2014 (3) TMI 335 - AT - Service Tax

Clearing and Forwarding Agent Service - Penalty under Section 75A 76 77 & 78 - Appellant contends that they are simply doing transportation work and unlike clearing and forwarding agent. They are not involved in storing of goods on behalf of the principal and thereafter forwarding them from time to time as per the direction of the principal - Interpretation of Clearing and Forwarding Agent Service - Held that - While arriving at this conclusion we also go by the trade understanding based on sheer common sense which is often uncommon. Because a buyer buys only rice and not wheat in a grocery shop which claims to sell wheat and rice the shop cannot cease to be a shop selling wheat and rice . In the same way rendering only forwarding service cannot make the appellant cease to be a Clearing and Forwarding Agent so as to save him from the tax. Some customers may want only clearing operations while some forwarding and others both. The expression clearing and forwarding operations is a compendious expression of nature of services offered any of which will bring the service providers in the tax net of this category. Moreover in the process of forwarding operations - clearance stages may arise such as at octroi posts or subsequent transits - appellant is engaged in providing transport service as transporter and the initial service of temporary storage of the vehicles at or near railway sidings which is eventually for a few days subject to availability of the rail rakes will not render the appellant to fall under the category of Clearing & Forwarding Agent - Following decision of MEDPRO PHARMA PVT. LTD. Versus COMMISSIONER OF C. EX. CHENNAI 2006 (6) TMI 2 - CESTAT NEW DELHI - Decided in favour of assessee.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of Service Tax under the category of 'Clearing and Forwarding Agent Service'.
3. Interpretation of relevant legal provisions and precedents.
4. Evaluation of the appellant's activities against the statutory definition.
5. Consideration of judicial and administrative precedents.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant is engaged in transportation services for Tata Motors, involving multiple functions such as transporting vehicles to railway sidings, loading and unloading vehicles, paying railway freight, ensuring no damage during transportation, and maintaining stockyards. The core issue is whether these services fall under the category of 'Clearing and Forwarding Agent Service' as defined under Section 65 of the Finance Act, 1994.

2. Applicability of Service Tax under the Category of 'Clearing and Forwarding Agent Service':
The Revenue issued show-cause notices proposing to impose Service Tax on the appellant under 'Clearing and Forwarding Agent Service' for the period April 2001 to March 2005, demanding Rs. 8,69,885/- along with penalties. The adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals), relying on the Tribunal's ruling in Coal Handlers Pvt. Ltd. Vs. Commissioner of Central Excise, Kolkata-I. The Commissioner (Appeals) concluded that the appellant's activities fell within the ambit of 'Clearing and Forwarding Agent Service'.

3. Interpretation of Relevant Legal Provisions and Precedents:
The appellant contended that their services are purely transportation and do not involve warehousing or dispatch activities typical of 'Clearing and Forwarding Agents'. They cited the CBE&C Circular No. B.43/7/97-TRU dated 11.7.1997, which outlines the activities of a 'Clearing and Forwarding Agent'. The appellant argued that they do not perform several key activities listed in the circular, such as warehousing goods or preparing invoices on behalf of the principal.

4. Evaluation of the Appellant's Activities Against the Statutory Definition:
The appellant emphasized that their role is limited to transporting vehicles and does not include storing goods or managing dispatch orders from the principal. They argued that their remuneration is for transportation services and actual reimbursement of railway freight, distinguishing their activities from those of a 'Clearing and Forwarding Agent'. They also referenced the Larger Bench decision in Larsen & Toubro Ltd. Vs. CCE, which clarified that mere procuring or having orders for the principal does not constitute 'Clearing and Forwarding Agent Service'.

5. Consideration of Judicial and Administrative Precedents:
The appellant relied on several judicial precedents, including the Punjab & Haryana High Court ruling in Commissioner of Central Excise, Jalandhar Vs. United Plastomers and the Gujarat High Court ruling in Commissioner of Central Excise & Customs Vs. Trade Tek Corporation. Both cases supported the view that services limited to transportation or consignment agency do not fall under 'Clearing and Forwarding Agent Service'. The Revenue, on the other hand, cited the Karnataka High Court ruling in CCE, Bangalore Vs. Mahavir Generics and the Tribunal's decision in Medpro Pharma Pvt. Ltd. Vs. Commissioner of Central Excise, Chennai, which suggested a broader interpretation of 'Clearing and Forwarding Agent Service'.

Conclusion:
After considering the rival contentions and judicial precedents, it was concluded that the appellant's activities primarily involve transportation services and temporary storage incidental to transportation. These activities do not constitute 'Clearing and Forwarding Agent Service'. Therefore, the appeal was allowed, and the demand for Service Tax under the disputed category was set aside, providing consequential relief to the appellant in accordance with the law.

(Operative part of the order pronounced in Court)

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