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TMI Blog2011 (9) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... MURTHY, JJ. Sandeep Sachdeva for the Appellant. Ms. MIJ Micheal for the Respondent. ORDER B.S.V. Murthy, Technical Member The issue involved in this appeal is whether the service provided by the appellants can be held liable to service tax by treating them as Clearing Forwarding (C F) agents. 2. Heard both the sides. Shri Sandeep Sachdeva, ld. Chartered Accountant on behalf of the appellants submitted that the agreement between IPCL and the appellants clearly provides that appellants are treated as a distributor and the agreement is for distribution of the products of IPCL and not for providing C F service as held by the ld. Commissioner in his order. In this connection he submits a copy of the letter issued by M/s. Reliance Industries Ltd. (with whom IPCL has amalgamated) wherein they have stated that IPCL was transferring goods from its manufacturing factories to the stock point of M/s.Hardik Industries Corporation and the transportation charges including unloading charges incurred in transferring the goods from factory to the stock point was borne by the IPCL. According to the ld. Chartered Accountant this shows that appellants were not performing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service charge at Rs. 350/- PMT. She submitted that the fact that what was paid to the appellants was a service charge and not a trade discount shows that what was provided was a service. She also drew our attention to clause 20 of the agreement which provides that property in and title to the stock of the said products lying with the distributor unsold shall continue to vest in the company. The company is entitled to recall such unsold stock at any time. This confirms the view that the operation of transfer of goods is basically a clearing operation and only a transfer of goods in view of the fact that property in the goods and the title of the goods remain with the IPCL till the same are sold. She further drew our attention to clause 4 of the agreement which provides that IPCL shall arrange to take insurance cover in respect of the products lying in the custody of the distributor against various risks of fire theft, riot, malicious damages, etc. also shows that the appellants were not acting as distributor but only as an agent. The requirement in the agreement in Clause 11 that the distributor has to regularly report a true and correct account of sales as well as that of stocks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready been held by the Larger Bench of the Tribunal that in view of the definitions as discussed above, it is not necessary that a C F agent should be 'providing all the services which are required to be provided by him in the normal trade parlance for the purpose of charging service tax. The definition of C F agent clearly provides that any person who is engaged in providing any service either directly or indirectly connected with the C F operations in any manner is liable. Therefore what we are required to find out is whether the services provided by the appellants in this case amounts to providing service connected with the C F operations of the IPCL. Before we proceed further, it is also necessary to note that merely because an agreement identifies a person as providing a particular service, it does not mean that it should be held as sacro sanet. In M/s. Medpro Pharma Pvt. Ltd., the issue before the Larger Bench came up in spite of the fact that in the agreement entered into between the parties in that case clearly identified Medpro as C F agent and in spite of that the dispute came up before the Tribunal and the appeal was not dismissed on the ground that the agreement called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it periodical reports and are subjected to inspection by IPCL show that relationship is not that of an independent distributor and a supplier. We are inclined to agree with the ld. Jt.CDR. The arguments advanced by both the sides and discussed above clearly show that the appellants are part of C F operations of IPCL. Except for raising their own bill and collecting money on their account and paying for the consignments received from IPCL from their own account all the other factors show that what is happening is a C F operation. Even though they are called as distributors, even while selling the goods to their identified customers they do not have the liberty but they are required to abide by the policy as regards the supply/sales of the goods of IPCL. This clause very clearly shows that IPCL would be deciding schedules of supply, payments etc. to be made by the distributor also. The property in the goods remains with the IPCL till the sale is complete to the ultimate buyer and any loss/damage before such a sale goes to the account of IPCL which again shows that appellants are nothing but a C F agent. There could be several operations as discussed above relating to sale and the met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1994 reads as follows:- "Clearing Forwarding Agent" means any person who is engaged in providing any service either directly or indirectly connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent". As is clear from the above a 'clearing forwarding agent' is not doing the business on his own behalf but is providing services to another person connected with the clearing and forwarding operations. The above definition was the subject matter of various clarifications issued by the Board as also by different Commissionerates. Reference in this regard is made to Para 2.2 of Trade Notice No.87/97/10/ST/97 issued by Madurai Commissionerate on 14/7/1997 wherein activities undertaken by 85 clearing forwarding agents are mentioned. The same activities are also mentioned in the show cause notice issued to the appellant laying down that a clearing and forwarding agent, inter alia, renders the following services:- a. Arrange to lift the goods from the place of manufacture, warehouse or a distribution point. b. Receiving such goods of the principal or his agent. c. Warehousing these goods. d. Dispatch the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods and it is this factor which will differentiate between a distributor and a C F agent. A C F agent acts under the instructions of the principal and merely forwards the goods to the customers of the manufacturer and acts like an agent between the principal and the ultimate buyer. He is not at all free to sell the goods to any independent party and at a cost which may be decided by himself. The only fact of the clearing the goods from the principal's factory, which in any case is also a part of the distributor's activities, is not sufficient to convert him into C F agent. There may be certain areas which, though belong to different categories, may overlap. In this case the essence of the services provided is required to be looked into. In my views the answer stands fully given by the Larger Bench decision of the Tribunal in the case of Larsen Toubro Ltd. v. CCE [2006] 4 STT 231 (New Delhi - CESTAT). As such I am of the view that the appellants have to be held as distributors and not covered by the definition of C F agents. 11. However, I agree with the ld. Member(T) that the demand is barred by limitation and is required to be set aside for the period beyond the normal perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement clearly provided for delivery of the goods to the appellant's godown and subsequently sale to various parties. For this proposition, he would also rely on the judgment of Hon'ble High Court of Punjab Haryana in the case of CCE v. United Plastomers [2008] 14 STT 67 (Punj. Har.), in the case of Dina Iron Steel Ltd. v. CCE [2007] 10 STT 6 (New Delhi - CESTAT), in the case of Salem Starch Mfrs. Service Industrial Co-operative Society Ltd. v. CCE [2005] 2 STT 249 (New Delhi - CESTAT), in the case of Susheel Yarn (P.) Ltd. v. CCE [2011] 32 STT 44 (New Delhi - CESTAT) (Mag.). It is his submission that entire agreement in the case in hand will indicate that there was an agreement for distribution of goods between IPCL and the appellant. 5. Ld.SDR, on the other hand, reading the same agreement, would submit that the agreement also indicates that the appellant is required to maintain account registers and correspondence of the same account registers was subject to examination, inspection, and verification of the stock by representative of IPCL. He would also read clause 13 to submit that entire control of the sale of the goods was as per directions of IPCL. Directions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictly in rotation so that the quality is preserved and the products are in a marketable condition. It is also seen that in clause 3, the appellant accepted full responsibility of any stock that he may hold on behalf of the company. On further reading of the agreement, it is seen that the appellant was at liberty to sell the product at the prices lower than the prices indicated by the company. This is evident from clause 8 of the agreement which is reproduced below. "8. The Company shall indicate from time to time to the Distributor its recommended list prices for the sale of said products. The Distributor shall be at liberty to sell the said products at prices lower than the said list prices. If the Distributor sells the said products at prices lower than the list prices, the difference between the list price and the price at which the said products are sold by the Distributor shall be to the account of the Distributor. The Distributor shall be entitled to add to the said list price, Octroi duty, terminal tax, Sales Tax or other local taxes or levies in force in the area and recover the same from their customers." 8. It can be seen from the above reproduced clause of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant-distributor are subject to verification of the representative officers of IPCL will not take the case of the Revenue any further as IPCL may decide the marketing and sales pattern of the goods which is informed to the distributor, is only for overall equitable distribution of goods in a given zone. Further, I find that the agreement in Clause No.16 specifically talks about the remittance of the value of the goods sold by the appellant to IPCL. On perusal of the records, I find that the appellant herein had issued invoices under Rule 57G, wherein he has indicated the sale of the goods to the purchaser indicating sales tax payable against sales tax form. All these will lead to conclusion that the appellant was a distributor of the said IPCL. As regards points raised by ld.SDR that the appellant is paid service charge per metric tonne for the quantity of the product sold. I find that mode of consideration as agreed between mutually by contracting party, cannot be a guiding factor to arrive at a conclusion whether a party is a distributor or otherwise. 11. In clause No.17 it is very clearly indicated that the distributor shall sell the product in original packing and in origina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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