2011 (2) TMI 500 - AT - Service Tax

Liability of service tax - Clearing and Forwarding Agent - Since, the duties of the Clearing & Forwarding Agent are to receive the goods on behalf of their principals and store them, thereafter deliver the goods at the instructions of their principals - It is not the situation as the respondents are procuring orders i.e., selling the goods of their principals which is not the duty of Clearing & Forwarding Agent - Moreover, the respondents are guaranteeing payment of goods sold by them on behalf of their principals which is also not the duty of Clearing & Forwarding Agent - Hence, the activity undertaken by the respondents is not covered under the category of Clearing & Forwarding Agency at all - Hence,do not find any infirmity in the impugned order and the same is upheld - Decided in favour of assessee.

Issues:
Interpretation of service tax liability under "Clearing & Forwarding Agency" for the period 1-9-1999 to 30-9-2002.

Analysis:
The appeal was filed by the Revenue against an order setting aside the demand for service tax under the category of "Clearing & Forwarding Agent" for the mentioned period. The respondents procured purchase orders from buyers for Reliance Industries Ltd., which then dispatched goods to the buyers. The Revenue argued that the respondents fell under the category of Clearing & Forwarding Agency as they procured orders and goods were dispatched by the principal. On the other hand, the respondents contended that they were not Clearing & Forwarding Agents as they procured orders for their principal and guaranteed payment for the goods supplied. The Tribunal examined the definition of Clearing & Forwarding Agent under section 65(25) of the Finance Act, 1994, which includes receiving, storing, and delivering goods on behalf of principals. The Tribunal noted that the respondents were involved in selling goods for their principal and guaranteeing payment, activities not typical of Clearing & Forwarding Agents. Consequently, the Tribunal upheld the lower appellate authority's decision, rejecting the Revenue's appeal.

This case involved a dispute over the interpretation of the duties and responsibilities of a Clearing & Forwarding Agent under the service tax regime for a specific period. The Tribunal analyzed the activities undertaken by the respondents in relation to the definition of a Clearing & Forwarding Agent as per the Finance Act, 1994. The Tribunal emphasized that the core duties of a Clearing & Forwarding Agent involve receiving, storing, and delivering goods on behalf of their principals. However, in this case, the respondents were primarily engaged in procuring orders and guaranteeing payment for goods sold on behalf of their principal, Reliance Industries Ltd. These activities did not align with the typical functions of a Clearing & Forwarding Agent as defined in the legislation. Therefore, the Tribunal concluded that the respondents' activities did not fall under the category of "Clearing & Forwarding Agency," leading to the rejection of the Revenue's appeal.

The Tribunal's decision hinged on a meticulous examination of the statutory definition of a Clearing & Forwarding Agent and a comparison with the actual activities carried out by the respondents during the relevant period. By scrutinizing the nature of the services provided by the respondents, the Tribunal determined that their role was distinct from that of a Clearing & Forwarding Agent. The Tribunal underscored that the respondents' involvement in procuring orders and ensuring payment for goods sold on behalf of their principal did not align with the functions typically associated with a Clearing & Forwarding Agent. As a result, the Tribunal upheld the lower appellate authority's decision to set aside the demand for service tax under the category of Clearing & Forwarding Agency, ultimately rejecting the Revenue's appeal in this matter.

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