Milk Chilling not ‘Agricultural Produce’, Liable for Service Tax: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that milk chilling is not considered agricultural produce and is subject to service tax. The appellant, involved in milk collection, chilling, and distribution, claimed exemption under the Negative List of the Finance Act, 1994. However, CESTAT determined that since chilling is a processing activity that alters the state of milk for preservation and transport, it does not qualify as agricultural produce. The tribunal emphasized that agricultural produce implies items directly obtained from agricultural operations without undergoing significant changes. Consequently, the appellant was held liable for service tax. This ruling highlights the importance of precise classification in taxation and regulatory compliance.