2013 (4) TMI 45 - HC - Service Tax

Classification - Consignment agent or selling agent - clearing and forwarding (C & F Agent) - Held that the Tribunal has concluded that the case of the respondent/assessee is clearly covered by the ratio of the decision in the case of M/s. Raja Rajeshwari Intl. Polymers Pvt. Ltd 2005 (1) TMI 423 - CESTAT BANGALORE wherein it has been observed that the dealer agent falls within the purview of Clearing and forwarding operation as the goods not directly or indirectly handled by him and no service tax is leviable on commission received by him on account of Del Credre Agency. Moreover, the said conclusion/observation stands settled by Larger Bench of the Tribunal in the case of Larsen & Toubro Ltd. v. Commissioner of Central Excise, Chennai reported in 2006 (6) TMI 3 - Appellate Tribunal, New Delhi wherein it has been held that services of commission agent are included in the definition of business auxiliary service and mere procuring or having orders for the principal by an agent on payment of commission basis would not amount to providing services as clearing and forwarding agent , within the meaning of definition of that expression under section 65(25) of the Finance Act, 1994. In the present case, from the different clauses of agreement between the parties and nature of acts performed by the assessee, it cannot be stated to be a Clearing and Forwarding Agent of BALCO. He was selling the goods received from BALCO to his own customers and receiving a discount in the process. - Assessee not liable to service tax - Decided against the revenue.

Issues Involved:
1. Whether the respondent assessee was providing taxable service as a Clearing and Forwarding Agent of BALCO.
2. Interpretation of the agreement between the respondent and BALCO.
3. Applicability of Section 65(25) and Section 65(105)(j) of the Finance Act, 1994.
4. Analysis of the respondent's activities in relation to the definition of Clearing and Forwarding Agent.
5. Consideration of previous judicial decisions and trade notices.

Issue-wise Detailed Analysis:

1. Whether the respondent assessee was providing taxable service as a Clearing and Forwarding Agent of BALCO:
The core issue was whether the respondent, under the agreement with BALCO, acted as a Clearing and Forwarding Agent (C & F Agent) and thus was liable to pay service tax. The departmental authorities believed the services rendered by the respondent amounted to clearing and forwarding services, making them liable for service tax. However, the respondent argued against this liability, stating they were not providing such services.

2. Interpretation of the agreement between the respondent and BALCO:
The agreement dated 28.7.1999 appointed the respondent as a consignment agent for BALCO. The Adjudicating Officer concluded that the respondent's activities under this agreement fell within the definition of a C & F Agent. However, the Appellate Commissioner, upon reviewing the agreement, found that the respondent was neither clearing nor forwarding goods but was purchasing and selling goods on their own invoices, receiving quantity discounts rather than commissions. The Tribunal upheld this view, noting that the respondent's activities did not align with those typically performed by a C & F Agent.

3. Applicability of Section 65(25) and Section 65(105)(j) of the Finance Act, 1994:
Section 65(105)(j) defines taxable service as any service provided to a client by a C & F Agent in relation to clearing and forwarding operations. Section 65(25) defines a C & F Agent as any person engaged in providing any service connected with clearing and forwarding operations, including consignment agents. The court had to determine if the respondent's activities under the agreement fell within these definitions.

4. Analysis of the respondent's activities in relation to the definition of Clearing and Forwarding Agent:
The court examined the specific tasks the respondent performed under the agreement. It was noted that the respondent was responsible for selling goods received from BALCO to their customers, issuing their own invoices, and receiving discounts based on sales volume. The court found that these activities did not include typical C & F Agent tasks such as receiving goods from the principal, warehousing, dispatching as per the principal's instructions, or maintaining stock records. The respondent's role was more akin to that of a seller rather than a service provider engaged in clearing and forwarding operations.

5. Consideration of previous judicial decisions and trade notices:
The court referred to the Tribunal's decision in Mahavir Generics and other similar cases where it was held that merely acting as a consignment agent did not equate to providing clearing and forwarding services. The court also considered the Trade Notice No. 87/97, which outlined typical tasks of a C & F Agent, and found that the respondent did not perform these tasks. The decision in Larsen & Toubro Ltd. v. Commissioner of Central Excise, Chennai was also cited, where the Tribunal clarified that procuring orders as a commission agent did not make one a C & F Agent.

Conclusion:
The court concluded that the respondent did not act as a C & F Agent under the agreement with BALCO. The respondent's activities were not related to clearing and forwarding operations but were more aligned with selling goods independently. The Tribunal's decision to disallow the Revenue's appeal was upheld, and the question was answered in favor of the respondent, dismissing the tax appeal.

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