2008 (10) TMI 120 - AT - Service Tax

Demand on services of a Clearing and Forwarding Agent to M/s ITC Limited (ITC) - appellant is not an agent of ITC but an independent dealer dealing in ITC s branded goods. - appellant has Sales Tax registration and issues bills for sales - appellant does not receive goods of ITC, does not store them on behalf of client - Merely receiving the goods in order to sell them from its own premises will not amount to clearing of the goods as a C&F Agent.

Summary

Issues:
1. Whether the appellant provided services as a Clearing and Forwarding Agent to the principal company.
2. Interpretation of the agreement between the parties.
3. Application of Circular No. 59/8/2003-ST and Trade Notice No. 87/97/10/Service Tax/97 in determining the nature of services provided.
4. Comparison of the appellant's activities with the definition of a Clearing and Forwarding Agent under the Finance Act, 1994.

Analysis:
1. The issue revolved around determining whether the appellant, Valli Inc., provided services as a Clearing and Forwarding Agent to the principal company, ITC Limited. The original authority imposed service tax and penalties on Valli based on this premise. The Commissioner (Appeals) affirmed this decision, concluding that Valli indeed rendered C&F Agent's services to ITC.

2. The interpretation of the agreement between ITC and Valli played a crucial role in the judgment. The agreement outlined the responsibilities of Valli, including receiving branded goods from ITC, maintaining a showroom, promoting sales, and remitting proceeds to ITC. The Commissioner (Appeals) analyzed this agreement to determine that Valli acted as a C&F Agent based on the terms and conditions specified.

3. The application of Circular No. 59/8/2003-ST and Trade Notice No. 87/97/10/Service Tax/97 was pivotal in defining the nature of services provided by Valli. The Circular clarified the distinction between consignment agents and commission agents, emphasizing the role of a C&F Agent in receiving and dispatching goods on behalf of the principal. The Commissioner (Appeals) relied on these guidelines to classify Valli's services.

4. The comparison of Valli's activities with the definition of a Clearing and Forwarding Agent under the Finance Act, 1994, was a key aspect of the judgment. Valli argued that it did not meet the criteria of a C&F Agent as it did not undertake traditional C&F operations like warehousing, dispatch orders, and maintaining stock records. The Tribunal analyzed Valli's operations in light of precedents and statutory definitions to determine that Valli's activities did not align with those of a C&F Agent.

5. Ultimately, the Tribunal concluded that Valli's role as a dealer in branded goods did not constitute Clearing and Forwarding Agent's service as defined under the Act. The Tribunal emphasized that Valli's activities, including taking delivery of goods, selling them from its outlet, and operating as an independent dealer, did not meet the criteria of a C&F Agent. The impugned order was set aside, and the appeal was allowed based on these findings.