2004 (5) TMI 5 - AT - Service Tax

Service Tax Clearing and forwarding agent (1) Definition (2) Classification (3) Insurance and Clearing and forwarding services

Summary

Issues:
1. Whether the services provided by the appellants qualify as Clearing and Forwarding Agents under the Service Tax statute.
2. Whether the services provided by the appellants fall under the definition of 'Business Auxiliary Service' introduced in the Finance Act of 2003.

Analysis:

Issue 1:
The appellants contended that the services rendered by them, facilitating the movement of coal to cement companies, did not classify them as Clearing and Forwarding Agents under Section 65(25) of the Finance Act of 1994. The advocate argued that the appellants did not enter into contracts for purchasing coal but only facilitated its movement. However, the Revenue argued that previous tribunal judgments had classified similar services as falling under the Clearing and Forwarding Agent category. The Tribunal noted that the definition of a clearing and forwarding agent is broad, encompassing services indirectly connected with clearing and forwarding operations. The appellants' activities, including obtaining consents, supervising loading, and complying with formalities, were deemed to fall within this definition, as established in the Prabhat Zarda case. Consequently, the Tribunal upheld that the appellants' services qualified as Clearing and Forwarding Agents.

Issue 2:
The appellants alternatively argued that their services could be classified under the newly introduced 'Business Auxiliary Service' under the Finance Act of 2003. However, the Tribunal found that the services provided did not align with the nature of promotional or routine tasks specified under Business Auxiliary Service. The Notification clarified that C & F agents working on a commission basis were not covered under Business Auxiliary Service as they were substantially categorized within C & F services. The Tribunal applied the classification principles under Section 65A of the Finance Act, emphasizing that a service should only be taxed under one category. Since Insurance services and C & F Services were more specific and were taxed before Business Auxiliary Service, the appellants' services did not qualify under the Business Auxiliary Service category. Consequently, the Tribunal rejected the appeal, concluding that the appellants' services did not meet the criteria for Business Auxiliary Service.

In conclusion, the Tribunal upheld that the appellants' services qualified as Clearing and Forwarding Agents based on the broad definition provided in the statute and previous tribunal judgments. The alternative argument for classification under Business Auxiliary Service was dismissed due to the nature of services provided not aligning with the specified criteria. The appeal was rejected based on these findings.