2001 (9) TMI 2 - AT - Service Tax

Summary

Issues:
1. Alleged contravention of Sections 68, 69, and 70 of the Finance Act, 1994 and the Service Tax Rules, 1994.
2. Failure to register under Section 69 of the Act in respect of the 'Clearing and Forwarding Agent'.
3. Failure to collect and deposit Service Tax.
4. Failure to furnish quarterly return in form ST-3 to the Central Excise Officers.
5. Imposition of penalties under Sections 76, 77, and 81(2) of the Act.

Analysis:

1. The appellants, a tobacco manufacturing company, engaged another company as their Agent for marketing their products. The agreement between them included clauses for commission payment, joint marketing activities, and record-keeping responsibilities for the Agent. The Assistant Commissioner issued a show cause notice alleging contravention of various sections of the Finance Act and Service Tax Rules for failure to register, collect and deposit Service Tax, and submit required returns.

2. The Commissioner confirmed a substantial demand on the appellants and imposed penalties for non-compliance. The appeals and stay petitions filed against this order argued that the appointed company was not a Clearing and Forwarding Agent as defined by the Act. The appellants contended that the Agent only collected orders and was not involved in the sale or delivery of goods, thus not liable for Service Tax.

3. The Tribunal considered the agreement clauses and submissions. It found that the Agent's responsibilities included marketing activities, record-keeping, and overseeing dealers, indicating a broader role than just order collection. The Tribunal disagreed with the argument that the Agent was not a Clearing and Forwarding Agent based on the Trade Notice and the Supreme Court's decision on collection of Service Tax from entities other than such agents.

4. While the Tribunal agreed that the Commissioner had exceeded his authority by confirming a higher demand than initially raised, it directed the appellants to make a pre-deposit to stay the recovery of the remaining amount and penalties. The appellants were given six weeks to make the deposit, and the matter was scheduled for further compliance reporting and hearing.

5. In conclusion, the Tribunal upheld the demand for the pre-deposit but waived the balance amount and penalties pending the appeal's disposal. The case highlighted the importance of contractual terms in determining the nature of services provided and the applicability of tax liabilities under the relevant laws and agreements.