IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, CHENNAI Service Tax Appeal No. 42414 of 2016 (Arising out of Order in Appeal No. 509/2016 (STA – I) dated 01.09.2016 passed by the Commissioner of Service Tax (Appeals – I), Chennai)

Updater Services Pvt. Ltd. Appellant No. 2/302A, UDS Salai Off. Old Mahabalipuram Road Thoraipakkam, Chennai – 600 097.

Vs.

Commissioner of GST & Central Excise Respondent Chennai South Commissionerate MHU Complex, Nandanam, Chennai – 600 035. APPEARANCE:

Shri G. Shivakumar, Advocate for the Appellant Shri N. Satyanarayanan, Authorised Representative for the Respondent CORAM Hon’ble Shri M. Ajit Kumar, Member (Technical)

Hon’ble Shri Ajayan T.V., Member (Judicial)

FINAL ORDER NO. 40542/2026 Date of Hearing: 15.12.2025 Date of Decision: 28.04.2026 Per M. Ajit Kumar, This appeal challenges Order-in-Appeal No. 509/2016 (STA–I)

dated 01.09.2016 passed by the Commissioner of Service Tax (Appeals–I), Chennai.

2. The appellant provides services classified as Manpower Supply Services and filed a refund claim of ₹42,13,554/- for service tax paid during April 2012 to September 2013. The claim was based on a contract with ITC Ltd. for processing unmanufactured tobacco, which the appellant contended was classifiable under Business Auxillary Service (BAS) upto 30.06.2012 and after 01.07.2012 (introduction of Negative List), was treated as BAS for reporting purposes. They claimed that the activity was exempt as per Notification No. 14/2004- ST as an agriculture-related service. A Show Cause Notice dated 29.01.2014 proposed rejection of the refund on the ground that the services rendered were classifiable as Manpower Supply Services (MSS) and was not eligible for the exemption. The Original Authority rejected the refund, holding that the notification was inapplicable during the relevant period. This decision was upheld by the Commissioner (Appeals), leading to the present appeal.

3. The learned Advocate Shri G. Shivakumar appeared for the appellant and Ld. Authorized Representative Shri N. Satyanarayanan appeared for the respondent.

3.1 Shri G. Shivakumar, Ld. Advocate, submitted on behalf of the appellant that:

A. The appellant has entered into a contract with ITC Ltd for processing unmanufactured tobacco including the related activities of packing and other incidental activities connected thereto.

B. Exemption was available to the service rendered by them under Notification 14/2004-ST, dated 10.09.2004 during the Pre-Negative List regime and was continued in Post-Negative List regime as per Sl. No. 30 of Mega Exemption Notification No. 25/2012-ST dated

20.06.2012.

C. A comparison of Section 66D(d)(v) of the Negative List with Mega Exemption Notification No. 25/2012, S. No. 30(a) shows substantial similarity and are favourable to the appellant.

D. The term “agricultural produce” is defined under Section 65B(5) of the Finance Act 1994, and covers the activity done by the appellant.

E. From the definition, it is evident that any produce of agriculture qualifies as agricultural produce, and therefore, tobacco is agricultural produce at that stage. Its only when any further processing is undertaken on tobacco, it ceases to qualify as agricultural produce within the meaning of Section 65B(5).

F. Had the legislative intent been to restrict the exemption only to processing undertaken to make agricultural goods marketable in the primary market, the statute could have expressly used the phrase “production process in relation to agricultural produce.

The Ld. Counsel prayed that the impugned order may be set aside and the refund granted.

3.2 Shri N. Satyanarayanan, Ld. Authorized Representative, walked us through the findings in the OIO and the impugned Order. He stated on behalf of revenue that:

A. The service provider’s employees carried out work within ITC’s factory premises. The consideration payable comprised the employees’ wages/salaries plus a 10% margin, as expressly provided in the contract.

B. The contract also specified the