Service Tax Liability on Threshing and Redrying of Tobacco Leaves not Under Business Auxiliary Services : CESTAT [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Hyderabad Bench, held that service tax liability on threshing and redrying of tobacco leaves does not arise under the category of Business Auxiliary Services (BAS).

The appellant, M/s Green Leaf Tobacco Threshers Ltd, are engaged in processing their own tobacco and also undertaking processing on job work basis for various other exporters. Their main activity is threshing and redrying of tobacco for which they are getting certain job work charges.

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The department has classified the said activity under the category of ‘Business Auxiliary Service’. It has also been noted that they have not discharged service tax under the category of ‘Goods Transport Agency Service’ (GTAS) under Section 65(105)(zzp) of Finance Act, 1994 and Rule 2(1)(d) of Service Tax Rules, 1994.

The appellants have contested that in order to fall under GTAS category, there has to be existence of consignment note as evidence as per Rule 4B of Service Tax Rules.

The tribunal observed that service tax liability on threshing and redrying of tobacco leaves does not arise under the category of BAS and reliance for the same has been placed on ML Agro Products Ltd v. CCCE & ST, Guntur. CESTAT also observed that in order to fall under GTAS in terms of Section 65(50b), service has to be provided by a GTA in relation to transport of goods.

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The two member bench of A.K Jyotishi (Technical Member) and Angad Prasad (Judicial Member) held that the demand cannot be sustained and allowed the appeal accordingly.

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