2006 (9) TMI 14 - AT - Service Tax

Service Tax Clearing and Forwarding Consignment stockist Appellant rendered services as consignment stockist and their activities of movement of goods from the factory/warehouse of principal to final destination were covered under clearing and forwarding operations (2) Interpretation of law (3) Department clarification

Issues Involved:
1. Whether the appellant provided taxable services as a "Clearing & Forwarding Agent".
2. The applicability of service tax on the services rendered by the appellant.
3. The imposition of penalties on the appellant for non-payment of service tax.
4. The classification of the appellant's services under the Finance Act, 1994.

Detailed Analysis:

1. Whether the appellant provided taxable services as a "Clearing & Forwarding Agent":
The appellant contended that it did not render services as a "Clearing & Forwarding Agent" but was engaged in a composite service of selling goods on behalf of GAIL, with storage and other activities being ancillary. The appellant argued that its activities of taking delivery of goods and selling them did not constitute clearing and forwarding operations. The Tribunal, however, examined the agreement between the appellant and GAIL, noting clauses that indicated the appellant's involvement in the movement of goods from the factory/warehouse to the buyers, which included responsibilities for lifting, receiving, stocking, and delivering goods. The Tribunal concluded that these activities constituted clearing and forwarding operations.

2. The applicability of service tax on the services rendered by the appellant:
The appellant argued that the services rendered were not taxable under the definition of "Clearing & Forwarding Agent" as per Section 65(105)(j) of the Finance Act, 1994. The Tribunal referred to the definition of "Clearing & Forwarding Agent" under Section 65(25) and noted that it includes consignment agents. The Tribunal also considered various judicial precedents and circulars, which supported the inclusion of consignment agents within the scope of clearing and forwarding operations. The Tribunal held that the appellant's activities fell within the taxable service of clearing and forwarding operations as defined under the Act.

3. The imposition of penalties on the appellant for non-payment of service tax:
The appellant requested leniency in the imposition of penalties, citing financial crises and closure of its units. The Tribunal noted that the appellant had not paid the service tax nor filed the required returns during the relevant period. The Tribunal also observed that the appellant did not challenge the levy of service tax before the lower authorities and sought only recalculation of the amount due. Given the clear evidence of taxable services rendered and the appellant's failure to comply with statutory requirements, the Tribunal found no grounds to waive the penalties imposed.

4. The classification of the appellant's services under the Finance Act, 1994:
The appellant argued that its services were composite in nature and should not be classified solely as clearing and forwarding operations. The Tribunal referred to Section 65(A) of the Finance Act, 1994, which deals with the classification of taxable services. The Tribunal noted that the appellant's services were not classifiable under multiple heads and that the provisions of Section 65(A) were not applicable to the period in question. The Tribunal concluded that the appellant's activities were clearly within the scope of clearing and forwarding operations and upheld the classification of the services under the relevant provisions of the Finance Act, 1994.

Conclusion:
The Tribunal dismissed the appeal, affirming the order of the Commissioner (Appeals) and holding that the appellant was liable to pay service tax as a "Clearing & Forwarding Agent". The Tribunal found that the appellant's activities constituted clearing and forwarding operations and were taxable under the Finance Act, 1994. The penalties imposed for non-payment of service tax were also upheld.

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