2014 (10) TMI 135 - AT - Service Tax

Nature of activity - Clearing and forwarding agents - Held that - use of expression and in between two expressions clearing and forwarding is reflective of the legislative intention to cover the person rendering clearing and forwarding services both. We also note that in a recent decision, Tribunal in the case of Videocon TV Manufacturer (P) Ltd. vs. CCE NOIDA, vide 2013 (7) TMI 349 - CESTAT NEW DELHI , by referring to Tribunals Larger Bench decision in the case of Larsen & Toubro Ltd. vs. CCE, Chennai reported in 2006 (6) TMI 3 - CESTAT CHENNAI has held that inasmuch as the assessee is working on commission basis and is not engaged in the activity of receiving goods from the factory or premises of principal, warehousing these goods, receiving despatch orders, arranging despatch of goods as per the direction of the principal, maintaining records of the receipt and despatch of goods and preparing invoices on behalf of the principal cannot be held to be clearing and forwarding agent. The main activity of clearing and forwarding agent is that he receives the despatch orders from the principal and arranges clearance of the goods in terms of the directions of the principal. He is not free to sell or purchase the goods by his own choice - appellant is free to sell the goods to his customers in small lots. Such permission given to the assessee in the present case is indicative of the fact that he is not working as clearing and forwarding agent of the principal. As such, we are of the view that no service tax liability would arise against him - Decided in favour of assessee.

Summary

Issues:
Service Tax liability on the appellant for providing clearing and forwarding services as a consignment agent.

Analysis:
The judgment addresses the issue of Service Tax liability amounting to Rs. 78,068/- confirmed against the appellant for allegedly providing clearing and forwarding services to their principal. The agreement between the appellant and the principal appointed the appellant as a consignment agent, requiring them to sell products in smaller lots at fixed prices. The Revenue argued that the appellant, being a consignment agent, falls under the definition of a clearing and forwarding agent as per Section 65(25) of the Finance Act, 1994.

The appellant contended that merely being a consignment agent does not automatically classify them as a clearing and forwarding agent unless engaged in clearance and forwarding operations. Referring to Section 65(105)(J) of the Finance Act, 1994, the appellant argued that taxable services by a clearing and forwarding agent must be in relation to clearing and forwarding operations. The appellant highlighted that the agreement allowed them to sell goods to other customers and not solely engaged in clearing and forwarding activities.

The Tribunal examined previous decisions on similar matters. Notably, the decision of the Larger Bench in the case of Medpro Pharma Pvt. Ltd. was overruled by the Hon'ble High Court of Punjab and Haryana in the case of CCE, Panchkula vs. Kulcip Medicines (P) Ltd. The Tribunal also cited a recent decision in the case of Videocon TV Manufacturer (P) Ltd. vs. CCE NOIDA, where it was held that an entity working on commission basis and not involved in specific clearing and forwarding activities cannot be considered a clearing and forwarding agent. The main activity of a clearing and forwarding agent involves receiving and dispatching goods as per the principal's directions, which the appellant was not engaged in.

Ultimately, the Tribunal found that the appellant's freedom to sell goods to customers in small lots indicated they were not functioning as a clearing and forwarding agent for the principal. Consequently, the Service Tax liability against the appellant was dismissed, and the appeal was allowed with consequential relief.