2013 (8) TMI 803 - AT - Service Tax

Nature of Business - Business Auxiliary Service OR Clearing and Forwarding Agent Services - Whether the appellant can be held to be clearing and forwarding agent of their principals - Held that - The service being provided by them was the service of commission agents covered in the definition of Business Auxiliary Service - The definition and scope of clearing and forwarding agents stand clarified by the Board in the circular and COMMISSIONER OF CENTRAL EXCISE, DELHI Versus D. R. POLYMERS 2013 (6) TMI 262 - CESTAT NEW DELHI - Clearing and forwarding agents only received dispatch orders from the principals and prepares the invoices on behalf of the principals - He was not free to sell the goods on its own - the assessee was selling the goods received from the principal, on his own and under the cover of his invoices and was paying sales tax on the same Tribunal held that he cannot be considered to be clearing and forwarding agent of the principal. The taxability of Appellant s service as Business Auxiliary Service (Commissioner Agent) and whether during the period w.e.f. 10-9-2004, they would be eligible for exemption under Notification No. 13/2003-S.T. as amended by Notification No. 8/2004-S.T had not been considered by the Commissioner (Appeals) - for this purpose the matter will had remanded back to Commissioner of Central Excise (Appeals). If service tax was chargeable on the Assesse s service by treating the same as Business Auxiliary Service then longer limitation period would not be applicable and service tax would be demandable only for normal limitation period - Penalty u/s 76 and 78 would be liable to be waived u/s 80 and as such no penalty would be imposable - Matter Remanded Back regarding eligibility for exemption under Notification No. 13/2003-S.T., dated 1-3-2003 as amended by Notification No. 8/2004-S.T., dated 10-9-2004 in respect of period w.e.f. 10-9-2004 and qualification of Service tax demand which would be receivable only for normal limitation period, if it is held that the Appellant are not eligible for exemption vide Notification No. 13/2003-S.T. as amended by Notification No. 8/2004-S.T.

Summary

Issues Involved:
1. Classification of the appellant's services: Whether the appellant's activities fall under 'commission agent' or 'consignment agent'.
2. Applicability of Service Tax: Whether the appellant's services are taxable under the category of 'clearing and forwarding agent'.
3. Eligibility for Exemption: Whether the appellant is eligible for exemption under Notification No. 13/2003-S.T. as amended by Notification No. 8/2004-S.T.
4. Limitation Period for Demand: Applicability of the longer limitation period for service tax demand.
5. Imposition of Penalty: Whether penalties under Sections 76 and 78 are applicable.

Detailed Analysis:

1. Classification of Services:
The central issue was to determine if the appellant's services were those of a 'commission agent' or a 'consignment agent'. The appellant argued that they were acting as commission agents, selling tea under their own invoices and paying sales tax, without receiving dispatch orders from the principals. They cited the definitions of 'commission agent' and 'consignment agent' as per the Finance Act and Black's Law Dictionary, emphasizing the distinction that commission agents cause the sale/purchase on behalf of another person, whereas consignment agents handle goods on behalf of the principal and follow the principal's dispatch orders.

2. Applicability of Service Tax:
The lower authorities and Commissioner (Appeals) had classified the appellant as a clearing and forwarding agent, thereby making them liable for service tax. However, the Tribunal found that the appellant did not perform the typical activities of a clearing and forwarding agent, such as receiving dispatch orders from the principal, arranging dispatch, and preparing invoices on behalf of the principal. Instead, the appellant sold the goods independently and under their own invoices, which aligns more with the role of a commission agent.

3. Eligibility for Exemption:
The Tribunal acknowledged the appellant's claim that their services as commission agents for tea, an agricultural produce, were exempt under Notification No. 13/2003-S.T. as amended by Notification No. 8/2004-S.T. However, the opposing counsel cited a judgment from the Hon'ble Madras High Court which questioned this exemption. Since the Commissioner (Appeals) had not considered this aspect, the Tribunal remanded the matter for re-examination of the appellant's eligibility for exemption.

4. Limitation Period for Demand:
The Tribunal held that if the appellant's services were classified as Business Auxiliary Services, the longer limitation period for service tax demand would not be applicable, given the circumstances of the case. Therefore, the service tax could only be demanded for the normal limitation period.

5. Imposition of Penalty:
The Tribunal concluded that penalties under Sections 76 and 78 should be waived under Section 80, given the nature of the case and the appellant's belief that their services were exempt. Thus, no penalties would be imposed.

Conclusion:
The Tribunal set aside the impugned order, recognizing the appellant's services as those of a commission agent under Business Auxiliary Service. The matter was remanded to the Commissioner of Central Excise (Appeals) to:
(a) Examine the appellant's eligibility for exemption under the relevant notifications for the period from 10-9-2004.
(b) Recalculate the service tax demand for the normal limitation period if the exemption was not applicable.

(Pronounced in the open Court on 26-4-2013)