2018 (12) TMI 651 – APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – 2019 (20) G. S. T. L. 146 (App. A. A. R. – GST) – Agricultural Produce or not? – Nature of warehoused goods – tea produce – Circular No. 16/16/2017-GST dated 15.11.2017 – 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?
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Held that:- The product being stored in the warehouse has got different name, character and uses from the green tea leaves which are cultivated in the tea gardens. Thus, the tea procured by Unilever is the manufactured product obtained from the different manufacturers – Thus, there is absolutely no doubt that the processes or treatments which are performed upon the
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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.
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In the said warehouses rented out by the appellant, the appellant's client Unilever have also been blending the tea of the various qualities and packing the same in the packets of specified quantity as per the order received from their overseas buyers of the tea product. The blending of tea of various qualities into different proportion depending upon the requirements of their overseas customers may be construed as manufacturing process as the said process imparts different flavour, colour to suit the need for their customers. Thus, the appellant's client Unilever is undertaking the said manufacturing process, thus changing the essential characteristics of agricultural produce further, in the warehouse rented ou
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UNGITA SHARMA, AND SHRI RAJIV JALOTA, MEMBER PROCEEDINGS (under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Nutan Warehousing Company 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, 1
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ods of all descriptions of agricultural and allied products. g) C. Appellant had been granted license for carrying out business of warehousing under the Bombay Warehousing Act, 1959. Accordingly, Appellant had constructed Warehouses at various places including warehouse at Fursungi, Pune (hereinafter referred to as the said warehouse). The Appellant had given on rent the said warehouse to M/s. Unilever India Exports Ltd (hereinafter referred to as Unilever) on specific compensation allowed under Bombay Warehousing Act. D. M/s. Unilever India Exports Limited (herein after referred to as Unilever ) procures tea of various qualities in bulk either from public tea auctions or directly from manufacturers of tea in 50 Kg bags and stores them in the said warehouse. Procured tea leaves normally undergo following standard processes prior to procurement- Tea leaves are plucked from the tea plants and the green leaves, plucked from the plants are not fit for the human consumption, it cannot be s
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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. 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 cult
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uce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. H. The Appellant considers tea as an agricultural produce. Agricultural produce is defined as per 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 producer which does not alter its essential characteristics but makes it marketable for primary market; I. Even though the blended and packed tea was kept for a very brief period but also the said activities of blending and packing were not taking away the essential characteristics of tea. Based on this understanding, the appellant were of the view that their activities of providing
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(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 mentioned that M/s. Unilever was procuring the tea from public auction in bulk in 50 Kg bags. After procurement, bulk tea was stored for a long time. When order is received, blending and packing is done and the packed products are despatched within 7-10 days. Based on this
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conveniently recorded that the case law relied by the appellant were not relevant, without discussing the same. 6. The appellant had relied on the several decisions including decision of the Supreme Court. The authorities have conveniently recorded that the case law relied by the appellant were not relevant without differentiating or recording any reason for nonrelevance of the same, based on facts or interpretation. Hence, the order passed is not a reasoned order and needs to be set aside, 7. 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, are clearly distinguishable. In the case 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, issue before the Hon'ble Supreme Court was to ascertain whether the activity of M/s. Belgachit Tea Co was taxable under the Bengal Agricultural Inco
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ultural 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 remained agricultural produce. Similar view had been expressed by the Hon'ble Uttaranchal High Court in case of Dehradun Tea Company Ltd. vs State Of Uttaranchal And Ors.[2006 148 STC 56 Uttra] = 2006 (6) TMI 474 – UTTARAKHAND HIGH COURT. 10. Relevant issue is not the ascertainment of Income viz. agricultural or business but the retention of essential characteristic of tea even after various processes undertaken. 11. The authorities had heavily relied on the facts that whether the income arising out of the activity of the appellant is assessable as agricultural income or not? Though the income arising out of activity of trading of agricultural produce is not assessable as income from agricultural produce but the activ
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se 2(d) of the Notification No. 12/2017-CT (Rate) dated 28.6.2017 has three ingredients- a) The produce must emerge from cultivation of plants or rearing of all life forms of animals. 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. c) The process undertaken does not alter its essential characteristics but makes it marketable for primary market. 14. The process undertaken on green leaves consists of only above processes and not beyond them. All the three ingredients are fulfilled in the present case. a) The produce must emerge from 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
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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. c. Unlike many agricultural products, tea-leaves are not marketable in the market, fresh from the tea gardens. Nobody eats tea-leaves. It is meant to be boiled for extracting juice out of it to make tea liquor. Tea-leaves are, therefore, only fit for marketing when by a minimal process, they are made fit for human consumption. Processes were necessary for the purpose of saving the tea-leaves from perishing, making them fit for transporting and marketing them. The process applied was minimal. Withering, crushing and roasting the tea-leaves will be surely necessary for preserving them. The process of fermentation or final roasting with charcoal for obtaining suitable flavour or colour and also the process of grading them with sieves were all within the region of minima
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e processes. At no stage, did it change its essential substance. It remained a tea leaf throughout. In its basic nature, it continued to be an agricultural produce. Thus, the condition of 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 ei
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ions are issued using the subordinate legislative power and are tabled in parliament. Circulars are issued for clarifying the issue, which had been dealt in the Act/rule/notification in a legal language. Circulars are issued by authority expressing their view point. It cannot override the Notification. Any circular contrary to the law (including notification) is nonest in the eye of the law. It is neither binding on the department nor on the Assessee. The applicant intend to rely on the five member Hon'ble Supreme Court decision in case of CCE Bolpur Vs Ratan Melting & Wire Industries [2008 (231) ELT 22 (SC)] =2008 (10) TMI 5 – SUPREME COURT OF INDIA. 16. Circular No. 16/16/2017-GST dated 15.11.2017 is contrary to the Notification No. 12/2017-CT (Rate) dated 28.6.2017, hence not legal. The CBEC had issued Circular No. 16/16/2017-GST dated 15.11.2017 clarifying the scope of Entry at Sr.No. 54 of the Notification No. 12/2017-CT (Rate) dated 28.6.2017. The said circular had clarif
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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 processing is done or such processing is done by the cultivator lik
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h 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. (C) The above definition is same as given in Order No. 1 of 2002. The explanation inserted in the Notification No. 13/2003-ST dated 20.06.2003 had remain in effect till 30.6.2012. From 1.7.2012, agricultural produce was defined in clause 65(B)(5) as under- (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; The exclusion and inclusion mentioned in the defini
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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 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. The above definition had three parts- a) Main part of definition b) Illustrative products by way of inclusion and c) Exclusion part The entries made in inclusive part of definition are only illustrative and do not expands the scope of the definition. Similarly exclusion part is also illustrative, w
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pite of the presence of 'manufactured products' in the exclusion part. Thus, as far as definition of agricultural produce is concerned, tea is not considered to be as manufactured product. Thus, tea was an agricultural produce covered in the main definition and continued to remain agricultural produce even after exclusion of the two parts (inclusion & exclusion) from 1.7.2012. 20. In light of the above, tea is an agricultural produce and its warehousing is exempted under E.No. 54(e) of the Notification No. 12/2017-CT. Personal Hearing 21. A personal Hearing in the matter was conducted on 20.11.2018 wherein Shri G.L. Navlakha and Shri Suresh Singh appeared on behalf of the appellant and reiterated the written submissions made at the time of the appeal. Shri Madan Deshmukh, Supdt., Division -I l, Pune -Il Commissionerate appeared on behalf of the respondent to defend the case and reiterated the same arguments which were earlier made before the Advance Ruling Authority. Discus
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not suitable for human consumption due to the presence of bitter taste inhered into it. The appellant further submitted that it is made suitable for consumption by subjecting the same under the various stages of processing, which are enumerated hereinbelow: (a) Exposing of the tea leaves under the sun or heating of the tea leaves for drying up; (b) Rolling of the dried up tea leaves by hand or machines to break the leaf cells and extracting juices or enzymes inhered into it; (c) Complete drying up by heating under the fire or sun or current of the hot air; (d) Fermentation of the tea leaves; (e) Sieving; (f) Roasting of the tea leaves with the charcoal to obtain the suitable flavour and colour. All these above processes are mostly carried out by the manufacturers after procuring the green tea leaves from the producers of the green tea leaves. Thus, as a result of the above enumerated processes, the tea leaves acquire the new flavour and colour and are now suitable for the human consump
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aves which are cultivated in the tea gardens. Thus, the tea procured by Unilever is the manufactured product obtained from the different manufacturers as per the submission made by the appellant themselves at para D above. Thus, there is absolutely no doubt that the processes or treatments which are performed upon the green tea leaves amounts to manufacture as per the definition 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 manufacture
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It should be produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products; (ii) It should be subjected to either no further processing or such processing by the cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; Now, subjecting the product in the question under the gauge of the above listed parameters, it is observed 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 by the above discussed methods. All these processes, which change the characteristics of the green tea leaves, are carried out by the manufacturers and not the cultivators or the pro
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pellant, 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 th
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ld by the advance ruling authority that the appellant warehouse had been used for the storage of the procured bulk tea after blending and packing by Unilever. The appellant has further contended that the warehouse had been used for storage of the bulk tea in 50 kg bags for most of the time and not for the blended and packed tea. However, as discussed in the above paragraphs, the bulk tea procured by Unilever before blending and packing itself does not fall within the definition of 'agricultural produce' as what is procured is black tea which Is processed out of green leaves. 29. In addition to the above discussions, we observe that in the said warehouses rented out by the appellant, the appellant's client Unilever have also been blending the tea of the various qualities and packing the same in the packets of specified quantity as per the order received from their overseas buyers of the tea product. The blending of tea of various qualities into different proportion depending
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e 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 Income Tax under Income Tax Act. Thus, vide this judgement, the Apex court has clearly put the manufacturing activity in relation to the tea which include the various processes like drying, heating, fermentation, sieving etc. as discussed above, out of the ambit of the agricultural activity an
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ricultural produce vide this judgment. On going through the above cited Apex court judgement, it is observed that the facts and circumstances covered under the said Apex court judgment is entirely different from the facts and circumstances of the case in question as the party/assessee involved in the cited case was agriculturist, who was also the owner the tea gardens and was involved in the processes being performed on the green tea leaves produced by him, while in the present case, it is the manufacturers other than the cultivator or producers of the tea, who is undertaking various manufacturing processes to convert green tea leaves to the tea fit for human consumption. It is only after the manufacturing of the black tea from the green tea leaves, that Unilever is procuring the same for storage in the warehouse for further processing the same by way of blending and packaging prior to exporting the same to the overseas market. Thus, the above cited judgement relied upon the appellant
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