TaxTMI 
TaxTMI 
2026 (3) TMI 1313
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....omers, which would fall under the category of 'Business Auxiliary Services' (BAS) and issued SCN proposing demand towards BAS along with interest and imposition of penalty. On adjudication, the adjudicating authority, vide OIO dt.21.12.2016, confirmed the demand along with interest and imposed penalties. Aggrieved by the same, the Respondents filed an appeal before the Commissioner (Appeals), who set aside the order of the adjudicating authority. 3. Learned AR for the department has submitted that the main issue involved in the present case is the liability of service tax on BAS provided by the respondents in connection with the process undertaken in relation to cured/seasoned tobacco. He has further submitted that tobacco is grown by the farmers who are termed as Growers and primarily seasoned which is called 'curing' in Barns located at their agricultural fields after cutting and threshing. The seasoned/cured tobacco is brought to the auction platforms designated by the Tobacco Board, in the form of Bales. There the Buyers/Exporters purchase the Tobacco on the auction platforms with the mediation of the Tobacco Board. For this the Tobacco Board also charges auction cha....
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....lture produce. There is considerable value addition by the service being provided by the Respondent and the consideration received for undertaking the said service with the involvement of large machinery and labour. The product will stabilize after threshing and the shelf life of tobacco will increase. In the absence of these processes the object of Virginia tobacco cultivation will remain incomplete and gets defeated and therefore, the entire threshing operation can be technically called Post Harvest operation of Virginia Tobacco cultivation for quality control and pre-shipment inspection. As regards the processes tobacco undergoes, the circular refers to two processes "threshing and drying". The normal dictionary meaning of threshing is "to separate grains of rice, wheat etc. from the rest of plant using a machine or especially in the past, by hitting it with a special tool, (Oxford Advanced Learners Dictionary New 7th Edition). 6. On the issue of whether the impugned activity undertaken by the respondents, who are not cultivators will make it out of purview of 'agriculture produce' or not, he has submitted that in terms of the Service Tax (Removal of Difficulty) Order....
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....s reported in [2018 (18) GSTL J38 (SC)]. In view of the above, the respondent has submitted that the present appeal filed by the department is liable to be dismissed. 9. Heard both sides and perused the records. 10. The short issue that arises for consideration is whether further processing, drying and packing of tobacco leaves undertaken on job work basis amounts to 'Business Auxiliary Service' or whether the same is processing of agricultural produce not liable to service tax. The definition of 'agricultural produce' under the Service Tax (Removal of Difficulty) Order, 2002, clarifies that agricultural produce includes produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator, which does not alter its essential characteristics but make it only marketable. This issue came up for consideration before this Bench in Green Leaf Tobacco Threshers Ltd and others Vs CCE & ST, Guntur (supra), wherein, it was held that processing and drying of tobacco leaves do not result in manufacture of any new product. The essential characteristic of tobacco remains unchanged. The activity is in relation to agricul....
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....Cooperation has clarified in letter dt.20.10.2010 as under:- Directorate of Marketing and Inspection, Ministry of Agriculture, Government of India, deals with only food and agricultural commodities. It does not deal with industrial commodities. The grading of tobacco by the Directorate of Marketing and Inspection is purely Agricultural quality control operations for facilitation exports. The certification is done only after removing unwanted/not useful material from the tobacco leaf as per the standard specifications. Here the product form will not change. Only the shape of the leaf will change. There are no chemical changes involved. The product will stabilize after threshing and the shelf life of tobacco will increase. In the absence of these processes, the object of Virginia tobacco cultivation will remain incomplete and gets defeated. After threshing also the tobacco is still called as manufactured tobacco only. Therefore the entire threshing operation can be technically called Post Harvest Operations and Virginia Tobacco cultivation for quality control and pre-shipment inspection. 5.4 In view of the above, we are of the view that the activity of the assessees....