CESTAT Sets Aside Service Tax Demand as Tea Estate Lease Was Composite Agricultural Arrangement

NEPC Agro Foods Limited Vs Commissioner of GST And Central Excise (CESTAT Chennai)

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed two appeals filed by the appellant against orders confirming service tax demands under various taxable categories. The disputes arose from allegations that the appellant, engaged in tea plantation activities and owning estates at Valparai, had rendered taxable services under the categories of “Renting of Immovable Property Service”, “Manpower Recruitment or Supply Agency Service” and “Supply of Tangible Goods Service” pursuant to a lease agreement dated 30.10.2009 entered into for plantation operations.

The Department alleged that the appellant had leased not only agricultural land but also buildings, labour quarters, offices, machinery and other infrastructure, thereby attracting service tax liability. It was further alleged that the appellant had supplied manpower by continuing as the employer of plantation workers and had provided tangible goods such as tractors without transferring ownership. Demands covering the period from November 2009 to June 2017 were confirmed along with interest and penalties.

The Tribunal identified the principal issue as whether the lease arrangement constituted taxable services under separate service categories or whether it represented a composite agricultural transaction excluded from service tax.