2018 (9) TMI 38 - AT - Service Tax

Classification of services - appellants engaged foreign agents in foreign countries for getting the meat exported from India to be cleared in foreign countries and delivering such goods to the consignees - Whether the Service classified under Business Auxiliary Service or Clearing and Forwarding Agent Service? - Held that - There is no responsibility cast on the foreign agent for promoting the sale of goods produced by the appellant - there is no activity mentioned in the agreement to fit into one of entries at Sl. No. (i) to (vi) of the definition under Section 65 (19) of the Finance Act, 1994. The services rendered by foreign agents to the appellant are correctly classifiable as clearing and forwarding agent service - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of service rendered by foreign agent as "Clearing and Forwarding Agent Service" or "Business Auxiliary Service" under the provisions of Taxation of Services Rules.

In this judgment by the Appellate Tribunal CESTAT ALLAHABAD, the appellants were engaged in exporting frozen meat and utilized foreign agents in foreign countries for clearing the goods and delivering them to consignees. The main issue was to determine whether the service provided by the foreign agent should be classified as "Clearing and Forwarding Agent Service" or "Business Auxiliary Service." The Revenue contended that the services fell under "Business Auxiliary Service" and were subject to service tax under Reverse Charge Mechanism if performed outside India for a recipient in India. On the other hand, the appellants argued that the services should be classified as "Clearing and Forwarding Agent Service" as the foreign agents were not responsible for promoting sales but for clearance and forwarding of goods.

Upon reviewing the agreement between the appellants and the foreign agents, the Tribunal found that the foreign agents were not tasked with promoting the sale of goods. The agreement did not mention any activities falling under the specified entries of the definition of "Business Auxiliary Service." Consequently, the Tribunal concluded that the services provided by the foreign agents should be correctly classified as "Clearing and Forwarding Agent Service." Therefore, the impugned Order-in-Appeal was deemed unsustainable.

The Tribunal allowed the appeal filed by the appellant, stating that they were entitled to consequential relief as per the law. The judgment highlighted the importance of analyzing the specific activities outlined in agreements to determine the appropriate classification of services under relevant tax provisions.