2017 (10) TMI 848 - AT - Service Tax

Classification of services - C&F Agent service - appellant supplied imported LPG to other contracted oil companies and getting storage rent - Held that - the appellant has never acted as an agent of other oil companies. In fact the LPG as imported is owned by the appellant. He is selling some part of it as per the requirements of other oil companies. They are charging certain amount as a rent for storage and upkeep of this LPG. We find any such arrangement, there is no obligation of C&F agency work. In fact, the appellant is not preparing any documents on behalf of other oil companies for selling / clearing the LPG to any third party - demand not sustainable. Extended period of limitation - Held that - the appellant came forward and got themselves registered for service tax in August 2002 itself. Hence the present demand notice issued on 06/07/2005 based on such contractual arrangement, which is in the knowledge of the Department for many years, is clearly hit by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants provided Clearing and Forwarding Agency (C&F) service and are liable for service tax.
2. Whether the demand for service tax is within the limitation period.

Analysis:
1. The appeal challenged the view that the appellants provided a taxable service under the category of Clearing and Forwarding Agency (C&F) Service. The Revenue contended that the appellants acted as agents of other oil companies, rendering them liable for service tax. The appellants argued that they did not provide C&F agency service but merely shared facilities and infrastructure with other oil companies based on agreements. They maintained a principal-to-principal relationship and did not act as agents. The Tribunal analyzed the statutory definition of a C&F agent under the Finance Act, 1994, emphasizing the need for a principal-agent relationship, receipt of goods from the principal, and preparation of invoices on behalf of the principal. The Tribunal found that the appellants did not fulfill the criteria of a C&F agent as they did not act on behalf of other oil companies but sold LPG owned by them based on agreements, concluding that the appellants were not liable for service tax as a C&F agent.

2. The appellants also contested the demand on the grounds of limitation, arguing that the notice issued was beyond the limitation period. They highlighted that they had disclosed agreement details to the Department when registering for service tax in 2002, indicating no suppression or misdeclaration. The Tribunal agreed with the appellants, noting that the demand notice issued in 2005 for the period from April to August 2002 was time-barred. The Tribunal considered the contractual arrangements known to the Department since 2002 and held that the demand notice issued in 2005 was clearly beyond the limitation period. Consequently, the Tribunal found in favor of the appellants on the limitation issue.

In conclusion, the Tribunal ruled in favor of the appellants, holding that they were not liable for service tax as a C&F agent and that the demand notice issued was time-barred. The judgment emphasized the absence of an agency relationship with other oil companies and the appellants' compliance with contractual agreements, leading to the allowance of the appeal.