Commission agent distinction under service tax: mere marketing and storage arrangements do not make clearing and forwarding services taxable.

A sole marketing agent who merely procures orders and arranges a separate storage facility for the principal's goods is a commission agent, not a clearing and forwarding agent, where it does not clear goods from the factory, store them in its own premises, or dispatch them to buyers. Applying the distinction drawn in the Larger Bench ruling and the definition of commission agent under the Central Excise and service tax framework, the article explains that such activity falls outside clearing and forwarding services and is more appropriately aligned with business auxiliary service concepts. On those facts, service tax under the clearing and forwarding category was not sustainable.

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Issues: Whether the respondents were liable to service tax as Clearing and Forwarding Agents, or were only Commission Agents outside the charging provision.

Analysis: On the undisputed facts recorded by the appellate authority, the respondents were appointed as sole marketing agents, maintained only a separate storage arrangement for the principals' goods, and did not themselves clear goods from the factory, store them in their own premises, or dispatch them to buyers. The Larger Bench ruling distinguished a commission agent who merely procures orders and collects payments from a clearing and forwarding agent who undertakes clearing and forwarding operations. The definition of commission agent under section 2(aaa) of the Central Excise Act, 1944, as applied through section 65 of the service tax provisions, and the introduction of business auxiliary service under section 65(19) of the Finance Act, 1994, support that distinction.

Conclusion: The respondents were only Commission Agents and not Clearing and Forwarding Agents; the service tax demand was not sustainable.

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