2006 (8) TMI 23 - AT - Service Tax

Service Tax Clearing and forwarding services Risk cover is in relation to risk during clearing, forwarding and transport, it is a separate activity from clearing and forwarding Demand of service tax set aside on ground that appellant activities are not clearing and forwarding agent

Summary

Issues:
Nature of service rendered by the appellant, duty demand, penalties

Analysis:
The case involved M/s. Larsen and Toubro providing marketing product support for earth moving equipments manufactured by related companies. The dispute centered on whether the service provided was akin to "clearing and forwarding services," attracting service tax and penalties. The appellant contested the characterization of their service, duty demand, and the imposition of penalties.

Upon reviewing the arguments and evidence, the appellant's counsel highlighted that the agreement focused on promoting sales and offering product support. They emphasized that sales and delivery were direct to equipment purchasers on ex-factory terms, supported by relevant documents. The counsel also referenced a Tribunal decision overruling the notion that procurement of sale orders equated to clearing and forwarding services, which negated the basis of the impugned order.

Conversely, the Senior Departmental Representative (SDR) argued that aspects of the agreement resembled clearing and forwarding, particularly citing pre-delivery equipment inspection and the appellant's risk-bearing responsibility during transport. However, the Tribunal noted that the appellant did not take delivery or dispatch the equipment, clarifying that the inspection aimed to ensure product quality and conformity, not traditional clearing and forwarding activities.

The Tribunal found that the pre-delivery inspection, even if resembling clearing and forwarding, did not meet its essential requirements. The mere presence of risk coverage during transport did not transform the appellant into a clearing and forwarding agent, as risk mitigation methods are distinct from the core activities of such services. Consequently, the Tribunal concluded that the service tax demand and penalties were unsustainable, setting aside the impugned order and ruling in favor of the appellant.

In the final verdict delivered on 11-8-06, the Tribunal allowed the appeal, providing consequential relief to the appellant due to the lack of merit in the service tax demand and penalties, ultimately vindicating M/s. Larsen and Toubro in the dispute.