2005 (3) TMI 4 - AT - Service Tax

Service Tax Marketing by clearing and forwarding agent External extent of clearing and forwarding activities Demand

Summary

Issues:
Challenge against order vacating service tax demand confirmed by original authority; Service tax on service rendered by consignment agent; Retrospective revalidation of Rule 2(1)(d)(xii) of Service Tax Rules, 1994; Nature of service rendered by consignment agent; Time-barred demand of service tax; Applicability of case law; Validity of demand raised after 12-5-2000; Parliament's amendments to Service tax provisions; Recovery of service tax from service receivers.

Analysis:
The appeal challenges the order passed by the Commissioner (Appeals) vacating a demand of service tax confirmed against the respondents by the original authority. The dispute arose from the service rendered by the consignment agent to the respondents during the period of 16-7-1997 to 31-8-1999, for which a demand of service tax was raised by the department. The respondents contested the demand on the grounds of not availing any taxable service and the demand being time-barred. The first appellate authority vacated the demand as time-barred, leading to the Revenue's appeal.

The Revenue argued that the tax on the service availed by the respondents was recoverable due to the retrospective revalidation of Rule 2(1)(d)(xii) of the Service Tax Rules, 1994. However, the respondents contended that the service by their consignment agent was not "Clearing and Forwarding" service and hence not taxable. They also emphasized the demand being time-barred, citing relevant case law to support their position.

The Tribunal found that the respondents' claim was supported by case law, stating that the service availed from the consignment agent was not within the purview of "Clearing and Forwarding" and thus not taxable under the Finance Act, 1994. The Tribunal referred to previous decisions to highlight that the demand of service tax was time-barred, making it unsustainable in law. Parliament's amendments to the Service tax provisions were also discussed, emphasizing the limitations on recovery of service tax from the service receivers for the relevant period.

In conclusion, the Tribunal sustained the impugned order, rejecting the Revenue's appeal based on the findings related to the nature of service, time-barred demand, and the legal framework governing the recovery of service tax from the service receivers.