Page 87 - GSTL_13th August 2020_Vol 39_Part 2

2020 ] IN RE : DECCAN TOBACCO COMPANY 173
The tobacco leaves are supplied/sourced in various stages but in all of which
there was no change in form of the leaves except some minimal activities done
on them to make them marketable. With the above entries in the tariff and also
the clarification of C.B.I. & C., it is clear that tobacco leaves in all these stages of
trading attracts GST rate of 5% only. However, the Authority for Advance Rul-
ings, New Delhi in its Ruling dated 6-4-2018 in the case of Shalesh Kumar Singh
[2018 (13) G.S.T.L. 373 (A.A.R. - GST)] wherein, the facts are different to those in
the case of the applicant, gave a ruling that even the dried tobacco is not tobacco
leaves and hence nothing is left to be considered as Tobacco leaves, as no trade is
done in the green tender leaf. The applicant claims that the above ruling had re-
sulted in multiple interpretations and had resulted in lot of confusion as to the
applicable rates of the tobacco leaves. The applicant submits the following legal
position with regards to the levy of GST on the tobacco leaves.
The applicant states that all of the tobacco crop that is produced shall
have to be cured before it can be marketed commercially in the primary market.
And the tobacco that is cured and brought to auction platforms is only called tobacco
leaves. In the common parlance, tobacco leaves mean cured (dried) tobacco leaves
only as the green tender is unfit for any commercial operations. In this context,
the applicant takes shelter under the following case law.
The applicant affirms that his stance is upheld in various celebrated cas-
es like M/s. D.S. Bist & Sons, Nainital - (1979) 004 SCC 0741 wherein a mention is
made about the agricultural produce. It says that it should be remembered that
almost every kind of agricultural produce has to undergo some kind of pro-
cessing or treatment by the agriculturist himself in his farm or elsewhere. In or-
der to bring them to a condition of non-perishability and to make them trans-
portable and marketable, some minimal process is necessary to be applied to
many varieties of agricultural produce. But there may be some other kinds of
agricultural produce which require some more processing to make it marketable.
In the case of such a commodity what one to judge is to find out whether in rela-
tion to that agricultural produce the process applied was minimal or was it so
cumbersome or long-drawn that either, in common parlance or in the market, or
even otherwise, anybody would not treat the produce as an agricultural produce.
Thus, as per the common parlance test, tobacco leaves mean only cured
tobacco because it is impossible to undertake any commercial activity on green
tobacco as plucked from the crop. From the stage of cured tobacco, the common
understanding of the term ‘tobacco leaves’ stretches upto the stage of threshed
and redried tobacco.
As per the GST Tariff both Tobacco Leaves and unmanufactured tobacco
(other than tobacco leaves) fall under the same HSN 2401 and the words are not
defined specifically in the said notification. As per explanatory notes to HSN
2401 ‘Unmanufactured Tobacco’ is defined and the same is reproduced below.

2401 Unmanufactured tobacco; tobacco refuse :
2401.10 Tobacco, not stemmed/stripped
2401.20 Tobacco, partly or wholly stemmed/stripped
2401.30 Tobacco refuse

This heading covers :
Unmanufactured tobacco in the form of whole plants or leaves in the natu-
ral state or as cured or fermented leaves, whole or stemmed/stripped,
trimmed or untrimmed, broken or cut (including pieces cut to shape, but
GST LAW TIMES  13th August 2020  87