2014 (10) TMI 135 - AT - Service Tax

Tribunal rules in favor of consignment agent, overturns Service Tax liability claim

M/s BK SALES CORPORATION Versus COMMISSIONER OF CENTRAL EXCISE ROHTAK, HARYANA

M/s BK SALES CORPORATION Versus COMMISSIONER OF CENTRAL EXCISE ROHTAK, HARYANA - 2014 (36) S.T.R. 1281 (Tri. - Del.) Issues:Service Tax liability on the appellant for providing clearing and forwarding services as a consignment agent.Analysis:The judgment addresses the issue of Service Tax liability amounting to Rs. 78,068/- confirmed against the appellant for allegedly providing clearing and forwarding services to their principal. The agreement between the appellant and the principal appointed the appellant as a consignment agent, requiring them to sell products in smaller lots at fixed prices. The Revenue argued that the appellant, being a consignment agent, falls under the definition of a clearing and forwarding agent as per Section 65(25) of the Finance Act, 1994.The appellant contended that merely being a consignment agent does not automatically classify them as a clearing and forwarding agent unless engaged in clearance and forwarding operations. Referring to Section 65(105)(J) of the Finance Act, 1994, the appellant argued that taxable services by a clearing and forwarding agent must be in relation to clearing and forwarding operations. The appellant highlighted that the agreement allowed them to sell goods to other customers and not solely engaged in clearing and forwarding activities.The Tribunal examined previous decisions on similar matters. Notably, the decision of the Larger Bench in the case of Medpro Pharma Pvt. Ltd. was overruled by the Hon'ble High Court of Punjab and Haryana in the case of CCE, Panchkula vs. Kulcip Medicines (P) Ltd. The Tribunal also cited a recent decision in the case of Videocon TV Manufacturer (P) Ltd. vs. CCE NOIDA, where it was held that an entity working on commission basis and not involved in specific clearing and forwarding activities cannot be considered a clearing and forwarding agent. The main activity of a clearing and forwarding agent involves receiving and dispatching goods as per the principal's directions, which the appellant was not engaged in.Ultimately, the Tribunal found that the appellant's freedom to sell goods to customers in small lots indicated they were not functioning as a clearing and forwarding agent for the principal. Consequently, the Service Tax liability against the appellant was dismissed, and the appeal was allowed with consequential relief.