2023 (5) TMI 1193 - AT - Service Tax

Levy of Service Tax - business auxiliary service - Tea, an agricultural produce or not - eligibility for exemption in terms of N/N. 13/2003-S.T. dated 20.06.2003, as amended by N/N. 08/2004-S.T. dated 09.07.2004 - denial of benefit on the ground that Black Tea is manufactured by the appellant after multiple processes wherein green tea leaf is converted into Black Tea, which would fall under Chapter 9 of the CETA, 1985 and that the same would no longer remain an agricultural produce of green leaf tea. HELD THAT - The meaning of 'agricultural produce', as extracted in the above paragraphs per Notification No. 08/2004 ibid. undoubtedly covers, inter alia, Tea, but, as specified therein, does not include manufactured products such as sugar, edible oils, processed food and processed tobacco. Therefore, the activity of manufacture is limited to products such as sugar, edible oils, processed food and processed tobacco and nothing beyond that - the production of Black Tea involves processes for which there is no bar in the said Notification. Further, the said Notification does not distinguish between Tea or Green Tea or Black Tea, and it is also well understood that there is no alteration to the essential characteristic other than, perhaps, making it marketable as either Green Tea or Black Tea. Even the processes involved in converting Green Tea into Black Tea does not alter the basic characteristic of the Tea as such and the same could not be considered as a non-agricultural product under any stretch of imagination. The demand raised against the appellant is not sustainable, for which reason the impugned order is set aside - Appeal allowed.

Summary

Issues:
The appeal challenges the demand of Service Tax on business auxiliary services provided by the appellant in relation to the sale of Black Tea in foreign countries.

Summary:
The appellant, a manufacturer of Black Tea, engaged foreign agents for promoting and selling the tea, for which they were paid commission. The issue revolved around whether this activity falls under "business auxiliary service" and is liable for Service Tax. The appellant claimed exemption under Notification No. 13/2003-S.T. dated 20.06.2003, as amended by Notification No. 08/2004-S.T. dated 09.07.2004, which exempted business auxiliary services related to the sale or purchase of agricultural produce.

The Adjudicating Authority upheld the demand for Service Tax, leading to the appeal. The First Appellate Authority also dismissed the appeal, stating that Black Tea, being a commercially different product from green tea leaf, does not qualify as an agricultural produce under the exemption notification.

However, the Tribunal disagreed with this interpretation. It noted that the definition of "agricultural produce" in the notification includes tea, and the processes involved in manufacturing Black Tea do not fundamentally alter its essential characteristics. The Tribunal emphasized that the notification does not exclude products like Black Tea from the definition of agricultural produce.

Therefore, the Tribunal held that the demand for Service Tax was not sustainable, setting aside the impugned order and allowing the appeal with consequential benefits as per law.