Tasty Bite Eatables Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. ST/48/12

(Arising out of Order-in-Appeal No. PIII/RSI/339/2011 dated 30.11.2011 passed by Commissioner of Central Excise, Pune, III)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Tasty Bite Eatables Ltd.

Appellant Vs.

Commissioner of Central Excise Pune III Respondent

Appearance:

Shri J.H. Motwani, Advocate with Ms. Nehal Parekh, Advocate for appellant Shri A.B. Kulgod, Asst. Commr (AR) for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 30.09.2015 Date of Decision: 30.09.2015

ORDER NO Per: M.V. Ravindran

This appeal is directed against Order-in-Appeal No. PIII/RSI/339/2011 dated 30.11.2011.

2. Heard both sides and perused the records.

3. On consideration of the submissions made by both sides and perusal of records, we find that the issue arises for consideration in this appeal is whether appellant is liable to discharge service tax liability under the category of Business Auxiliary Services or otherwise.

4. We find that appellant is engaged in the activity of preparation of vegetables, fruits by processing the same packing in consumer packs for their clients. Revenue is of the view that this activity amounts to rendering of services under business auxiliary services while it is the case of the appellant that by undertaking processing of vegetables they have undertaken an activity of manufacture and hence not covered under service tax liability. The appellant has also relied upon the boards circular dated 26.5.2011.

5. We find that the appellant is preparing the vegetables by sorting, cleaning, boiling and freezing the same and subsequently packing it in unit packings to be sold by their customers under the brand name. The first appellate authority has held that the activity undertaken by the appellant is not in respect of agriculture are in relation to agriculture. Learned departmental representative would also argue on the same grounds. We find that the said argument does not hold water inasmuch, the board vide circular number 143/12/2011  ST dated 26/5/2011 has clarified the taxability of an activity of processing on behalf of client in relation to agriculture. The said circular is reproduced.

Subject: - Processing for or on behalf of client, in relation to agriculture  causing sale or purchase of agricultural produce -- reg.

Representations have been received that client processing of tobacco involving threshing and drying of tobacco leaves and client processing of raw cashew involving roasting/drying, shelling and peeling of raw cashew to recover kernel, are considered by the field formations as not falling within the meaning of the expression in relation to agriculture appearing in notification 14/2004-ST (as amended) dated 10th September, 2004, resulting in avoidable disputes and litigation.

2. These representations have been examined. In the cases represented, the agricultural produce namely tobacco or raw cashew, which are subject to client processing retains their essential characteristics at the output stage and therefore the processes undertaken on or behalf of client should be considered as covered by the expression in relation to agriculture. Client processing which falls under business auxiliary service undertaken on the primary agricultural produce namely tobacco or raw cashew, does not result in any change in their essential character of tobacco or cashew. In the light of the above principle (i) process of threshing and drying of tobacco leaves and thereafter packing the same and (ii) processing of raw cashew and recovering kernel, undertaken for, or on behalf of, the clients by processing units are covered by the expression ... processing of goods for, or on behalf of, the client.....and provided in relation to agriculture,... appearing in the said notification.

3. Also where the commission agents stationed abroad provide business auxiliary service to promote the export of rice, said business auxiliary service is covered by notification 13/2003-ST(as amended) because, the word rice is mentioned under the explanation to the term agricultural produce, in the inclusive portion along with other items like cereals, pulses, etc.

4. Trade Notice/Public Notice may be issued to the field formations accordingly.

5. Please acknowledge the receipt of this circular. 5.1 The above said clarification would squarely apply in the facts of this case as it is undisputed that appellant is undertaking the processing of vegetables on behalf of their client. It is settled law that revenue officers cannot argue against the boards circular. In the case in hand, the first appellate authority as well as the authorised representative of the revenue are arguing against the boards clarification as reproduced hereinabove. We do not have any hesitation to hold that such arguments put forth by the departmental representative needs to be dismissed. In our view the activity of processing the vegetables by the appellant will be in relation to agriculture hence not liable to service tax under business auxiliary services.

5.2 In view of the foregoing, in the facts and circumstances of this case, it has to be held that the impugned order is unsustainable and liable to be set aside and we do so.

6. Impugned order is set aside and appeal is allowed with consequential relief if any. (Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

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