2021 (4) TMI 879 - AAR - GST

Exemption from service tax - Agricultural Service - service of cold storage of tamarind inner pulp without shell and seeds - N/N. 11/2017- C.T.(Rate) and 12/2017- C.T.(Rate) both dated 28/06/2017 - HELD THAT - In the case at hand, it is seen from the affidavits of the Traders and the oath of allegiance of the Cultivators that the process of removing the shell and seeds are undertaken as a Cottage Industry with the Human Resource as a main resource and wooden stick, wooden/iron hammer as equipment. The video CD furnished by the applicant shows the tamarind fruit being sun dried, beaten to remove the shell and take the pulp, then hammered to remove seeds. The photographs furnished shows tamarind with Pod; Tamarind with seed and fibre; tamarind without seed. The product for which the cold storage service is provided by the applicant is the deshelled, destringed 8v deseeded tamarind. In the present case, the product stored is processed by drying the same in the sun and then by beating with wooden sticks to remove the pod and hammered to deseed and destring for extraction of the endocarp/pulp of the Tamarind. This process is not done at farm level. It is clone as a Cottage Industry as furnished in the affidavits of the Traders and the Oath of allegiance of the Farmers to whom the storage services are extended by the applicant. Therefore, as clarified in the Circular above, the Tamarind which is processed by sun drying, deshelling, deseeding, the process which are not farm level processes, is not an Agricultural Produce as defined under explanation 2(d) of the Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. Once the product for which the storage services are extended is held to be not an agricultural produce , then the exemption at Sl.No. 54 of the Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 is not available to the product, irrespective of the class of receivers of the service. The Tamarind inner pulp without shell and seeds is not an Agricultural produce as defined under explanation 2(d) of the Notification No. 12/2017- C.T.(Rate) dated 28.06.2017 and therefore the service of cold storage of such tamarind are not exempted under Sl.No. 54(e) of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Whether the service of cold storage of tamarind inner pulp without shell and seeds is exempted under the definition of "Agricultural produce" as per Notification No. 11/2017-C.T.(Rate) and 12/2017-C.T.(Rate) both dated 28/06/2017.

Issue-wise Detailed Analysis:

Issue 1: Applicability of Exemption for Cold Storage Services of Tamarind Inner Pulp
The applicant, engaged in providing cold storage services for various agricultural products including tamarind, sought clarification on whether their services for storing tamarind inner pulp without shell and seeds qualify for exemption under the GST notifications mentioned.

Applicant's Argument:
The applicant argued that tamarind, cultivated by small farmers, undergoes minimal processing such as shelling and removal of seeds, which does not alter its essential characteristics. They claimed that such processed tamarind should still be considered "agricultural produce" and thus, the storage services should be exempt under Notification No. 11/2017 and 12/2017.

Supporting Documents Submitted:
- Copies of rulings from Andhra Pradesh and Rajasthan ARAs.
- Invoices, FSSAI license, and list of major service receivers.
- Photographs and a video CD showing the tamarind processing steps.
- Affidavits from traders and cultivators confirming the manual processing methods.

Jurisdictional Authorities' Comments:
- Central authority confirmed no pending proceedings against the applicant.
- State authority supported the applicant's view, stating that tamarind after shell and seed removal retains its essential characteristics and qualifies as agricultural produce.

Authority's Examination:
The authority reviewed the facts, documents, and arguments presented. They noted that the tamarind undergoes sun drying, deshelling, and deseeding, which are not typically farm-level processes but rather cottage industry activities. They referred to the definition of "agricultural produce" under Notification No. 12/2017, which specifies that any processing should not alter the essential characteristics and should be done at the farm level.

Relevant Notifications and Circulars:
- Notification No. 11/2017-C.T.(Rate) and 12/2017-C.T.(Rate): Exempt services related to loading, unloading, packing, storage, or warehousing of agricultural produce.
- Definition of Agricultural Produce: As per Notification No. 12/2017, agricultural produce means any product from plant cultivation or animal rearing, with minimal processing that does not alter its essential characteristics.
- Circular No. 16/16/2017-GST: Clarifies that processed products like tea, coffee, jaggery, and dehusked pulses do not qualify as agricultural produce.

Conclusion:
The authority concluded that the tamarind inner pulp, after undergoing processes like drying, deshelling, and deseeding, does not meet the criteria of "agricultural produce" as defined in the notifications. These processes are not farm-level activities and alter the essential characteristics of the tamarind.

Ruling:
The tamarind inner pulp without shell and seeds is not considered "agricultural produce" under Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. Consequently, the service of cold storage for such tamarind is not exempted under Sl.No. 54(e) of the same notification.

Final Decision:
The service of cold storage of tamarind inner pulp without shell and seeds is not exempt from GST under the specified notifications.