Tobacco Threshing & Redrying Not Taxable Under BAS; No GTAS Liability Without Consignment Note — CESTAT Hyderabad
Case Background
Green Leaf Tobacco Threshers Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Hyderabad)
In a significant ruling pronounced on 13.03.2026, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, set aside a service tax demand that had been confirmed against the appellant through an Order-in-Original dated 11.01.2013. The adjudicating authority had not only confirmed the demand but also imposed penalties, prompting the appellant to challenge the order before the Tribunal.
The case revolved around two distinct service tax disputes — one concerning the classification of tobacco processing activities under Business Auxiliary Service (BAS), and the other relating to alleged non-payment of service tax under Goods Transport Agency Service (GTAS) for the period 01.10.2009 to 31.12.2011.
Nature of Business and Department's Allegations
The Appellant's Core Activities
The appellant, M/s Green Leaf Tobacco Threshers Ltd, was engaged in tobacco processing — both for its own account and on a job work basis for several other exporters. The primary job work activity involved threshing and redrying of tobacco leaves, for which the appellant received job work charges.
Issue 1 — Classification Under Business Auxiliary Service
The Revenue department took the position that the job work activity of threshing and redrying tobacco leaves constituted a Business Auxiliary Service under the Finance Act, 1994, and accordingly raised a service tax demand on the charges collected by the appellant for such processing.
Issue 2 — Non-Payment Under Goods Transport Agency Service
Separately, the department alleged that the appellant had failed to discharge its service tax liability under the Goods Transport Agency Service category falling under section 65(105)(zzp) of the Finance Act, 1994. The department's case was primarily grounded in Rule 2(1)(d) of the Service Tax Rules, 1994 read with section 65(105) of the Finance Act, 1994, covering the period from 01.10.2009 to 31.12.2011.