2018 (3) TMI 552 - AT - Service Tax

Non-payment of service tax - Clearing and Forwarding services - The department was of the view that the respondents are liable to pay service tax on the wheat handling charges under the category of clearing and forwarding agency services - Held that - The sum total of the activities rendered by the respondents show that they are holders of Stevedoring licence and were engaged in transportation and custom house handling works. Thus, they have entered into a composite agreement for facilitating export of wheat by MMTC from the godowns of FCI. Their functions include identification of goods to be exported in co-ordination with the buyers, transportation of the goods and also to provide temporary storage of the goods. The very fact that the respondents are obliged not to provide temporary storage alone but rendering of custom house handling work etc., would show that their activities cannot be classified under clearing and forwarding service - appeal dismissed - decided against Revenue.

Summary

Issues: Alleged non-payment of service tax under "Clearing and Forwarding" services.

In this case, the issue revolves around the alleged non-payment of service tax under the category of "Clearing and Forwarding" services by the respondents. The department contended that the respondents should pay service tax on wheat handling charges under this category. The original authority confirmed the demand, interest, and penalties, but the Commissioner (Appeals) set aside the decision, leading the department to appeal before the Tribunal.

The department argued that the services provided by the respondents should be classified under clearing and forwarding services, not cargo handling services. They highlighted that the respondents were appointed by a company to carry out various services related to the handling of goods, transportation, storage, and customs clearance. The department emphasized that the collective services provided by the respondents fell under the category of clearing and forwarding agent service, justifying the imposition of service tax on the handling charges.

On the other hand, the respondents argued that their activities were not classifiable under Clearing and Forwarding services. They claimed to be engaged in various activities beyond handling wheat, such as manufacturing HDPE sacks, stevedoring, salt trading, and transportation. The Tribunal, after reviewing the records and cross-objections, found merit in the respondent's contention. They concluded that the respondents' activities, including holding a stevedoring license and engaging in transportation and custom house handling works, did not align with the classification of clearing and forwarding services. The Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the department's appeal, stating that the activities of the respondents did not fall under the category of clearing and forwarding services, thus rejecting the imposition of service tax on the handling charges.

Therefore, the Tribunal ruled in favor of the respondents, determining that their activities did not qualify as clearing and forwarding services, and upheld the decision of the Commissioner (Appeals) to set aside the demand for service tax, interest, and penalties.