2009 (1) TMI 741 - AT - Service Tax

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery of demand of service tax with penalties.
2. Classification of activity as 'Clearing and Forwarding Agents' service or 'Business Auxiliary Service'.
3. Interpretation of CBEC Circular and relevant case laws.

Analysis:
1. The case involved an application for waiver of pre-deposit and stay of recovery of service tax demand with penalties imposed on the appellants under various sections of the Finance Act, 1994. The original authority found that the appellants provided 'Clearing and Forwarding Agents' service to two different persons under similar agreements during a specific period, resulting in a demand for service tax, interest, and penalties. The impugned order sustained the original authority's decision.

2. The facts of the case revealed that the appellants received chemicals from two entities under identical agreements and engaged in 'consignment commission sales' of those goods. The lower authorities classified the activity as 'Clearing and Forwarding Agents' service, making the appellants liable to pay service tax on the commission received. The appellants argued that the activity should be classified under 'Business Auxiliary Service' as they were registered under this category post-introduction of the service tax. The appellants relied on a Tribunal decision and a CBEC Circular to support their claim.

3. The ld. SDR relied on a Tribunal decision in a different case to argue that for an activity to be taxed under 'Clearing and Forwarding Agents,' it was not necessary for both 'Clearing' and 'Forwarding' activities to be undertaken; either sufficed. However, after considering the submissions from both sides, the judge found that the impugned activity resembled the one in a previous Tribunal case, which was held not to constitute 'Clearing and Forwarding Agents' service. The judge also referenced the CBEC Circular, emphasizing the distinction between a 'Commission Agent' and a 'Consignment Agent.'

4. Ultimately, the judge ordered a complete waiver of pre-deposit and stay of recovery of service tax and penalties pending appeal. The decision was based on the prima facie similarity of the impugned activity to that in a previous case, the registration of the appellants under 'Business Auxiliary Service,' and the interpretation of the CBEC Circular regarding the role of a 'Commission Agent.' The judgment highlighted the importance of proper classification and registration under the relevant service tax category.