2005 (7) TMI 2 - AT - Service Tax

Clearing & Forwarding service clearing and forwarding both must be satisfied to levy service tax under this category.

Summary

Issues:
1. Whether the appellant's services to its members are considered "clearing and forwarding services" for the purpose of service tax liability.

Analysis:
The judgment revolves around the classification of the appellant's services provided to its members within the realm of "clearing and forwarding services" for the imposition of service tax. The appellant, a Co-operative of Starch and Sago manufacturers, allows its members to bring sago consignments for sale at its premises, where the consignments are auctioned off. The key contention raised by the appellant is that they merely provide a platform for facilitating sales, emphasizing that they do not engage in the physical handling or forwarding of the consignments. The appellant argues that since the consignments are brought by the owners themselves and delivered to buyers at the sales premises without any forwarding involved, the characterization of their services as clearing and forwarding is unwarranted.

The Tribunal delves into the question of whether the co-operative society and its members should be considered as separate entities for the purpose of determining service provision. Even if treated as distinct entities, the Tribunal finds no basis for categorizing the co-operative society's activities as clearing and forwarding services. Notably, the Tribunal references a prior decision in the case of Mahavir Generic to support its conclusion. The Tribunal emphasizes that since the appellant does not undertake any clearing of consignments from its premises and no forwarding occurs post-sale, the characterization of their services as clearing and forwarding is untenable. Consequently, the Tribunal rules in favor of the appellant, setting aside the impugned order and allowing the appeal, thereby relieving the appellant from the service tax demand stemming from the disputed classification.

In conclusion, the judgment underscores the importance of analyzing the actual nature of services provided by an entity to determine its tax liability accurately. The Tribunal's decision highlights the significance of the specific operational processes involved in a transaction to ascertain whether it aligns with the legal definition of a particular service category, such as clearing and forwarding. By meticulously examining the factual circumstances and the absence of forwarding activities in the present case, the Tribunal concludes that the appellant's services do not fall within the ambit of clearing and forwarding services, warranting the reversal of the tax demand and granting relief to the appellant.