2017 (9) TMI 258 - AT - Service Tax

Clearing and Forwarding Agency service - case of appellant is that they are only forwarding the cargo from railway-yard to the godown owned by the clients and they also supplied labour and facilitated the transport upto the storage point. Since the tax liability under Clearing & Forwarding Agent will arise only for a person, who is engaged in both the activities of Clearing & Forwarding , they are not liable to tax - Held that - it is clear that the appellants were obliged to clear the consignments from railways on behalf of their clients and in case of delay in getting RRs, they were to clear the cargo under necessary indemnity bond. They were also to bear the railway expenses incurred for getting the consignments cleared, liability for payment of demurrage, wharfage, penal wharfage, etc., which will be on the appellant s account - it is clear that factually the appellants are involved in clearing activities also in terms of the statutory definition for C & F Agents - As the appellants were involved in both the clearing and forwarding activities along with maintenance of records for such dealings, their services are covered by tax entry - appeal dismissed - decided against appellant.

Summary

Issues: Service Tax liability of Clearing and Forwarding Agent under Section 65(25) read with Section 65(105)(j) of the Finance Act, 1994.

Analysis:
1. The appeal challenged an order of the Commissioner (Appeals) regarding the Service Tax liability of the appellants, who provided services related to loading, unloading, transportation, and storage of cargo for a specific client.

2. The dispute centered around whether the appellants, registered under the category of "Clearing and Forwarding Agent," were liable to pay Service Tax on the full consideration received from their clients. The Original Authority confirmed a Service Tax liability and imposed penalties, which were upheld by the Commissioner (Appeals).

3. The appellant's counsel argued that the appellants were not engaged in both clearing and forwarding activities as required for Service Tax liability under the said category. They claimed to only forward cargo from railway-yards to clients' godowns, providing labor and transport facilitation up to the storage point. The counsel also contested the demand for an extended period and penalties.

4. The Department's representative contended that the appellants were aware of their obligations regarding Service Tax liability as Clearing and Forwarding Agents. Contracts showed the appellants' involvement in clearing cargo, contradicting the appellant's claim of only providing forwarding services.

5. The Tribunal observed that the appellants were indeed engaged in both clearing and forwarding activities based on contract terms. The contracts obligated the appellants to clear consignments from railways on behalf of clients, bear expenses, and maintain records, meeting the statutory definition for Clearing and Forwarding Agents.

6. The Tribunal found that the appellants failed to establish a bona fide belief or reasonable cause for not paying Service Tax on the full amount received. Despite being registered and paying some Service Tax, they did not fulfill their obligations for the entire quantum. Consequently, the Tribunal dismissed the appeal, upholding the Commissioner (Appeals)'s decision on Service Tax liability and penalties.