Commission-based order procurement is not clearing and forwarding agency service; Service Tax demand fails.

Mere procurement of purchase orders on commission basis by an indenting agent does not amount to clearing and forwarding agency activity under the Finance Act, 1994. The controlling principle applied was that, without any actual clearing or forwarding function, order solicitation for a foreign principal falls outside the statutory definition of "Clearing and Forwarding Agent". On that basis, the Service Tax demand was held unsustainable and the appeal was allowed in favour of the assessee.

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Issues: Whether persons engaged only in procuring purchase orders on commission basis as indenting agents fall within the scope of "Clearing and Forwarding Agent" service under Section 65 of the Finance Act, 1994 and are liable to Service Tax.

Analysis: The demand was founded on the view that an indenting agent procuring orders for a foreign principal answered the description of a clearing and forwarding agent. That view had earlier been taken in a Division Bench decision, but it stood overruled by a Larger Bench. The controlling principle applied was that mere procurement of orders on a commission basis, without more, does not amount to clearing and forwarding agency activity within the statutory definition.

Conclusion: The appellants, being engaged only in procuring orders on commission basis, did not fall within the definition of "Clearing and Forwarding Agent" and the Service Tax demand was unsustainable. The appeal was allowed in favour of the assessee.

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