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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 ..... s rendered by the respondent under such agreement amounted to clearing and forwarding services for and on behalf of BALCO and that therefore, the respondent was liable to pay service tax as a Clearing and Forwarding Agent ("C & F Agent" for short). Respondent not having registered himself as such agent and not having paid the service tax, a show cause notice dated 27.3.2003 came to be issued calling upon him why service tax of Rs. 1,11,585/should not be recovered from him with interest calculated at Rs. 29,821/and further, why penalty under sections 76, 77 and 78 of Chapter V of the Finance Act, 1994 be not imposed. 3. The respondent replied to the show cause notice and denied any liability either to pay tax or be subjected to penalty. The Adjudicating Officer i.e. Deputy Commissioner, Central Excise, Customs and Service Tax, Vadodara however, by his order dated 31.5.2004 held that the respondent was a C & F Agent within the meaning of Section 65(25) of the Finance Act, 1994. He therefore, confirmed the duty and interest demand. He also imposed matching penalties under sections 76,77 and 78 of the Finance Act, 1994. The Adjudicating Authority was of the opinion that looking to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not providing taxable service as clearing and forwarding agent, the demand of service tax was not sustainable. Ld. SDR has not been able to distinguish the above judgement with reference to the clause of the agreement between BALCO Trade Tek Corporation. Therefore, ratio of the Mahavir Generics order is applicable on all fours to this case. Following the ratio thereof we uphold the impugned order and reject the appeal." 6. Taking us through various terms and conditions contained in the agreement between respondent and M/s. BALCO, learned counsel Shri Ravani for the department vehemently contended that the Tribunal committed a grave error in confirming the decision of the Appellate Commissioner. He submitted that as per clause (j) of subsection 105 of Section 65 of the Finance Act, 1944, any service provided to a client by a Clearing and Forwarding Agent in relation to clearing and forwarding operation in any manner is a taxable service. He submitted that looking to the nature of activities carried on by the respondent for and on behalf of M/s. BALCO, it should be held that he was acting as a Clearing and Forwarding Agent. He submitted that the language used in sub-section (25) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refers to the respondent as a consignment agent. Clause (1.1) which provided general conditions provided that the respondent will send to M/s. BALCO necessary requisition with clear despatch instructions for sale of material on consignment transfer basis for the specific items so as to reach the office of M/s. BALCO by 7th of every month. It further provided that despatches will be made subject to release of payment by the respondent within financial arrangements made. ● Clause (1.2) thereof reads as under: "(1.2) Material will be despatched to you from our works as under: (a) Despatch on credit basis: On "freight pre-paid" basis through Balco's nominated transporter. (b) Despatch against advance payment: Either "freight prepaid" basis or on "freight to pay" basis." ● Clause(1.5) essentially provided that all liabilities of sales tax would rest on the respondent. ● Clause 6 of the agreement pertains to entitlement of charges. Relevant portion of clause(6.4) thereof reads as under : "6.4 You will raise the bill as per directions given above and/or issued from time to time and you will charge the amount from the customers as charged by the company in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of sales tax forms. The performance in this regard will be reviewed every quarter." 10.With the above terms and conditions in mind, if we revert back to the statutory provisions, we may recall that Section 65(105)(j) makes services rendered to a client by a C & F Agent in relation to clearing and forwarding agent in any manner a taxable service. Term "Clearing and Forwarding Agent" is defined under Section 65(25) to mean any person who is engaged in providing any service either directly or indirectly connected with clearing and forwarding operation in any manner to any other person and includes a consignment agent. Thus though the definition of Clearing and Forwarding Agent is quite wide since it takes within its sweep any person who is engaged in providing services either directly or even indirectly which service is connected with clearing and forwarding operation in any manner, essentially what is a taxable service is a service rendered by a Clearing and Forwarding Agent to a client in relation to clearing and forwarding operation. The essential question is whether looking to the terms noted above, respondent can be stated to be providing such services in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng these goods, receiving despatch orders from the principal, arranging despatch of goods as per the directions of the principal by engaging transport, maintaining records of the receipt and despatch of goods and the stock available at the warehouse, preparing invoices on behalf of the principal. In the present case, the sale was made by the respondent under its own invoice to its own customers and not as directed by the principal. Thus in our view the respondent did not act as a C & F Agent. The respondent did not provide any service in relation to clearing and forwarding operations. Merely because the respondent was referred to as a consignment agent in the agreement in question cannot by itself be sufficient to include the respondent within the definition of C& F Agent as provided in section 65(25) of the Finance Act, 1994 since the respondent as per our interpretation of the terms of the agreement, did not provide any service to the principal in relation to clearing and forwarding of the goods. Whether the respondent acted as a C & F Agent must depend on the terms of the agreement and not a stray expression used therein. 13. We are fortified in our view by few decisions of Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such goods or services. This clearly shows that the activities of mere procurement of purchase order for the principal on commission basis of a commission agent is treated separately by the Parliament from the activities of a Clearing and Forwarding Agent. Activity of procuring orders is thus independent of clearing and forwarding operation. The agents doing these activities can be different, Moreover, clearing and forwarding operations do not flow directly or indirectly from mere procurement of order. There is no obligation on the person procuring orders as a commission agent for the principal, only by virtue of that agency, to carry out clearing and forwarding operation in respect of the goods which are to be supplied pursuant to the orders so procured. 10. It appears to us that the expression "directly or indirectly" and "in any manner" occurring in the definition of "clearing and forwarding agent" cannot be isolated from the activity of clearing and forwarding operations. A person may undertake to provide service of procurement of orders as an agent of the principal without agreeing to provide services of clearing and forwarding of the goods. Clearing and Forwarding has a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said conclusion/observation stands settled by Larger Bench of the Tribunal in the case of Larsen & Toubro (supra) wherein it has been held that services of commission agent are included in the definition of "business auxiliary service" from 1.7.2003 and mere procuring or having orders for the principal by an agent on payment of commission basis would 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. While reaching to this conclusion the Tribunal has observed that the expression "directly or indirectly" and "in any manner" occurring in the definition of "clearing and forwarding agent" cannot be isolated or the activity of clearing and forwarding operation and an agent it engaged only for procuring purchase orders for the vendor on commission basis does not engage in any of the activities connected with clearing and forwarding operations directly or indirectly." 14.In Halsbury's Laws of England, it is explained that Forwarding Agent is one who undertakes the shipment or transmission of goods. There is a custom of the trade that a forwarding agent incurs persona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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