2013 (8) TMI 566 - AT - Service Tax

Clearing and forwarding services Section 65(105)(j) appellant was rendering assistance in the marketing of goods produced and also ensuring that the goods are sold at the terms and discounts as specified by the manufacturer company Held that - The appellant does not fall within the taxable service category of Clearing & Forwarding Agency Services - he did not deal with the goods at all as is expected in the case of Clearing & Forwarding Agent - he has to procure the orders from the stockists and forward the same - For the services rendered appellant charged commission - Thus, from the terms and conditions entered into by the appellant, it is clear that the appellant was acting as a commission agent by procuring the orders for the sale of the goods as decided in M/s Prabhat Zarda Factory (India) Ltd. Vs. CCE (2002 (2) TMI 4 - CEGAT, KOLKATA) order to be set aside - appeal decided in the favour of the assessee.

Summary

Issues:
Classification of services under 'Clearing and Forwarding Services' for Service Tax liability.

Analysis:

Issue 1: Classification of services under 'Clearing and Forwarding Services'

The case involved a dispute regarding the classification of services provided by the appellant, M/s Malhotra Distributors Pvt Ltd. (MDPL), under the category of 'Clearing and Forwarding Services' for Service Tax liability. The appellant had entered into an agreement with M/s Vidyut Metallics Ltd. (VML) to assist in marketing goods produced by VML by obtaining orders and ensuring sales at specified terms and discounts, for which they received a commission. The Department contended that the services rendered fell under 'Clearing and Forwarding Services,' imposing a Service Tax demand along with penalties. The appellant challenged this classification, arguing that they were solely involved in marketing activities and did not engage in typical clearing and forwarding agent functions as defined by the Circular issued by the CBE&C.

Issue 1 Analysis:
The appellant's counsel highlighted the specifics of the agreement with VML, emphasizing that the appellant's role was limited to procuring orders and ensuring sales terms compliance, without engaging in traditional clearing and forwarding activities like receiving, warehousing, dispatching goods, or preparing invoices. The counsel referenced a Circular clarifying the scope of clearing and forwarding services and cited precedents, including a decision by a Larger Bench of the Tribunal, to support the argument that procuring purchase orders for a vendor on a commission basis did not constitute clearing and forwarding agency services. The counsel also relied on judgments from Punjab & Haryana High Court and other Tribunal decisions to bolster their position that mere order procurement on a commission basis did not fall under the category of Clearing & Forwarding Agency Services.

Issue 1 Conclusion:
After considering the submissions from both sides and reviewing the agreement between the parties, the Tribunal found that the appellant's activities aligned more with acting as a commission agent for order procurement rather than a clearing and forwarding agent. Citing the precedent set by the Larger Bench of the Tribunal and decisions from various High Courts and Tribunals, the Tribunal concluded that the services provided by the appellant did not fit within the taxable service category of Clearing & Forwarding Agency Services. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant.

Overall Conclusion:
The judgment by the Appellate Tribunal CESTAT Mumbai addressed the issue of the classification of services provided by the appellant under 'Clearing and Forwarding Services' for Service Tax liability. Through a detailed analysis of the agreement terms, legal precedents, and relevant definitions, the Tribunal concluded that the appellant's activities as a commission agent for order procurement did not fall within the scope of Clearing & Forwarding Agency Services. The decision provided clarity on the distinction between different service categories, emphasizing the specific functions and activities that define each classification, thereby resolving the dispute in favor of the appellant.