TMI Blog2018 (12) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... product i.e. the black tea can be construed as agricultural produce or not? - Held that:- Though the product is a produce out of cultivation of the plants, the same is obtained as a result of the specific manufacturing processes, carried out by the manufacturers on the original agricultural produce i.e. green tea leaves for making them suitable for consumption by imparting the desired flavor and colour - All these processes, which change the characteristics of the green tea leaves, are carried out by the manufacturers and not the cultivators or the producers of the green tea leaves as envisaged under the definition of the agricultural produce. Thus, the manufactured products do not fulfill the prescribed criteria of the agricultural produce, and thus cannot be considered as agricultural produce. The said processes carried out on the green tea leaves do have bearing on the taste and colour of the tea, the appellant's contention that the above discussed processes carried out on the green tea leaves does not alter the characteristics of the tea is devoid of any merit and thus is not sustainable. In the said warehouses rented out by the appellant, the appellant's client Unilever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd (herein after referred to as the Appellant ) against the Advance Ruling No. GST-ARA-30/2017-18/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. E. The said procurement was undertaken during season. As per the specific order, M/S Unilever undertook blending and packing of the same 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxability of renting of warehouse as the warehouse was used for warehousing of tea, an agricultural produce. Under this background, the Appellant had requested for advance ruling vide their application dated 16.1.2018 on the following issue- Whether the supply of warehouse services used for packing storage of tea, under above mentioned 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an agricultural produce or not? Hence, the case law relied by the authorities is clearly distinguishable. Therefore order needs to be set aside. 8. The case law of Narendra Tea Co (P) Ltd = 2012 (7) TMI 531 - ITAT KOLKATA is clearly distinguishable and not relevant. In the case of Narendra Tea Co (P) Ltd, issue before the Kolkata I TAT was to ascertain whether the activity 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om cultivation of plants or rearing of all life forms of animals- Green leaves are plucked from the tea plant. Hence the first condition is undoubtedly fulfilled. b) Either no further processing is done or such processing is done as is usually done by a cultivator or producer on the said produce. a. Tea leaves are plucked from the tea plants and the green leaves, plucked from the plant are not 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processes, not altering the essential characteristics of the agricultural produce is also satisfied. The processes undertaken makes it marketable for primary market. Primary Market had not been defined in the GST Act. In case of tea, primary market is a sale and purchase of tea in bulk from cultivator or producer. The said term primary market is indirectly defined in the definition of Buyer , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of 'Agricultural produce'. In the entire order, there is no finding/observation in respect of this phrase. Appellant intend to rely on the Supreme Court decision in case of Union of India Vs Brigadier P.S. Gill [2012 (279) ELT 321 (SC)] = 2012 (10) TMI 634 - SUPREME COURT OF INDIA . Hence, the order is not correct and needs to be set aside. 18. In 2002, an order No. 1/2002 was issued vide M.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; Both the entries mentioned above vizclause 65(B)(5) and entry no. (iii) of Section 66D requires that the processes carried out on the agricultural goods do not alter the essential characteristics of agricultural produce. Thus 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sionerate appeared on behalf of the respondent to defend the case and reiterated the same arguments which were earlier made before the Advance Ruling Authority. Discussion and findings 22. Heard the representatives of both sides. On examination of the written as well as oral submissions made by the appellant and the counter arguments in this regard made by the representative of the Department, the moot issue before us to decide upon is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provided in the clause 72 of Section 2 of the CGST Act, 2017, which are reproduced herein below: (72) manufacture means processing of raw material or inputs in any manner that results in emergence of new product having a distinct name, character and use .... The above fact is also acknowledged by the appellant in their submissions, wherein they have submitted that Unilever , their client to whom the warehouse is being rented out, have been procuring 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 produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant (and not the cultivator or producer), as submitted by the appellant, leaves no doubt in one's mind that they have lost the nature and characteristics of an agricultural produce in terms of the definition of 'agricultural produce' and are ready for secondary or tertiary market. The intention of legislature has never been to exempt agricultural produce at every stage. Had it been the case, then all agricultural produce, processed or manufactured by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the cultivator or producers of the tea. Thus, the blended and packaged product, which are to sold to the overseas markets, which are definitely not the primary markets as envisaged in the definition of the agricultural markets, reproduced above. The above finding further entrenches our opinion that the stored products are not the agricultural produce as being projected by the appellant. 30. In the submission made by the appellant before us, they have argued that 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the appellant that the explanation by virtue of Circular No. 16/16/2017-GST dated 15.11.2017 is contrary to the Notification No. 12/2017-CT (Rate) dated 28.6.2017, it is observed that the clarification is not contrary rather it clarifies the doubts of trade and department on certain issues and is consistent with the said notification. The Board is empowered under section 168 of the CGST Act 2017 to issue such circulars for the purpose of uniformity in the implementation of the Act and al/ officers and al/ other persons employed in the implementation of the Act shall observe and follow such orders/circulars. 33. Now, after we conclude that the products stored in the warehouse of the appellant are not the agricultural produce, we come to the question asked in the advance ruling application filed by the them i.e . Whether the supply of warehouse services used for packing storage of tea, under above mentioned facts circumstances was/is exempted vide Serial No 54(e) of Notification No. 12/2017- Central tax (rate) or otherwise. . The answer to this question will be negative as the said exemption granted vide the above notification is provided to the storage and war ..... X X X X Extracts X X X X X X X X Extracts X X X X
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