The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the processes of converting green tea into black tea do not alter basic characteristics and set aside the Service Tax Demand.
M/s. Glenworth Estate Limited, the appellant challenged the Order-in-Appeal passed by the Commissioner (Appeals), Salem, whereby the demand, inter alia, of Service Tax has been upheld.
The appellant is manufacturing ‘Black Tea’ falling under Chapter Sub-Heading 09024060 of the First Schedule to the Central Excise Tariff Act (CETA), 1985. It appeared that the appellant had engaged foreign agents to help the appellant in promoting / marketing/sale of such manufactured Black Tea in foreign countries, for which they were paid a commission.
It was alleged to be liable to pay Service Tax and the appellant, not having remitted the Service Tax, the same came to be proposed to be demanded vide Show Cause Notice by the Assistant Commissioner, Coonoor Division.
The appellant replied to the Show Cause Notice denying any Service Tax liability and claiming exemption in terms of Notification No. 13/2003S.T. dated 20.06.2003, as amended by Notification No. 08/2004-S.T. dated 09.07.2004, whereby business auxiliary service provided by a commission agent in relation to sale or purchase of agricultural produce was exempted.
Further contended that Tea, per se, being an agricultural produce, stands covered in the definition of “agricultural produce” as defined under Notification No. 08/2004. The Commissioner (Appeals) dismissed the appeal.
The impugned Order-in-Appeal has upheld the denial of the benefit of the above Notifications 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.
A two-member bench comprising Mr P Dinesh,(Judicial) and Mr Vasa Seshagiri Rao, (Technical) observed that 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 of other than, perhaps, making it marketable as either Green Tea or Black Tea. The CESTAT set aside the demand raised against the appellant.
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