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TMI Blog2019 (11) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... ax accordingly. As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the maximum extent for sustainability and to continue as leaf for further process. The tobacco leaf will be entitled as a commercial commodity only after drying (Curing) and normally put to trade in form of bundles. The same will be traded between the farmer and the trader and trader to trader/manufacturer and so on - The commodity tobacco leaves shall be interpreted in the light of the entry 109, Schedule- I of Notification No. 1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017 CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401. As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the transaction takes place in between the farmer and the trader on the auction platform. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be the applicable rate of tax if the applicant gets the tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others? - HELD THAT:- 28% (14% SGST +14% CGST) as per SI.No. 13 of Schedule IV Notification No.1/2017 Central Tax (Rate), dt.28.06.2017. - AAR No.10/AP/GST/ 2019 - - - Dated:- 26-3-2019 - D. RAMESH, AND S. NARASIMHA REDDY, MEMBER Represented by: Y. Srinivasa Reddy, Advocate ORDER (Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017) 1. The present application has been filed u/s 97 of the Central Goods Services Tax Act, 2017 and AP Goods Services Tax Act, 2017, (hereinafter referred to CGST Act and APGST Act respectively) by ML exports, Guntur (hereinafter referred to as applicant), registered under the Goods Services Tax. 2. The provisions of the CGST Act and APGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the tobacco leaves in their threshing premises and selling them to the clients in India and to export to various countries. (d) Engaging in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers. In the case of sale of tobacco leaves, the applicant may undertake the following minimal process on the tobacco before supplying as per the requirement of the dealer: Grading : The applicant may get an order from the buyers to grade the tobacco. In such cases, the applicant engages manual labour to segregate or classify the tobacco leaves into various grades depending on their size (width), length, colour or shade and other physical parameters of the leaf. These activities will be performed manually by unskilled labour and who will open the bale and separate the tobacco leaves to physically grade the tobacco into different categories as stated above. The tobacco leaves so graded, will again be packed into bales and wrapped in Jute bags for onward supply to other tobacco dealers or manufacturers. Butting : The tobacco leaf when plucked from the plant will have a rough edge on the side it attached to the plant. These rough edges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs? On Verification of basic information of the applicant, it is observed that the applicant falls under centre jurisdiction, i.e. The Assistant Commissioner of Central Tax, Guntur CGST Division, Guntur. Accordingly, the application has been forwarded to the jurisdictional officers with a copy marked to the State Tax authorities, Assistant Commissioner (State Tax), Chilakaluripet circle, Narasaraopet Division, Guntur to offer their remarks as per Section 98 (1) of CGST/APGST Act 2017. The jurisdictional officers concerned responded that there are no proceedings passed or pending relating to issue on which Advance Ruling is sought by the applicant. 6. APPLICANT'S INTERPRETATION OF LAW AND FACTS: Prior to the introduction of GST, the products of Tobacco leaves and unmanufactured tobacco were not leviable to tax under VAT and Central Excise Laws. The Hon'ble Customs, Central Excise and Service Tax appellate Tribunal, Hyderabad had set aside the service tax demand raised on the process of threshing and re-drying of tobacco leaves, saying that these are intermediate production processes carried out in relation to agriculture and are exempt from service Tax. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Burley Tobacco 2401 20 50 Tobacco for manufactures of Bidis, not stemmed 2401 20 60 Tobacco for manufactures of Chewing tobacco 2401 20 70 Tobacco for manufactures of cigar and cheroot 2401 20 80 Tobacco for manufactures of Hookah tobacco 2401 20 90 Other The tobacco leaves are supplied/ sourced in various stages but in all of which there was no change in form of the leaves except some minimal activities done on them to make them marketable. With the above entries in the tariff and also the clarification of CBIC, it is clear that tobacco leaves in all these stages of trading attracts GST rate of 5% only. However, the Authority for Advance Rulings, New Delhi in its Ruling dt.6.4.2018 in the case of Shalesh Kumar Singh = 2018 (5) TMI 529 - AUTHORITY FOR ADVANCE RULING - DELHI wherein, the facts are different to those in the case of the applicant, gave a ruling that even the dried tobacco is not tobacco leaves and hence nothing is left to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. As per explanatory notes to HSN 2401 'Unmanufactured Tobacco' is defined and the same is reproduced below. 2401 - Unmanufactured tobacco; tobacco refuse: 2401.10 - Tobacco, not stemmed/ stripped 2401.20 - Tobacco, partly or wholly stemmed/ stripped 2401.30 - Tobacco refuse This heading covers: Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/ stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, blended, stemmed/ stripped and cased (sauced or liquored) with a liquid of appropriate composition mainly in order to prevent mould and drying and also to preserve the flavor are also covered in this heading. The Central Tobacco Research Institute (CTRI), Guntur vide its letter dt.11.12.2012 addressed to the Indian Tobacco Association explained as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GST for goods were mentioned in Notification No.1/2017-CT ibid. It is not mentioned as to who shall be supplier and who shall be recipient. While Notification No.4/2017 - CGST (Rate) dt.28.06.2017 notifies the cases where the RCM (Reverse Charge Mechanism) shall be applied, it is silent as to the rate. Thus, as long as the product remains the same, it does not matter whether the same is procured from an agriculturist or an unregistered dealer, or registered dealer. The application of RCM is only to prescribe as to who shall pay the tax and it had no bearing on the applicability of the rate of GST. Thus, the applicant contends that the commodities dealt by him fall under the head Tobacco Leaves only and the applicable rate is 5% only. The applicant had quoted an instance where the levy of service Tax is set aside on the support services administered on tobacco leaves in a recent case of proposed levy of service tax on the services associated with the threshing, re-drying, transportation, warehousing etc., of this agricultural produce, that various orders passed by the field formations were set aside by Hon'ble Tribunal vide Final Order dt.22.02.2017 = 2017 (2) TMI 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 and submitted additional material along with physical samples of their commodity explaining different stages of processing. The applicant further submitted a costing sheet on 02-03-2019, wherein the value addition made at different levels is presented, of the activities being under taken by him, like butting, threshing, etc. 8. DISCUSSION AND FINDINGS: We have examined the issues raised in the application. The taxability, classification, applicable rate of tax, for the goods supplied as governed under the provisions of respective GST Acts are examined. The applicant is engaged in the following activities: (a) Purchase of the cured tobacco leaves brought by tobacco farmers at the Tobacco Auction Platforms in case of FCV variety or directly from farmers in case of Non-FCV variety of tobacco and selling them to other dealers or exporters or manufacturers of tobacco. (b) Purchase of the tobacco leaves from other dealers and sell them to the clients within India and overseas. (c) Threshing and re-drying of the tobacco leaves in their threshing premises and selling them to the clients in India and to export to various countries. (d) Engaging in threshing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge mechanism. Hence it is clear that the commodity 'tobacco leaves' is distinct from the other entries in this aspect. As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the transaction takes place in between the farmer and the trader on the auction platform. Further, as per the clarification issued by The Department TRU(Tax Research Unit)vide circular F.No.322/2/2017/Dec.2017, Tobacco Leaves means, leaves of tobacco as such or broken leaves or Tobacco Leaves stems . It clearly expresses that the leaves as long as they do not loose their basic character as 'leaves', shall be considered as tobacco leaves only. In the present case the applicant purchases the dried leaves on auction platform and trades the same to other dealers or exporters and further engaged in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers. In the light of the facts and legal position the ruling is given as under. RULING (Under section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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