2013 (12) TMI 1023 - AT - Service Tax

Demand of service tax - Clearing and forwarding agents - Shipment of coal to various thermal power plants - Whether a clarification letter issued by the Board constitute an order u/s 37B - Held that - Section 37B authorizes the Board, where it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise officers as it may deem fit. The letter dated 10.12.2003 is not a letter, instruction, or direction falling within the scope of Section 37B issued to excise/service officers as is apparent from the letter. No other statutory provision has been brought to our notice which authorizes the CBEC to issue advisories to service tax providers, academically interpreting provisions of the fiscal legislation, including of the Act. Be that as it may. In any event, the letter dated 10.12.2003 has not explored the contours of clearing and forwarding agent service either in terms of Section 65(25) or of the taxable service enumerated in Section 65(105)(j). The scope of clearing and forwarding agent service as identified by the contemporaneous executive construction set out in Board Circular dated 11.7.97 nor in the subsequent Board Circular dated 20.4.2012, issued by express invocation of Section 37B of the 1944 Act was not ever adverted to in the letter dated 10.12.2003. We therefore treat the contents of this letter to be random observations, of not amounting to an order or direction issued under Section 37B of the 1944 Act - Decided in favour of assessee.

Summary

Issues:
Service tax demand for providing Clearing and Forwarding Agent service; Interpretation of the definition of 'Clearing and Forwarding Agency' service; Applicability of service tax, interest, and penalties under Sections 76 and 78 of the Act; Scope of services provided by the appellant company; Contention regarding not handling physical coal, lack of contractual relationship with collieries or railways, and absence of receiving coal consignments or dispatch orders; Analysis of various circulars and judicial decisions defining Clearing and Forwarding Agent service; Examination of the letter dated 10.12.2003 and its legal standing as a Board Circular; Evaluation of the letter's impact on the classification of service under the Act; Conclusion on the appeal against the adjudication order confirming service tax demand.

Detailed Analysis:

The judgment pertains to an appeal against a service tax demand of Rs.8,30,371 imposed on the appellant company for providing Clearing and Forwarding Agent service. The primary authority confirmed the demand, interest, and penalties under Sections 76 and 78 of the Act based on the services rendered by the appellant in facilitating the transport of coal to various thermal power plants and coal confirming industries. The appellant denied handling physical coal, having contractual relationships with collieries or railways, or receiving coal consignments or dispatch orders, challenging the classification of their services as Clearing and Forwarding Agency service.

The definition of 'Clearing and Forwarding Agency' service under Section 65(25) of the Finance Act, 1994 was extensively discussed, emphasizing that services indirectly connected with clearing and forwarding operations fall within the taxable service category. Judicial precedents such as Prabhat Zarda Factory (India) Ltd. and Coal Handlers Pvt. Ltd. were cited to illustrate the broad scope of Clearing and Forwarding Agent service, encompassing activities facilitating the transport of goods from the principal's premises to the end customers.

The judgment analyzed the TRU Circulars issued by the Board to clarify the functions of a Clearing and Forwarding agent, highlighting the essential requirement of a principal-agent relationship for services to qualify under this category. It referenced the overruling of the Prabhat Zarda Factory (India) Ltd. decision by a Larger Bench, which differentiated between Clearing and Forwarding Agent service and Business Auxiliary Service based on the nature of activities performed.

The letter dated 10.12.2003, presumed to be a Board Circular, was scrutinized for its impact on the classification of coal merchant services as Clearing and Forwarding Agency service. The court concluded that the letter did not meet the criteria of a Board Circular under Section 37B of the Central Excise Act, 1944, and did not provide a comprehensive analysis of the statutory provisions defining Clearing and Forwarding Agent service. Consequently, the court ruled in favor of the appellant, quashing the adjudication order and allowing the appeal without costs.

In summary, the judgment delves into the nuanced interpretation of the Clearing and Forwarding Agency service, considering statutory provisions, judicial decisions, and executive clarifications to determine the applicability of service tax on the activities performed by the appellant company. The legal analysis provided a comprehensive overview of the issues involved, ultimately leading to the decision in favor of the appellant based on the lack of substantial evidence supporting the service tax demand.