In Re: M/s. Nutan Warehousing Company Pvt. Ltd.
GST
2018 (12) TMI 651 – APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – 2019 (20) G. S. T. L. 146 (App. A. A. R. – GST)
APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – AAAR
Dated:- 10-12-2018
MAH/AAAR/SS-RJ/13/2018-19
GST
SMT. SUNGITA 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 “t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ecticides 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 and services of all kinds in connection therewith.
f) To provide godowns and warehousing facilities for goods 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 auc
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
d in the bulk packs.
The processing of the tea makes it marketable by minimal process and they are made fit for human consumption. All the above processes are necessary for the purpose of saving the tea leaves from perishing. In case the above process is not carried 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.
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 Notif
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
tial characteristics of agricultural produce but make it only marketable for the primary market;
(d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing of agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce 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 pro
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
r 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 afte
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
s also not changing essential characteristic of tea. Thus, none of the processes carried out either separately or jointly is capable of changing the essential characteristics of the tea. Authorities had not provided any reasoning or explanation, whether these processes are changing the essential characteristics of tea or not? Hence, order needs to be set aside.
5. The authorities have 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 Indi
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
fe 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;
13. The definition of Agricultural produce as defined under clause 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 pr
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ous 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 minimal process and they are made fit for human consumption. All the above processes are necessary for the purpose of saving the tea leaves from perishing. In case the above process is not carried 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 o
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
tended to bring out its potential qualities of flavour and colour. The potential inherited in the tea leaf from the outset when still a leaf on the tea bush. The potential surfaced in the tea leaf when the mechanical processes of withering, crushing and roasting, fermenting by covering with wet sheets and roasting again were applied. The tea leaf was made fit for human consumption by subjecting it to those 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”, give
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
irectly 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. Thus, buyer as defined in the order issued under the Tea Act, 1953, operates only in primary market.
15. Notifications 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
object. Therefore, the proper effect to the phrase that “which does not alter its essential characteristics but makes it marketable” must be given, while interpreting the definition 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 :-
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ated 20.06.2003, vide which definition of agriculture produce was inserted in the by adding explanation to Notification No. 13/2003-ST dated 20.06.2003. The said definition 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 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ii) 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 fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rom the scope. “Such as” is appearing in the exclusion clause makes it illustrative also. Thus, both the parts- inclusion as well as exclusion parts are neither expanding nor restricting the scope of the main definition.
Tea is appearing in this list along with the fruits, vegetables, cereals, which means that the tea is at par with the fruits, vegetables, cereals as an agricultural produce. Further, tea had been included in the inclusion part in spite 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 Hear
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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 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 c
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
he product to the overseas market. Vide the above said letter, Unilever have stated that their main and sole ingredients are black tea of various qualities, which are blended in the specific proportion as per the specific orders received from their respective customers before packing the same.
Thus, from the above discussion, it can amply be inferred 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 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
y done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;
Now, we will examine the product in question i.e. black tea in light of the above definition of the agricultural produce to arrive at the conclusion regarding its status as agricultural produce or otherwise. We list out the following two characteristic parameters which will determine any goods to be the agricultural produce or otherwise.
(i) 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
leaves does not alter the characteristics of the tea is devoid of any merit and thus is not sustainable.
26. The notification no. 12/2017-CT (Rate) exempts from GST certain services in relation to agricultural produce. If Tea stored in appellant's warehouse is agricultural produce, same should be covered under the said notification without any doubt. But the processes carried out by the client of the appellant (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. A
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
sing is done either by the cultivator or the producers which does not alter the essential characteristics but makes it marketable for primary market. Thus, the above notification levying GST on the processed tea product including black tea is clearly indicate that the disputed product is not an agricultural produce, rather the same is a manufactured produce.
28. It is contended by the appellant that the advance ruling authority had made the decision on wrong facts, as it was held 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'
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ainly 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 l
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Court grossly covers the facts and circumstances of the case in question, which is the storage of the manufactured tea by the appellant's client, there is no reason that the same cannot be applied in the present case.
31. In their submissions, the appellant have relied upon 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 pleading that the Apex court has settled the issue of tea as an agricultural 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 manufacture
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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 warehousing services when provided in relation to the agricultural produce.
In view of the above discussion, we pass the following order:
ORDER
We do not find any reason to interfere with the ruling given by Authority fo
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
