2018 (9) TMI 833 - HC - Service Tax

High Court rules in favor of appellant in service tax dispute, citing service nature distinction.

M/s Shreenath Roadways Versus Union Of India Through, Commissioner Of Central Excise, Jaipur-I

The High Court held that the appellant's services did not fall under the category of 'Clearing and Forwarding Agent' for service tax liability as they ... Clearing and forwarding agency service - service with reference to loading, unloading, transportation, storage of cargo for M/s. Binani Cement Ltd. - Whether, the Tribunal was justified in holding that the service rendered by the appellant falls in the category of clearing and forwarding and liable to pay service tax as per the section 65(105((j) of the Finance Act, 1944? - Extended period of limitation. Held that:- From the clause which is reproduced hereinabove, it is very clear that the appellant herein was only responsible for the handling of the work at the depot and in view of clause(10) of the circular they were not involved in the manufacturing activity - Even otherwise, in view of the decision of Punjab and Haryana High Court in Kulcip Medicines (P) LTD. [2009 (2) TMI 89 - Punjab and Haryana High Court] which has been followed in Narottam & Company [2013 (8) TMI 291 - CESTAT NEW DELHI], we are of the opinion that the case of the appellant herein is identically situated, therefore, both the questions are required to be answered in favour of the assessee against the department. It was held in the above mentioned cases that the activity of the appellant is only of forwarding and not clearing and forwarding, the only activity done by him is (a) providing labour for unloading of the goods at the rail heads, loading into the trucks for transport from rail-head to godown and unloading and stacking of the cement at the godown (b) arranging the dispatch of the goods as per the instructions and maintaining record of receipt and dispatch, and service tax not payable under Clearing and forwarding agent service. Appeal allowed - decided in favor of assessee. Issues Involved:1. Whether the Tribunal was justified in holding that the service rendered by the appellant falls in the category of clearing and forwarding and liable to pay service tax as per Section 65(105)(j) of the Finance Act, 1944.2. Whether the Tribunal was correct in law in not deciding the ground of limitation taken in the memo of appeal, irrespective of the fact that it was decided by the Adjudicating authority.Detailed Analysis:1. Service Tax Liability under Clearing and Forwarding Agent Category:The primary issue was whether the appellant’s services fell under the category of 'Clearing and Forwarding Agent' as defined in Section 65(25) read with Section 65(105)(j) of the Finance Act, 1994, thereby making them liable to pay service tax. The appellant argued that their activities were limited to handling and forwarding services, not clearing. They referenced the definition of a 'Clearing and Forwarding Agent' and cited several judgments, including *Commissioner of C.EX., Panchkula Versus Kulcip Medicines (P) LTD.*, where it was held that both clearing and forwarding activities must be performed to fall under the taxable category. The appellant also cited the Supreme Court's affirmation of this interpretation in *Coal Handlers Pvt. LTD. Versus Commissioner of C.EX., Range Kolkata-I* and other relevant cases.The Tribunal, however, concluded that the appellant was involved in both clearing and forwarding activities. It noted that the appellant’s contracts included responsibilities such as clearing consignments from railways, bearing railway expenses, and handling demurrage charges, which indicated involvement in clearing activities. Consequently, the Tribunal upheld the service tax liability.2. Ground of Limitation:The appellant contended that the Tribunal erred by not addressing the ground of limitation raised in the memo of appeal. The appellant highlighted that the period in question was from April 1, 2000, to September 9, 2004, and argued that the Tribunal should have considered whether the demand was time-barred. The Tribunal, however, did not explicitly address this issue in its decision.Conclusion:The High Court reviewed the arguments and evidence presented by both parties. It noted that the appellant's activities, as per the contract terms, were primarily related to handling and forwarding services at the depot, not manufacturing. The High Court referenced the decision in *Kulcip Medicines (P) LTD.* and subsequent cases, which clarified that both clearing and forwarding activities must be performed to attract service tax under the relevant provisions. Since the appellant’s activities were limited to forwarding, the High Court concluded that the Tribunal’s decision was incorrect.The High Court also noted the Tribunal's failure to address the limitation issue, which was a significant oversight.Judgment:The High Court allowed the appeal, answering both questions in favor of the assessee and against the department. The Tribunal’s order was set aside, and the demand for service tax was deemed unsustainable.