2023 (11) TMI 613 - AT - Service Tax

Classification of services - Clearing and Forwarding Agents Services or Custom House Agent service - Appellants are undertaking work of facilitating of shipping of goods through various Shipping Lines or Airlines - HELD THAT - The appellants have been paying service tax on the charges recovered by them for undertaking work of custom clearances from their clients. The customs clearance work was being done by them through the some other person who are appropriately registered as custom house agent with the customs department - the activity undertaken by the appellant cannot be categorized under Clearing And Forwarding Agent Service since in the appellants own case this tribunals in GUDWIN LOGISTICS VERSUS COMMISSIONER OF CENTRAL EXCISE 2011 (12) TMI 262 - CESTAT, AHMEDABAD has held that the activity under taken by the appellant do not fall under the category of Clearing And Forwarding Agent Service. Thus, the activity undertaken by the appellant do not fall under the category of clearing and forwarding service. The impugned Commissioner (Appeal) s order is set aside as it has traveled beyond the charges elicited in the show cause notice and in the impugned Order-In-Original - appeal allowed.

Issues Involved:
1. Classification of services provided by the appellant.
2. Validity of the Commissioner (Appeals) decision.
3. Imposition of penalties under the Finance Act, 1994.

Summary:

1. Classification of Services Provided by the Appellant:
The appellants facilitated the shipping of goods through various Shipping Lines or Airlines and outsourced Custom Clearance work to qualified Customs House Agents (CHA) since they did not possess a valid CHA license. The Department contended that the appellants' activities should be classified under "Clearing and Forwarding Agents Services" rather than "Customs House Agent" services. Two show cause notices were issued, demanding service tax and proposing the cancellation of their CHA registration, arguing that they should register under "Clearing & Forwarding Agent" services as defined in Section 65(25) of the Finance Act, 1994.

2. Validity of the Commissioner (Appeals) Decision:
The Commissioner (Appeals) classified the services under "Business Auxiliary Service" as defined under Section 65(19) of the Finance Act, 1994, which was beyond the scope of the show cause notice and the Order-In-Original. The Tribunal found that the Commissioner (Appeals) had erred by traveling beyond the charges specified in the show cause notice. The Tribunal referenced the Supreme Court decision in Caprihans India Ltd. Vs. Commissioner of Central Excise, which held that the adjudicating authority cannot go beyond the charges in the show cause notice.

3. Imposition of Penalties:
The Tribunal noted that the appellants were paying service tax on the charges for custom clearances undertaken by registered CHAs. It was determined that the activities did not fall under "Clearing and Forwarding Agent Service" as previously adjudicated in the appellants' own case (2012(26) S.T.R 443). The Tribunal emphasized that the appellants did not engage in the core activities of Clearing and Forwarding Agents, such as handling goods, warehousing, or dispatching goods on behalf of a principal, which are essential characteristics of such services.

Conclusion:
The Tribunal set aside the impugned orders, holding that the activities undertaken by the appellant do not fall under the category of "Clearing and Forwarding Agent Service." The Commissioner (Appeals) decision was also set aside for exceeding the scope of the show cause notice. The appeals were allowed, and the Tribunal relied on the Supreme Court decision in Caprihans India Ltd. to support its findings.

(Pronounced in the open court on 09.11.2023)

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