2007 (5) TMI 69 - AT - Service Tax

Clearing and Forwarding Agent Revenue contended that the services of consignment agent performed by respondent covered under the Clearing and Forwarding agent and liable to pay service tax Held that revenue contention was correct and allow the appeal of revenue

Summary

Issues involved:
- Interpretation of the role of a consignment agent in relation to Service Tax liability
- Comparison of different Tribunal decisions regarding the classification of clearing and forwarding agents
- Analysis of contractual agreements to determine the responsibilities of the consignment agent

Analysis:
1. The appeal was filed by the Revenue challenging the Commissioner (Appeals) order, which relied on a previous Tribunal order to hold that the consignment agent is not liable to pay Service Tax. The Commissioner determined that the respondent was a consignment stockist based on the agreement with certain companies, leading to the dropping of the Service Tax demand and penalty.

2. The Revenue's argument relied on a Larger Bench decision and a Division Bench decision, emphasizing that even if activities related to clearing or forwarding were present, a person could be classified as a clearing and forwarding agent. The Division Bench highlighted that a consignment agent falls under the definition of a 'Clearing & Forwarding Agent' as per Section 65(105)(j) of the law.

3. The Tribunal noted that the respondent's agreements with companies like Bayer ABS Ltd. and SRF Polymers Ltd. indicated their involvement in safe delivery of goods and compliance with tax obligations. Clauses in the agreements showed the respondent's responsibility for damages, short deliveries, and promoting sales, aligning with the duties of a clearing and forwarding agent.

4. By examining the agreements closely, the Tribunal concluded that the consignment agent was actively involved in the movement of goods, qualifying them as a Clearing & Forwarding agent. The analogy of an orchestra in the Medpro Pharma decision was used to illustrate that even subtle activities under the agreements could constitute taxable clearing and forwarding operations.

5. Consequently, the Tribunal set aside the order-in-appeal and restored the order-in-original, ruling in favor of the Revenue. The decision highlighted the importance of contractual obligations and activities performed by the consignment agent in determining their classification for Service Tax liability.

6. The judgment emphasized the significance of contractual terms, the nature of activities performed, and the legal framework to ascertain the responsibilities and liabilities of consignment agents in the context of Service Tax regulations. The decision provided clarity on the classification of consignment agents as clearing and forwarding agents based on their contractual engagements and operational roles.