Clearing and forwarding service tax applies only to composite clearing and forwarding activity, not mere downstream distribution.

Service tax under the clearing and forwarding entry applies only where the agent performs the composite functions of clearing and forwarding in relation to the principal's goods. The appellant received goods after the manufacturer had already cleared them and only undertook further distribution, so the essential element of clearing was absent. On those facts, the activity did not fall within the taxable description in Section 65(105)(j) of the Finance Act, 1994. The demand was therefore unsustainable, the impugned order was set aside, and the appeal was allowed with consequential relief.

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Issues: Whether the appellant's activity of receiving goods from the manufacturer and further distributing them amounted to taxable clearing and forwarding services under sub-clause (j) of Section 65(105) of the Finance Act, 1994.

Analysis: The taxable entry covers only services rendered in relation to clearing and forwarding operations. The Board circular also indicated that the levy applies where the agent performs the composite function of receiving goods from the principal, storing them, and arranging delivery to customers. On the contract and facts, the appellant did not clear the goods from the manufacturer's premises; the goods were cleared by the manufacturer and delivered to the appellant, who only undertook further distribution. As the element of clearing was absent, the service did not satisfy the statutory description of clearing and forwarding service.

Conclusion: The demand for service tax was not sustainable and the appellant succeeded.

Final Conclusion: The impugned order was set aside and the appeal was allowed, granting the appellant consequential relief.

Ratio Decidendi: Service tax under the clearing and forwarding entry is attracted only when the agent performs both clearing and forwarding functions in relation to the principal's goods; isolated forwarding or distribution activity is outside the levy.

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