CUSTOMS, EXCI SE AND SERVI CE TAX APPELLATE TRI BUNAL HYDERABAD Division Bench – Court No. – I Service Tax Appeal No. 30423 of 2018 (Arising out of Order-in- Appeal No.GUN-EXCUS-000-APP-0186-17-18 dt.31.01.2018 passed by Commissioner of Central Tax & Customs (Appeals), Guntur)

Commissioner of Central Tax Guntur - GST ......Appellant PB No.331, CR Building, Kannavarithota, Guntur, Andhra Pradesh – 522 004 VERSUS M/ s Premier Tobacco Packers Karedu, Near Singarayakonda, NH-5, ……Respondent PB No.1, Prakasam Dist., AP – 523 101 Appearance:

Shri K. Sreenivasa Reddy, AR for the Appellant.

Shri C.S. Srinivas, Consultant for the Respondent.

Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL)

HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL)

FI NAL ORDER No. A/ 30159/ 2026 Date of Hearing: 25.11.2025 Date of Decision: 13.03.2026 [Order per: ANGAD PRASAD]

The Department is in appeal against OIA dt.31.01.2018, whereby, the Commissioner (Appeals) has set aside the order of the adjudicating authority confirming the demand of service tax of Rs.1,66,98,271/- and penalties imposed on M/s Premier Tobacco Packers (hereinafter referred to as the Respondent) (impugned order).

2. The brief facts of the case are that the respondents are in the business of trading in tobacco and are also engaged in the activity of threshing and re-drying of tobacco leaves on job work basis. The department noticed that the respondents failed to discharge service tax liability on the job work charges received from their customers, which would fall under the category of ‘Business Auxiliary Services’ (BAS) and issued SCN proposing demand towards BAS along with interest and imposition of penalty. On adjudication, the adjudicating authority, vide OIO dt.21.12.2016, confirmed the demand along with interest and imposed penalties. Aggrieved by the same, the Respondents filed an appeal before the Commissioner (Appeals), who set aside the order of the adjudicating authority.

3. Learned AR for the department has submitted that the main issue involved in the present case is the liability of service tax on BAS provided by the respondents in connection with the process undertaken in relation to cured/seasoned tobacco. He has further submitted that tobacco is grown by the farmers who are termed as Growers and primarily seasoned which is called 'curing' in Barns located at their agricultural fields after cutting and threshing. The seasoned/cured tobacco is brought to the auction platforms designated by the Tobacco Board, in the form of Bales. There the Buyers/Exporters purchase the Tobacco on the auction platforms with the mediation of the Tobacco Board. For this the Tobacco Board also charges auction charges from both the growers and Buyers, along with other charges under Tobacco Board Act. These buyers/exporters, whoever purchased the ‘cured tobacco’ bring it to their respective godowns. According to the demand and quality lying with them, the buyers/ exporters get their product processed by the respondent or similar industries. These companies/ firms come in to picture only after tobacco auctions are planned and conducted by the Tobacco Board. Thereby, it is clear that the respondent company has no nexus with growing, harvesting, seasoning of tobacco at primary stage. The claim made by the respondent that their process is in relation to Agriculture is not tenable and the charges collected by them attract Service Tax under BAS.

4. He has further submitted that the processing done in the respondent’s factory is one of the processes carried out for cigarette manufacturing. The Board's Circular No.143/12/2011-ST, dated 26.05.2011 is not applicable to the instant case as the said Circular was issued in the context of processing of tobacco involving threshing and drying of tobacco leaves fall within the meaning of expression in relation to agriculture appearing in Notification No. 14/2004-ST as amended. It clarifies that, "Client processing which falls under Business Auxiliary Service undertaken on