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2017 (1) TMI 39 - AT - Service TaxClassification of services - main function of the appellant under the agreement was to receive the goods on the strength of invoice on stock transfer basis and sell the goods on negotiated price to various customers - whether the service would fall under the head commission agent services or under the head Clearing and Forwarding Agent services? - appellant is providing services of receiving/dispatching of goods etc. on the direction of its principal and not for the principal. Held that - the appellant is neither clearing the goods for M/s.B.A.L. nor dispatching the goods at the directions of M/s. B.A.L. The appellant itself identifies and is selling the goods to its buyers as per the terms of agreement between M/s.B.A.L. and the appellant. Thus, the appellant is effectively causing sale of goods on behalf of M/s.B.A.L. and not clearing and forwarding the goods - in an identical set of facts, this Tribunal in the case of D.R. Polymers 2013 (6) TMI 262 - CESTAT NEW DELHI has held that no liability to pay service tax as C & F agent arises, when the service provider is free to sell the goods to the buyers arranged by him - appellant cannot be considered as C & F agent. Appeal allowed - decided in favor of appellant.
Issues:
Interpretation of the definition of a clearing and forwarding agent under Section 65(25) of the Finance Act, 1994; Determination of whether the appellant's activities constitute C&F agent services or consignment sales agent services; Assessment of service tax liability and penalties imposed on the appellant. Analysis: The case involved a dispute regarding the appellant's role as a distributor appointed by a principal company for selling goods. The service tax department alleged that the appellant was acting as a consignment agent providing C&F services. The primary issue was whether the appellant's activities fell under the taxable category of 'Clearing and Forwarding Agent' service. The appellant argued that they were not engaged in C&F work but acted as a consignment sales agent, receiving commission and discounts for facilitating sales. The appellant contended that such commissions and discounts should not be taxable under C&F agent services. The appellant relied on precedents to support their position, emphasizing that they were not performing typical C&F agent activities. On the other hand, the revenue authority maintained that the appellant's activities, as per the agreement with the principal company, constituted C&F agent services, justifying the service tax demand and penalties imposed. The revenue reiterated the findings of the adjudicating authority, asserting that the appellant's actions aligned with the scope of C&F agent services. The Tribunal analyzed the definition of a clearing and forwarding agent under Section 65(25) of the Finance Act, which requires the agent to undertake activities related to clearing and forwarding of goods. The Tribunal referenced a Supreme Court judgment to define clearing and forwarding operations, emphasizing activities like receiving goods, dispatching orders, and maintaining records. Upon reviewing the agreement between the appellant and the principal company, the Tribunal found that the appellant was not involved in clearing and forwarding goods but was facilitating sales on behalf of the principal. Citing a previous Tribunal decision, the Tribunal concluded that when a service provider is free to sell goods to buyers arranged by them, they cannot be considered a C&F agent. The Tribunal ruled in favor of the appellant, stating that the appellant's activities did not warrant service tax liability as a C&F agent. In conclusion, the Tribunal allowed the appeal in favor of the appellant, emphasizing that the appellant's role was that of a consignment sales agent rather than a clearing and forwarding agent, thereby rejecting the service tax demand and penalties imposed on the appellant.
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