2018 (4) TMI 1329 - AT - Service Tax

Classification of services - respondent is engaged in providing services in connection with the movement of coal for various companies as per the terms of agreement entered into between them - whether the services classifiable under clearing and forwarding agents service or not? - extended period of limitation - penalty - Held that - On a plain reading of the scope of work described in the agreement, it transpires that the respondent is not engaged in providing either of the service mentioned in the definition clause - clearing or forwarding - the services provided by the respondent should not be classified under clearing and forwarding agents service , for the purpose of levy of service tax. Since there is no demand, extended period and penalty cannot sustain. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against dropping of proposed demand on the ground of limitation
- Classification of services under the taxable category of 'clearing and forwarding agents service'
- Interpretation of the definition of 'clearing and forwarding agents service'

Analysis:
1. The Revenue appealed against the dropping of the proposed demand based on limitation, arguing that the respondent did not deposit service tax due to fraudulent means. The Revenue contended that the longer period of limitation should be invoked for recovery. The respondent, in their cross-objection, challenged the service tax demand under the category of 'clearing and forwarding agents service.' They cited judgments from the Hon'ble Supreme Court and the Hon'ble High Court of Bombay to support their stance.

2. The case involved the respondent providing services related to coal movement for various companies. The department classified these services under 'clearing and forwarding agency service' under Section 65(25) of the Finance Act, 1994. Show cause proceedings led to a service tax demand being confirmed, along with penalties and interest. The Commissioner (Appeals) upheld the service tax demand within the normal period but dropped the demand under the extended limitation period, citing no elements of fraud.

3. The Tribunal analyzed the definition of 'clearing and forwarding agents service' under Section 65(25) of the Act. It noted that for a person to fall under this category, they must be engaged in 'clearing and forwarding operations.' The Tribunal found that the respondent's services did not align with this definition, as per the agreement's scope of work. Citing judgments from the Supreme Court and the High Court of Bombay, the Tribunal concluded that the service tax could not be levied under the 'Clearing & Forwarding Agents Service' category.

4. Ultimately, the Tribunal dismissed the Revenue's appeal and allowed the respondent's cross-objection. The judgment highlighted that the respondent's services did not meet the criteria for classification under the 'clearing and forwarding agents service' category, as outlined in the relevant legal provisions and supported by previous judicial decisions.