2019 (8) TMI 1302 - AT - Service Tax

Clearing and Forwarding Agents Services - activities of receipt of the goods, storage of same, sale from depot, preparation of invoices, maintenance of records collection of the sale proceeds and remitting the sale proceeds to their principals - service provided without obtaining registration and payment of service tax - demand of service tax on consideration/ commission/ remuneration amounting to ₹ 2,82,57,464/- received during the period Sept 99 to Sept 2003 - demand alongwith interest and penalty - time limitation. HELD THAT - Finance Act, 1994 was amended by Finance Act, 1997 to levy Service tax on various services including the Clearing and Forwarding Agent Services . The scope of the service Clearing Forwarding Agents was explained by the Board in its Circular F.No. B.43/7/ 97-TRU dated 11.7.1997. From the agreement it is quite evident that the appellant undertakes all activities right from the receipt of the goods, storage of same, sale from depot, preparation of invoices, maintenance of records collection of the sale proceeds and remitting the sale proceeds to their principals. It is also evident from clause 2, 7 8, 12 20 that the substantial ownership of the goods is with the Mills (principal) - Thus in terms of the Circular/ Trade Notices issued, appellants undertake all the activities that a Clearing and Forwarding Agent undertakes. Also the agreement provides for the remuneration for the services rendered by the appellants as percentage of the sale effected by them - Hence there are no doubt that the activities undertaken by the appellant are covered by the definition of Clearing and Forwarding Agent as per Section 65(25) of the Finance Act, 1994 - demand of service tax upheld. Extended period of limitation - HELD THAT - Tribunal has in case of Telera Logistics Pvt Ltd 2013 (12) TMI 1021 - CESTAT MUMBAI while upholding the demand made under taxable category of Clearing and Forwarding Agent Services have also upheld the invocation of extended period of limitation as per proviso to section 73(1) of Finance Act, 1994. Thus, the appeal filed should fail both on merits and limitation. Demand of Interest - HELD THAT - Since the demand of tax has been upheld the demand for interest will follow - It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted - the demand of interest made under Section 75 of the Finance Act, 1994 is upheld. Penalty u/s 78 of FA - HELD THAT - It is now settled position in law that penalty under section 78 can be imposed only if the ingredients specified in the said section are present. The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid - Since in respect of show cause notice, the demand could have been made by invoking the extended period of limitation as provided by Section 73, the penalties imposed under Section 78 of The Finance Act, 1994. is upheld. Penalties u/s 75A, 76 and 77 of Finance Act, 1994 - HELD THAT - Penalties under Section 75A, 76 and 77 of Finance Act, 1994 are in nature of civil penalties and are imposed in cases where the person who by his act of omission or commission has failed to fulfill the obligations cast on him under the statue - penalty upheld. Penalty u/s 76 - HELD THAT - Penalty under Section 76 of the Act is imposed for failure to pay Service Tax by the due date - penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Classification of services as "Clearing and Forwarding Agent Services."
2. Applicability of service tax under Section 65(25) of the Finance Act, 1994.
3. Validity of the extended period of limitation for demand under Section 73(1)(a) of the Act.
4. Imposition of penalties under Sections 75A, 76, 77, and 78 of the Act.
5. Interest liability under Section 75 of the Act.

Issue-wise Detailed Analysis:

1. Classification of Services as "Clearing and Forwarding Agent Services":

The tribunal examined whether the appellants' activities fell under the definition of "Clearing and Forwarding Agent Services." The appellants argued that they were only "Depot Agents" and not involved in "Clearing Operations." However, the tribunal noted that the appellants undertook all activities specified in the agreement, including receiving goods, warehousing, dispatching goods as per the principal's instructions, maintaining records, and preparing invoices. The tribunal concluded that the appellants' activities were covered by the definition of "Clearing and Forwarding Agent" as per Section 65(25) of the Finance Act, 1994.

2. Applicability of Service Tax under Section 65(25) of the Finance Act, 1994:

The tribunal referred to the CBEC Circular F.No. B.43/7/97-TRU dated 11.7.1997, which explained the scope of "Clearing and Forwarding Agent Services." The tribunal found that the appellants' activities matched the description provided in the circular. The tribunal also referred to various judgments, including the Karnataka High Court's decision in Mahavir Generics, which held that the services provided by consignment agents fell within the scope of "Clearing and Forwarding Agent Services." The tribunal rejected the appellants' reliance on dictionary meanings and other judgments, stating that the CBEC circulars and relevant case laws provided a clear understanding of the taxable services.

3. Validity of the Extended Period of Limitation for Demand under Section 73(1)(a) of the Act:

The appellants contended that the demand was time-barred as they were under a bona fide belief that they were not rendering taxable services. The tribunal, however, noted that the appellants had not taken registration, did not pay service tax, nor filed ST-3 returns. The tribunal held that the appellants' conduct indicated a willful intention to evade service tax, justifying the invocation of the extended period of limitation. The tribunal referred to the decision in Telera Logistics Pvt Ltd, where the extended period was upheld under similar circumstances.

4. Imposition of Penalties under Sections 75A, 76, 77, and 78 of the Act:

The tribunal upheld the penalties imposed under Sections 75A, 76, 77, and 78 of the Finance Act, 1994. The tribunal noted that penalties under Sections 75A, 76, and 77 are civil penalties imposed for failure to fulfill statutory obligations. The tribunal referred to the Supreme Court's decision in Gujarat Travancore Agency, which held that mens rea is not required for imposing civil penalties. The tribunal also upheld the penalty under Section 78, stating that the conditions for invoking the extended period of limitation were met, and thus, the penalty was justified.

5. Interest Liability under Section 75 of the Act:

The tribunal upheld the demand for interest under Section 75 of the Finance Act, 1994. The tribunal referred to the Bombay High Court's decision in P V Vikhe Patil SSK, which held that interest is a civil liability for the delay in payment of tax. The tribunal also cited other decisions supporting the imposition of interest for delayed payment of service tax.

Conclusion:

The tribunal dismissed the appeal, upholding the classification of services as "Clearing and Forwarding Agent Services," the applicability of service tax, the validity of the extended period of limitation, the imposition of penalties, and the demand for interest. The tribunal relied on relevant circulars, agreements, and case laws to support its decision.