2009 (2) TMI 137 - AT - Service Tax

Clearing and Forwarding Agency Service versus Business Auxiliary Service - appellant was getting goods as a broker from the principal and keeping the same for sometime till buyer is found for selling the goods received from the principal. It is submitted that this is not a case of clearing & forwarding agency but a business auxiliary service. Appellant relies on paras 17 to 21 of the agreement between the parties. According to the appellant the appellant only furthers business of principal as an agent. Therefore the appellant should succeed when the law was not in force even to bring business auxiliary services into tax net. Held that a bare perusal of the relation of the principal and agent read with the CBEC Circular No. 8/43/7/97-TRU dated 11-7-1997 brings the very nature of activity of the present appellant to the scope of the law under the category of Clearing & Forwarding Agency.

Summary

Issues: Classification of services as business auxiliary service or clearing & forwarding agency.

In this case, the main issue revolves around the classification of services provided by the appellant as either business auxiliary service or clearing & forwarding agency service. The appellant argues that they act as a broker receiving goods from the principal and keeping them until a buyer is found, furthering the business of the principal as an agent. On the other hand, the respondent contends that the agreement clearly establishes a relationship where both parties discharge obligations towards each other, indicating a clearing and forwarding agency relationship.

The Tribunal carefully analyzed the nature of activities carried out by the appellant as highlighted in the appellate order. The Tribunal noted that goods received from the principal were delivered to serve the principal's interests, a characteristic of clearing and forwarding services. Referring to previous judgments, including Larsen & Toubro case, Naresh Kumar & Co. (P.) Ltd. v. CST, and Karam Chand Thappar v. CST, the Tribunal emphasized the importance of the agreement's characteristics in determining liability. By considering the legal aspects along with the factual background, the Tribunal concluded that the appellant's activities fell within the scope of a Clearing & Forwarding Agency, dismissing both appeals.

Overall, the judgment clarifies the distinction between business auxiliary services and clearing & forwarding agency services based on the nature of activities and the relationship between the parties as outlined in the agreement. The decision underscores the significance of analyzing the specific obligations and functions performed by the appellant to determine the appropriate classification under the relevant laws and regulations.