2015 (9) TMI 53 - AT - Service Tax

Clearing & Forwarding Agency Service or Business Auxiliary Service - penalty of under Sections 78 & 76 and also under 75A and 77 of the Finance Act - Held that - Appellant s principal activity is sale and marketing of goods on behalf of the principal manufacturer and also for carrying out storage and distribution. The lower authorities have held that the levy would fall under C&F Agent service because the appellants are handling the goods in addition to sale and marketing. In view of definition and Explanation to Section 65 (19), it is clear that appellant s principle activity is sale and marketing of the goods for their principal manufacturer, eventhough they may handle the goods for storage and distribution and forwarding of goods. The Tribunal in an identical issue in the case of CCE Vs Transasia Sales Syndicate (2007 (7) TMI 82 - CESTAT, BANGALORE ) held that service rendered by the assessee do not fall under Clearing & Forwarding service but as Commission Agents . - appellant s principle activity is not related to clearing & forwarding of goods, as it is clearly evident from the agreement that the appellant was appointed as Commission Agent for marketing and sale of goods. Therefore, the demand under C&F service is not sustainable as held in the above Tribunal s decision in CCE Vs Transasia Sales Syndicate (supra) which has been upheld by Hon ble Supreme Court as reported in 2012 (3) TMI 419 - SUPREME COURT . - service tax demand confirmed under C&F service is not sustainable - Decided in favour of assessee.

Summary

Issues:
- Classification of service tax on commission received by appellants under Clearing & Forwarding Agency Service for the period September 1999 to March 2004.
- Applicability of Sections 78, 76, 75A, and 77 of the Finance Act in confirming the demand and penalty.

Analysis:

Issue 1: Classification of Service Tax
The primary issue in this case revolves around the classification of service tax on the commission received by the appellants under Clearing & Forwarding Agency Service. The appellants argued that they acted as commission agents, primarily engaged in the sale and marketing of goods on behalf of the principal manufacturer. They relied on relevant agreements and circulars to support their position. The key contention was whether the appellants' activities should be classified under Business Auxiliary Service as commission agents or as Clearing & Forwarding Agents. The Tribunal analyzed the agreements between the appellants and the principal manufacturer, noting clauses that specified the appellants' role in marketing and selling goods, entitling them to a commission based on sales. The Tribunal referred to the definition of "commission agent" under the Act, emphasizing that the appellants' principal activity was sales and marketing, even though they also handled goods for storage and distribution. Citing precedents and the Tribunal's order in a similar case, it was concluded that the appellants' activities aligned more with commission agents rather than Clearing & Forwarding Agents.

Issue 2: Applicability of Sections 78, 76, 75A, and 77
Regarding the applicability of Sections 78, 76, 75A, and 77 of the Finance Act in confirming the demand and penalty, the adjudicating authority had confirmed the demand and imposed penalties under these sections. The LAA upheld the demand and penalty, except for setting aside the penalty under Section 78. The appellants challenged these penalties in the present appeals. After hearing arguments from both sides, the Tribunal focused on the core issue of service tax classification. By analyzing the nature of the appellants' activities and the agreements in place, the Tribunal concluded that the demand under Clearing & Forwarding Agent service was not sustainable. Citing a Tribunal decision upheld by the Hon'ble Supreme Court, the Tribunal set aside the impugned orders, allowing the appeals and rejecting the service tax demand confirmed under Clearing & Forwarding service.

In conclusion, the Tribunal's detailed analysis and reliance on legal provisions, agreements, and precedents led to the classification of the service tax demand in favor of the appellants as commission agents rather than Clearing & Forwarding Agents. The decision highlighted the importance of understanding the nature of services provided and the specific terms of agreements in determining the appropriate tax classification.