CESTAT Chennai Rules Black Tea as Agricultural Produce, Exempts Commission Agents from Service Tax

Tribunal Upholds Negative List Exemption for Commission Agents Dealing in Agricultural Produce Under Finance Act, 1994

In a significant ruling, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in Chennai has declared black tea as an agricultural produce, thereby exempting services provided by commission agents for its sale from service tax. The judgment dated November 10, 2025, addresses the appeals filed by Glenworth Estate Ltd. against the Commissioner of GST & Central Excise, challenging the imposition of service tax on commissions paid to foreign agents for the sale of black tea.

The tribunal, comprising Shri M. Ajit Kumar, Member (Technical), and Shri Ajayan T.V., Member (Judicial), heard the appeals collectively and delivered a unified verdict. The primary contention revolved around whether black tea qualifies as agricultural produce, which would exempt the services related to it under the negative list as per Section 66D of the Finance Act, 1994.

The appellant, represented by Advocate T.R. Ramesh, argued that the processes involved in converting green tea to black tea do not alter its essential characteristics, thus maintaining its status as agricultural produce. The appellant further cited a CBEC Circular and previous tribunal orders supporting their position.

The tribunal concurred with the appellant's argument, referencing its earlier decision in the appellant's own case, which held that the conversion process does not change the basic nature of tea. The tribunal emphasized that once classified as agricultural produce, services by commission agents for its sale are covered under the negative list, making them non-taxable.

Additionally, the tribunal dismissed the penalties imposed under Sections 76 and 77 of the Finance Act, 1994, for non-payment of service tax, noting that the demand for interest and penalties was unsustainable given the exemption status of the services.

The ruling is expected to have far-reaching implications for the tea industry and other sectors dealing in agricultural produce, as it clarifies the tax obligations under the Finance Act, 1994, for commission-based services.

Bottom Line:

Service Tax - Black tea held to be agricultural produce - Services provided by commission agent for sale or purchase of agricultural produce are covered under the negative list as per Section 66D of the Finance Act, 1994, and are not exigible to Service Tax.

Statutory provision(s): Finance Act, 1994 Sections 65B(5), 66D(vii), 76, 77

Glenworth Estate Ltd. v. Commissioner of GST & Central Excise, (CESTAT)(Chennai) : Law Finder Doc Id # 2808393