applicant has explained the process which is mentioned supra and hence is not being repeated. A manual process of coating the leaves with natural edible gum is done to enhance the life of the leaves, to preserve the nicotine content and to ensure that it is not destroyed by bugs/insects. The applicants case is that this coating of natural gum does not amount to manufacture as defined under Section 2(72) of the CGST Act, 2017. Under the CGST Act, 2017, we find that manufacture is defined as processing of raw material/ inputs in any manner which results in emergence of a new product having a distinct name, character and use. The applicant has stated that no new product emerges post coating. The applicant has also relied upon case laws to substantiate his plea. 21. The applicant has further stated that this coated unmanufactured t....
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....notes for 2401, reproduced supra, covers unmanufactured tobacco in the form of whole plants/leaves in natural state, cured or fermented leaves, whole, stemmed/stripped, trimmed/semi trimmed, broken/cut, blended cased with a liquid of appropriate composition mainly to prevent drying and to preserve the flavour. Now, as per the applicant, the purpose of coating the natural edible gum on the leaves, is to enhance its life, to preserve the nicotine content and further to ensure that it is not destroyed by bugs/insects. Thus, though the applicant has undertaken the above process of coating, consequent to the cleaning process, removal of unwanted substances & thereafter cutting and grading of leaves procured from the agriculturist, in terms of the HSN notes, it still remains an unmanufactured tobacco. This is more so because even in terms of section 2(72) of the CGST Act, 2017, which defines manufacture, since no new product emerges post the coating process, we hold that the product is classifiable under CTH 2401 as ''unmanufactured raw tobacco leaves'. We further hold that the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017....