TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 494
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat IPCL was transferring goods from its manufacturing factories to the stock point of M/s.Hardik Industries Corporation and the transportation charges including unloading charges incurred in transferring the goods from factory to the stock point was borne by the IPCL. According to the ld. Chartered Accountant this shows that appellants were not performing the service of clearing the goods from IPCL. He drew out attention to Clause 8 of the agreement between the parties which provides "the company shall indicate from time to time to the distributor its recommended list prices for the sale of said products. The distributor shall be at liberty to sell the said products at prices lower than the said list prices. If the distributor sells the said products at prices lower than the said list prices, the difference between the list price and the price at which the said products are sold by the distributor shall be to the account of the distributor". He submits that this shows clearly that the appellants were selling goods unlike a C&F agent, who does not actually sell the goods on his own account. He also drew out attention to illustrative copies of the invoices which show that the bill ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the products lying in the custody of the distributor against various risks of fire theft, riot, malicious damages, etc. also shows that the appellants were not acting as distributor but only as an agent. The requirement in the agreement in Clause 11 that the distributor has to regularly report a true and correct account of sales as well as that of stocks as may be prescribed by IPCL from time to time also shows that relationship between the two parties to the agreement was that of an agent and a principal and not of two principals. It also shows that the operations carried out by the appellants were that of an agent providing services of C&F. The agreement also allows inspection of the books of account, registers and records of the appellants by the company's authorized representative which again shows that the relationship was not that of a distributor and the supplier. The provision in clause 17 of the agreement that the distributor shall sell the products as per the distribution norms/supply policy of the company communicated to them from time to time also shows that appellants were not at liberty to sell the goods as they wanted. This clause according to the Jt.CDR enables I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... held as sacro sanet. In M/s. Medpro Pharma Pvt. Ltd., the issue before the Larger Bench came up in spite of the fact that in the agreement entered into between the parties in that case clearly identified Medpro as C&F agent and in spite of that the dispute came up before the Tribunal and the appeal was not dismissed on the ground that the agreement called Medpro as the C&F agent on the ground that the service was covered by the definition. In this case also appellants call themselves consignment stockist in their invoice. In view of the above discussion the fact that the agreement identifies the appellants as the distributor is not relevant and we are required to consider the nature of service provided and whether it is covered by the C&F agent's service. Several decisions have been cited by the ld. Chartered Accountant in support of his arguments but we feel that in view of the position discussed above, each case has to be decided on merits based on the type of service provided, the agreement between the parties and the facts and circumstances of the case. A holistic view by reading the whole agreement, the facts and circumstances of the case and the law, has to be arrived at and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payments etc. to be made by the distributor also. The property in the goods remains with the IPCL till the sale is complete to the ultimate buyer and any loss/damage before such a sale goes to the account of IPCL which again shows that appellants are nothing but a C&F agent. There could be several operations as discussed above relating to sale and the method adopted for raising the invoice but overall the service provided by the appellants is clearly that of the C&F operations and is covered by the definition of C&F agent. In view of the above position, we do not find any reason to interfere with the impugned order and accordingly the appeal as regards the levy of service tax on the appellants treating them as C&F agent has to be upheld. 6. In the appeal memo, the appellants have submitted that in the event of non-acceptance of their contention regarding their liability to service tax the amount collected by them may be treated as cum service tax. They submitted that where gross amount charged by a service provider is inclusive of tax payable, the value of the taxable service shall be such amount after addition of tax payable and equal to the gross amount charged. Therefore, they....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the show cause notice issued to the appellant laying down that a clearing and forwarding agent, inter alia, renders the following services:- a. Arrange to lift the goods from the place of manufacture, warehouse or a distribution point. b. Receiving such goods of the principal or his agent. c. Warehousing these goods. d. Dispatch the goods to various persons upon instruction of the principal or his agent. e. Engagement of transport of such goods handled by him. f. Maintenance of records & receipt, dispatch, stock in warehouse goods in transit. g. Payment of taxes, rental charges of godown hired etc. on behalf of the principal or his agent. One of the essential activities of clearing & forwarding agent's service includes receipt of the goods from the principal and dispatch of the same to various persons upon instructions of the principal or his agent. As such clearing and forwarding agent does not have any independent activity of selling the goods on his own. He merely receives the goods on behalf of the principal and dispatches the same to the customers of the principal only, under his instru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en by the Larger Bench decision of the Tribunal in the case of Larsen & Toubro Ltd. v. CCE [2006] 4 STT 231 (New Delhi - CESTAT). As such I am of the view that the appellants have to be held as distributors and not covered by the definition of C&F agents. 11. However, I agree with the ld. Member(T) that the demand is barred by limitation and is required to be set aside for the period beyond the normal period of limitation. Similarly, I agree with him that penalty is not required to be imposed. As such, the only difference of opinion which emerges is as to whether for the period with the limitation, the appellants are required to be held as C&F agent, so as to pay service tax or they are required to be held as distributors. Accordingly, following difference of opinion is referred to third Member for resolving the dispute. DIFFERENCE OF OPINION Whether the appellants are required to pay service tax, for the period within limitation, as C&F agent or they are required to be held as distributors and the tax confirmed against them is to be set aside in its totality? THIRD MEMBER ORDER M V Ravindran, Judicial Member (As a Third Member) - This Difference of Opinion has been listed bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... agreement, would submit that the agreement also indicates that the appellant is required to maintain account registers and correspondence of the same account registers was subject to examination, inspection, and verification of the stock by representative of IPCL. He would also read clause 13 to submit that entire control of the sale of the goods was as per directions of IPCL. Directions and control of IPCL is very clearly visible from the agreement. He would draw my attention more specifically to the clause 16 of the agreement and submit that the amount which is paid to the current appellant is service charge of fixed amount of Rs. 350/- per metric tonne for the quantity of product sold by the distributor. It is his submission that the property and title of the stock of the product lying with distributor un-sold continued to vest in IPCL, which would indicate that the agreement is not for sale as has been contended by the ld.Counsel. It is his submission that if it is purchase and sale of goods of IPCL, then there is no necessity for entering into such kind of agreement by both sides. He would submit that Hon'ble High Court of Karnataka in the case of CCE v. Mahaveer Generics [20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the list price and the price at which the said products are sold by the Distributor shall be to the account of the Distributor. The Distributor shall be entitled to add to the said list price, Octroi duty, terminal tax, Sales Tax or other local taxes or levies in force in the area and recover the same from their customers." 8. It can be seen from the above reproduced clause of the agreement that the recommended price of the company cannot be considered as price at which the distributor has to sell the product. It is also seen that the distributor is within his rights to sell the product at a lower price subject to the condition that the difference between the recommended price and such lower price would be to the account of distributor i.e. appellant. It can be concluded that, if the selling of the goods at lower price than the recommended list price would be allowed, it would clearly indicate that the appellant is working as a distributor and not as C&F agent. My views also gets fortified from the clause 13, which would clearly indicate that amounts were deposited in cash with IPCL and subject to such deposit only the goods will be released to the appellant for further sale. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid service charge per metric tonne for the quantity of the product sold. I find that mode of consideration as agreed between mutually by contracting party, cannot be a guiding factor to arrive at a conclusion whether a party is a distributor or otherwise. 11. In clause No.17 it is very clearly indicated that the distributor shall sell the product in original packing and in original trade name/brand name of the IPCL. As regards the condition of clause 20 of the said agreement, unsold stock of the unsold goods lying with the distributor, title shall continue to vest in the hands of IPCL, would mean that the quantity which is un-sold and for which the appellant distributor had not paid sufficient deposit, would be the property of IPCL. In my view, this is purely commercial agreement entered into between IPCL and the appellant as a manufacturer and distributor. 12. As regards judgment of Hon'ble High Court of Karnataka in the case of Mahaveer Generics (supra), it is seen that the said judgment was rendered in a dispute as to whether the respondent therein was consignment agent or commission agent. Their Lordship went through the entire agreement and has come to the conclusion that ....