2013 (7) TMI 349 - AT - Service Tax

Classification of service whether appellant was providing clearing and forwarding services by handling and distribution of products Held that - As the assessee has not provided any of the core enumerated activities of clearing and forwarding operations, it has not directly or indirectly provided any service connected with clearing and forwarding operations in any manner to any other person - appellant is not liable to service tax under the taxable head clearing and forwarding agency - appellant was not engaged in any of the six enumerated activities which constitute clearing and forwarding operations- there is neither the conjunctive service of clearing and forwarding provided by the assessee nor either of the services of clearing or forwarding following the decision of Larsen & Toubro Ltd. vs. CCE, Chennai reported in 2006 (6) TMI 3 - Appellate Tribunal, New Delhi) - appeal decided in the favor of the assessee

Summary

Issues involved:
Interpretation of "clearing and forwarding agency service" under Section 65(105)(j) of the Finance Act, 1994.

Analysis:
The judgment discusses the interpretation of the term "clearing and forwarding agency service" as per Section 65(105)(j) of the Finance Act, 1994. It refers to a case where an assessee entered into an agreement with a company for handling and distributing products, receiving commission based on sales, and reimbursement of expenses. The Punjab & Haryana High Court ruled that the levy of service tax for "clearing and forwarding agency service" requires both clearing and forwarding operations to be present. If a person only provides services as a forwarding agent without being involved in clearing operations, they cannot be considered a clearing and forwarding agent.

A full Bench of the Tribunal in a separate case analyzed the activities associated with a clearing and forwarding agent, including receiving goods, warehousing, arranging dispatch, maintaining records, and preparing invoices. It was established that engaging in these activities is essential to be classified as a clearing and forwarding agent providing taxable services.

The Tribunal in the current case found that the appellant did not engage in any of the essential activities of a clearing and forwarding agent. The appellant procured goods from manufacturers and received payments directly without being involved in clearing, warehousing, dispatch, record-keeping, or invoicing. As a result, the appellant did not provide any service connected with clearing and forwarding operations, as required by the law.

Considering the legal precedents and the specific activities of the appellant, the Tribunal concluded that the appellant was not liable to service tax under the category of "clearing and forwarding agency." The Tribunal also highlighted the distinction between commission agency service and Business Auxiliary Service, noting that the appellant was not treated as a Business Auxiliary Service provider either. Consequently, the Tribunal quashed the previous orders confirming the service tax liability, with no costs awarded.

In summary, the judgment clarifies the criteria for classifying a service as "clearing and forwarding agency service" under the Finance Act, emphasizing the necessity of engaging in specific operations related to clearing and forwarding to attract service tax liability.