2008 (8) TMI 85 - AT - Service Tax

Appellant is a corporation established by State Government with a view to undertake wholesale business of Indian-made foreign liquor - hold that the appellant cannot be considered as an agent rendering services to the State Government for consideration, in spite of the fact that the agreement between the appellant-corporation and the supplier of liquor refer the appellant as procurement agent appellant-corporation is engaged in purchase/sale of liquor and cannot be considered as C & F agent

Summary

Issues:
1. Whether the appellant, a corporation established by the Chattisgarh State Government for wholesale liquor business, is liable to pay service tax under the category of C & F agent?
2. Whether the appellant's role as a procurement agent for the government constitutes a service for consideration?
3. Whether the appellant's transactions with liquor suppliers constitute sale and purchase, or if they are acting purely as an agent?

Analysis:
1. The appellant, a corporation formed by the Chattisgarh State Government for liquor trade, was under scrutiny for service tax liability as a C & F agent. The Commissioner had imposed service tax, interest, and penalties, alleging that the appellant acted as a consignment agent. However, the Tribunal disagreed, emphasizing that the appellant's role was not that of a C & F agent. The Tribunal noted that the appellant purchased liquor at fixed prices and sold it to licensed dealers, operating under strict regulations due to the nature of the product. The transactions were on a FOR destination basis, and the appellant could not be categorized as a service provider in the C & F agent capacity.

2. The Tribunal examined whether the appellant's status as a procurement agent for the government implied a service for consideration. The Commissioner had contended that the appellant acted as a C & F agent, collecting commission for services rendered. However, the Tribunal observed that the State Government did not pay any charges to the appellant for these services, leading to the conclusion that the appellant was not an agent providing services to the government for consideration. Despite references in agreements to the appellant as a procurement agent, the Tribunal held that the appellant's activities did not align with the characteristics of a service provider.

3. Regarding the nature of transactions between the appellant and liquor suppliers, the Tribunal analyzed the agreements and operations. It was found that the transfers were akin to sale and purchase transactions, supported by the appellant's license for liquor purchase and sale. The agreements specified prices on a FOR destination basis, indicating a sale relationship rather than a pure agency role. Despite the appellant labeling income as commission in financial statements, the Tribunal determined that the appellant engaged in liquor purchase and sale activities, not functioning as a C & F agent or an agent for the supplier. Consequently, the Tribunal set aside the Commissioner's order, allowing the appeal with consequential relief and disposing of the cross-objection and miscellaneous application accordingly.