Page 88 - GSTL_13th August 2020_Vol 39_Part 2

174 GST LAW TIMES [ Vol. 39
not tobacco ready for smoking). Tobacco leaves, blended, stemmed/
stripped and cased (sauced or liquored) with a liquid of appropriate com-
position mainly in order to prevent mould and drying and also to preserve
the flavour are also covered in this heading.
The Central Tobacco Research Institute (CTRI), Guntur vide its letter dated
11-12-2012 addressed to the Indian Tobacco Association explained as follows :
‘‘The operations of stripping, threshing, re-drying and packing are contributing to the
value-addition to the farm produced tobacco by improving the shelf-life and maintaining
the quality. Further, export price of tobacco generally influences the farm price. Hence,
the above operations are construed as an extension of agricultural activity only as in the
case of other commodities like cotton, chillies etc. The threshed and re-dried FCV tobacco
has no use as such, hence it can be considered as primary agricultural produce only.
In another letter, the CTRI has opined as follows :
“The curing (drying) is an integral process of agricultural operations, like in
case of any other agricultural products. The curing operations followed in India are de-
pendent on several factors such as type of tobacco, convenience, agricultural infrastruc-
ture etc. The four prevalent methods of curing are (i) flue-curing (ii) air-curing (iii) fire-
curing and (iv) sun-curing. The main characteristics of tobacco leaf viz., Nicotine and
sugars will remain unaltered by the process of curing/drying
Further applicant contends that it is a settled legal position that an entry
in the tariff has to be read ‘as it is’ following the principle of literal Rule of inter-
pretation and the ‘word’, ‘term’ or a ‘phrase’ shall not be read by affixing or suf-
fixing another word to it. In the above entry, the term ‘Tobacco Leaves’ is men-
tioned without any qualifier attached to it viz., ‘dried tobacco leaves’, ‘undried
tobacco leaves’, ‘cured tobacco leaves’ etc., In such cases, it cannot be read that
tobacco leaves means only those leaves cut from the plants and tobacco leaves on
which certain operations are conducted will not be ‘tobacco leaves’. It is also
clear that in the absence of the definition given to the term ‘tobacco leaves’, shall
be understood in its natural and commercial meaning.
Further the Tax Research Unit of C.B.I. & C. in its Circular No.
332/2/2017-TRU clarified as under :
“Q. 42. Tobacco leaves falling under heading 2401 attracts 5% GST on
reverse charge basis in respect of supply by an agriculturist.
What is the meaning of Tobacco leaves?
Reply : For GST Rate 5%, tobacco leaves means, leaves of tobacco as
such or broken tobacco leaves or tobacco leaves stems”.
The applicable rates of GST for goods were mentioned in Notification No.
1/2017-C.T. ibid. It is not mentioned as to who shall be supplier and who shall be
recipient. While Notification No. 4/2017-CGST (Rate), dated 28-6-2017 notifies
the cases where the RCM (Reverse Charge Mechanism) shall be applied, it is si-
lent as to the rate. Thus, as long as the product remains the same, it does not mat-
ter whether the same is procured from an agriculturist or an unregistered dealer,
or registered dealer. The application of RCM is only to prescribe as to who shall
pay the tax and it had no bearing on the applicability of the rate of GST.
Thus, the applicant contends that the commodities dealt by him fall un-
der the head Tobacco Leaves only and the applicable rate is 5% only.
The applicant had quoted an instance where the levy of Service Tax is set
aside on the support services administered on tobacco leaves in a recent case of
proposed levy of service tax on the services associated with the threshing, re-
drying, transportation, warehousing etc., of this agricultural produce, that vari-
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