2008 (4) TMI 31 - SC - Service Tax

Appeal allowed; matter remitted for fresh determination whether consignment-stockist activities attract service tax for 1.9.1999-31.7.2002

M/s. Super Poly Fabriks Ltd Versus Commissioner of Central Excise, Punjab

Appeal allowed. SC held that, given the agreement's terms and the limited grounds in the show-cause notice, the matter should be remitted to the assessing ... Liability of appellant to pay service tax on clearing and forwarding agent - HELD THAT:- The agreement is titled as 'Consignment Stockistship Agreement'. Appellant has various jobs to perform thereunder. It does not arrange for any transport. It, however, provides for godowns. It gets the insurance company to conduct a survey. It has to furnish dates as regards stock in its custody. It has to furnish guarantee to recover full value of the stocks which it holds for the company or sell on behalf of the company or for such a sum as would be determined by the company in its discretion. The company, however, has to indicate the recommended list prices for the sale of the product whereto the appellant is entitled to at octroi duty, terminal tax, sales tax or other local taxes or levies in forced in the local area and recover the same from their customers and maintain proper accounts for the same. Clauses 13 and 14 of the said agreement empower to sell the goods as also to issue Form 'F' to the Company. The period in question is from 1.9.1999 to 31.7.2002. The notice to show cause had referred only to paragraph 20.1 and 20.3 of the agreement. Its activities are said to be sale and/or getting booking orders for the product. It is true that the appellant has not appeared before the assessing authority or the appellate authority. However, keeping this in view, we are of the opinion, that the interest of justice would be subserved if the matter is remitted to the assessing authority with liberty to the parties to adduce such evidence as may be found necessary for determining the issue(s). Appeal is allowed Issues:1. Liability of appellant to pay service tax for services provided.2. Interpretation of the Consignment Stockistship Agreement.3. Determination of appellant's role as a clearing and forwarding agent.4. Application of Section 65(19) and Section 65(25) of the Act.5. Compliance with service tax regulations and penalty provisions.Analysis:1. The main issue in this case was whether the appellant was liable to pay service tax for the services provided under the Consignment Stockistship Agreement. The appellant argued that it merely accepted orders on behalf of its principal and did not engage in clearing and forwarding activities, thus disputing the imposition of service tax.2. The interpretation of the Consignment Stockistship Agreement was crucial in determining the nature of the appellant's activities. The agreement outlined various responsibilities of the appellant, including receiving orders, arranging insurance cover, and selling goods. The High Court highlighted clauses indicating the appellant's involvement in clearing and forwarding operations, such as lifting, stocking, and delivering goods.3. The court analyzed whether the appellant's role aligned with that of a clearing and forwarding agent as defined in Section 65(25) of the Act. The appellant's activities, such as procuring orders, handling goods, and coordinating deliveries, were assessed to ascertain if they fell within the scope of clearing and forwarding operations.4. Section 65(19) and Section 65(25) definitions of 'business auxiliary service' and 'clearing and forwarding agent' were pivotal in determining the applicability of service tax. The court emphasized the need to consider the agreement as a whole and the substance of the appellant's actions, rather than relying solely on labels or nomenclature.5. The court addressed the appellant's non-appearance before the assessing and appellate authorities, emphasizing the importance of due process and evidence in determining liability for service tax. Despite setting aside the impugned orders and penalties, the court remitted the matter to the assessing authority for a comprehensive review with the opportunity for both parties to present necessary evidence.In conclusion, the judgment focused on the nuanced interpretation of the agreement, the nature of the appellant's activities, and the application of relevant legal provisions to determine the liability for service tax. The court underscored the importance of a holistic assessment of the agreement and substantive actions in resolving the dispute.