By TIOL News Service

MUMBAI, OCT 27, 2015: THE appellant is engaged in the activity of preparation of vegetables, fruits by processing the same &packing in consumer packs for their clients.

Revenue is of the view that this activity amounts to rendering of services under Business Auxiliary services (BAS) while it is the case of the appellant that by undertaking processing of vegetables they have undertaken an activity of 'manufacture' and hence not covered under service tax liability. The appellant has also relied upon the Board's Circular 143/12/2011-ST dated 26.5.2011.

Having met with failure before the Commissioner(A), the appellant is before the CESTAT.

The CESTAT observed -

"5. We find that the appellant is preparing the vegetables by sorting, cleaning, boiling and freezing the same and subsequently packing it in unit packings to be sold by their brand name. The first appellate authority has held that the activity undertaken by the appellant is not in respect of agriculture are in relation to agriculture. Learned departmental representative would also argue on the same grounds. We find that the said argument does not hold water inasmuch, the board vide circular number 143/12/2011 - ST dated 26/5/2011 has clarified the taxability of an activity of processing on behalf of client in relation to agriculture. The said circular is reproduced.

x x x

5.1 The above said clarification would squarely apply in the facts of this case as it is undisputed that appellant is undertaking the processing of vegetables on behalf of their client. It is settled law that revenue officers cannot argue against the board's circular. In the case in hand, the first appellate authority as well as the authorised representative of the revenue are arguing against the board's clarification as reproduced hereinabove. We do not have any hesitation to hold that such arguments put forth our view the activity of processing the vegetables by the appellant will be in relation to agriculture hence not liable to service tax under business auxiliary services."

Holding that the order is unsustainable, the same was set aside and the appeal was allowed with consequential relief.

(See 2015-TIOL-2288-CESTAT-MUM)