Clearing and forwarding service test excludes mere commission agency and coordination activities under the Finance Act.

Services involving procurement of orders, supervision of transportation and follow-up for payment were held not to constitute clearing and forwarding service under the Finance Act, 1994. The governing test is whether the activity substantially involves clearing of goods and forwarding them on the principal's instructions; mere commission agency and incidental coordination do not satisfy that test. As the assessee did not undertake receipt, warehousing, dispatch control or similar C&F functions, the classification as clearing and forwarding service failed and the demand based on that classification was not sustained.

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Issues: Whether the activities under the agreements, including procurement of orders, supervision of transportation, and follow-up of payment, constituted clearing and forwarding service under the Finance Act, 1994.

Analysis: The service falls within clearing and forwarding only when it is connected with clearing of goods and forwarding them to a destination on the principal's instructions. Mere procurement of orders, coordination with customers, supervision of transport, and follow-up for payment are ancillary to a commission agency arrangement and do not, by themselves, amount to clearing and forwarding operations. On the facts, the assessee was found to have rendered commission agency services and not to have undertaken receipt, warehousing, dispatch control, or similar C & F functions. The reasoning adopted was consistent with the governing test for clearing and forwarding service.

Conclusion: The activity was not clearing and forwarding service and the issue was answered in favour of the assessee.

Final Conclusion: The appeal failed, and the demand based on classification of the assessee's services as clearing and forwarding operations was not sustained.

Ratio Decidendi: A service is taxable as clearing and forwarding only if it substantially involves clearing of goods and forwarding them under the principal's directions; commission agency and incidental coordination services do not satisfy that test.

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