TMI Blog2019 (11) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be interpreted in the light of the relevant notifications and to decide the rate of tax accordingly. As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the maximum extent for sustainability and to continue as leaf for further process. The tobacco leaf will be entitled as a commercial commodity only after drying (Curing) and normally put to trade in form of bundles. The same will be traded between the farmer and the trader and trader to trader/manufacturer and so on - The commodity tobacco leaves shall be interpreted in the light of the entry 109, Schedule- I of Notification No. 1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017 CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401. As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax if the applicant gets the tobacco leaves re-dried without getting them threshed? - HELD THAT:- 5% (2.5% SGST + 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the applicant gets the tobacco leaves threshed and re-dried? - HELD THAT:- 28% (14% SGST +14% CGST) as per Sl.No. 13 of Schedule IV Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the applicant gets the tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others? - HELD THAT:- 28% (14% SGST +14% CGST) as per Sl.No. 13 of Schedule IV Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What is the applicable rate of tax if the applicant gets the service of bundling of tobacco leaves by the service providers and then the bundled leaves are sold to others? - Whether bundled or sold separately tobacco leaves attract 5% (2.5% SGST + 2.5%CGST) as per Sl.No.109 of schedule 1 Notification Central Tax (Rate) dated 28.06.2017? - What is the applicable rate of tax if the applicant gets the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Schedule - IV; Sl. No. 13 2401 Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves CGST 14 % + SGST 14% i.e., total GST = 28% The applicant opines that though there is clarity as to the product description in the above two headings, since the terms Tobacco leaves and Unmanufactured Tobacco (other than tobacco leaves) are not defined in the Tariff, classification of the commodity at various stages in the above specified heads may be a contentious issue. He, therefore, sought for an Advance Ruling. 4. Activities of the applicant: The applicant engages in the following activities as far as tobacco is concerned : (a) Purchase of the cured tobacco leaves brought by tobacco farmers at the Tobacco Auction Platforms in case of FCV variety or directly from farmers in case of Non-FCV variety of tobacco and selling them to other dealers or exporters or manufacturers of tobacco. (b) Purchase of the tobacco leaves from other dealers and sell them to the clients within India and overseas. (c) Engaging other service providers on job work basis for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GST applicable on tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves? (b) What will be the applicable rate of tax if the applicant purchases tobacco leaves form other dealers who have purchased them from farmers, for the purpose of trading? (c) What will be the applicable rate of tax if the applicant segregates the tobacco into grades depending upon their size (width), colour /shade, length, texture of the leaf etc., and sells such graded tobacco leaf? (d) What will be the applicable rate of tax if the tobacco leaves are butted and sold to other dealers? (e) What is the applicable rate of tax if the applicant gets the tobacco leaves re-dried without getting them threshed? (f) What will be the applicable rate of tax if the applicant gets the tobacco leaves threshed and re-dried? (g) What will be the applicable rate of tax if the applicant gets the tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others? (h) What is the applicable rate of tax if the applicant gets the service of bundling of to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-classification of the tariff heads under GST. As per the Customs Tariff, the relevant heads are as under: 2401 Unmanufactured tobacco; tobacco refuse. 2401 10 Tobacco, not stemmed or stripped 2401 10 10 Flue Cured Virginia Tobacco 2401 10 20 Sun cured Country (Natu) Tobacco 2401 10 30 Sun cured Virginia Tobacco 2401 10 40 Burley Tobacco 2401 10 50 Tobacco for manufactures of Bidis, not stemmed 2401 10 60 Tobacco for manufactures of Chewing tobacco 2401 10 70 Tobacco for manufactures of cigar and cheroot 2401 10 80 Tobacco for manufactures of Hookah tobacco 2401 10 90 Other 2401 20 Tobacco partly or wholly stemmed or stripped. 2401 20 10 Flue Cured Virginia Tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. But there may be some other kinds of agricultural produce which require some more processing to make it marketable. In the case of such a commodity what one to judge is to find out whether in relation to that agricultural produce the process applied was minimal or was it so cumbersome or long-drawn that either, in common parlance or in the market, or even otherwise, anybody would not treat the produce as an agricultural produce. Thus, as per the common parlance test, tobacco leaves mean only cured tobacco because it is impossible to undertake any commercial activity on green tobacco as plucked from the crop. From the stage of cured tobacco, the common understanding of the term tobacco leaves stretches upto the stage of threshed and redried tobacco. As per the GST Tariff both Tobacco Leaves and Unmanufactured tobacco (other than tobacco leaves) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant contends that it is a settled legal position that an entry in the tariff has to be read as it is following the principle of literal Rule of interpretation and the word , term or a phrase shall not be read by affixing or suffixing another word to it. In the above entry, the term Tobacco Leaves is mentioned without any qualifier attached to it viz., dried tobacco leaves , undried tobacco leaves , cured tobacco leaves etc., In such cases, it cannot be read that tobacco leaves means only those leaves cut from the plants and tobacco leaves on which certain operations are conducted will not be tobacco leaves . It is also clear that in the absence of the definition given to the term tobacco leaves , shall be under stood in its natural and commercial meaning. Further the Tax Research Unit of CBIC in its Circular No.332/2/2017-TRU clarified as under: Q. 42. Tobacco leaves falling under heading 2401 attracts 5% GST on reverse charge basis in respect of supply by an agriculturist. What is the meaning of Tobacco leaves? Reply: For GST Rate 5%, tobacco leaves means, leaves of tobacco as such or broken tobacco leaves or tobacco leaves stems . The applicable ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cco leaves butted and sold to other dealers; (v) On tobacco leaves re-dried without threshing. In view of all the above, the applicant is of the view that the following commodities that the applicant deals with, will fall under the head Tobacco Leaves only and the applicable rate is 5% only: (a) Tobacco leaves in Cured form procured from farmers directly in case of Non-FCV tobacco and at Tobacco Auction Platforms in case of FCV tobacco. (b) Tobacco leaves traded between dealers of tobacco without rendering any further processes, what so ever. (c) Tobacco leaves that are subjected to minimum manual process like grading, butting or re-drying, where no physical or chemical changes are happening to the leaves. (d) Tobacco leaves that are threshed and re-dried, where only the tobacco leaves are as such but are in broken form. 7. RECORD OF PERSONAL HEARING: Sri Y. Srinivasa Reddy the authorized representative of the Applicant company appeared for personal hearing on 01.02.2019 and they reiterated the submission already made in the application. Further the representative of the applicant appeared before this authority on 18.02.2019 and submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is an entry of tobacco leaves under Reverse charge mechanism also as explained below: As per the notification 4/2017 CGST (Rate), the supply of the Tobacco Leaves shall be under Reverse charge No Tariff item subheading, heading or chapter Description of supply of Goods Supplier of goods Recipient of goods 3 2401 Tobacco Leaves Agriculturist Any registered person The commodity tobacco leaves shall be interpreted in the light of the entry 109, Schedule- I of Notification No. 1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017 CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401. It is to note that though there are different entries with respect to tobacco there is a specific entry in Schedule I of Notification 1/2017 (CGST Rate) as Tobacco leaves, and for the same the liability was brought under reverse charge mechanism. Hence it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... size (width), colour /shade, length, texture of the leaf etc., and sells such graded tobacco leaf? 5% (2.5% SGST + 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. (d) What will be the applicable rate of tax if the tobacco leaves are butted and sold to other dealers? 5% (2.5% SGST + 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. (e) What is the applicable rate of tax if the applicant gets the tobacco leaves re-dried without getting them threshed? 5% (2.5% SGST + 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the applicant gets the tobacco leaves threshed and re-dried? 28% (14% SGST +14% CGST) as per Sl.No. 13 of Schedule IV Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. (g) What will be the applicable rate of tax if the applicant gets the tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others? 28% (14% SGST +14% CGST) as per Sl.No. 13 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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