Agriculture produce definition under setvice tax

This issue has not clarified yet by CBEC.

In this context, the question that arises is whether the consideration received for undertaking the said process on behalf of seed Companies would be liable for payment of Service Tax under the Negative List regime w.e.f. 1 July 2012?

In the new regime of service tax, at the outset 'service' has been defined in clause (44) of Section 65B of the Finance Act, 1994 (Act). Section 66B specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list. The negative list of services is contained in section 66D of the Act.

As per clause (f) of section 66D of the Act 'processes amounting to manufacture or production of goods' is a service covered under 'Negative list'. The phrase 'processes amounting to manufacture or production of goods' has been defined in section 65B (40) of the Act to inter-alia mean a process on which duties of excise are leviable under Section 3 of the Central Excise Act, 1944 (1 of 1944). It has been clarified in Education Guide (Para 4.6) that Section 66D (f) covers manufacturing activity carried out on contract or job work basis, which does not involve transfer of title in goods, provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts .

Thus, the 'processes on which duties of excise are leviable under section 3 of the Central Excise Act, 1944' are excluded from the purview of service tax.

It may be noted that the Apex Court in the judgment of Grasim Industries Ltd 2011-TIOL-100-SC-CXobserved that "the charging Section 3 of the Act comes into play only when the goods areexcisable goods under Section 2(d) of the Act falling under any of the tariff entry in the Schedule to the Tariff Act and are manufactured goods in the terms of Section 2(f) of the Act".

Given the above, if answer to both the following questions is in the affirmative, then Service Tax will not be leviable on the aforesaid process:

1.Whether the process of making 'seeds for sowing' from raw grain / cerealsamounts to 'manufacture'?

2. Whether the goods manufactured are 'excisable goods'?

CBEC may like to issue a clarification in this regard before the "seeds" of litigation are sown by the officers all over the country except, of course , Jammu & Kashmir.

thanks Gaurav Maheshwari. Now the issue is not only processing activity, Under reverse charge mechanism GTA services, the service receiver is liable to pay the service tax. But as per notification no.3/2013 dated 1st March, 2013 point no. (v) reads as:

for entry 21, the following entry shall be substituted, namely:-

“21. Services provided by a goods transport agency, by way of transport in a goods carriage of,-
(a) agricultural produce;

My doubt is whether GTA service is applicable for the tranportation of Processed seeds.

“agricultural produce” means any produce of agriculture 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;

Processed seeds are agricultural produce since no essential characterstics e raw seeds are altered. Seeds are only processed to make them marketable. Therefore in my view processed seeds are agricultural produce.