TMI Blog2023 (12) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... the cultivator / producer, or otherwise cannot be consumed. Further such processes do not alter its essential characteristic of tea ceasing to be an agricultural produce. Also such processing is necessary for making tea marketable for primary market. Merely by blending i.e. mixing or combining different teas and/or packing, such processes would not change the basic character of tea as an agricultural produce . Again by undertaking packing, it cannot be countenanced that the essential characteristic of tea to be an agricultural produce would undergo any change. It is ill-conceivable that the packs of tea cannot be sold in marketable lots, acceptable packages for its marketing. The law laid down by the Supreme Court in COMMISSIONER OF SALES TAX, LUCKNOW VERSUS DS. BIST AND OTHERS [ 1979 (9) TMI 168 - SUPREME COURT] is clearly applicable in the facts of the present case, which ought to have persuaded the AAR to hold that the tea belonging to Unilever as stored in the petitioner s godown, did not change its essential characteristics merely because certain processes were undertaken, so as to reach to a conclusion that tea was an agricultural produce. In reaching the above conclusion as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been committed by the statutory authorities. This Hon ble Court be pleased to issue a Writ of Certiorari or any other appropriate writ, order or directions under Article 226 of the Constitution of India calling for the records of the Petitioners case and after examining the legality and validity thereof quash and set aside the impugned order dated 10.12.2018 passed by Respondent No. 6 under Section 101 of the CGST Act and the MGST Act - Hon ble Court be pleased to declare that the Petitioner is entitled to exemption from payment of GST in terms of SI. No. 54(e) of the Notification 12/2017-Central Tax (Rate) dated 28.06.2017 and the corresponding notification issued under the MGST Act - Petition allowed. - G. S. KULKARNI JITENDRA JAIN, JJ. For the Petitioner : Mr. Shriram Sridharan with Mr. Shanmuga Dev. For the Respondent Nos. 1 and 3. : Mr. Karan Adik with Ms. Maya Majumdar,. For the State/ Respondent Nos.2, 4 6 : Ms. Shruti D. Vyas, B Panel Counsel. JUDGMENT (PER: G. S. KULKARNI, J.):- 1. Rule, made returnable forthwith. Respondents waive service. By consent of parties, heard finally. 2. This petition under Article 226 of the Constitution of India challenges an order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter 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 and 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 bulk packs. 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 substantially. The process undertaken on green leaves consists of only above processes and not beyond them. 6. The procurement of such tea is stated to be undertaken during the season. As per the orders as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No. 54 to Notification No. 12 / 2017-Central Tax (Rate) or otherwise? 9. Before the AAR, the petitioner contended that Unilever to whom the warehouse of the petitioner was licensed, was procuring tea of various quality in bulk either from public tea auctions or directly from manufacturers of tea and was undertaking blending and packing of the same at the petitioner s warehouse. It was contended that after packing, tea was exported to overseas countries. It was contended that the petitioner was of the firm view that the tea procured in bulk, either from public tea auctions or directly from manufacturers of tea, was an agricultural produce as defined in clause 2(d) of the Notification No. 12/2017-CT(Rate) dated 28 June 2017. It was contended that storage and warehousing of tea post procurement, blending and packing undertaken by Unilever was thus exempted under Entry No. 54(e) of the 2017 Notification. It was next contended that based on such understanding the petitioner had neither taken GST registration nor discharged the GST liabilities, however, at the instance of Unilever, the petitioner had taken registration and was regularly discharging GST liability. 10. The AAR conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted from payment of tax, and that the processing of tea has made the tea marketable by minimal process, so as to make the tea fit for human consumption as asserted by the petitioner, is not the correct position, as such processes were not minimal processes, which are usually undertaken by a cultivator or producer on an agricultural produce. It is contended that these are the processes which require well established plant and machinery to undertake the same and hence such operations were correctly taken as manufacturing process. For such reason, the agricultural produce after undergoing these processes was required to be treated as processed goods. It is contended that the question as raised by the petitioner in fact has already been addressed by CBIC Circular dated 15 November, 2017 (No. 16/16/2017-GST) and hence the processed tea does not qualify to be defined as Agricultural Produce . It is contended that the AAR s observation that the stored goods in the present case, i.e., tea was a non-agricultural produce cannot be faulted. The affidavit has laid emphasis on the activities of Unilever in regard to processing of the tea so as to contend that it is not an agricultural pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which were undertaken on the tea after Unilever procured the tea, namely, the activities of blending / mixing in specific proportions, packaging for the purpose of export as and when an order was received, which is 7 10 days prior to export of such consignment, all such activities would not change the character of the tea of being an agricultural produce. It is submitted that every kind of agricultural produce would undergo some kind of treatment in its form in order to bring them to the condition, of making such produce non perishable, and/or to make it either transportable or marketable. This would apply to tea leaves, which are not marketable in the market afresh from the tea gardens and are subjected to minimal processes necessary to save the tea leaves from perishing and to make them fit for transporting and marketing. It is submitted that this is well acceptable principle as laid down by the Supreme Court in the case of D. S. Bist and Sons (supra). It is submitted that even if such processes are undertaken by Unilever, it would not make any material difference, as the tea would retain its character as an agricultural produce as held by the Supreme Court in D. S. Bist and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled as agricultural produce for the purpose of any exemption under the 2017 notification. Mr. Adik has taken us through the orders passed by the AAR as also the appellate authority AAAR in support of his contention, to contend that within the limited jurisdiction of this Court in issuing a writ of certiorari, the findings which are borne by the record ought not to be interfered. In support of his contention Mr. Adik has placed reliance on the decision of the Division Bench of this Court in Jotun India Pvt. Ltd. Vs. the Union of India Ors. Writ Petition No. 12691 of 2019, Order dt. 22.12.2022. Analysis and Conclusion:- 19. We have heard learned Counsel for the parties, we have also perused the record. As seen from the record, the issue which had fallen for consideration of the AAR was whether the petitioner would be entitled to exemption in supply of warehouse services as let out to Unilever for packing and storage of tea under the Item Sr. No. 54(3) of the 2017 Notification . 20. To consider as to whether in the facts and circumstances of the case, the view taken by the AAR and as confirmed by the AAAR would stand the test of law in categorizing tea as stored in the petitioner s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sr. No. 54(e) of the 2017 Notification which reads thus:- 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- (a) .; (b) .; (c) ..; (d) ..; (e) loading, unloading, packing, storage or warehousing of agricultural produce; Nil Nil (emphasis supplied) 23. On a plain reading of the definition of the agricultural produce and as applicable in the present context, it can be certainly inferred that the tea is produced from the cultivation of plants (tea gardens). It is an edible produce meant for human consumption. It can also be said that tea without processing, which can be done either by the cultivator / producer, or otherwise cannot be consumed. Further such processes do not alter its essential characteristic of tea ceasing to be an agricultural produce. Also such processing is necessary for making tea marketable for primary market. Merely by blending i.e. mixing or combining different teas and/or packing, such processes would not change the basic character of tea as an agricultural produce . Again by undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embered that almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his farm or elsewhere in order to bring them to a condition of non-perishability and to make them transportable and marketable. Some minimal process is necessary to be applied to many varieties of agricultural produce. As for example, when wheat stalks are cut from the farm, threshing and winnowing have to be done. The product so obtained has to be dried for a few days. The husk and dust have to be separated. Thereafter packing the wheat in bags or other containers it is taken to the markets for sale. One can never suggest that such a wheat product becomes a commodity different from the one which was produced in the process of agriculture. To pursue that example further, if the agriculturist who produces the wheat has a flour mill and crushes the wheat produced by him in that mill and then if the flour so produced is sold by him one can never reasonably suggest that the flour sold by him is an agricultural produce, because in that event, the manufacturing process goes beyond the limit of making the agricultural produce fit for marketing as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g them with seives were all within the region of minimal process and at no point of time it crossed that limit and robbed the tea-leaves, the agricultural produce, of their character of being and continuing as such substantially. In my opinion, therefore, the view expressed by the High Court is quite justified and sustainable in law. 8. In Volume 21 of Encyclopaedia Britannica (1968 edition) under the head 'Tea' are dealt with at page 739 the processes of cultivation and manufacture of tea. Under the sub-head 'Cultivation' it is found stated:- Tea leaves are plucked either by hand or with special shears. In the tropical areas of southern India, Ceylon, and Indonesia, harvest continues throughout the year, but in the subtropical regions of northern India and China and in Japan and Formosa, the harvests are seasonal. The flavour and quality of the tea-leaves vary with the climate, soil, age of the leaf, time of harvest (even from season to season), and method of preparation. Then comes the sub-head 'Manufacture' which enumerates the categories of three classes of teas and then it is mentioned:- Most stages of processing are generally common to the three types, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im into gur and sold it. It appears to me that this case has gone a bit too far and on an appropriate occasion it may require further consideration. Nonetheless, in the instant case one can safely conclude, as I have done, that with a view to prevent deterioration and for the purpose of facilitating transport and making it marketable the assessee himself did some processing to the plucked tea-leaves and hence the High Court was right in holding that such sales were not exigible to sales-tax. Similar or identical principles have been applied by other High Courts also in respect of different commodities such as rubber, sole crepe, casuarina, pig bristles etc. The cases are- Deputy Commissioner of Agricultural Income-Tax and Sales-Tax, South Zone v. Sherneilly Rubber Cardamom Estates Ltd. Others, Deputy Commissioner of Agricultural Income-Tax and Sales- Tax, Quilon v. Travancore Rubber and Tea Co., Ltd.; Commissioner of Income-Tax v. Woodland Estates Ltd.; Rayavarapu Mrityanjaya Rao v. The State of Andhra Pradesh and Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons. Broadly speaking these cases have been decided on application of the correct principles of law. 11. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulty in holding that the sale was of his agricultural produce. 12. 13 . 14. . 15. .The question before us is whether after the tea leaf had been put through the process of withering, crushing, roasting and fermentation it continued to be agricultural produce. If the Calcutta High Court can be said to have laid down that as a result of those processes the tea leaf ceased to be agricultural produce, I am unable to agree with it. To my mind, the tea leaf remained what it always was. It was tea leaf when selected and plucked. and it continued to be tea leaf when after the process of withering, crushing and roasting it was sold in the market. The process applied was intended to bring out its potential qualities of flavour and colour. The potential inhered in the tea leaf from the outset when still a leaf on the tea bush. The potential surfaced in the tea leaf when the mechanical processes of withering, crushing and roasting, fermenting by covering with wet sheets and roasting again were applied. The tea leaf was made fit for human consumption by subjecting it to those processes. At no stage. did it change its essential substance. It remained a tea leaf throughout. In its basic nature, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner s godown, did not change its essential characteristics merely because certain processes were undertaken, so as to reach to a conclusion that tea was an agricultural produce. In reaching the above conclusion as to what was understood by the term agricultural produce in some enactments and how they were considered by the Court can be discussed. 27. In CIT vs. Cynamide 1993 3 SCC 727, the Supreme Court had an occasion to interpret the word agricultural product or product of agriculture , wherein the Supreme Court held that the term `agricultural product' or `product of agriculture is required to be construed liberally so as to include not merely the primary product as it actually grows, but also a product which undergoes a simple operation so as to make it more saleable or more usable. It was observed that the rice and the husk though separated remain as they were produced and hence continue to be agricultural product' or product of agriculture'. 28. In Lipton India Ltd., Calcutta etc. Vs. Bihar State Agricultural Marketing Board, Patna and Ors. 1997 SCC OnLine Pat 288, the Court held that the products like Tree Top , Frooti and Appy , which were ready-made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular cannot whittle down the exemption notification and restrict the scope of the exemption notification or hit it down. In other words, it was held that by issuing a circular a new condition thereby restricting the scope of the exemption or restricting or whittling it down cannot be imposed. The principle is applicable to the instant cases also, though the controversy is of different nature. 30. Similar view was taken by the Supreme Court in the case TATA Teleservices Ltd. Vs. Commissioner of Customs (2006)1 SCC 746 while upholding the orders passed by the Andhra Pradesh High Court. 31. In so far as the impugned orders are concerned, on a perusal of the orders passed by the AAR the emphasis appears to be more on the issue that the process by which the tea leaves are dried which results in emergence of a manufactured product, and therefore, tea ceases to be an agricultural produce. In our opinion, such reasoning would in fact go contrary to the decisions of the Supreme Court as noted above for the reason that the essential characteristic of the tea being an agricultural produce would not stand extinguish by mere processing and packing in whatever form. The AAAR has also not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety Ltd. (2010) 13 SCC 336; and Ranjeet Singh Vs. Ravi Prakash AIR 2004 SC 3892. We find that there is an error of law apparent on the face of the record by both the forums below. Thus, when there is an error of law and when it is apparent, a writ of certiorari can be issued even if the authorities below has not transgressed their jurisdiction in any way. In such context Mr. Sridharan is also correct in placing reliance on the celebrated decision of the Supreme Court in Hari Vishnu Kamat (supra) where the Supreme Court has held that one of the grounds to issue a writ of certiorari is to correct an error of law which must be manifest on the face of the record. 33. In the aforesaid circumstances, we are inclined to allow this petition. It is accordingly, allowed in terms of prayer clause (a) and (b) which read thus:- a) that this Hon ble Court be pleased to issue a Writ of Certiorari or any other appropriate writ, order or directions under Article 226 of the Constitution of India calling for the records of the Petitioners case and after examining the legality and validity thereof quash and set aside the impugned order dated 10.12.2018 passed by Respondent No. 6 under Section 101 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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