Black Tea Falls Within Agricultural Produce Definition: CESTAT Holds Service Tax on Export Brokerage Unsustainable [Read Order]
The Bench observed that an Earlier CESTAT Ruling in Assessee’s Own Case Holding Black Tea to be an Agricultural Produce Remains Binding and has Not been Overturned
The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that black tea qualifies as an agricultural produce and accordingly, commission paid to foreign agents for facilitating export cannot be subjected to service tax under the Reverse Charge Mechanism. The Tribunal set aside orders confirming tax, interest and penalties on appellant.
The dispute arose when the department demanded service tax on commission paid to overseas agents for promoting the export of black tea. The lower authorities held the services taxable under Section 65(44) read with Notification No. 30/2012, rejecting the assessee’s claim that the underlying product black tea was an agricultural produce covered under the negative list.
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Before the Tribunal, the appellant, Glenworth Estate Ltd, argued that black tea retains its essential agricultural character even after withering, fermentation or heating. They relied on CBEC Circular No. 143/12/2011-ST and the Tribunal’s own order in Glenworth Estate Ltd. (Final Order No. 40350/2023), which had previously held that processing of green tea into black tea does not alter its essential nature. It was further submitted that export commission paid for promotion of overseas sales is not taxable in India, and penalties could not survive in the absence of suppression.
Revenue reiterated the findings of the orders-in-appeal.
The Bench, comprising Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) observed that the earlier CESTAT ruling in the assessee’s own case holding black tea to be an agricultural produce remains binding and has not been overturned. It further noted that as per Section 65B(5) and Section 66D(vii) of the Finance Act, 1994, services provided by a commission agent for sale or purchase of agricultural produce fall under the negative list and are not taxable.
Once black tea is recognized as an agricultural produce, the Tribunal held, the question of service tax liability under reverse charge does not arise. Consequently, the other issues relating to interest, penalties and place of provision of services became redundant.
Setting aside the impugned orders, CESTAT allowed the appeals and granted consequential relief.
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