2011 (12) TMI 262 - AT - Service Tax

Clearing & Forwarding Versus Custom House Agent - liaisoning between the exporter and importer - licensed CHA by collecting documents and forwarding the same to CHA - coordinating clearance of the goods from Port into the vessel - Transport services not undertaken - purchased space of ocean going vessels and in turn sold the space to the exporter for a profit - Held That - In view of Larsen & Toubro (2006 (6) TMI 3 - CESTAT NEW DELHI) and Kulcip Medicines (2009 (2) TMI 89 - PUNJAB AND HARYANA HIGH COURT) service to be treated as Custom House Agent.

Issues Involved:
1. Classification of services provided by the appellant.
2. Interpretation of the definition of "Clearing & Forwarding Agent" under Section 65(25) of the Finance Act, 1994.
3. Applicability of CBEC circulars and judicial precedents.
4. Determination of Service Tax liability and penalties.

Detailed Analysis:

Issue 1: Classification of Services Provided by the Appellant
The appellant was engaged in various activities related to facilitating the clearance of export/import cargo, including freight booking, coordination with shipping lines and CHAs, shifting empty containers, and employing labor for cargo stuffing. The lower authorities concluded that these activities fell under the "Clearing & Forwarding Agent" services as defined in Section 65(25) of the Finance Act, 1994. The appellant contested this classification, arguing that their activities did not encompass both clearing and forwarding operations, which are essential to qualify as a "Clearing & Forwarding Agent."

Issue 2: Interpretation of the Definition of "Clearing & Forwarding Agent"
The adjudicating authority interpreted the definition of "Clearing & Forwarding Agent" broadly, holding that the appellant's services were connected with clearing and forwarding operations. However, the Tribunal found this interpretation incorrect. The definition requires that both clearing and forwarding operations be undertaken by the service provider. The Tribunal referred to CBEC circulars and judicial precedents, including the Punjab & Haryana High Court's decision in CCE Panchkula v. Kulcip Medicines (P.) Ltd., which clarified that the term "Clearing & Forwarding Agent" is conjunctive and not disjunctive. Therefore, a service provider must perform both clearing and forwarding activities to fall under this category.

Issue 3: Applicability of CBEC Circulars and Judicial Precedents
The Tribunal referred to CBEC circulars from 1997 and 2002, which outlined the essential characteristics of services provided by a "Clearing & Forwarding Agent." These circulars emphasized that the relationship between the service provider and the client should be in the nature of principal and agent, involving activities such as receiving goods, warehousing, dispatching goods, and preparing invoices. The Tribunal found that the appellant did not engage in these activities and, therefore, could not be classified as a "Clearing & Forwarding Agent." The Tribunal also cited the Calcutta High Court's decision in Karamchand Thapar & Bros. (Coal Sales) Ltd. v. Union of India, which supported the conjunctive interpretation of the term.

Issue 4: Determination of Service Tax Liability and Penalties
The Tribunal concluded that the appellant's activities did not fall under the "Clearing & Forwarding Agent" services, thereby nullifying the Service Tax demand and penalties imposed by the adjudicating authority. The Tribunal highlighted that the appellant did not receive goods from the principal, store them, dispatch them, or prepare invoices on behalf of the principal. Additionally, the appellant did not receive any commission for such services, further supporting their argument.

Conclusion:
The Tribunal set aside the impugned order, holding that the appellant was not providing "Clearing & Forwarding Agent" services. Consequently, the Service Tax demand and penalties were annulled, and the appeals were allowed with consequential relief.

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