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TMI Blog2015 (5) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... s as to whether such services provided by them would label them as Clearing & Forwarding Agents (for short, 'C&F Agents') and, thus, make them liable to service tax in accordance with the Finance Act, 1994 (hereinafter referred to as the 'Act'), as amended from time to time. Since the issue to be decided in both the appeals is identical and also arises almost in the same factual background, it would serve our purpose if we reproduce the facts from Civil Appeal No. 7215 of 2004. 2. The appellant in this case is providing certain services as Agent. Such services are provided to M/s. Gujarat Ambuja Cements Limited and M/s. Ambuja Cements Eastern Limited (hereinafter collectively referred to as 'Ambuja companies'). At the material time, these were public sector undertakings under the Government of Gujarat. These industries need coal as a raw material for production of cement, which is the main manufacturing activity undertaken by the said companies. Industries that need coal as a raw material generally approach the Ministry of Industries, Government of India with their requirements. The Ministry of Industries, after enquiry, recommends to the Ministry of Coal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant surrendered the said Registration Certificate on the ground that services rendered by them were not covered by Section 65(25) of the Act. The application for surrender was, however, rejected by the Superintendent of Central Excise (SCE), Service Tax Cell, Kolkata-I, Commissionerate on February 08, 2001 by passing the Order-in-Original. The SCE, in that order, took the view that the services rendered by the appellant under the aforesaid contract with Ambuja companies would be covered by Section 65(25) of the Act and, therefore, exigible to service tax. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner of Central Excise (Appeals), Kolkata, which was also dismissed by the Commissioner on November 05, 2002. This order was challenged by the appellant before the Customs, Excise & Service Tax Appellate Tribunal (for short, 'CESTAT'). 5. The CESTAT has also dismissed the appeal by the impugned order dated May 24, 2004 by observing that the matter is covered by its own judgment in the case of M/s. Prabhat Zarda Factory (India) Ltd. v. Commissioner of Central Excise, Patna 2002 (145) ELT 222. The Tribunal has noted in this behalf that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anctions from the office of Executive Director-Rail Movement, supervising loading of the wagons, sending samples and assuring the proper quality and quantities, complying with the formalities relating to payments for freight. As such, it is quite clear that the appellant is covered by the definition of clearing and forwarding agent, as interpreted by the Tribunal in the above referred case of Prabhat Zarda. 6. The appellants have alternative contention that they are covered by the new i.e. Business Auxiliary Service introduced vide Finance Act of 2003. However, we find that the said services are in the nature of promotional or marketing of the customers goods or in the nature of doing the other routine type of jobs like billing or collection of cheques, maintenance of accounts and evaluation of prospective customers and public relation services. The services being provided by the appellant cannot be equated to the above. It is also seen that the expression 'commission agent' has been explained by the Notification dated 20th June, 2003 reported in 155 ELT N-171, vide paragraph 2.1.3 it has been clarified that C&F agents work on commission basis do not fall under the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss may also involve clearance at subsequent stages during forwarding operations. In the opinion of the larger Bench, the procurer of orders on commission basis renders services which are not connected with such clearing and forwarding operations, which have bearing on the movement of goods. It also mentioned that normally a C&F Agent undertakes the following activities: (i) receiving the goods from the factories or premises of the principal or his agents; (ii) warehousing these goods; (iii) receiving despatch orders from the principal; (iv) arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized transporters of the principal; (v) maintaining records of the receipt and despatch of goods and the stock available at the warehouse; and (vi) preparing invoices on behalf of the principal. 8. Since the appellant in that case was engaged only for procuring purchase orders for vendor on commission basis and was not engaged in any of the above activities, the larger Bench concluded that the services provided by the said appellant would not fall within the definition of 'clearing and forwarding agent' as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the activity of clearing and forwarding operations. A person may undertake to provide service of procurement of orders as agent of the principal without agreeing to provide services of clearing and forwarding of the goods. Clearing and forwarding has a very specific connotation in the context of movement of goods from the supplier to their destination and agents undertaking clearing and forwarding operations may never have been concerned with procurement of orders for the goods which are cleared and forwarded. A person entrusted with the work of commission agent for procuring orders for the principal cannot insist on also providing services as clearing and forwarding agent in respect of those goods and it would be open for the principal to engage some other person for the purpose of forwarding such goods. In cases where the buyer is under an obligation to take delivery of the goods from the vendor's premises, there would not be even any need on the part of the vendor to engage any forwarding agent, nor can a person engaged for the purpose of clearing and forwarding operations, insist on procuring orders for the principal in the absence of any stipulation to that effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , thus taking advantage of lower freight rates." The Penguin Business Dictionary defines this expression in the following words: "Forwarding agent. A GENERAL AGENT who specializes in moving goods from a factory or port of entry to their proper destination. Such an agent normally owns the transport necessary for this work and often arranges FREIGHT and customs formalities for his principal." In Fourth Edition of Halsbury's Laws of England (Volume 5), the characteristics of 'forwarding agents' are narrated in the following manner: "442. Characteristics of forwarding agents. A forwarding agent is one who carries on the business of arranging for the carriage of gods for other people. It must be clearly understood that a forwarding agent is not, in general, a carrier: he does not obtain possession of the goods: and he does not undertake the delivery of them at the other end. All that he does is to act as agent for the owner of the goods to make arrangements with the people who do carry, such as shipowners, road hauliers, railway authorities and air carriers, and to make arrangements, so far as they are necessary, for the intermediate steps between the ship and the rail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetently. In ordinary transactions a forwarding agent is not liable for failing to insure the goods, in the absence of instructions from his customer to do so: but he may, in certain circumstances, be liable for not consulting his customer and advising him as to the proper transport and insurance arrangements which should be made for valuable goods. A forwarding agent is not normally personally liable to pay the charges of carriers whom he engages to carry the gods on behalf of his principal; but there is a custom of the London freight market that forwarding agents incur personal liability to shipowners for the payment of freight or of dead freight for booked space left unfilled. A forwarding agent who tenders dangerous goods to carriers without warning them of their nature or of the precautions which should be taken in their carriage is personally liable to the carriers for any resulting damage through breach of the implied warranty that the goods are fit for carriage." 11. From the reading of the definition contained in the aforesaid provision, together with its dictionary meanings contained in Legal and Commercial dictionaries, it becomes apparent that in order to qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-determined/agreed covenants between them. Therefore, there is no occasion for Ambuja companies to instruct the appellant to dispatch/forward the goods to a particular destination which is already fixed as per the contract between the coal company and the Ambuja companies. The appellant does not even undertake any loading operation. The primary job of the appellant, as per the contract between the appellant and the Ambuja companies, is of supervising and liaisoning with the coal company as well as the Railways to see that the material required by Ambuja companies is loaded as per the schedule. At no stage custody of the coal is taken by the appellant or transportation of the coal, as forwarders, is arranged by the appellant. We are, thus, of the clear opinion that the services rendered by the appellant would not qualify as C&F Agent within the meaning of Section 65(25) of the Act. 13. In view of the aforesaid discussion, the appeals are allowed and the impugned orders passed by the Tribunal are set aside by quashing the demand of service tax made from the appellants. No costs. CIVIL APPEAL NO. 9967 OF 2014 The Commissioner of Service Tax, Kolkata, is aggrieved by the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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