2021 (1) TMI 140 - AT - Service Tax

Appellant not liable for service tax on consignment agency services due to non-implementation of agreement.

The Tribunal found that the appellant was not liable for service tax on consignment agency services as the agreement was not acted upon, and no amounts ... Leviability of service tax - clearing and forwarding agent service - consignment agency services alleged to have been rendered by the appellant to Tata Steel Limited - HELD THAT:- The appellant’s activities were limited to conversion of the raw materials supplied by TSL into finished goods and to send the said finished goods of TSL to the clearing and forwarding agent/consignment agent, appointed by the appellant and TSL jointly, who were situated at various parts of the country - it is also found that although the appellant had entered into the consignment agency agreement with TSL this agreement was never acted upon by the parties. The appellant also did not receive any amount from TSL as and by way of consignment agent or towards providing any consignment agency service under the said consignment agency agreement. No evidence to the contrary is available from either the show cause notices or the impugned orders. Exactly same issue decided in the case of COMMR. OF CENTRAL EXCISE & SERVICE TAX, RANCHI VERSUS M/S TINPLATE COMPANY OF INDIA LTD. [2018 (7) TMI 1373 - CESTAT KOLKATA] where it was held that It is seen that the Assessee paid the duty on the Invoice value and the Revenue had not disputed the fact that the assessee cleared the converted goods on payment of Central Excise duty - In as much the facts of the instant appeals and those involved and considered in the order are the same and involves the same parties, we are in agreement with the appellant’s submission that the said order is also applicable to the instant appeals. In the instant appeals, it is also found from the records that the Department has not disputed the fact that the appellant had cleared the converted goods on payment of central excise duty and that the charges for freight is included in the invoice value - the impugned order not sustainable. Appeal allowed - decided in favor of appellant. Issues Involved:1. Leviability of service tax on consignment agency services under the category of 'clearing and forwarding agent service.'Issue-Wise Detailed Analysis:1. Leviability of Service Tax on Consignment Agency Services:Background and Agreements:The appellant was engaged by Tata Steel Limited (TSL) for converting raw materials into finished goods on a job work basis as per an agreement. Additionally, the appellant entered into a consignment agency agreement with TSL on March 30, 1998, to act as a consignment agent, for which service charges were agreed upon. The appellant also appointed various consignment agents across the country jointly with TSL under tripartite agreements.Show Cause Notices and Adjudication Orders:The Commissioner of Central Excise & Service Tax, Jamshedpur issued show cause notices alleging that the appellant received consignment agency charges but failed to discharge proper service tax. Consequently, service tax demands were confirmed along with interest and penalties under various sections of the Finance Act, 1994.Appellant's Contention:The appellant argued that although a consignment agency agreement was entered into, it was never acted upon. The appellant did not receive any amount for acting as a consignment agent or for providing consignment agency services, and the agreement remained inoperative.Tribunal’s Findings:Upon reviewing the records and agreements, the Tribunal found that the appellant's activities were limited to converting raw materials supplied by TSL into finished goods and sending these goods to consignment agents. The consignment agency agreement was never acted upon, and no amounts were received by the appellant under this agreement. No contrary evidence was presented in the show cause notices or impugned orders.Precedent Case:The Tribunal referred to a previous decision involving the same appellant and similar facts, where it was held that the appellant was not liable for service tax on consignment agency services as the agreement was not acted upon, and the charges were included in the assessable value of the goods on which excise duty was paid. This decision was not appealed by the Revenue and had become final and binding.Legal Principles:The Tribunal cited the Hon’ble Punjab & Haryana High Court’s decision in Commissioner of Central Excise Vs. Kulcip Medicines (P) Ltd., which clarified that service tax on clearing and forwarding agent services requires both clearing and forwarding operations to be performed. If only one of these activities is performed, the levy of tax would not be attracted.Conclusion:Following the precedent and the High Court’s decision, the Tribunal found that the appellant had cleared the converted goods on payment of central excise duty, and the charges for freight were included in the invoice value. Therefore, the impugned orders of the Commissioner were erroneous and unsustainable.Judgment:The Tribunal set aside the impugned orders passed by the Commissioner and allowed the appeals with consequential relief.Order Pronouncement:The order was pronounced in the open court on January 5, 2021.