Rice Qualifies as “Agricultural Produce” under Notification, Service Tax on Commission Agents Not Payable: CESTAT [Read Order]
CESTAT rules rice is “agricultural produce” under Notification 13/2003-ST, exempting commission agent services from service tax.
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that rice qualifies as “agricultural produce” under Notification No. 13/2003-ST, making commission agent services for its sale or export exempt from service tax.
Bharat Industrial Enterprises Ltd., the appellant, is engaged in cultivation of paddy and the sale and export of rice obtained by de-husking. During 2007–08, the appellant paid service tax under reverse charge on commission paid to agents for promoting its domestic and export sales.
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Later, the company filed a refund claim of Rs. 13,63,497, arguing that the payment was made under a mistaken understanding since commission agent services in relation to agricultural produce were exempt under Notification No. 13/2003-ST.
The adjudicating authority allowed the refund, but on revision, the Commissioner of Central Excise, Panchkula, set aside the order, holding that rice was not covered by the definition of agricultural produce and directed recovery of the refund with 13 percent interest per annum. The appellant then approached the Tribunal.
The appellant’s counsel argued that rice clearly falls within the inclusive definition of “agricultural produce” in the notification. It was explained that the definition covers cereals, pulses, fruits, vegetables, and other items, and rice is specifically mentioned.
The counsel relied on CBIC Circular No. 143/12/2011-ST dated 26 May 2011, which clarified that rice is an agricultural produce. They relied on tribunal decisions in Kohinoor Foods Ltd. v. CCE, Bola Raghavendra Kamath & Sons v. CCE, and MNC Corporation v. CCE, all of which recognized rice as agricultural produce for this exemption.
The revenue’s representative argued in support of the Commissioner’s order and maintained that the refund had been wrongly sanctioned.
The two-member bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the inclusive clause in the definition of agricultural produce under the notification clearly covered cereals, and rice being a cereal, there was no ambiguity. The tribunal pointed out that the CBIC’s 2011 circular confirmed this position and left no room for doubt.
The tribunal explained that since rice is an agricultural produce, the commission agent services received by the appellant for promoting its sales were exempt from service tax under Notification No. 13/2003-ST. The appeal was allowed and the refund claim was restored with consequential relief.
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