2006 (6) TMI 2 - AT - Service Tax

Service Tax C F Agent Clearing or Forwarding or both services are covered under the definition of C F Agent for the purpose of service tax Interpretation of law

Summary

Issues Involved:
1. Whether services provided by a person engaged in either clearing, or forwarding operations, or both, fall within the definition of "clearing and forwarding agent" under Section 65(23) of the Finance Act, 1994, so as to attract the levy of service tax?
2. Whether the levy of service tax is attracted only when the clearing and forwarding agent carries out both clearing and forwarding operations, and not otherwise?

Detailed Analysis:

Issue 1: Definition of "Clearing and Forwarding Agent" under Section 65(23) of the Finance Act, 1994

Relevant Legal Provisions:
- Section 65(23) defines "clearing and forwarding agent" as any person engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consignment agent.
- Section 65(90) states that any service provided to a client by a clearing and forwarding agent in relation to clearing and forwarding operations in any manner amounts to taxable service.

Appellant's Argument:
- The appellant argued that their services did not constitute "clearing and forwarding" as defined under the Act. They emphasized the conjunctive nature of the term "and" in "C&F Agent," arguing that unless both clearing and forwarding activities are performed, the service does not become taxable.
- They relied on the Tribunal's decisions in Kulcip Medicines P. Ltd. v. CCE, Delhi-III and Vaman Pharma Pvt. Ltd. v. CC., Bangalore, which held that without performing both clearing and forwarding, the service does not fall under the taxable category.

Revenue's Argument:
- The Revenue argued that the term "and" can be used disjunctively to mean either of the services (clearing or forwarding) would suffice to attract service tax. They cited various legal precedents to support this interpretation.
- They emphasized that the agreement between the appellant and Cipla Limited included multiple activities such as receiving, storing, and distributing stocks, which collectively fall under "C&F operations."

Tribunal's Observation:
- The Tribunal noted that the term "operations" is more extensive than "activities" and encompasses a range of interconnected tasks. The definition of "C&F Agent" should be viewed in this broader context.
- The Tribunal referred to various sources and definitions to conclude that the term "C&F operations" is well understood in trade parlance to include a spectrum of tasks, not necessarily performed simultaneously.

Conclusion:
- The Tribunal held that "C&F operations" cannot be dissected into separate activities of clearing and forwarding. Any service falling within this category would attract service tax under Section 65(23). Thus, the question of whether services provided by a person engaged in either clearing or forwarding operations fall within the definition of "clearing and forwarding agent" was answered in the affirmative.

Issue 2: Requirement of Performing Both Clearing and Forwarding Operations to Attract Service Tax

Appellant's Argument:
- The appellant argued that performing only one of the activities (either clearing or forwarding) does not make them liable for service tax. They highlighted the conjunctive use of "and" in the definition to argue that both activities must be performed to attract tax.

Revenue's Argument:
- The Revenue contended that the context in which "and" is used should be considered. They argued that the term "C&F operations" is a compendious expression that includes any of the services provided by a C&F agent.

Tribunal's Observation:
- The Tribunal observed that the term "C&F operations" should be interpreted as a single composite class of activities. The Tribunal likened this to an orchestra where different instruments contribute to a harmonious performance, implying that various tasks performed under C&F operations are interconnected and collectively form the taxable service.

Conclusion:
- The Tribunal held that the expression "clearing and forwarding operations" includes any of the services provided by a C&F agent, and it is not necessary for both activities to be performed simultaneously to attract service tax. Thus, the question of whether service tax is attracted only when both clearing and forwarding operations are performed was answered in the negative.

Final Judgment:
- The Tribunal concluded that services provided by a person engaged in either clearing or forwarding operations, or both, fall within the definition of "clearing and forwarding agent" under Section 65(23) of the Finance Act, 1994, and attract the levy of service tax.
- It is not necessary for both clearing and forwarding operations to be performed simultaneously to attract service tax. Any service falling under the category of "C&F operations" will be taxable.