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TMI Blog2013 (4) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... not amount to providing services as “clearing and forwarding agent”, within the meaning of definition of that expression under section 65(25) of the Finance Act, 1994. In the present case, from the different clauses of agreement between the parties and nature of acts performed by the assessee, it cannot be stated to be a Clearing and Forwarding Agent of BALCO. He was selling the goods received from BALCO to his own customers and receiving a discount in the process. - Assessee not liable to service tax - Decided against the revenue. - TAX APPEAL No. 477 of 2006 - - - Dated:- 14-6-2012 - MR. AKIL KURESHI AND MS. HARSHA DEVANI JJ. Appearance: MR YN RAVANI for Appellant(s): 1, RULE SERVED for Opponent(s): 1, ORAL JUDGMENT (Per: HONOURABLE MR.JUSTICE AKIL KURESHI) JUDGMENT 1. This appeal by the Revenue is directed against the judgement of CESTAT dated 1.3.2005. While admitting the appeal following substantial question of law was framed: Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the respondent assessee was not providing taxable service as Clearing and Forwarding Agent of BALCO? 2. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have received quantity discount and not commission. Such an activity would not come within the scope of services of clearing and forwarding agents and as mentioned in Mumbai Commissionerate above trade notice. Unless their services can be treated as one to a client by clearing and forwarding agent in relation to clearing and forwarding operation, in any manner the services cannot be taxed. Merely because the word consignment agent has been used in agreement they cannot be compelled to pay service tax. In this context, I find that the Hon'ble CESTAT, New Delhi in case of Mahavir Generics reported at 2004(170)ELT 78(Tri. Del.) held that Service tax clearing and forwarding operations products of principal supplied to appellant on consignment basis and sold by appellant to customersActivity not comes within services provided to client by clearing and forwarding agent in relation to clearing and forwarding operations Service tax not leviable. 5. The department challenged the order of the Appellate Commissioner before the CESTAT. The Tribunal by impugned order dated 1.3.2005 rejected the revenue's appeal. The Tribunal relied on its earlier decision in case of M/s. Cip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of CESTAT in case of Prabhat Zarda Factory (India) Ltd. v. Commr. of C. Ex. Patna reported in 2002(145) ELT 222, in which the Tribunal on the basis of the nature of activities carried on by the appellant therein and adopting wider interpretation to the term Clearing and Forwarding Agent held that the activities would come within the purview of such definition. 7. Section 65(105)(j) makes services rendered by a Clearing and Forwarding Agent to a client in relation to clearing and forwarding operation, a taxable service. Subsection (105)(j) thereof reads as under : Section 65(105) 'taxable service' means any service provided (j) to a client, by a clearing and forwarding agent in relation to clearing and forwarding operation in any manner. Term Clearing and Forwarding Agent has been defined in Section 65(25) as under: (25) 'Clearing and 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. 8. We may notice that the definition of Clearing and Forwarding Agent includes consignmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions are made for the respondent to make payment for the goods received on credit within the specified time, failing which, to pay the same with interest. ● Clause(11) provided for discount. Relevant portion thereof reads as under : 11. Discount. You will be allowed Discount location wise on the basis of lifting of quantity per annum as under. The off take of Korba and BBU will be clubbed together for arriving at total tonnage for entitlement of Discount. Such Discount will be allowed on basic price of the product including alloy and temper charges as also packing charges. For computation of Discount date of invoices shall be taken as reference date. xxx During the year 1999-2000, you are required to lift 700 rolled promots 60 T extrusions, and shall ensure to lift both the product i.e extrusions and rolled products every month proportionately to the guaranteed off take mentioned on annual basis and performance shall be reviewed every quarter. In case of any shortfall in performance either in fulfilling the required off take or a submission of timely payments, sales tax forms, annexures we shall have the right to terminate the agency at any time within contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent. We have to see the effect of these factors cumulatively. Essentially under the agreement respondent was receiving the goods for sale outright to the customers that the respondent would get. It is ofcourse true that price thereof was predecided by the principal and respondent could not charge any higher or further rate. Nevertheless, sale was made by the respondent under its own invoice. For such purpose, respondent would receive a certain discount. Respondent would have to place the orders so as to reach the principal by 7th February of every month. In case of credit basis, same would be on freight prepaid basis through BALCO's nominated transporter. On advance payment, however, the same would be either on freight prepaid basis or on freight to pay basis. The respondent was liable to pay sales tax and other taxes. Respondent also had responsibility to reach a minimum prescribed turnover of such sales. Most importantly, the qualifying criteria for renewal of agency provided that consignment agent would be renewed depending upon the performance in terms of committed off take in both the products and release of payment on due dates and timely submission of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of the principal. The Tribunal referred to and relied on the Trade Notice no.87/97 and interpreting the term Clearing and Forwarding Agent, disapproved the view of the Division Bench in case of Prabhat Zarda(supra). Relevant observations of the Tribunal may be noted: 9.3 An agent engaged only for procuring purchase orders for the vendor on commission basis does not engage in any of the above activities, directly or indirectly. Commission agent engaged to procure orders and not entrusted with the work of clearing and forwarding of the goods would be a person who, in the ordinary course of business, makes contracts for sale or purchase of goods for others. The definition of commission agent in Section 2(aaa) of the Central Excise Act 1944, would apply in relation to service tax as it applies in relation to duty of excise by virtue of sub-section( 121) or Section 65 of the Act. Services of Commission Agent are included in the definition of Business Auxiliary Service under sub-section( 19) of section 65 with effect from 1.7.2003, which includes service of a commission agent. As defined in explanation (a) to subsection (19) of section 65 commission agent is a person who ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to engage any forwarding agent, nor can a person engage for the purpose of clearing and forwarding operation, insist on procuring orders for the principal in the absence of any stipulation to that effect. ● In case of K.K. Corporation v. Commissioner of Service tax, Chennai reported in 2007(5) S.T.R. 89 (Tri-Chennai), the Tribunal once again referring to and relying upon the said Trade Notice No.87/97 held that selling agent advertising product of principal, conducting market survey, reporting trends and tastes of customers, procuring orders from buyer and appointing authorised dealers with the approval of principal cannot be termed as Clearing and Forwarding Agent. ● Division Bench of Punjab and Haryana High Court in case of Commissioner of C.Ex., Jalandhar v. United Plastomers reported in 2008 (10) S.T.R. 229 (P H), approved the decision of the Tribunal while rejecting the Revenue's appeal on the question whether the dealer or commission agent would be covered within the expression Clearing and Forwarding Agent and in the process made following observations: 13. We find no force in the argument raised by the counsel for the appellant. While passing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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