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TMI Blog2019 (8) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of service tax under Sec 76 of the Act. However, the penalty should not exceed the service tax confirmed as above. I impose penalty of Rs. 1000/- under Sec 77 of the Act. I impose penalty of Rs. 14,86,779/- under Sec 78 of the Act." 2.1 Acting on the intelligence that appellants are depot keepers/ depot agent providing taxable services under the category of "Clearing and Forwarding Agents Services", to various yarn manufacturing mills, without obtaining registration and payment of service tax, investigations were undertaken by the department. 2.2 After completion of investigations a show cause notice dated 20.05.2004 was issued to the appellants asking them to show cause as to why;- (i) The service tax amounting to Rs. 14,86,779/- (Rupees Fourteen lakhs eighty six thousand seven hundred and seventy nine only) leviable on the consideration/ commission/ remuneration amounting to Rs. 2,82,57,464/- received by tem during the period Sept 99 to Sept 2003 should not be recovered from them under Section 68 of the Act and Rule 6 of the Rules read with Section 73(1)(a) of the Act; (ii) The interest, as applicable should not be recovered from them for nonpayment of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration received for unloading and transporting the goods from the railway station or any other place where the goods are unloaded from the carrier to the warehouse would not be covered in the meaning of services rendered by a clearing and forwarding agent. (v) The warehousing of the goods does not come under either clearing operation or forwarding operation. However a clearing and forwarding agent may render the warehousing services as a ancillary operation. (vi) Further the definition of clearing and forwarding agent includes consignment agent. At the same time, the taxable service has been defined to be "in relation to Clearing & Forwarding operations in any manner". Therefore, only if a person acting as a consignment agent and rendering the services of in relation to Clearing & Forwarding operations would he be liable to pay service tax on such services provided by him. (vii) The trade notice referred to by the Additional Commissioner is not applicable to present facts of case. (viii) The issue on merits is covered by the decisions in following cases:- * Kulcip Medicines (P) Ltd [2009 (14) STR 608 (P & H)] * Mahavir Generics [2006 (3) STR 276 (T-Del)] * VNSS Textil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their own cost and on their own. * For categorizing the services rendered under the category of "clearing and forwarding services" it is essential that service should be that clearing and forwarding both. In case the service provider is not providing both the services of clearing and forwarding then the services rendered will not be classifiable under this category. As have been held in following decisions:- * Kulcip Medicines [2009 (14) STR 608 (P&H)] & {2012 (25) STR J127 (SC)] * Shreenath Roadways [2018 (16) GSTL 239 (Raj)] * Novacare Drug Specialities Pvt Ltd [2014 (34) STR 247 (T-Mum)] * Narottam & Company [2014 (33) STR 472 (TDel)] * Coal Handlers Pvt Ltd [2015 (38) STR 897 (SC)] * The submissions made by the learned Authorized Representative, in respect of place of removal, as per Section 4 of Central Excise Act, 1944, are contrary to the provisions of the section itself, as the section states that place of removal was only for that section. * Predominant part of the Show Cause Notice is barred by limitation. The Show Cause Notice dtd 20.05.2004 proposes the demand for period Sept 1999 to Sept 2003. Since the issue involved is one of interpretation of statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and forwarding the goods as per the instructions of the Mills, by way of dispatching these goods to their buyers. Hence are covered by the definition of Clearing and Forwarding Agent as defined by Section 65(25) of the Finance Act, 1994. * Failure on the part of appellants to comply with the provisions of Finance Act, 1994 and Rules made thereunder, also make them liable for penal actions as prescribed. 5.1 We have considered the impugned order with the submissions made in appeal and during the course of arguments. 5.2 Finance Act, 1994 was amended by Finance Act, 1997 to levy Service tax on various services including the "Clearing and Forwarding Agent Services". The scope of the service Clearing & Forwarding Agents was explained by the Board in its Circular F.No. B.43/7/ 97-TRU dated 11.7.1997. The relevant paragraphs of the said circular are reproduced below: "2. Clearing and Forwarding Agents 2.1 Clearing and forwarding agent has been defined as any person who is engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consigning agent. The taxable service has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver name called) paid to such agent by the client engaging such agent (Notification No. 27/97-S.T. refers.) 2.5 For the services rendered, the C&F agent receives commission or remuneration which usually consists of two components : (I) Minimum commission on a flat rate or turnover basis depending on the packages/consignments handled; (II) A variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal. This is usually given as a percentage of the turnover. The above two constitute the remuneration or commission paid to the C&F agent by the principal. 2.6 In cases where C&F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for service tax purposes it would suffice to register only such regional or head offices. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the service tax liability. The above clarification has been issued by the various Commissionerates as trade notice for information of all concerned. [Trade Notice No 87/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Depot areas and forward the related documents to the Depot Agent direct and that the Depot Agent shall sell the goods and remit the sale proceeds to MILLS by TT OR DD immediately within 7 days (seven days) from the date of sale. (b) For Belated payments, the Mill will be charging interest @ 24% on the Depot Agent which will have to be paid by the Depot Agent. Credit shall be given to the Agents for interest on advance remittances made by them against sale proceeds before the due date @ 15% on such advances. 6. THAT THE MILLS will pay the Depot Agent's Commission 1.5% (one and half percent only) flat rate for sales made by them on the Ex mill value of yarn realised by the Mills, for the services rendered by them. It is clarified that the Ex-mill realization would be realization exclusive of all expenses and outgoings such as EXCISE DUTY, SALES TAX, SURCHARGE, TURNOVER TAX AND OTHER TRANSIT DUES, INSURANCE, INTEREST, OVERDUE INTEREST AND DEMURRAGE AND ANY COMMISSION PAID ON THE SALES. The Depot Agent will have to send their debit notes for the Commission amount in each month and the Commission will be settled monthly by the Mills. 7. THAT the goods in the custody of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any remittance if the goods are sold for export through a party of the above area by the Mills. 21. THAT the Depot Agent will prepare the yarn invoice in quadruplicate and post three copes direct to the Mills and by the next day available post. 22. THAT the Depot Agent shall reconcile the Accounts once in a month wherever the difference occurs between the Mills and the Depot. The Depot Agent and Mills will finalize and settle the Accounts within three months of the termination of this agreement." 5.4 From plain reading of the agreement along with the activities as specified in the Circular dated 11.07.1997 it is observed that appellants are undertaking all the all the activities as specified at para 2.2 (a to f). The relevant clause(s) of the agreement which is in respect of the specified activity is as indicated in table below: Sl No Activity Clause of Agreement (a) Receiving the goods from the factories or premises of the principal or his agents; 3 & 5 (b) Warehousing these goods; 9, 11 & 12 (c) Receiving dispatch orders from the principal; 4 & 5 (d) Arranging dispatch of goods as per the directions of the principal by engaging transport on his own or thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the approval that it has received in judicial decisions or in legislation. 17. In Francis Bennion Statutory Interpretation, Fourth Edition, the law is stated in the following terms at page 596 : "Section 231. The basic rule. - In the period immediately following its enactment, the history of how an enactment is understood forms part of the contemporanea expositio, and may be held to throw light on the legislative intention. The later history may, under the doctrine that an ongoing Act is always speaking, indicate how the enactment is regarded in the light of developments from time to time. COMMENT On a superficial view, it may be though that nothing that happens after an Act is passed can affect the legislative intention at the time it was passed. This overlooks the two factors stated in this section. Contemporanea expositio. The concept of legislative intention is a difficult one. Contemporary exposition helps to show what people though the Act meant in the period immediately after it was passed. Official statements on its meaning are particularly important here, since every Act is supervised, and most were originally promoted, by a government department which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services must be "in relation to clearing forwarding operation". Thus, the definition makes it clear that all services rendered by the clearing and forwarding agent are not within the scope of the levy; the levy is limited to "clearing and forwarding operations". The Circular of the Board on this issue may be read : "The matter has been examined. Normally, a C&F agent receives goods from the factories or premises of the Principal or his agents, stores these goods, dispatches these goods as per orders received from the Principal or owner, arranges transport, etc. for the purpose and prepares invoices on behalf of the principal. For this service, the C&F agents receive commissions on the basis of agreed terms. Therefore, an essential characteristic of any services, to fall in the category of C&F agent, is that the relationship between the service provider and receiver should be in the nature of principal (owner) and agent. The C&F agent carried out all activities in respect of the goods right from stage of their clearances from the premises of the principal to its storage and delivery to the customers." 6. The above Para in the circular makes it clear that only when a C&F agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of dictionary meaning is erroneous and liable to be set aside. 7. Sri Raghavendra B., learned counsel for the appellant would elaborate his submissions to contend that the Tribunal ought not to have traversed beyond interpreting the Section as per the language employed in the Statute itself and would submit that while interpreting the taxing Statutes the authorities cannot import which is not expressed in the provision itself and in this regard he relies upon the decision in the matter of Commissioner of Sales Tax U.P v. Modi Sugar Mills Pvt. Ltd., reported in AIR 1961 S.C. 1047. He would also add that Tribunal was in error in relying upon the dictionary meaning and in this regard he would rely upon the decision of the Hon'ble Supreme Court in the case of Ponds India Ltd v. Commr. of Trade Tax, Lucknow reported in 2008 (227) E.L.T. 497 (S.C.) by drawing our attention to paragraph 24 contending that definition of dictionary meaning as found in Wikipedia should not be used in aid of construction of a Fiscal Statute. He would also submit that Section itself being explicitly clear wherein the word consignment agent has also been included in the Section itself and hence it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee falls outside the purview of clearing and forwarding agent and as such prays that the question of law be answered against the revenue and in favour of the assessee. 11. Further, we are not able to accept the contention of the assessee for more than one reason. At the outset it is to be seen that agreement itself terms the assessee as a consignment agent. Thus, the parties were at ad-idem when the contract was entered into between them as to what their status would be. In so far this contention is concerned the parties namely that the principal and the agent having understood in unequivocal terms as to their duties and responsibilities which include not only having effective control of the goods by the Principal but also in so far as the price determination is concerned it was in the hands of both the principal and as well as the agent namely, the assessee. Hence, by no stretch of imagination it can be concluded that in the event, of assessee being a commission agent the price determination would also be left within the domain of a Commission agent. The said reasoning would not appeal to logic. Hence, we are unable to accept the said contention. 12. Another as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the activities of a clearing & forwarding agent. Activity of procuring orders is thus independent of clearing & forwarding operations. The agents doing these activities can be different. Moreover, clearing & forwarding operations do not flow directly or indirectly from mere procurement of orders. 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 & forwarding operations in respect of the goods which are to be supplied pursuant to the orders so procured." and have come to the conclusion that the agent engaged for procuring the purchase orders for the vendor on commission basis does not engage in the above activities as mentioned at para 9.2 therein, if there was mere procurement of purchase orders for the principal on commission basis by the assessee, it would have definitely fallen under the category of commission agent and would have stood outside the activity of the clearing and forwarding agent. But, it is not so in the instant case as seen from the Clauses mentioned in the Agreement. Thus, we will have to hold in the context of the agreement in question that apart from procur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said decision would be inapplicable to the facts of the case as we have held that activity carried on by the assessee is that of a Consignment Agent. The Judgment of Kulcip Medicine (supra) relied on by the learned counsel for the respondent to contend that. Mahaveer Generics case namely, the judgment in question before this Court in the present appeal has also been taken into consideration in Kulcip's case is liable to be brushed aside the contention of the assessee is not appealing to us for the reason that Tribunal in the said decision (Kulcip's case) at paragraph 13 has taken the view that the Judgment in Mahaveer Generic (present case) has been accepted by the revenue and no appeal has been tiled and accordingly was persuaded to accept the stand of assessee. The view taken by the Punjab & Haryana High Court in Kulcip's case, we find is factually in error since the revenue had filed the present appeal challenging the legality and correctness of Mahaveer Generic case in the present appeal & it was pending as on the date of disposal in Kulclp's case by Punjab & Haryana High Court and hence, the view taken in Kulcip Medicine case is inapplicable to the facts & circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... variably be attached to these words or expressions." 15. Dilworth (supra) and few other decisions came up for consideration in Peerless General Finance and Investment Co. Ltd. and this Court summarized the legal position that inclusive definition by the Legislature is used; (one) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names. 16. It goes without saying that interpretation of a word of expression must depend on the text and the context. The resort to the word 'includes' by the Legislature often shows the intention of the Legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may suggest that word "includes" may have been designed to mean "means" The setting, context and object of an enactment may provide sufficient guidance for interpretation of word "includes" for the purposes of such enactment." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operations" now remind us of an orchestra, performing a western classical symphony. It reminds us of a connoisseur's experience of harmony in western classical music. While listening to Mahler's 9th Symphony, one does not listen to an individual violin or a trumpet, but the harmony emanating from many different seemingly unrelated instruments. In the same way, a C&F Agent's functions consisting of seemingly unrelated tasks are well orchestrated. This view of ours is strengthened by various references including the Report of the United Nations Economic Commission for Africa referred to by us in the preceding paragraphs all revealing in no uncertain terms that the freight forwarders are known variously as clearing agent, shipping forwarding agent etc. We are, therefore, of the view that even if one segment of activities is not demonstrated to be performed, it cannot be held that the appellants were not engaged in taxable service. Due to their orchestrated nature of work, such isolated activity can also be covered under "C&F Operations". Merely, because the bassoon was not played in one of the movements of a symphony, it does not cease to be otherwise a part of the orchestra. While fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elera Logistics Pvt Ltd [2014 (33) STR 514 (T-Mum)] while upholding the demand made under taxable category of Clearing and Forwarding Agent Services have also upheld the invocation of extended period of limitation as per proviso to section 73(1) of Finance Act, 1994 stating as follows: "4.5 The next plea of the appellants is that keeping in view the nature of operation they were under the bona fide belief that no Service Tax is payable and hence extended period of limitation cannot be extended. We note that the demand is from October, 1999 onwards. The appellant had not taken any registration. The first time they took registration was in December, 2001 relating to clearing and forwarding services. However, after taking the registration they did not pay Service Tax or filed any returns. After sometime they started correspondence disputing the leviability of Service Tax. Keeping in view the conduct of the appellants, we have no hesitation in holding that there was a clear cut suppression of activities before 2002 and later on also the act of correspondence, not filing the returns, etc., clearly indicates the wilful intention to evade Service Tax. We therefore hold that the extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warded them as per the directions of the service recipient. Section 65(25) of Finance Act, 1994 defines clearing and forwarding agent as under : "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." The taxable service is defined under Section 65(105)(j) ibid is as under : "Taxable service" means any service provided or to be provided to a client, by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner." It is thus clear that as per the activities performed by the appellant, it is squarely covered within the definition of clearing and forwarding agent and it provided service to a client in relation to clearing and forwarding operations. We have taken note of the Punjab and Haryana High Court judgment in the case of Kulcip Medicines Pvt. Ltd. (supra) wherein the word "clearing" was given the meaning as if such clearing was required from the factory. Supreme Court vide its order [2012 (25) S.T.R. J127 (S.C.)] summarily dismissed the special l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od has been rightly invoked. As regards the contention of the appellant that the reasoning of the Commissioner (Appeals) in the impugned order is inadequate, suffice to say that even if that is the case, the appellate Court can use different reasoning based on transactional documents and come to an appropriate finding and the appellate Court is not in any way bound by the reasoning of the lower authorities in this regard." In our view all the arguments advanced by the appellants both on the merits and limitation have been considered and rejected in these decisions. In view of these decisions appeal filed should fail both on merits and limitation. 5.11 Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. In case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] Hon'ble Bombay High Court has stated as follows: "10.So far as interest u/s. 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid. Since in respect of show cause notice, we hold that demand could have been made by invoking the extended period of limitation as provided by Section 73, we uphold the penalties imposed under Section 78 of The Finance Act, 1994. Hon'ble Supreme Court has in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] held as follows: "23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides." 5.13 Penalties under Section 75A, 76 and 77 of Finance Act, 1994 are in nature of civil penalties and are imposed in cases where the person who by his act of omission or commission has failed to fulfill the obligations cast on him under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 : "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws." 5. Accordingly, we hold that the element of mensrea was not required to be proved in the proceedings taken by the Income Tax Officer under Section 271(1)(a) of the Income-tax Act against the assessee for the assessment years 1965-66 and 1966-67." In Chairman, SEBI v. Shriram Mutual Fund [2006-TI0L-72- SC-SEBI] the Hon'ble Apex Court held that mensrea is not an essential element for imposing penalty for breach of civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w was again expressed by Kerala High Court in case of Lawson Travel and Tours (I)(P) Ltd [2015 (37) ELT 183 (Ker)] as follows: "5. What we notice is, the liability to pay Service Tax is in accordance with the Finance Act, 1994, as the taxable services involved in the matter was for the period from April, 2000 to March, 2004. The decision of this High Court referred above in Krishna Poduval's case (supra) was also prior to Finance Act, 2008, which made a remarkable distinction between Sections 76 and 78 of Service Tax Act. As the period in question relates prior to Finance Act, 2008, the assessing authority and later the Tribunal were justified in placing reliance on Krishna Poduval's case (supra) by the High Court of Kerala. 6. We find no good reason to opine that both Sections 76 and 78 are not applicable to the case of the appellant. On the other hand, we find, at the relevant point of time prior to Finance Act, 2008, penalty could be imposed under both the provisions and it is for appellant/assessee to convince authorities concerned by evidence that they are not liable to pay Service Tax and that there is justification in the defence raised by them regarding refund of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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