2008 (5) TMI 167 - AT - Service Tax

Appellant, manufacturer appointed M/s. Shatabdhi as their Consignment Sale Agent to effect sales, stock the products at the price fixed by them - ownership of the goods remain with appellants - M/s. Shatabdhi was paid a commission on the net realized sales agent paid service tax as C/F agent on commission collected from appellant held that agent is not covered as C/F agent hence refund claimed by appellant is rightly entitled because incidence of service tax is born by appellant himself

Summary

Issues:
Refund claim of Service tax paid by the appellants to their Consignment Sale Agent, M/s. Shatabdi Paints.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals-II), Bangalore. The appellants, M/s. Marigold Paints Pvt. Ltd., appointed M/s. Shatabdi Paints as their 'Consignment Sale Agent' to sell goods on their behalf. M/s. Shatabdi Paints collected Service tax from the appellants on the commission earned. The appellants, though believing the services were not taxable, advised M/s. Shatabdi to register under the 'Clearing and Forwarding' category and pay Service tax. The appellants applied for a refund of the Service tax paid, relying on a Tribunal decision. However, the lower authority rejected the refund claim based on a different Tribunal decision. The Commissioner (Appeals) also rejected the appeal, stating that the Department had appealed against the Tribunal decision relied upon by the appellants.

Upon careful consideration, the Tribunal found that the decision relied upon by the lower authority had been overruled by a Larger Bench decision in another case. The Tribunal referred to the functions of a 'Clearing and Forwarding Agent' (C & F) as outlined in a Trade Notice, emphasizing the specific activities such agents undertake. The Tribunal concluded that M/s. Shatabdi Paints, as a 'Consignment Sale Agent,' did not fall under the category of a 'Clearing and Forwarding Agent' and thus were not required to pay Service tax. Relying on the Larger Bench decision, the Tribunal allowed the appeal, stating that the appellants were entitled to the refund claim as they had borne the incidence of the Service tax.

In conclusion, the Tribunal overturned the lower authority's decision, emphasizing that the appellants' agent did not qualify as a 'Clearing and Forwarding Agent' and therefore were not liable to pay Service tax. The Tribunal allowed the appeal and granted the appellants the refund claim with consequential relief.