2009 (2) TMI 119 - AT - Service Tax

Service Tax Clearing and Forwarding Agent s Service Assessee submitted that , they were only assisting their principals by way of procuring orders as also by way of rendering assistance in the matter of storage, transportation etc., of the goods they further submitted that such service would not qualify to be clearing and forwarding agent s service (C & F service) to be taxed under the service tax provisions of the Finance Act, 1994 Tribunal observed that the real nature of the transactions between them and their principals requires to be deciphered not only from the text of the agreements but also from other documents like debit notes associated therewith - In this view of the matter, the genuineness of the appellants claim of not having physically dealt with the goods in the course of rendering assistance to their principals is in serious doubt. Stay granted partly.

Summary

Issues:
Waiver of pre-deposit and stay of recovery in service tax dispute involving assistance agreements designated as 'agents' and 'principals'.

Analysis:
The case involved an application seeking waiver of pre-deposit and stay of recovery regarding a substantial service tax amount and penalties imposed on the appellant. The appellants were engaged in rendering assistance to certain parties under agreements designating them as 'agents' of the other contracting parties referred to as 'principals'. The appellants claimed that the services provided did not fall under the category of 'clearing and forwarding agent's service' to be taxed under the Finance Act, 1994. The agreements produced by the appellants were scrutinized to determine the nature of their services. The learned consultant for the appellants argued that they never physically handled the goods procured by the principals, emphasizing their role in procuring orders and providing assistance in storage and transportation. However, the learned SDR contended that certain provisions in the agreements indicated that the appellants were expected to deal with the goods as well. Reference was made to an agreement with M/s. Sone Vanaspati Ltd., highlighting commission charges and debit notes raised by the appellant, suggesting a more involved role in the transactions than mere assistance. The Tribunal found that the real nature of the transactions needed to be ascertained not just from the agreements but also from associated documents like debit notes. The genuineness of the appellants' claim of not physically handling the goods was cast into doubt, indicating a lack of a prima facie case against the service tax demand.

In the absence of a clear demonstration of financial hardships supported by evidence, the Tribunal directed the appellants to pre-deposit a specified sum within a stipulated timeframe, failing which the recovery proceedings would continue. The decision was based on the assessment that the appellants had not successfully established their case against the service tax demand, considering the nature of their services and the associated documentation. The Tribunal's ruling underscored the importance of examining all relevant aspects of the agreements and supporting documents to determine the actual nature of the transactions and the applicability of service tax provisions.