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2018 (6) TMI 645 - AT - Service TaxClassification of services - An arrangement was made between them and HLL to the effect that the said Oil and Vanaspati would be sold through the marketing network of HLL for a period of 3 years - whether the activities of the appellant fall within the scope of Commission Agent under BAS or under Clearing and Forwarding Agent ? - Held that - As per the agreement, the scope of services to be performed by HLL is only as a commission agent for distribution of products of Bunge in designated territory. Evidently, the responsibility of transporting the products upto the depots to HLL is that of Bunge. Bunge has also been given the responsibility of transportation from HLL depots to the redistribution stockists. To fall within the tax net of clearing and forwarding agent service, the services provided have to be in relation to clearing and forwarding operation and not either clearing or forwarding operation - clearing of goods from Bunge upto the depot of HLL is done only by the former. Even secondary transportation from HLL depots is the responsibility of Bungee. This being so, we are unable to appreciate the reasoning of the lower authority that the activities of the appellants are in the nature of consignment agent and would therefore fall within the scope of C&F agents service . The appellant cannot be brought within the fold of clearing and forwarding agents service. They are correctly classifiable only as a commission agent for BAS under Section 65 (19) of the Act. The impugned order holding to the contrary cannot then sustain and requires to be set aside in toto, which we hereby do - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of services provided by HLL to Bunge as 'Business Auxiliary Service' (BAS) or 'Clearing and Forwarding Agency Service' (C&F). 2. Demand and computation of service tax on Goods Transport Agency (GTA) services. 3. Invocation of the extended period for the issuance of the Show Cause Notice (SCN). 4. Imposition of penalties under Section 76 and 78 of the Finance Act, 1994. Issue-wise Analysis: 1. Classification of Services: The core issue is whether the services provided by HLL to Bunge should be classified under 'Business Auxiliary Service' (BAS) or 'Clearing and Forwarding Agency Service' (C&F). The appellant argued that HLL acted as a "Commission Agent" under BAS as defined in Section 65 (19) of the Finance Act, 1994, and not as a C&F agent. The adjudicating authority, however, classified the services under C&F, leading to a service tax demand. The Tribunal examined the definitions and the agreement between HLL and Bunge, noting that HLL's role was limited to acting as a commission agent for distributing Bunge's products and not involved in clearing operations. The Tribunal concluded that the services provided by HLL fall under BAS and not C&F, setting aside the adjudicating authority's order. 2. Demand and Computation of Service Tax on GTA Services: The appellant contested the service tax demand on GTA services, arguing that the audit party had taken incorrect figures from the trial balance. The appellant clarified that the trial balance included both paid and unpaid freight charges, whereas the ST-3 returns only reflected paid freight charges on which service tax was payable. The Tribunal considered the appellant's submissions and found that the figures in the trial balance did not accurately represent the taxable value. The Tribunal also noted the exemptions available under Notification No. 34/2004-ST for freight charges below specific thresholds, which were not considered in the trial balance. Consequently, the Tribunal found merit in the appellant's arguments and set aside the demand for service tax on GTA services. 3. Invocation of Extended Period for Issuance of SCN: The appellant argued that the SCN dated 21.10.2008, invoking the extended period, was issued based on audit objections and hence was not sustainable. The Tribunal agreed with the appellant, noting that the extended period could not be invoked solely based on audit objections without evidence of suppression or willful misstatement. As a result, the Tribunal found the invocation of the extended period unsustainable. 4. Imposition of Penalties under Section 76 and 78: The adjudicating authority had imposed a penalty under Section 78 of the Finance Act, 1994, but dropped the penalty under Section 76. The appellant argued that the imposition of penalties was not justified given the facts of the case. The Tribunal, considering its findings on the classification of services and the computation of service tax, concluded that the imposition of penalties was not warranted. The Tribunal set aside the penalty under Section 78 and upheld the decision to drop the penalty under Section 76. Conclusion: The Tribunal held that the services provided by HLL to Bunge were correctly classifiable under BAS and not C&F. The demand for service tax on GTA services was set aside due to incorrect computation. The invocation of the extended period for the SCN was found unsustainable, and the imposition of penalties under Section 78 was set aside. The appeal was allowed with consequential reliefs, and the miscellaneous application for amendment of the cause title was granted.
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