Black Tea Is Agricultural Produce, Commission Paid To Foreign Agents Not Liable To Service Tax : CESTAT Chennai
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside service tax demand on commission paid to foreign agents for sale of black tea, finding that 'essential characteristic' of agricultural produce is retained. CESTAT Chennai clarified that black tea gets covered by the expression 'in relation to agriculture' appearing in Notification...
The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside service tax demand on commission paid to foreign agents for sale of black tea, finding that 'essential characteristic' of agricultural produce is retained.
CESTAT Chennai clarified that black tea gets covered by the expression 'in relation to agriculture' appearing in Notification 14/2004-S.T. (as amended) dated September 10, 2004 observes that “Once the black tea is found to be agricultural produce, services provided by a commission agent for sale or purchase of agricultural produce is covered by the negative list…”
Assessee paid commission to their foreign agents for sale of their black tea. The Department sought to levy service tax on this commission on the premise that commission attracts service tax as per section 65(44) and 65(19) of the Finance Act, 1994 read with Notification No. 30/2012 dated June 20, 2012, issued show causes demanding service tax of Rs. 63,115 and Rs.83,823 along with interest and for imposing penalties. On appeal, the demand came to be confirmed, hence the present appeal.
Assessee submitted that just because the tea was allowed to wither and ferment in the air for some time before being subjected to heating process, the product would not lose the character of agricultural produce.
The Bench comprising of Mr. M. Ajit Kumar (Technical Member) and Mr. Ajayan T.V. (Judicial Member) on whether 'black tea' is an 'agricultural produce' and the services provided by the Commission Agent would be covered under the Negative List in terms of Sec.65B(5) and 66D(vii) of the Finance Act, 1994, relied on assessee's own case which dealt with conversion of 'Green Tea' into 'Black Tea'.
Further, CESTAT elaborated on the 'binding nature' of Circular No. 143/12/2011-ST dated May 26, 2011 that clarifies the applicability of service tax on certain processes carried out for a client in the agricultural sector, as also illustrates how raw cashew which are subjected to roasting/drying, shelling and peeling would not alter the essential character of cashew.
The tribunal discussed the meaning of the expression 'agriculture produce' as enumerated in final order of assessee's own case that held “even the processes involved in converting Green Tea into Black Tea does not alter the basic characteristic of the Tea as such and the same could not be considered as a non-agricultural product under any stretch of imagination”
In view of the above, CESTAT allowed the appeal of the assessee.
Case Name: Glenworth Estate Ltd.
Case No. : Service Tax Appeal No. 40031 of 2018
Date of Decision: 10.11.2025
Appearance: Advocates T.R. Ramesh appeared on behalf of the assessee, whereas Revenue was represented by Authorised Representative Mr. M. Selvakumar.