2007 (7) TMI 82 - AT - Service Tax

Demand(Service tax) - Department alleged that that appellant liable to pay service tax on the commission received under the category of C& F agent services - Held that appellant activity is not covered under C & F agent service and demand set aside

Summary

Issues:
1. Whether the respondents were providing "Clearing & Forwarding Agents" service taxable under the Finance Act, 1994.
2. Whether the services rendered by the respondents fall under the category of 'C & F Agents' or 'Consignment Agents' under the 'Business Auxiliary Service'.

Analysis:

Issue 1:
The case involved the Revenue appealing against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals-II), Bangalore, confirming a demand of Service Tax against the respondents. The Revenue argued that the respondents were providing "Clearing & Forwarding Agents" service, thus taxable under the Finance Act, 1994. The lower authority imposed various penalties and confirmed the demand. The respondents challenged this before the Commissioner (Appeals), who relied on a decision of the Tribunal in a different case and dropped the proceedings against the respondents.

Issue 2:
The Revenue was aggrieved by the decision of the Commissioner (Appeals) on several grounds. They cited a Tribunal case to support the argument that services rendered for procurement of orders and managing market development for commission are chargeable to Service Tax under the category of clearing and forwarding agents. The Revenue also highlighted a CBEC order outlining the essential characteristics of a C & F Agent relationship. The respondents, on the other hand, argued that they were covered under 'Business Auxiliary Services' and not as C & F Agents. They referenced various Tribunal decisions and Supreme Court cases to support their position.

The Appellate Tribunal, after a detailed analysis, held that the distinction between 'Clearing & Forwarding Agents' and 'Consignment Agents' is crucial. A Clearing & Forwarding Agent arranges the dispatch of goods as per the principal's directions without the right to sell the goods. On the other hand, a Consignment Agent sells the goods and receives a commission. The Tribunal referred to specific cases and statutory definitions to support their decision. They concluded that the decision of the Commissioner (Appeals) was correct, rejecting the Revenue's appeal as lacking merit.

In conclusion, the Tribunal's judgment clarified the distinction between different types of agents and upheld the decision in favor of the respondents, emphasizing the specific nature of the services provided by the respondents as Consignment Agents rather than Clearing & Forwarding Agents.