2016 (3) TMI 110 - AT - Service Tax

Classification of commission - Whether under Clearing and Forwarding Agents or Business Auxiliary Service - Respondents as per agreement were appointed as agents to assist procuring at best possible price and identifying vendors for medical equipment products for which they received commission - as per the agreement, respondents were appointed as agents exclusively for assisting in procuring the specified products at most attractive prices, by identifying suitable vendors for which a commission at the rate of 8% of the purchase amount was agreed. Therefore, such activity clearly falls within the definition of BAS. But BAS services provided by Commission agents were outside the purview of levy of service tax till 8.7.2009. So, no demand can be raised as barred by limitation also. - Decided against the revenue

Summary

Issues:
Levy of Service Tax on "Clearing and Forwarding Agents" services

Analysis:
The appeal was filed by Revenue challenging the order passed by the Commissioner (Appeals) which set aside the levy of Service Tax on "Clearing and Forwarding Agents" services alleged to have been rendered by the appellants. The respondents were appointed as agents to assist in procuring products at the best possible price and identifying vendors for medical equipment products, for which they received a commission. The show cause notice alleged that these services would fall under various categories including "Clearing and Forwarding Agent" services. The Order-in-Original confirmed the service tax demand and penalty under this category. However, the Commissioner (Appeals) observed that the appellants did not perform activities of C&F agents, leading to the appeal by the Revenue.

The Revenue argued that the activities of the respondents fell within the ambit of C&F agents based on the agreement, which included procurement of goods and order execution. On the other hand, the respondents contended that their activities would fall under Business Auxiliary Service, which was not taxable during the relevant period. They also highlighted that the show cause notice did not specify the exact category under which they were sought to be taxed, making it unclear.

Upon reviewing the records and submissions, the Tribunal analyzed whether the activities for which the respondents received commission would be categorized as C&F agents service during the period 2001-02. The agreement showed that the respondents were appointed as agents to assist in procuring specific products at attractive prices by identifying suitable vendors, falling within the definition of Business Auxiliary Service (BAS). However, BAS services provided by Commission agents were not taxable until 8.7.2009. Additionally, the demand was found to be barred by limitation as the show cause notice was issued for periods prior to 2002. The Commissioner (Appeals) rightly set aside the demand, and the Tribunal found no reason to interfere with the impugned order.

Ultimately, the appeal filed by Revenue was dismissed, and the Cross Objection was also dismissed.