Case Law Details

Case Name : Guwahati Tea Warehousing Association Vs. Union of India (Guwahati High Court)
Appeal Number : Case No. : WP(C) 3215/2018
Date of Judgement/Order : 23/05/2018
Related Assessment Year :
Courts : Guwahati High Court (37)

Guwahati Tea Warehousing Association Vs. Union of India (Guwahati High Court)

Guwahati Tea Warehousing Association has filed a Petition in Gauhati High Court against imposition of Goods and Services Tax (GST) on loading, packing, warehousing, etc of processed tea. Case was admitted for hearing on 23.05.2018. 

The petitioner’s Association’s challenge herein is the clarification dated 15.11.2017 issued by the Government of India in the Ministry of Finance, Department of Revenue by which it clarified that the processed tea (i.e., black tea, white tea etc) falls outside the definition of agricultural produce given in Notification No. 11/ 2017 and 12/2017 and corresponding notifications issued under IGST and UGST Acts and therefore the exemption from GST is not available to their loading packing warehousing etc. and that any clarification issued in the past to the contrary in the context of Service Tax or VAT/ Sales Tax is no more relevant. The petitioner contended that the Hon’ble Supreme Court in other cases have held that tea is a ‘agricultural produce’ for which such taxe is not applicable.

It was held by Hon’ble High Court that Payment toward GST made by the petitioners’ Association in terms of the impugned clarification F.No.354/173/2017-TRU of Government of India, Ministry of Finance, Department of Revenue dated 15.11.2017 shall be subject to the outcome of this writ petition.

We have attached below the copy of High Court Order dated 23.05.2018

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FULL TEXT OF THE PETITION FILED IS AS FOLLOWS

MOST RESPECTFULLY SHEWETH :-

1. That the Petitioner is a Warehousing Association having it’s registered Office at Surana Bhawan, Tokobari Road, Guwahati-781001, Assam. The members of the petitioner association are engaged in the business of providing services of warehousing and storage of tea to the different tea estates and others in the State of Assam. The petitioner in the present case is represented by its General Secretary, Sri Manoj Kumar Surana, residing at Surana Bhawan, Tokobari Road, Guwahati-781001, Assam. Most of the Members of the petitioner are citizens of India and are as such entitled to all rights and privileges guaranteed under the Constitution of India as amended from time to time

2. That the Respondent No. 1 is the Union of India represented by the Secretary to the Government of India Ministry of Finance. The Respondent No 2. is the State of Assam, represented by the Commissioner & Secretary to the Government of Assam, Department of Agriculture, the Respondent No. 3 is the Commissioner GST, and the respondent No. 4 is Goods & Service Tax Council.

3. That the Petitioner Association was established in the year to provide storage and warehousing services in the State of Assam thereby preserving the goods from time they are produced until they are needed for consumption protecting quality and quantity of the stored tea. The petitioner plays a substantial role in ensuring that the entire supply chain system functions efficiently in the State of Assam. It is pertinent to mention herein that the very intent of the Legislature in respect to exemption of “storage and warehousing of agriculture produce” is to reduce the tax burden on the farming sector.

4. That the petitioner most respectfully begs to state that prior to 1st July, 2012, storage and warehousing of agricultural produce were exempted from the payment of service tax. For the purpose of Clause (87) of Section 65 of the said Act, the expression “agricultural produce” means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but make it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copras, sugar cane, jiggery, raw vegetable, fibres such as cotton flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food, processed tobacco. It is pertinent to mention herein that since tea was specifically included in the definition of agricultural produce, there was no liability to pay service tax on warehousing of processed tea. Copy of the Order No. 1/2002-ST dated 01.08.2002 is annexed herewith and marked as ANNEXURE-I.

5. That the petitioner most respectfully begs to state that from 1st July, 2012, negative list concept was introduced under Service Tax laws. During the period 1st July, 2012 to 30th June, 2017, services other than those specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another were liable to service tax. The negative list of services, in respect of which service tax was not payable, was contained in Section 66D of Chapter V of the Finance Act, 1994. Services by way of “loading, unloading, packing, storage or warehousing of agricultural produce have been specifically included in the negative list under Clause (d) of section 66D. The term “agricultural Produce” was defined under Section 65B(5) of the Finance Act, 1994 (inserted vide Finance Act, 2012) as “agricultural produce” means any produce of agriculture on which either processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. Therefore even after insertion of definition under section 65B(5), “processed tea was treated as “agricultural produce” and no service tax was levied on warehousing of processed tea. Therefore prior to the coming into effect of the Goods and Service Tax Act, 2017, the Storage and Warehousing of Tea was considered as Storage and Warehousing of Agricultural Produce and was always exempted from payment of tax to reduce burden on the farming sector.

6. That the petitioner most respectfully begs to state that prior to coming into effect of the Goods and Service Tax, 2017 the Ministry of Finance, (Department of Revenue) Government of India, vide Notification No. 11/ 2017 dated 28.06.2017 in Sl. No. 24 (under Heading No. 9986) Clause (e) and 12/2017 dated 28.06.2017 in Sl. No. 54 (Heading 9986) Clause (e) have exempted Services relating to cultivation of plants and rearing of all life forms of animals, fibre, fuel, raw material or other similar products or agricultural produce by way of— (e) loading, unloading, packing, storage or warehousing of agricultural produce; under Section 11(1) of the Central Goods and Service Tax Act, 2017 thereby considering processed tea as agricultural produce falling within the ambit of the definition of the term ‘agricultural produce’. The term “agricultural produce” has also been defined in the said Notification a mentioned below:

agricultural produce means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.” 

And thereby by virtue of the said Notification Warehousing and Storage of Tea was exempted from the purview of GST.

Copies of the Notification No. 11/2017 and Notification No. 12 of 2017 dated 28.06.2017 are annexed herewith and marked as ANNEXURES- II & III respectively.

7. That the petitioner most respectfully begs to state that with the advent of GST and pursuant to the Notification No. 11/2017 and 12 of 2017 the petitioner has vide an application dated 31.08.2017 to the Respondent No.2 has sought official clarification with respect to the Item “Tea” (processed tea) as to whether the said item falls under the ambit of agricultural produce for smooth and hassle free running of the business. Copy of the Application dated 31.08.2017 is annexed herewith and marked as ANNEXURE-IV.

8. That the petitioner most respectfully begs to state that however most surprisingly the Respondent Authorities contrary to the express provisions of law and contrary to the Notifications issued thereunder, have vide Circular/Clarification No. 16/16/2017-GST dated 15.11.2017 issued clarifications with respect to applicability of GST with respect to certain services. Under the said Circular/Clarification it has been stated that the item “Tea” used for making beverages, such as black tea, green tea, white tea is a processed product made in tea factories after carrying out several processes, such as drying, rolling, shaping, refining, oxidation, packing etc. on green tea leaf and is the processed output. As per clause 4 of the Sl. No.1 of the said Circular/Clarification, green tea leaves and not tea is considered as agricultural produce eligible for exemption available for loading, unloading, packing, storage or warehousing of agricultural produce. It is further clarified that processed products such as tea (black tea, white tea etc.) falls outside the definition of agricultural produce as given in the Notification No. 11/2017 and 12 of 2017 and therefore exemption from GST is not available to their loading, packing, warehousing etc. and also stated that any clarification issued in the past to the contrary in the context of service tax or VAT/Sales Tax is no more relevant.

Copy of the impugned Circular/Clarification dated 15.11.2017 is annexed herewith and marked as ANNEXURE-V.

9. That the petitioner most respectfully begs to submit that the impugned Circular/Clarification dated 15.11.2017 imposing GST on loading, unloading, packing, warehousing, etc. on processed tea being violative of the express provisions of law in this regard is liable to set aside and/or quashed by this Hon’ble Court.

10. That the petitioner most respectfully begs to submit that as regards the definition of the term “Agricultural Produce”, the same have been defined under Section 2(d) of the Central Goods and Service Tax Act, 2017 as under :-

“Agricultural Produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.”

From the definition given above it is absolutely clear that an item will constitute as an agricultural produce, if the item is-

a) a produce out of cultivation plants;

b) on which either or no further processing is done, or such processing is done and is usually done by the cultivator or producer;

c) processing has not altered its essential characteristics and made it marketable for primary market.

From the analysis of the definition of the term “agricultural produce” made above it is apparent that the item green tea leaves is a direct and raw outcome of the agricultural activities and the same are directly plucked from tea plants. Green tea leaves which are plucked from the tea plants without grading and processing has no market value, as unless it is graded and processed, the green tea leaves get rotten. And therefore in order to make the green tea leaves marketable the same has to be processed thereby retaining its essential characteristics. Thereby the Tea stored by the petitioner is essentially and agricultural produce and is exempted from payment of tax under the provisions of Notification 12 of 2017 and 11/2017. The impugned Circular/Clarification dated 15.11.2017 is thereby contrary to the express provisions of law is liable to be set aside and/or quashed.

11. That the petitioner most respectfully begs to submit that unprocessed tea leaves are not used raw and are usually processed immediately after being harvested, as they tend to wilt quickly. It is pertinent to mention herein that even after processing it does not cease to be an agricultural produce as it retains it essential characteristics making it fit for human consumption.

12. That the petitioner most respectfully begs to submit that as tea harvesting season have already been started thereby not granting exemption under GST in respect to loading, packing, warehousing etc. as per the Notification No. 11/2017 and 12 of 2017 would cause irreparable loss and damage to the petitioner.

13. That the petitioner most respectfully begs to submit that the impugned Circular/Clarification dated 15.11.2017 in imposing tax in respect to loading, packing and warehousing of tea defeats the very purpose of granting exemption. The tax burden will inevitably be passed on to the farmers in the form of higher price for storing goods in the absence of any viable alternative for warehousing of their goods. And as a result it will directly feed into the cost of agricultural produce. Therefore the impugned Circular/Clarification dated 15.11.2017 is liable to be set aside and/or quashed by this Hon’ble Court.

14. That the petitioner most respectfully begs to submit that in various judicial pronouncements by the various High Courts and the Apex Court it has been rightly held that the tea leaf remained what it was in the initial stage. It was a tea leaf when selected and plucked and it continued to be a tea leaf even after the process of withering, crushing and roasting and sold in the market. The fact is that the essential characteristics of green tea leaves do not get altered and is by the process made fit for human consumption. At no stage, did processing change its essential substance. It remained a tea leaf throughout and not changed into a new item. In its basic nature, it continued to be agricultural produce and therefore the impugned Clarification/ Circular being contrary to the provisions of law as well as the provisions Goods and Service Tax Act, 2017 is liable to be interfered with.

15. That the petitioner most respectfully begs to submit that the Circular/Clarification No. 16/16/2017-GST dated 15.11.2017 is contradictory in itself. The said Circular/Clarification in Clause 2 of SL. No.1 accepts the definition of the term ‘agricultural produce’ as is given in the earlier Notification No. 11/2017 and 12 of 2017 dated 28.06.2017 and on the other hand it denies tea being a processed product to be a agricultural produce and thereby making it not eligible for exemption in respect of loading, unloading, packing, storage or warehousing of the same. It is pertinent to mention herein that the green tea leaves are processed retaining its basic substance and not altering into a new item unlike other agricultural produce such as sugarcane etc. Therefore the impugned Circular/Clarification dated 15.11.2017 is liable to be set aside and/or quashed by this Hon’ble Court.

16. That the petitioner most respectfully begs to state that the Respondent authorities in issuing the Clarification/ Circular dated 15.11.2017 in denying the exemption from GST in respect of loading, unloading, packing, warehousing etc. which have always been granted to the members of the petitioner association treating the storage, loading, unloading, packing, warehousing etc. of tea to be of agricultural produce is therefore illegal, without jurisdiction and has seriously affected the rights of the Petitioner under Article 14, 19(1)(g) and 21 of the Constitution of India. Further by way of the impugned Clarification/ Circular dated 15.11.2017 by trying to levy tax on loading, unloading, packing, warehousing etc. of tea/ agricultural produce by the petitioner, the respondent authorities has merely acted as tax gatherers and as such the impugned clarification/ circular dated 15.11.2017 is bad in law and liable to be set aside and/or quashed.

17. That the Petitioner submit that as a result of the impugned clarification / circular dated 15.11.2017, the rights of the Petitioner to carry out trade is being affected. The Respondent authorities are violating the fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India.

18. That the petitioner begs to submit that it is a settled proposition of law that a Clarification cannot run contrary to the provisions of Act and the law settled by the Supreme Court as well as other courts in that behalf. In the instant case it is absolutely clear from the provisions of law as well as the Central Goods and Service Tax Act, 2017 as well as various Notifications issued in that behalf that the Green tea Leaves being agricultural produce is exempted from payment of tax/ GST. Since the impugned clarification dated 15.11.2017 runs contrary to the same, the same is liable to be interfered with by this Hon’ble Court.

19. That the petitioner most respectfully begs to submit that even if the clear provisions of law misinterpreted by the respondent authorities is assumed to be correct (However not accepting) than also in common parlance and in Commercial parlance, the item “Green Tea leaves” are treated as agricultural produce. Further, the same also satisfied the scientific test, The fact that the essential characteristics of the green tea leaves do not get altered due to processing of the same has been admitted by the Government of India in Service Tax (Removal of Difficulty) Order, 2002. The Service Tax (Removal of Difficulty) Order, 2002 was issued vide Order No. 1/2002-ST dated 01.08.2002, which clarified the term “agricultural produce” as follows:-

“The expression “agricultural produce” means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton flax, jute, etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and Tea but does not include manufactured products such as sugar, edible oils, processed food, processed tobacco.”

The said at its first part put a condition that to remain an item as agricultural product, the essential characteristics of the basic item should not be altered in course of processing. In the second part of the definition it illustrates few items including “Tea” as agricultural produces. Thus the aforesaid order clearly states that “Tea” is “agricultural produce” and that the processing does not alter the essential characteristics of green tea leaves. Thus on the basis of the facts and on the basis of the observation of the Hon’ble Apex Court and also on the basis of the Order of the Government of India, the item “Tea” apparently satisfies all the tests of being an agricultural produce. In light of the definition provided in the aforesaid notification it may kindly be concluded that the item “Tea” falls under the ambit of the “agricultural produce”. And therefore any interpretation contrary to the same is liable to be interfered with by this Hon’ble Court.

20. For that the petitioner craves leave to take up further and/or additional grounds, if any, at the time of hearing of the instant petition.

21. That in the circumstances, the Petitioners submit that this Hon’ble Court may be pleased to pass all requisite orders and directions, with immediate effect otherwise the petitioner shall suffer irreparable loss and injury and shall be subjected to grave hardships and inconvenience which cannot be compensated in terms of money.

22. That the Petitioner further submits that in view of the aforesaid facts and circumstances of the case and to do complete justice to the Petitioners, this Hon’ble Court may be pleased to grant the reliefs as prayed for.

23. That the petitioner most respectfully begs to state that from what has been stated herein above, it would go to show that the petitioner has a strong prima facie case and the balance of convenience is in favour of the petitioner. The Petitioner would be subjected to be irreparable loss and injury if the Writ Petition of the petitioner be not admitted and the impugned clarification dated 15.11.2017 issued by the Respondent authorities is not set aside by this Hon’ble Court.

24. That the petitioners craves leave before this Hon’ble Court to produce a copy all or any documents necessary for a just adjudication of the case, if necessary, at the stage of hearing.

25. That the Petitioners submit that they have not filed any other proceedings for relief similar to that sought in the present Writ Petition before any forum.

26. That the petitioner has no other alternate efficacious remedy save and except the proceedings initiated under Article 226 of the Constitution of India before this Hon’ble Court.

27. That the Petitioner had demanded justice and the same has been denied.

28. That this petition has been filed bonafide and in the interest of justice.

In the premises aforesaid, it is most respectfully prayed that Your Lordship’s may graciously be pleased to call for records, admit the petitioner and issue Rule calling upon the Respondents to show cause as to why the impugned clarification dated 15.11.2017 passed by the Respondent authority be not set aside and/or quashed and the loading, unloading, packing, warehousing etc. of Tea be declared to be exempted from GST as earlier being agricultural produce and/or pass why a Writ in the nature of Certiorari and/or other Writ, Order or Direction should not be issued setting aside the impugned Circular/ Clarification dated 15.11.2017 and/ or pass such further and/ or other Order(s) as Your Lordship’s may deem fit and proper.

-AND-

Pending disposal of the instant Writ Petition, this Hon’ble Court may be pleased to stay the operation of the impugned clarification dated 15.11.2017 by the Respondent authority, and also refrain the respondents authorities from taking coercive measures against the petitioner during the pendency of this Writ Petition and/or pass such further or other Order(s) as Your Lordship’s may deem fit and proper.

And for this act of kindness your Petitioner as is always in duty bound shall ever pray.

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