2012 (10) TMI 161 - AT - Service Tax

Clearing and Forwarding Agent - assessee contested to fall under the category of Cargo Handling Service - service tax demand, penalty u/s 78, 76, 75A & personal penalty u/s 81 - period 2001-02 to 2003-04 - Held that - Under the agreement dt.30.03.2001, M/s. SAIL had appointed the Appellant as their Consignment Agent and authorized them to receive the stocks from railway yard on their behalf, stack it in the stock yard, maintain the stock in the stock yard properly and load in the trucks of consignees of Nepal after preparation of necessary documents for and on behalf of M/s. SAIL. The activities were not limited to just loading and unloading of the cargo but also involves stacking which included marking/painting, loading into customers vehicle for delivery with weighment and necessary documentation. Also, the Appellant were required to carryout the stock verification during storage of the said goods at the said stockyard. A comparison between activities carried out by the Appellant and the ones listed in the Circular dt. 11.07.1997 was issued by the CBEC , it is clear that the Appellant s services rendered to M/s SAIL fall under the scope of clearing and forwarding service. Besides, under the said agreement the Appellant represent M/s SAIL before all concerned relating to the movement of said goods, as their agent. As decided in COMMISSIONER OF C. EX., BANGALORE-I Versus MAHAVEER GENERICS 2009 (11) TMI 104 - KARNATAKA HIGH COURT the activities which the consignment agents were required to discharge had been narrated in the said agreement namely, the principal to supply the product from any of its depots in loan licence to the agent on a consignment basis through a stock-transfer note for sale by him, as the agent of the principal. Thus the relationship between M/s SAIL and the Appellant is admittedly that of a principal and agent, which is also amply clear from various terms and conditions of the agreement. The service of consignment agent has been specifically included in the scope of Clearing and Forwarding Agent service. Admittedly, the Appellant carry out all these activities as an agent of M/s SAIL for movement of the goods and hence the Appellant render the service of a clearing and forwarding agent - against assessee. Invoking extended period of limitation - Held that - The longer period of limitation is invokable as the Appellant had not discharged their service tax liability inspite of being made liable to discharge all statutory liability of a consignment agent as stipulated at clause 9.4 of the Consignment Agency agreement with M/s SAIL besides they suppressed the taxable value & intentionally evaded payment of service tax stating the service rendered by them as cargo handling service - there is an element of mis-declaration by the Appellant all along claiming that their services a export services and the amounts of sale proceeds were received in convertible foreign currency and not in the Indian Rupees and also suppression of the taxable value received from M/s SAIL inspite of repeated reminders from the Range Officer, thus the demands issued to them are not barred by limitation and extended period of limitation is rightly invoked - against assessee. Only personal penalty imposed on the Director, Shri Atul Kumar Jain u/s 81 is not maintainable as oth the authorities below have not recorded specific involvement of Shri Atul Jain in the short/non payment of the service tax warranting a personal penalty against him except holding that he was overall incharge of the affairs of the Appellant Company.

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of service tax on the services rendered.
3. Invocation of extended period of limitation for issuing show cause notices.
4. Imposition of penalties on the appellant company and its Director.

Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The primary issue revolves around whether the services rendered by the appellant to M/s SAIL fall under the category of "Cargo Handling Services" or "Clearing and Forwarding Agent" services. According to the agreement dated 30.03.2001, the appellant was appointed as a consignment agent by M/s SAIL. The appellant's responsibilities included receiving goods from the factory, transporting them, storing them with proper stacking, and dispatching them as per SAIL's instructions. The Tribunal referred to the definitions in the Finance Act, 1994, and the CBEC Circular dated 11.07.1997, which outlines the activities of a Clearing and Forwarding Agent. After comparing the activities, it was concluded that the appellant's services align more closely with those of a Clearing and Forwarding Agent rather than Cargo Handling Services.

2. Applicability of Service Tax on the Services Rendered:
The appellant argued that their services were related to the handling of export cargo to Nepal and thus should be exempt from service tax. However, the Tribunal found that the services provided by the appellant, including receiving, storing, and dispatching goods on behalf of M/s SAIL, fall under the category of Clearing and Forwarding Agent services. The Tribunal emphasized that the relationship between M/s SAIL and the appellant was that of a principal and agent, and the services rendered were not limited to cargo handling but included activities typical of a Clearing and Forwarding Agent. Therefore, the appellant was liable to pay service tax on these services.

3. Invocation of Extended Period of Limitation for Issuing Show Cause Notices:
The Tribunal addressed the issue of whether the extended period of limitation was rightly invoked. For Appeal No. ST-188/08, the show cause notice was issued invoking the extended period due to suppression of taxable value and non-payment of service tax, discovered during a raid by DGCEI. The Tribunal agreed with the Commissioner (Appeals) that the extended period was applicable as the appellant had not discharged their service tax liability and had misdeclared their services. For the subsequent show cause notices (Appeal No. ST-178/08), the Tribunal found merit in the argument that there was a change in circumstances, including non-cooperation by the appellant and misdeclaration of services as export services. Thus, the extended period of limitation was rightly invoked for all notices.

4. Imposition of Penalties on the Appellant Company and Its Director:
The Tribunal upheld the penalties imposed on the appellant company under various provisions of the Finance Act, 1994, due to the intentional evasion of service tax and misdeclaration of services. However, regarding the personal penalty on the Director, Shri Atul Kumar Jain, the Tribunal found no specific involvement in the short/non-payment of service tax. The authorities below had only stated that he was overall in charge of the company's affairs. Therefore, the personal penalty imposed on Shri Atul Kumar Jain was set aside, and his appeal (ST-189/88) was allowed.

Conclusion:
The Tribunal dismissed the appeals (ST-188/08 and ST-178/08) filed by the appellant company, upholding the orders of the lower authorities. However, the appeal (ST-189/88) filed by the Director, Shri Atul Kumar Jain, was allowed, and the personal penalty imposed on him was set aside.

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