Activities involving the blending and packing of tea do not alter its essential character as an agricultural produce, making such services exempt from service tax under Notification No. 14/2004-ST, even if they are classified as Business Auxiliary Services.

PER: D.M. MISRA

This is an appeal filed against Order-in-Appeal No.287/2013-ST dated 19.11.2023 passed by the Commissioner of Central Excise, Customs and Service Tax (Appeals), Cochin.

2. Briefly stated the facts of the case are that the appellant during the relevant period alleged to have provided services relating to collection of manufactured tea from auction centre, storing, blending and repacking of tea for their clients but not discharging service tax for such activities. Alleging that the services rendered by the appellant fall under the taxable category of Clause (v) under Section 65(105zzb) of Business Auxiliary Service, show-cause notice was issued to them on 10.07.2007 for recovery of the service tax of Rs.5,53,355/- with interest and penalty for the period from November 2005 to December 2006. On adjudication, the demand was confirmed with interest and penalty. Aggrieved by the said order, they filed an appeal before the learned Commissioner (A), who in turn rejected their appeal. Hence, the present appeal.

3. At the outset, the learned advocate for the appellant has submitted that they were only into packing of tea and not rendering any services which would fall under the category of production or processing of goods as mentioned under Business Auxiliary Service. They were not subjecting the tea procured from their clients for processing, leave alone production of goods. The activity undertaken by the appellant is only packing of ready to use tea and not in production or processing of tea before completion of manufacturing activity, therefore, the allegation of the department that it falls under the Business Auxiliary Service is wholly incorrect. Further, she has submitted that the product dealt with the appellant i.e., tea is a “agricultural produce”, hence, exempted vide Notification No. 14/2004-ST dated 10.9.2004 from payment of service tax. The said Notification was amended subsequently also allows exemption to “agricultural and other categories”. In support she has referred to the judgment of the Tribunal in the case of CCE vs. Parkson Estates & Industries: 2011 (23) STR 77 (Tri.-Bang.) and also the judgment of the Hon’ble Bombay High Court in the case of Nutan Warehousing Company Pvt. Ltd. vs. CCT, Pune : 2024 (80) GSTL 227 (Bom.)

4. The learned Authorised Representative (AR) for the Revenue reiterated the findings of the learned Commissioner (A).

5. Heard both sides and perused the records. The short question involved in the present appeal for consideration is whether the activity undertaken by the appellant fall under the taxable category of Business Auxiliary Service and exempted as an agricultural produce under Notification No. 14/2004-ST dated 10.09.2004. In the show-cause notice, it is alleged that the activities undertaken by the appellant contains collection of tea, unloading, stacking, spreading, blending, filling, weighing, loading in containers. The appellant collect tea auctioned by their client from the storage godown, then loading, transporting and unloading the same at their own godown, packing the same in 100 grams, 500 grams and 1 kg. by engaging their own workers using the packing materials supplied by their clients, repacking of containers in large boxes, stacking, dispatching of the packed tea or stacking and loading the same in vehicles brought by the clients. The appellant in their submission claim that the activity undertaken by them cannot fall under the scope of Clause (v) of the definition of Business Auxiliary Service under Section 65(105zzb) i