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TMI Blog2007 (7) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant directing them to show cause as to why the service tax amount due from the commission received by the appellant be not demanded and penalty be not imposed and why interest should not be recovered, as receiving the commission is in respect of the services provided by the appellant will fall under the category of C & F agent services. (clearing and forwarding agent) within the purview of Clause 25 of Section 65 of Finance Act, 1994. 3. The appellant resisted the show cause notice on the ground that they are not providing any clearing and forwarding agent services and the commission received by them is in respect of the procurement of purchase orders by them for their parties. The adjudicating authority did not accept the contentions of the appellant and confirmed the demand imposed penalty and directed for recovery of interest. On an appeal, Commissioner (Appeals) also concurred with the findings of the adjudicating authority and upheld the order-in-original. Hence this appeal. 4. Learned Advocate appearing on behalf of the appellant submits that during the relevant period, the appellant had received commission from 21 parties. Out of the 21 parties, they had agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and forwarding agent services has to be read. We may read the same :- "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". 7. In order to get covered under the ambit of clearing and forwarding agent, it has to be shown that the appellant has provided the services in respect of clearing and forwarding agent to their customers. It can be noticed from the records that since the appellant did not have any agreement with 19 parties, their scope of work was limited to merely procuring the orders. This is clearly coming out from the allegations in the show cause notice which read as under '9. And whereas, Shri Virendra Singh, authorized signatory of M/s. Pulp & Paper Limited, Muzaffarnagar in his aforesaid statement dated 17- 2-2004 inter alia stated that during the year 1999-2000 the commission income was received from these parties on account of commission on sale, that they do not have any written agreement with any of these parties regarding commission income, that they have an extensiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment does not confer any exclusive right upon the Commission Agent and that Rampur Distillery is at liberty to appoint more agent on commission basis on such conditions as it may decide, or to carry out the work specified herein for and on its own behalf. 4. Commission Agent shall not make any representations about the Products or Rampur Distillery terms of supply including prices to prospective customers save and except as expressly communicated in 'writing to it by Rampur Distillery'. 5. Commission : In consideration of the services rendered by the Commission Agent under this letter, Rampur Distillery shall pay to the Commission Agent a commission of Rs. 1/- (Rupee One only) per B,L. in case of Extra Neutral Alcohol (ENA) & Rectified Spirit (RS) or at the rates which will be decided after mutual consent of both the parties, on the sales of the products as against orders given by the Commission Agent from time to time." 9. We find from records that appellant entered into an agreement with the said Rampur Distilleries on 31st March, 2001 for providing essential and related supervision of transport services to M/s. Rampur Distillery. The relevant portion that for arise fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate with the customers for getting the payments released within such time, as may have been agreed to by RAMPUR DISTILLERY, and also ensuring that the said payments reach RAMPUR DISTILLERY'S designated officer within shortest possible period. RAMPUR DISTILLERY has the right to impose the penalty in case of non-recovery of payments from the customers or delay in getting the payments within the agreed period due to fault of the representative. (iv) The REPRESENTATIVE shall not vary the terms of payments for the supplies made, without the prior consent of RAMPUR DISTILLERY. The payments shall be made in such manner as may specify, in this behalf, RAMPUR DISTILLERY reserves the right to specify different terms and conditions for different customers. 4.1 In consideration of the supervision of transportation for the despatches of Products by the Representative under this Agreement, RAMPUR DISTILLERY shall pay to the Representative contract charge in the form of supervision charges, to be notified from time to time, on the despatch of the product by RAMPUR DISTILLERY. These may be disbursed from time to time at the sole discretion of RAMPUR DISTILLERY, RAMPUR DISTILLERY reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may exceed 10% of total invoice amount. 4.3 The commission shall become due for payment and shall depend upon the due realization of all moneys, due to HIL upon the supplies made. In case of delay in the realization of the payments within the prescribed period, suitable deduction shall be made from commission payable towards the interest for the delayed period if it is more than 90 days." 11. It can be noticed from the above re-produced portions of the agreement between the appellant and Rampur Distillery and Holosticks India Ltd. that the appellants were appointed as commission agent for the purpose of procuring the orders and in addition to that supervising the transportation, ensuring the execution of orders and pursuing for payment. It was argued on behalf of the revenue that these additional activities as done by the appellant in respect of Rampur Distilleries and Holosticks India Ltd. are in addition to mere procurement of orders and would get included in the definition of clearing and forwarding agents services. We are unable to accept this contention made by the revenue. We find from the records, that, though the agreement between the appellant and these two parties i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent is entitled. A clearing and forwarding agent normally undertakes the following (a) Receiving the goods from the factories or premises of the principal or his agents; (b) Warehousing these goods; (c) Receiving despatch orders from the principal; (d) 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; (e) Maintaining records of the receipt and despatch of goods and the stock available at the warehouse; (f) Preparing invoices on behalf of the principal. 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. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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.' 14. We find that the Larger Bench has categorically laid down the ratio that the services of commission agent are included in the definition of business Auxiliary services w.e.f. 1-7-03 i.e. to say that the services of commission agent were not covered under any other category of services and more so in the clearing and forwarding agent services. The Larger Bench has categorically laid down that the clearing and forwarding agent services would include the activities as indicated in paragraph '9.2' reproduced above. We find from records that in the present case before us, the appellant has not rendered any services in respect of receiving the goods, warehousing the goods, receiving de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision and the Larger Bench and Division Bench of the Tribunal squarely covers the issue before us. 16. Accordingly, we find that the appellants have made out a case in their favour. In the facts and circumstances, as mentioned above, the impugned order is liable to be set aside and we do so. Impugned order is set aside and appeal allowed with consequential relief, if any. (Pronounced in the open court on_____________) Sd/- Sd/- (T.V. Sairam) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , indicating the role played by the appellants. The relevant extract reads as: "Shri Virendra Singh, authorized signatory of M/s. Tehri Pulp and Paper Limited, Muzaffarnagar, when asked to explain the entire process regarding sale of products of these parties stated that whenever any body wants to use their services in selling of their products then he approaches them and they procure orders from the customers and inform the manufacturers/suppliers (who have paid commission to them) to despatch their goods to the customers as per orders procured by them, that the payments are being made by the customers for the goods purchased by them directly to the manufacturers/suppliers, that they pursue the customers to making early payment directly to the manufacturers/suppliers, that debit notes are raised by them to the manufacturers/suppliers for making payment of commission to M/s. Tehri Pulp and Paper Ltd." (EMPHASIS SUPPLIED) 19. Further in the said statement, Shri Virendra Singh, had also clarified their role in the following words: "...that the product of these parties were sold through them and for which they were paid commission, that the activities that were undertaken by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the appellant has performed/has bound themselves to per form the following tasks: (i) Procurement of orders from the customers; (ii) Inform to manufacturers/suppliers (who have paid commission to them) to despatch their goods to the customers as per orders pro cured; (iii) Pursuing the customer to make an early payment directly to the manufacturers/suppliers; (iv) Raising debit notes to the manufacturers/suppliers for making payment of commission (the above tasks have been admitted by the authorized signatory in his statement dated 17-2-2004); and (v) In respect of the commission received from the various other par ties, with whom no agreements were made, the authorized signatory in his statement dated 17-2-2004 has admitted the following tasks: (a) procurement of orders, (b) ensuring execution, (c) pursuing the customers for making payment of supplies made. (vi) The authorized signatory in his statement dated 17-2-2004 has also described the responsibility under agreement dated 31-3-2001 with M/s. Rampur Distillery by referring to the task, namely, "supervising the transportation of despatches including making necessary arrangement for transportation of the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not flow directly or indirectly from mere procurement of order. 26. It is relevant to note here that, the Larger Bench had observed that, "Clearing & Forwarding Operations" did not flow directly or indirectly from "mere procurement of orders" and that there was no obligation on the person procuring orders as a Commission Agent for the principal carrying out "clearing & forwarding operations" in respect of the goods which were to be supplied pursuant to the orders so procured. The facts of the present case are, however, at variance with the situation referred to in the case before the Larger Bench, and hence distinguishable. However, in my opinion, they fall in line with the ratio laid down by the Larger Bench of this Tribunal in Medpro Pharma Pvt. Ltd. v. CCE, Chennai, 2006 (3) S.T.R. 355 (T-L.B.). Paragraph 31 of this judgment compares the "Operations" undertaken by a 'Clearing & Forwarding Agent' to an orchestrated form of musical work which has to be viewed in the context of an over-all impact which result in 'Clearing and Forwarding Operations' rather than isolating them to decide whether each of the activities would amount to 'Clearing & Forwarding Opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Member (T) DIFFERENCE OF OPINION. 29. Since difference of opinion has arisen between the Member (Judicial) and Member (Technical), the following question has been formulated for reference to the Third Member :- "Whether the appeal is to be allowed as held by. Member (Judicial) or to be ordered as held by Member (Technical)." In view of the above, registry is directed to place the file before Hon'ble President for orders. Sd/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the terms and conditions and which also indicate the commission to which the C&F agent is entitled. A clearing and forwarding agent normally undertakes the following (a) Receiving the goods from the factories or premises of the principal or his agents; (b) Warehousing these goods; (c) Receiving despatch orders from the principal; (d) Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized trans porters of the principal; (e) Maintaining records of the receipt and despatch of goods and the stock available at the warehouse; (f) Preparing invoices on behalf of the principal. 32. The contention is that the appellants are not warehousing the goods or taking any steps for clearance of the goods from the manufacturer's place. Therefore, they are not undertaking any activity as clearing and forwarding agent. The contention is that during the period in dispute, only with two parties, the appellants had written agreements and there is no written agreement in respect of other 19 parties from whom they receive only the commission. The contention is that appellant had only procured orders for the goods and wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her consideration except for commission for procurement of orders. In view of the above discussion, I agree with the view taken by Hon'ble Member (Judicial) and the impugned order is liable to be set aside and appeal is allowed with consequential relief, if any. (Order dictated and pronounced in the Open Court) Sd/- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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