2016 (1) TMI 66 - AT - Service Tax

Clearing and forwarding agent (C&F agent) services - appellant is a distributor of Indian petrochemicals Corporation Ltd. - Scope of the distributor agreement entered by IPCL and the appellant - Held that - appellant is required to function as distributor and is required to sell the products at a price as per the list price and remit the sale proceeds to IPCL appellant is responsible for discharge of all sales tax liability as dealer under the relevant clause; is required to sell the products as per distribution norms of IPCL; required to disclose as distributor and effect sales of products of IPCL on appellants own bills. Identical issue in respect of a distributor of IPCL. In more or less of the same kind of agreement was considered by the Tribunal (in majority decision) in the case of Hardik Industrial Corporation 2011 (9) TMI 494 - CESTAT, AHMEDABAD .

Summary

Issues involved:
Whether the appellant is liable to pay service tax as a clearing and forwarding agent based on the agreement with Indian Petrochemicals Corporation Ltd.

Analysis:
The appeal challenged an Order-in-Original dated 28.06.2006, where the authorities concluded that the appellant, appointed as a distributor by Indian Petrochemicals Corporation Ltd. (IPCL), acted as a clearing and forwarding agent and was liable for service tax. The appellant contested the show cause notice, but the adjudicating authority confirmed the demands. The first appellate authority also dismissed the appeal. The main contention was whether the appellant's role as a distributor fell under the category of clearing and forwarding agent services. The appellant argued that the agreement with IPCL clearly outlined their role as a distributor, not a clearing and forwarding agent, citing specific clauses in the agreement.

The departmental representative, however, argued that the appellant represented themselves as a consignment agent of IPCL based on the agreement's holistic reading. They referred to a judgment by the High Court of Karnataka to support their position. The Tribunal analyzed the agreement and relevant clauses, noting that the appellant was required to function as a distributor, sell products at list prices, remit sale proceeds to IPCL, and disclose as a distributor. The definition of Clearing and Forwarding Agent under section 65(25) was examined, and it was concluded that the appellant did not function as such based on the agreement's terms.

The Tribunal referred to a previous case involving a distributor of IPCL, where a similar agreement was considered, and it was held that the distributor was not a clearing and forwarding agent. The Tribunal found that the arguments raised by the departmental representative were previously addressed and rejected in the earlier case. Consequently, the impugned order was deemed unsustainable, set aside, and the appeal was allowed.