2011 (2) TMI 528 - AT - Service Tax

Demand - Clearing & Forwarding Agent - Show cause notices were issued to the appellants alleging that the appellants are performing duties of clearing & forwarding agent, hence, they are liable to pay service tax on the amount received as commission from their principals - appellants are supplying the goods at the instruction of their principals to the prospective buyers and all the control of their activities is managed by their principals - Board s Circular No. 59/A/2003 dated 20-6-2003 - services of commission agents have been exempted from service tax w.e.f. 1st July, 2003 vide notification No. 13/2003-S.T., dated 20th June 2003 - A consignment agent s job is to receive the goods from the principal and dispatch them on the directions of the principal, whereas a commission agent s job is to cause sale/purchase on behalf of another person - Held that present exemption is available only to such commission agent who is not a consignment agent - Appeal is allowed

Summary

Issues:
Appeal against service tax demand for the period prior to April 2003 under the category of "Clearing & Forwarding Agent."

Analysis:
The appellants filed appeals against a service tax demand alleging that they were performing duties of a clearing and forwarding agent. The appellants argued that they were engaged as commission agents, selling goods on behalf of their principals by identifying buyers, and receiving commission for this activity. The lower authorities confirmed the demands, leading to the appeal. The advocate for the appellants contended that they were not liable to pay service tax as clearing and forwarding agents before April 2003, as they did not supply goods to buyers at the direction of their principals. Instead, they claimed to be covered under Business Auxiliary Services from April 2003 onwards. The Departmental Representative argued that the appellants were supplying goods at the instruction of their principals and relied on a circular stating that as the appellants were engaged in both commission agent and clearing & forwarding agent activities, they were liable to pay service tax.

Upon review, the Tribunal examined the agreement between the appellants and their principals, determining that the appellants were acting as agents promoting the sale of their principals by identifying buyers. The Tribunal concluded that the appellants' activities did not fall under the category of "Clearing & Forwarding Agent" during the period in question. It was noted that the appellants were correctly classified under Business Auxiliary Services from April 2003 onwards and had been discharging their service tax liability under that category. The Tribunal rejected the Departmental Representative's argument and the reliance on the circular, which clarified the taxability scope under "Clearing & Forwarding Agent" but was deemed inapplicable to the appellants' case. Consequently, the Tribunal set aside the impugned order, allowing the appeals with any consequential relief.

This judgment highlights the importance of accurately determining the nature of services provided to ascertain the correct category for service tax liability. The Tribunal's analysis of the appellants' role as commission agents, not falling under the category of clearing and forwarding agents, showcases the significance of contractual agreements in defining tax obligations. The decision emphasizes the need for a precise understanding of service activities to ensure proper compliance with tax regulations and the relevance of legal interpretations in resolving tax disputes effectively.