Blend the beef, bread, egg, milk, salt, pepper and tarragon in a bowl, then shape into 18 meatballs.
Roll in flour and brown in shortening in a skillet over moderate heat.
Dissolve the soup mix in 2 cups hot water and add to meatballs.
Cook over low heat for 20 to 25 minutes or until meatballs are done.
Mix 2 tablespoons flour and 1/4 cup water until smooth and stir into meatball mixture.
Cook until smooth and thickened.
Sprinkle with cheese just before serving.