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TMI Blog2009 (2) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... nd distribution of the products of the principal and entrusted with the job of receiving, storing and distributing the products of the principal to his authorised stockists and distributing centers is liable to pay Service Tax under the category of 'Clearing and forwarding Agent" when no clearing activity from the manufacturer's (Principal) premises is directly undertaken by the agent or Service Tax is leviable under the category "Clearing and forwarding" only if an agent renders both clearing forwarding services." Brief facts of the case may first be noticed. The assessee respondent is holding registration certificate in form ST 2 for payment of Service Tax as 'clearing and forwarding agent'. Under Section 70 of the Finance Act, 1994 every person liable to pay service tax is required to furnish to the proper officer of Central Excise a return in the form of ST 3. As per amended rule 7(1) of Service Tax Rules, 1994 the return is to be filed on half yearly basis. The assessee- respondent entered into an agreement with M/s Cipla for handling and distribution of their products and were entrusted with the job of receiving, storing and distributing Cipla products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d forwarding agent were not within the scope of the levy of service tax which is limited to clearing and forwarding operations. It has also placed reliance on the circular dated 20.4.2002 issued by the Central Board of Excise and Customs, New Delhi being circular No. 2/1/2002-ST dt 20.4.2002 F.No.137/04/.2002-CX.4 It interpreted para 10 of the circular which reads thus: " 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 receives 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 carries out all a ctivities in respect of goods right from stage of their clearance from the premises of the principal to its storage and deliver to the customers." (emphasis added) On the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding operations cannot be dissected into clearing and forwarding. Indeed such operations would fall in the common category and hence all or any of the services of that category would attract the imposition of service tax as per the provisions of sub section (j) of Section 65(105) of the Act. The view of the larger Bench is discernible from paras 32,33,34 and 35 which reads thus: " 32. While arriving at this conclusion, we also go by the trade understanding based on sheer common sense, which is often common. Because a buyer buys only rice and not wheat in a grocery shop, which claims to sell "wheat and rice", the shop cannot use to be a shop selling "wheat and rice". In the same way, rendering only "forwarding" service cannot make the appellant cease to be "Clearing and Forwarding Agent", so as to save him from the tax. Some customers may want only clearing operations, while some forwarding and others both. The expression "clearing and forwarding operations" is a compendious expression of nature of services offered any of which will bring the service providers in the tax net of this category. Moreover, in the process of forwarding operationsclearance stages may arise such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent service than the expression 'forwarding' and one person may not necessarily be able to render both the services. He has maintained that the aforesaid emphasis should be accepted especially when the Board has issued a circular. He has further submitted that in any case the revenue has accepted the view of the Tribunal in the case of M/s Mahavir Generics (supra) then the filing of the present appeal would be an unholy act on the part of the revenue. After hearing learned counsel for the parties, perusing the record and various provisions of the statute/ circular we find that for answering the question it would be necessary to first read the provisions of clause (j) of Section 65(105) of the Act which reads thus: " 65. Definitions In this Chapter, unless the context otherwise requires.- (1) to (104) xx xx xx xx xx (105) "taxable service" means any service provided or to be provided.- (a) to (g) xx xx xx xx (h) to a client, by a custom house agent in relation to the entry or departure of conveyances or the import or export of goods. t a (i) xx xx xx xx (j) to a client, by a clearing and forwarding agent in relation to clearing and forwarding operations, in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble the Supreme Court rendered in the case of Inayat Ali Khan v. State of U.P. (1971) 2 SCC 31 (Para 5) and para 6 of the judgement of Hon'ble the Supreme Court rendered in the case of Ape Belliss India Ltd v. Union of India (2001) 132 ELT 8. The observations of their Lordship reads thus : "6........ A plain reading of the Section (sic Tariff Public Notice) clearly shows, as contended by Mr. Bhatt, that for an alloy steel to be considered as stainless steel, it will have to satisfy two conditions i.e. The alloy steel should be known in the trade as stainless steel and further, it should contain 11% chromium as a component of the allow steel. This is clear from the use of the word "and". If the intention of the trade notice was to treat the two types of alloy steels as stainless steel, then it would have been made clear by using the word "of" instead of the word "and"." We are further of the view that the circulars issued by the Board are binding and meant for adoption for the purposes of bringing uniformity. In that regard reliance may be placed on the judgements of Hon'ble the Supreme Court in the cases of Ranadey Micronutrients v. Collector of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 forming this view, we have certainly not overlooked the fact that while music can be sometimes taxing, a tax can never be musical. 32. While arriving at this conclusion, we also go by the trade understanding based on sheer common sense, which is often uncommon. Because a buyer buys only rice and not wheat in a grocery shop, which claims to sell "wheat and rice", the shop cannot cease to be a shop selling "wheat and rice". In the same way, rendering only "forwarding" service cannot make the appellant ceases to be "Clearing and Forwarding Agent", so as to save him from the tax. Some customers may want only clearing operations, while some forwarding, and others both. The expression "clearing and forwarding operations" is a compendious e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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