2009 (5) TMI 52 - AT - Service Tax

Clearing and Forwarding Agent (C&F Agent) versus Business Auxiliary Service (BAS) - Commissioner (Appeals) found that the marketing agents appointed by the respondents did not carry out any activity other than procuring orders for the respondents goods - This activity was brought under the tax net with effect from 1-7-2003 when BAS introduced. BAS, inter alia, covered of promotion of marketing or sale of goods. Therefore the service involved is correctly classifiable under BAS with effect from 1-7-2003. Same services could not be classified under C&F Agent service for any previous period as the scope of C & F Agent service was not modified when BAS was introduced in the Act demand is not sustainable.

Issues:
1. Whether the demands of service tax against the respondent were correctly vacated by the Commissioner (Appeals) for services availed from marketing agents?
2. Whether the services provided by the marketing agents fall under the category of 'Clearing and Forwarding Agents' for the purpose of service tax liability?
3. Whether the introduction of Business Auxiliary Service (BAS) with effect from 1-7-2003 impacts the classification of services availed by the respondents during the period of 10/97 to 8/99?

Analysis:

Issue 1:
The Commissioner (Appeals) vacated two demands confirmed against the respondents concerning services classified under "Clearing and Forwarding Agents" availed from marketing agents. The original authority found that the marketing agents were required to perform functions similar to those of C&F Agents as per the agreement with the respondents. The Commissioner (Appeals) distinguished the case from a previous judgment by highlighting that the marketing agents did not engage in marketing goods like in the previous case. The respondents had a dedicated marketing department and did not require the marketing agents to perform those functions. Therefore, the Commissioner (Appeals) held that the respondents were not liable to pay service tax for the services provided by the marketing agents.

Issue 2:
In the appeal filed by the revenue, it was argued that the marketing agents not only procured orders but also carried out additional functions as per the agreement. The respondents, in their cross objection, emphasized that the marketing agents were not involved in handling goods or transportation, and the possession of a warehouse was optional as per the agreement. The introduction of BAS with effect from 1-7-2003 was highlighted, stating that the impugned services were covered under BAS, making them not exigible to service tax during the period of 10/97 to 8/99.

Issue 3:
The Tribunal analyzed the scope of services provided by Clearing and Forwarding Agents as per the Board's Circular and previous judgments. It was established that the activities performed by the respondents did not align with those of C&F Agents. The Tribunal referred to a Larger Bench decision which clarified that mere procuring orders by an agent on a commission basis did not amount to providing services as a C&F Agent. The Tribunal concluded that the services provided by the marketing agents were correctly classifiable under BAS introduced from 1-7-2003 and not under C&F Agent services. The Tribunal upheld the impugned order, rejecting the appeal by the revenue and disposing of the cross objection filed by the respondents.

In conclusion, the Tribunal sustained the decision of the Commissioner (Appeals) to vacate the demands of service tax against the respondents for services availed from marketing agents, clarifying the classification of services under the relevant tax categories.

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