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TMI Blog2023 (3) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... process; * Once completely dry, the harvest is then collected & stored in a suitable dry location, wherein the bigger stems, the suckered leaves & the main harvest is stored separately; * This whole leaf or the broken leaf [formed during the course of bundling in gunny/jute bags] are thereafter procured from the farmer/agriculturist by the applicant; the broken leaf is also known as 'Bhukko' in common trade parlance; * This is primarily used in bin manufacturing or chewing tobacco manufacturing. 4. It is the applicant's contention that they sell some part of this goods/product, so procured from the farmer/agriculturist, on as it is basis, without any further process. 5. The applicant further contends that they also carry out certain process on the whole leaf/broken leaf, so procured from the farmer/agriculturist viz:- * process of sorting & cleaning; * removing unwanted substances like small stones, earth particles, cleaning out any residual smaller sized stem pieces; * thereafter cutting and grading of leaves is done, which is popularly known as 'unmanufactured raw tobacco leaves'; * since the unmanufactured raw tobacco is prone to change in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or advance ruling viz,- (i) Whether for the purchase of raw tobacco from farmer [including naturally broken tobacco known as 'tobacco leaves or tobacco bhukko'] is covered under reverse charge mechanism? (ii) What would be the rate of tax in case of coating process is done on unmanufactured tobacco. If the applicant carried out the process of coating on the tobacco belonging to other person [job work basis] whether registered or otherwise. 11. Personal hearing was granted on 9.2.2023 wherein Shri Jigar Parikh, CA, Shri Gautam Patel (Director), and Shri Jagdishbhai Patel (Director), appeared and reiterated the facts as stated in the application. It was further submitted that their product would fall under 2401; that as far as job work was concerned, it will be for registered persons only. They further sought a week's time to submit additional submissions & case laws. 12. Vide letter dated 15.2.2023, the applicant has submitted additional submissions, raising the following averments viz,- * that even after carrying out the process of coating natural gum on the tobacco leaf, their product remains broken tobacco leaf and no new product emerges; * that the coated p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017] Rate of Tax (Schedules) for specified goods under CGST - Schedules I to VI In exercise of the powers conferred by sub-section (I) of section 9 of the Central Goods and Services Tax Act. 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the rate of the central tax of - (i) 2.5 per cent, in respect of goods specified in Schedule I, (ii) 6 per cent, in respect of goods specified in Schedule II. (iii) 9 per cent, in respect of goods specified in Schedule III, (iv) 14 per cent, in respect of goods specified in Schedule IV, (v) 1.5 per cent, in respect of goods specified in Schedule V, and (vi) 0.125 per cent, in respect of goods specified in Schedule VI appended to this notification (hereinafter referred to as the said Schedules), that shall he levied on intra-State supplies of goods, the description of which is specified in the corresponding entry in column (3) of the said Schedules, falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedules. SCHEDULE I - 2.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tube) - bearing a brand name 71% 6. 2401 Unmanufactured tobacco (with lime tube) -bearing a brand name 65% 7. 2401 30 00 Tobacco refuse, bearing a brand name 61% (3) For the purposes of this notification, the phrase "brand name" means brand name or trade name, whether registered or not. that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person. * (D) 2. In this Act, unless the context otherwise requires,- (72) "manufacture " means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufacturer" shall be construed accordingly; * (E) HSN notes of chapter 24 [relevant extracts] 24.01 - Unmanufactured tobacco; tobacco refuse.- 2401.10 - Tobacco, not stemmed/S tripped 2401.20 - Tobacco, partly or wholly stemmed/stripped 2401.30 - Tobacco refuse Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states as follows :- 3. Job work has been defined in CGST Act as under. "Job work means any treatment or processing undertaken by a person on goods belonging to another registered person and the expression job worker' shall be construed accordingly. " 4, in view of die above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. I k2017-Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act. 2017. that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which arc carried out on physical inputs (goods) which arc owned by persons other than those registered under the CGST Act. 18. The entire process undertaken at the fanners end and at the applicant's end is discussed supra and is not being repeated for the sake of brevity. Of the two questions posed in Sr. No. 14, in Form GST ARA-01, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the CGST Act, 2017, we find that manufacture is defined as processing of raw material/ inputs in any manner which results in emergence of a new product having a distinct name, character and use. The applicant has stated that no new product emerges post coating. The applicant has also relied upon case laws to substantiate his plea. 21. The applicant has further stated that this coated unmanufactured tobacco, is not fit for consumption even with lime tube since the tobacco has rough surface & does not provide a soothing experience when put in the mouth. Further, since the natural gum coated tobacco leaves subsides the nicotine it cannot be used for smoking; that these leaves are ideally used by Zarda manufacturers for making scented tobacco. 22. Chapter 24, tariff item 2401, which deals with unmanufactured tobacco, is reproduced below for ease of reference: Tariff Item Description Unit Rate of Duty Standard Preferential Area (1) (2) (3) (4) 5 2401 UNMANUFACTURED TOBACCO; TOBACCO REFUSE 240110 - Tobacco , not stemmed or stripped : 24011010 --- Flue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 13 of Schedule IV. 24. However, the applicant has submitted that they propose to supply the said coated tobacco, to the customers in gunny bag without any brand name but with their name being put up on the gunny bags so as to identify the lot. If so be the case, we hold that the applicant would be liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 13 of Schedule IV, along with 71% Compensation Cess in terms of notification No. 1/2017-Compensation Cess (Rate) dated 28.6.2017 (Sr. No. 5), more so in view of the fact that in terms of the said notification "brand name" means brand name/trade name, whether registered or not, & includes a name/mark, symbol, monogram, label, signature or invented word or writing, used in relation to a specified goods for the purpose of indicating, a connection in the course of trade between such specified goods and some person using such name or mark, with or without any indication of the identity of that person. 25. We find that the applicant's reliance on the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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