CESTAT rules in favor of appellants in service tax case on clearing and forwarding services

The Appellate Tribunal CESTAT, Chennai ruled in favor of the appellants in a service tax case related to clearing and forwarding services. The tribunal found that the appellants were not liable for service tax as they did not undertake the clearance of goods from their principals. The decision was based on a previous ruling by the Punjab & Haryana High Court. The impugned order was set aside, and the appeal was allowed.

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Issues: Whether the assessee's activities of receiving goods from principals, storing them, dispatching them on sale invoices, maintaining stock records, collecting sale proceeds, and remitting amounts to the principals constituted clearing and forwarding service for the purpose of service tax liability.

Analysis: The assessee did not clear goods from the principals in the first instance; the goods were already supplied by the principals to the assessee. The activities undertaken were limited to receipt, storage, dispatch, record maintenance, collection of amounts, and remittance on behalf of the principals. On these facts, the Tribunal applied the principle that where goods are already cleared by the principal, the recipient who merely receives, stores, and sells them cannot be treated as a clearing and forwarding agent for service tax purposes.

Conclusion: The activity did not amount to clearing and forwarding service and the service tax demand, interest, and penalty were unsustainable; the appeal was allowed in favour of the assessee.

Ratio Decidendi: A person who only receives goods already cleared by the principal, stores them, and carries out incidental sales and remittance functions is not a clearing and forwarding agent liable to service tax under that category.

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