2011 (5) TMI 386 - AT - Service Tax

Demand of service tax and interest - Consignment agents - Respondent is a manufacturer paper and paper board - They sold the product either at the factory gate or through consignment agents appointed by them - Consignment Agent undertake sole responsibility for collection and deposit of sales tax or any other tax on the sale of the Product within his territory and also prepare and submit Sales Tax Returns do all the formalities and necessary compliance as required under the tax laws of the Centre and State - The Principal shall not be responsible in respect of sales tax or any other tax matters after transfer of title of the product - A show cause notice dated 9.1.03 was issued proposing recovery of service tax under the category of C & F agent as the term C & F included consignment agent in terms of Section 65(25) of Finance Act 1994 - As per the decision Hon ble High Court of Karnataka in the case of CCE Bangalore vs Mahaveer Generics 2009 -TMI - 75387 - KARNATAKA HIGH COURT - set aside the order of the Commissioner (Appeals) and that of the original authority and remand the matter to the original authority for fresh consideration in the light of decision of the Hon ble High Court of Karnataka in the case of Mahaveer Generics - Hence the appeal is allowed by way of remand.

Summary

Issues:
- Interpretation of agreements with consignment agents for sale of products
- Recovery of service tax under the category of C & F agent
- Applicability of previous tribunal decisions in similar cases
- Request for de novo consideration by the original authority

Interpretation of agreements with consignment agents for sale of products:
The case involved a manufacturer of paper and paper board who sold products through consignment agents under specific agreements. The agreements outlined the responsibilities of the principal and consignment agents, including dispatch of products, maintenance of records, payment of commission, and compliance with tax laws. The department issued a show cause notice for recovery of service tax under the C & F agent category, considering consignment agents as part of it. The original authority dropped the demand, which was upheld by the Commissioner (Appeals). However, the department appealed, arguing that the decision should be set aside for fresh consideration.

Recovery of service tax under the category of C & F agent:
The department sought to recover service tax under the C & F agent category, including a proposal for appropriation of a specific amount along with interest. The matter was adjudicated by the original authority, then set aside by the Commissioner (Appeals) and remanded for fresh consideration. Eventually, the original authority dropped the demand, leading to the department's appeal and the respondent's cross objection supporting the Commissioner (Appeals)'s decision.

Applicability of previous tribunal decisions in similar cases:
The Tribunal compared the agreements in this case with a previous decision involving Mahaveer Generics, highlighting a key difference related to the clause concerning the arrangement of goods delivery and payment of octroi duty by consignment agents. The Commissioner (Appeals) and the original authority relied on the Mahaveer Generics case, which was not overturned by a higher forum. However, the Tribunal noted that the decision in Mahaveer Generics had been overruled by the Hon'ble Karnataka High Court. Consequently, the Tribunal decided to set aside the previous orders and remand the matter for fresh consideration in light of the High Court's decision.

Request for de novo consideration by the original authority:
After considering the submissions and records, the Tribunal granted the department's request for de novo consideration by the original authority. The order of the Commissioner (Appeals) and the original authority were set aside, and the matter was remanded for fresh consideration based on the decision of the Hon'ble High Court of Karnataka. The appeal was allowed by way of remand, and the cross objection was also disposed of accordingly.