2011 (2) TMI 121 - AT - Service Tax

Demand - Clearing & Forwarding Agent - Business Auxiliary Services - Time barred - the appellants are engaged in financing their clients for purchase of coal and also arranging for transportation of coal. - Held that - the activities undertaken by the appellants are not covered under the category of Clearing & Forwarding Agent - SCN also held as time barred - decided in favor of assessee.

Summary

Issues Involved:
1. Classification of services provided by the appellants.
2. Applicability of service tax under the category of "Clearing & Forwarding Agent."
3. Validity of show-cause notices and the issue of limitation.
4. Relevance and applicability of case laws cited by both parties.

Detailed Analysis:

1. Classification of Services Provided by the Appellants:
The appellants were registered under "Business Auxiliary Services" since 2004 and were involved in activities such as making payments for coal, arranging transportation, and paying freight and insurance. The department contended that these services fell under the "Clearing & Forwarding Agent" category as per CBEC Circular No. 159/01/03-CE-4 and Section 65(25) of the Finance Act, 1994. However, the appellants argued that their activities did not align with the typical functions of a Clearing & Forwarding Agent, as they were primarily involved in financing transactions and receiving commissions for these services.

2. Applicability of Service Tax under "Clearing & Forwarding Agent":
The Tribunal examined the definition of "Clearing & Forwarding Agent" under Section 65(25) of the Finance Act, 1994, and CBEC Circular No. 37B No. 2/1/2002-ST. It was observed that the appellants' activities, which mainly involved financing the purchase of coal and arranging transportation, did not fit within the scope of services typically provided by a Clearing & Forwarding Agent. The Tribunal referenced the case of Hanuman Coal Co. v. CCE, where similar activities were not considered as Clearing & Forwarding Agent services.

3. Validity of Show-Cause Notices and the Issue of Limitation:
The appellants argued that the show-cause notices were barred by limitation. The Tribunal agreed, noting that the show-cause notices were issued after a considerable delay and beyond the permissible period. The Tribunal also cited the decision in the case of Hanuman Coal Co., where it was held that the show-cause notice was time-barred.

4. Relevance and Applicability of Case Laws Cited by Both Parties:
The Tribunal considered the case laws cited by both parties. The respondent relied on Coal Handlers (P.) Ltd. v. CCE and CCE v. Mahaveer Generic, arguing that the appellants' services fell under Clearing & Forwarding Agent. However, the Tribunal found these cases to be factually different from the present case. The Tribunal emphasized that the main activity of the appellants was financing, which did not align with the Clearing & Forwarding Agent services. The Tribunal also referenced the Larger Bench decision in Larsen & Toubro Ltd. v. CCE, which clarified that the terms "directly or indirectly" and "in any manner" should not be isolated from the core activities of clearing and forwarding operations.

Conclusion:
The Tribunal concluded that the activities undertaken by the appellants did not fall under the category of "Clearing & Forwarding Agent" and that the show-cause notices were time-barred. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief. The Tribunal also reiterated the importance of judicial discipline and the need to follow precedents, as emphasized by the Bombay High Court and the Supreme Court in various judgments.