2005 (5) TMI 390 - AT - Service Tax

Summary

Issues:
Service tax liability of the appellants as clearing and forwarding agents under Section 65 Clause 25 of the Finance Act, 1994.

Analysis:
The judgment involved an appeal against the Order-in-Appeal where the Commissioner upheld three Orders-in-Original confirming service tax demand and penalties against the appellants. The main contention was whether the appellants, acting as selling agents for M/s. Raymond Ltd., fell within the definition of clearing and forwarding agents under Section 65 Clause 25 of the Finance Act, 1994, for the period from March 1999 to March 2003.

The appellants argued that they were not liable to pay service tax as they were only selling agents of M/s. Raymond Ltd. and should be classified under the 'Business Auxiliary Services' category. They relied on the precedent set in Mahavir Generics v C.C.E., Bangalore, 2004. On the other hand, the J.D.R. relied on the decision in Prabhat Zarda Factory (India) Ltd., 2002, stating that the appellants, being clearing and forwarding agents, were indeed liable to pay service tax for the period in question.

The definition of "clearing and forwarding agent" under Section 65 Clause 25 of the Finance Act, 1994, was crucial in determining the appellants' liability. The Tribunal noted that the appellants were appointed as selling agents by M/s. Raymond Ltd., and their role was limited to selling products on consignment basis and remitting proceeds to the company. The Tribunal concluded that the appellants' activities did not align with the definition of clearing and forwarding agents but rather classified them as sale/commission agents based on the agreement with M/s. Raymond Ltd.

Additionally, the Department's acceptance of the appellants' activities falling under Business Auxiliary Services and charging service tax under that category from September 2004 further supported the appellants' position. The Tribunal distinguished the case referenced by the J.D.R., Prabhat Zarda Factory (India) Ltd., as it involved different responsibilities and market conditions. The Tribunal found that the appellants' activities were more aligned with being sale/commission agents rather than clearing and forwarding agents, leading to the conclusion that the service tax demand and penalties imposed on the appellants were not legally sustainable.

Therefore, the Tribunal set aside the impugned order, allowing the appeals of the appellants with consequential relief as per the law.