2019 (1) TMI 1106 - AT - Service Tax

Classification of services - Commission Agent or a Clearing and Forwarding Agent or not - cenvat credit availed and utilized in excess of 20% - cenvat credit on the service tax paid on Mobile Phone Charges under Section 73(2) of the Finance Act 1994 read with Rule 14 of Cenvat Credit Rules, 2004? Whether the appellant is a Commission Agent or a Clearing and Forwarding Agent during the period 01.04.2001 to 09.07.2004? - Held that - The products of the principal are supplied to the appellant on consignment basis and the appellant sells the products to customers. On going through the agreement between the appellant and M/s. Fine Organic Industries, it is seen that the appellants are appointed as consignment agents. Similarly the agreement with M/s. Baerlocher India Additives (P) Ltd. and DCW Ltd. mention the appellants to be consignment agents - learned Commissioner (Appeals) has found that the appellants have not contested the payment of service tax for the previous period. Therefore, there was no reason to change the existing classification as Clearing and Forwarding Agents - the lower authority and the Commissioner (Appeals) have rightly upheld the classification under Clearing and Forwarding Agents - appeal dismissed. Whether the appellants are liable to pay cenvat credit availed and utilized in excess of 20% and as to whether the appellants are eligible to avail a cenvat credit on the service tax paid on Mobile Phone Charges under Section 73(2) of the Finance Act 1994 read with Rule 14 of Cenvat Credit Rules, 2004? - Held that - The service on which no service tax is leviable under Section 66 can be termed as exempted service . We find that this is very curious and extended argument. To be an exempted service, the activity should be a service. Without any statute categorizing the trading as a service, it cannot be held that it is an exempted service . We do not find any infirmity with the order of the original authority. Accordingly, we find that the impugned Order-in-Revision as far as this demand is concerned is not sustainable. Cenvat credit on Mobile Phone Bills availed by the appellant during 04/2004 to 12/2005 - Held that - Commissioner in the Revision order has upheld this demand only on the ground that the said decision of CESTAT was appealed against in High Court of Gujarat. However, the learned Commissioner has not found if the same was stayed. Under these circumstances, the contentions in the Order-in-Appeal are not valid and upholding of demand is incorrect. In view of the case-law that as long as the input services are utilized for the purpose of providing the output services, credit is admissible. Therefore, the order on this ground is also liable to be set aside. Appeal disposed off.

Summary

Issues involved:
1. Classification of the appellant as a Commission Agent or a Clearing and Forwarding Agent during 01.04.2001 to 09.07.2004
2. Liability of the appellants to pay cenvat credit in excess of 20% and eligibility to avail cenvat credit on service tax paid on Mobile Phone Charges under Section 73(2) of the Finance Act 1994 read with Rule 14 of Cenvat Credit Rules, 2004

Analysis:

Issue 1: Classification of the appellant
The appellant contended that they should be reclassified as a Commission Agent instead of a Clearing and Forwarding Agent. They argued that based on their agreements with various companies, they were functioning as consignment agents, not Clearing and Forwarding Agents. However, the Commissioner and Commissioner (Appeals) upheld the classification as Clearing and Forwarding Agents. The Tribunal noted that the definition of Clearing and Forwarding Agents includes activities of Consignment Agents as per Section 65(25) of the Finance Act 1994. Since the appellants did not contest the payment of tax for the previous period, the appeal had no impact on their tax liability. Consequently, the appeal on this issue was dismissed.

Issue 2: Cenvat credit on Mobile Phone Charges
Regarding Appeal No. ST/469/2009, the original authority dropped certain demands. The issue of trading being an exempted service was examined, with the original authority determining that trading was a non-taxable service and not an exempted service under the Finance Act 1994. The Tribunal agreed with the original authority's decision, emphasizing that trading must be a taxable service to be considered exempted. The Tribunal also addressed the cenvat credit on Mobile Phone Bills, where the original authority disallowed a portion of the credit. The Commissioner in the Revision order upheld this disallowance based on a CESTAT decision, but the Tribunal found this decision to be incorrect as the High Court appeal status was not considered. The Tribunal concluded that as long as input services are used for providing output services, credit should be admissible. Therefore, the appeal was allowed on this issue with consequential relief.

In conclusion, Appeal No. ST/172/2008 was dismissed, while Appeal No. ST/469/2009 was allowed with consequential relief, if any.