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Is milk an agriculture produce ?

Service Tax - Started By: - Kunal Pawar - Dated:- 26-10-2015 Last Replied Date:- 5-1-2016 - Whether commission received on account of collection and supply of milk to Dairies taxable under BAS. If milk considered as agriculture produce, it is exempted being includes in negative list. However, nowhere in the definition of Agriculture produce, it is clearly mentioned that milk is an agriculture produce. - Reply By Rajagopalan Ranganathan - The Reply = Sir,Milk is dairy product and not agricultural .....

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r - The Reply = Sir, Thanks for guidance. As per Section 65B(3) & 65B(5), definitions of agriculture and agriculture produce are as under :-Section 65B(3) - agriculture means the 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 &Section 65B (5) - agricultural produce means any produce of agriculture on which either no further processing is done or such processing is done as is usual .....

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. Please assist. - Reply By Ganeshan Kalyani - The Reply = The term milk is not mentioned in the exemption notification no.25/2012. Milk cannot be said as Agriculture produce. Therefore service is applicable. - Reply By KASTURI SETHI - The Reply = Kunal Pawar Ji, I have read your views expressed on 27.10.2015. Milk cannot be termed as agriculture produce by any stretch of imagination (practically, lawfully and as per dictionary meaning). There is a world of difference between the activity of  .....

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agriculture produce' laid down under Section 65 B(3) & (5) of the Finance Act. - Reply By MARIAPPAN GOVINDARAJAN - The Reply = Dear Kasthuri Sethi Sir, your explanation and justification is superb. - Reply By Kunal Pawar - The Reply = Thanks a lot Kasturi Sethi Sir for necessary guidance. - Reply By KASTURI SETHI - The Reply = Shri MARIAPPAN GOVINDARAJAN JI, Thanks for liking and appreciating my reply. - Reply By Ganeshan Kalyani - The Reply = Nice explanation sir. - Reply By KASTURI SET .....

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nd cattle feed are agriculture produce or not ? Food grains or not ? My reply is as under :- First of all we should know what is bran. What is chaff ? What is husk ? what is cattle feed ? What is milling ? During the process whether there is any change in essential character of the goods ? During milling whether any new product emerged ? What is bran ? As per dictionary meaning, Bran is the hard outer layers of cereal grain. It consists of the combined aleurone. Along with germ, it is an integra .....

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;) As per dictionary meaning:- Chaff is the dry, scaly protective casings of the seeds of cereal grain, or similar fine, dry, scaly plant material such as scaly parts of flowers, or finely chopped straw. Chaff is indigestible by humans, but livestock can eat it and in agriculture it is used as livestock fodder, or is a waste material ploughed into the soil or burnt. HUSK and chaff are the same. What is milling ? Milling is a cutting process that uses a milling cutter to remove material from the .....

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rovided by cold storage is outside the ambit of the levy. Doubts have been raised about the scope of term agricultural produce . In order to clarify the scope of this term beyond doubts, an order has been issued under the power vested under section 95 of the Finance Act (see Order No. 1/2002-S.T., dated 1-8-2002). As clarified in the order, the term agricultural produce would cover all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as .....

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g, harvesting, drying which does not alter its essential characteristics but makes 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, 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. ANALYSIS Bran is an integral part of the whole grain (may be .....

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of goods (agriculture produce) nor any new product emerges as a result of milling. Bran is eaten by human being as well as animals. Biscuit of bran are available. Dalia is made of wheat and bran. Bran is not separate from wheat for dalia. All the items mentioned above are food grains (whether milled or not) and bran of these is complete food grain being more nutritious than wholegrain. Thus these are food grains as well as agriculture produce. Milling has done nothing except separating into thr .....

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because a new product has emerged. Basic essential character changed. After the manufacture of Sugar, there is by-product called bagasse. Bagasse can be compared to chaff or husk. Though bagasse has emerged after milling/crushing sugar cane, Hon ble Supreme Court in the case of Union of India Vs. DSCL SugarsLtd. 2015 reported as (322) E.L.T. 769 (S.C.) = 2015 (10) TMI 566 - SUPREME COURT has held that it is an un-manufactured product, being not result of any process. Despite being a bye-product .....

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). I think there should not be even an iota of doubt or dispute that these are agriculture produce. Conclusion : By undergoing any process does not mean it is out of the gamut of agriculture produce. There are two major factors i.e. A new product must emerge and essential character of the goods must be altered to be out of natural product or agriculture produce. 2015 (322) E.L.T. 769 (S.C.) = 2015 (10) TMI 566 - SUPREME COURT IN THE SUPREME COURT OF INDIA A.K. Sikri and Rohinton Fali Nariman, JJ .....

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anks Kasturi Sir. - Reply By piyush agarwal - The Reply = Definition of agricultural produce as per Section 65B(5) Agricultural produce means any produce of agriculture 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 Definition of Agriculture as per Section 65B(3) Agriculture: As per section 65B(3) of the act, it means the cultivati .....

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or which does not alter its essential characteristics but makes it marketable for primary market . The process done by man or machine to produce rice does not alter the characteristics but only makes it marketable in primary market. Hence it is still agricultural produce. Further any process after procuring from primary market would stretch beyond agricultural definition and would be taxable. - Reply By piyush agarwal - The Reply = Circular No. 177/03/2014 - ST dated 17th February, 2014 clarifie .....

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heat, rice, oats, barley etc. is edible for human beings as well as animal. It is eaten by animals direct and human beings eat by mixing with an other eatable item. Bran is agriculture produce though it undergoes some processes by machine or manually by farmers. I invite comments from all experts on my views expressed above. - Reply By KASTURI SETHI - The Reply = Assessee is concerned with relief. Govt has granted relief to the assessee by granting exemption from Service Tax in respect of rice v .....

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s, supply of machinery towards rice or commission on sale of rice are taxable service under service tax. - Reply By Ganeshan Kalyani - The Reply = Your second para seems not right as supply of labour for agricultural activity is exempt from service tax and so as other activity for agricultural purpose. - Reply By KASTURI SETHI - The Reply = I fully agree with Sh. Ganeshan Kalyani, Sir. But here Sh.Piyush Agarwal does not agree that rice is agriculture produce.Services by a commission agent for s .....

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e been extended to rice. As per dictionary meaning, ' Paddy is a field flooded with water where rice is grown or a rice field.Paddy is agriculture produce and rice is not, it cannot be digested. Dictionary meaning of paddy cannot be changed or twisted. If we read the expression/term of 'Services relating to agriculture or agriculture produce under Section 66(D)(d)' between the lines, rice, bran and husk of paddy are either covered under the definition of 'agriculture produce' .....

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r threshing (Negative List) which changed the essential character of paddy. This is view of Sh.Piyush Agarwal. I do not agree with Sh.Piyush Agarwal on the following grounds:- (1) Services in relation to agriculture or agriculture produce are in the Negative List under Section 66(D)(d) of the Finance Act. As per para No.5 of Board's Circular dated 17.2.14.milling of paddy is an intermediate production process in relation to agriculture. What we obtain after milling of paddy ? These are rice, .....

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e parts i.e. rice, bran and husk which already exist. No new product has emerged in this way.Paddy is only separated into three goods by way of milling/ threshing. All these three goods have not lost their individual identity or essential character at the time of milling paddy. They retain their original shape as they grew; only they were separated into three goods.Rice, bran and husk all are agriculture produce. 3. It is a fact that rice is not a manufactured product. Then what is it ? Rice, br .....

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overed under the definition of 'agriculture produce' or in 'services relating to agriculture'. These are my views/interpretations. - Reply By piyush agarwal - The Reply = Respected Sethi & Kalyani Sir, I would like to draw your attentions on bold letters on Circular 177/03/2014 - ST dated 17th February, 2014 These doubts have arisen in the context of definition of 'agricultural produce' available in section 65B(5) of the Finance Act, 1994. The said definition covers & .....

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unloading, packing, storage and warehousing of rice are exempt from service tax being rice is food grain and these service are also exempted for agricultural produce. However, supplies of labours, supply of machinery towards rice or commission on sale of rice are taxable service under service tax for being food grain but these services would be EXEMPTED if rice would have been agricultural produce. Service relating to agriculture or agricultural produce by way of inter alia services provided by .....

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ret it. It is also true that Gvt cannot be generous in giving away all benefits. But the law is always good in giving the best to its citizen. Hence I would request you accept the fact and enjoy the life. Thanks. - Reply By KASTURI SETHI - The Reply = w.r.t. Sh.Piyush Agarwal's views, I would like to further point out that Board's circulars have no statutory force. It is a fact that Act/Rules will prevail over circular. Jaggery has been declared as agriculture produce vide Board's ci .....

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have either been amended or withdrawn from 1.7.12 keeping in view the changes/amendments in Service Tax at large scale effective from 1.7.2012 I mean to say Board's circular is challengeable and not final. The Apex Court has also held that Board's circular which is contrary to law is not binding on the departmental officers. Definition of 'agriculture' under Section 65 B(3) is also defective. rearing of all life-forms of animals, except the rearing of horses,- Why the horses have .....

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