TaxTMI 
TaxTMI 
2014 (1) TMI 1146
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....ring and Forwarding Agents' but failed to comply with the formalities required under the Finance Act, 1994 and also failed to discharge Service Tax on the said services rendered. A Show Cause Cum Demand Notice was issued to them on 19-10-2004 demanding Service Tax of Rs. 22,99,86,707/- for the period from 1-9-1999 to 31-3-2004. The ld. Commissioner, on adjudication, confirmed the demand of Rs. 21,74,78,903/- under Section 73(2) and imposed penalty under various provisions, including equivalent penalty of Rs. 21,74,78,903/- under Section 78 of the Finance Act, 1994. Aggrieved by the said order, the appellant are in appeal before this Tribunal. 3. The ld. Sr. Advocate assailing the impugned Order had advanced, mainly, the following arguments : (i) the adjudicating authority has no jurisdiction; (ii) the services rendered by the Appellant do not fall under the category of 'Clearing and Forwarding Agent', (iii) the demand is barred by limitation; and (iv) the computation of demand is incorrect. 3.1 The ld. Sr. Advocate, Shri N.K. Poddar for the Appellant, at the outset, submitted that the ld. Commissioner, Service Tax, Kolkata lacks jurisdiction in passing the impugned Orde....
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....n but to make separate application for registration in respect of each of such premises or offices to the concerned Superintendent of Central Excise. 3.4 He has further contended that sub-rule (3A) of Rule 4 of the Service Tax Rules would apply in cases where assessee has centralized accounting system and the Commissioner of Central Excise permits such assessee to seek centralized registration and the Commissioner would grant such registration only after he was satisfied that it would not be detrimental to the interest of Revenue. The ld. Advocate contended that the materials on record did not show that the appellant had maintained any centralized billing system at Kolkata and/or that it had opted for Centralised Registration during the period 1st September, 1999 to 31st March, 2004. 3.5 The ld. Advocate further submitted that since all its clients had been situated outside Kolkata and the billing also done from respective Branch offices outside Kolkata, the Commissioner of Service Tax, Kolkata had no territorial or other jurisdiction whatsoever to pass the impugned order dated 31-3-2007 covering all the aforesaid locations/Branch offices. The ld. Advocate submitted tha....
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....bsp; Monitoring supply of requisite quantity of coal, through proper weighment of loaded wagons, at the weigh bridges functioning at the Railway sidings of coal fields; (h) Ensuring that the Coal Mining Companies do obtain Railway Receipts after loading of the coal, but before dispatch of the wagons; (i) Monitoring the wagons movement to ensure that these are not diverted by the Railway Authorities; (j) In the case of Tamil Nadu Electricity Board (TNEB), the Assessee Company carried out the activities falling within the category of "Cargo Handling Services" within the Paradip Port. Handling Coal in relation to TNEB contract consists of composite operation such as supervising/monitoring loading of coal into wagons at Talcher, unloading of coal from railway wagons at the stock-yard within the Paradip Port, storing of coal into the dumps of TNEB at the port, intra-port transportation from stock-yard to the wharf, stevedoring, shore handling, etc. This activity is limited only for TNEB, and that too in relation to Paradip Port only. 3.7 The ld. Adv. submitted that the services rendered by the appellant to Tamil Nadu S....
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.... dispatch of goods as per the directions of the Principal by engaging transport on its own or through the authorized transporters of the Principal; e. maintaining records of the receipt and dispatch of goods and the stock available at the warehouse; f. preparing invoices on behalf of the Principal. iv. For the services rendered, the C&F Agent receives, from the Principal, commission or remuneration which usually consists of two components : a. minimum commission on a flat rate or turnover basis depending on the packages/consignments handles; b. a variable commission based on performance which is computed on the performance indicators agreed upon between agent and the Principal. This is usually given as a percentage of the turnover. v. In the case of services rendered by Clearing and Forwarding Agents, the Service Tax liability shall be discharged by the person availing the service so rendered. In other words, the Principal who engages a Clearing and Forwarding Agent is the person responsible for collecting and paying the Service....
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....r the appellant to clear the coal at any stage whatsoever hence they could not be lawfully called as the clearing agent. 3.14 The ld. Advocate further referring to the definition of 'forwarding agent' in Black's Law Dictionary (Fifth Edition), Advanced Law Lexicon (Third Edition-2005), West's Legal Dictionary by William Statsky (1985 Edition), Penguin Business Dictionary, P.G. Osborn & S.T Grandage, Oxford English Dictionary (Words and Phrases (Permanent Edition- Volume 17) (WP) and that from the activity of forwarding agent mentioned, in the aforesaid dictionary meanings, indicate that a forwarding agent has to dispatch the goods strictly in accordance with the instructions of its principal. In the present case the coal moved directly under a contract of sales between coal mining company and the Electricity Boards and the destination of coal is known to the seller. The Railway racks are placed only for the destination, there has been no occasion at all for the State Electricity Board to indicate to the Appellant and consequently the Appellant to indicate to the coal mining company, the places to where the coal had to be dispatched. It is his submission that at no point of ti....
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.... forwarding agent or the freight forwarding company must necessarily receive/take goods into his or/custody for transit, warehouse it and issue Bills of Lading, other documents for transportation of the goods, for or on behalf of the Principal, act as an agent for the owner of the goods to make arrangements with the carrier who would carry the goods viz. Ship owners, Railway Authorities, etc. for delivery, whereas, in the present case, there was no occasion for the appellant to take over the custody of the coal and or actually deal with the coal from the collieries to the consumption sites. The coal moves under a contract of sale entered into by the coal Mining company directly with the State Electricity Boards, the destination to which the coal was to be delivered, was known to both the parties; the Railway rakes were placed only for that destination on the basis of indents made by the coal companies and the appellant had no role to play in any of these activities. The appellants role is that only it carries out the supervision and liaison work in relation to the loading of coal into the wagons in order to ensure that coal loading is to stipulate specifications, quality and quanti....
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....f Section 65(19) of Chapter V of the Finance Act, 1994, w.e.f. 10th September, 2004 and reading with the explanation inserted therein subsequently by the Finance Act, 2005 w.e.f. 16-6-2005. It is his submission that if such cases were already covered under the category of clearing and forwarding agents then there was no need for the Parliament to specifically amend the statute by the Finance Act, 2004 and Finance Act, 2005. It is his argument that subsequent amendments of 2004 & 2005 indicate that the appellant were not covered earlier under the category of clearing and forwarding agents as the services rendered by them was specifically brought through Legislative amendment, within the category of Business Auxiliary Services. 3.21 The ld Sr. Adv. further distinguishing the judgment of Hon'ble Karnataka High Court in the case of Commr. of Central Excise v. Mahaveer Generics - 2010 (17) S.T.R. 225 (Kar.), submitted that the facts of the said case are different from the present one. In that case a mere reading of various clauses of the agreement, it clearly shows that M/s. Mahaveer Generics has been appointed by the appellant as a consignment agent to take charge of the product ....
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.... no liability to Service Tax on transportation of goods by Railways. He has submitted that the judgment of the Tribunal in Bhagyanagar Services v. Commr. of Central Excise, Hyderabad - 2006 (4) S.T.R. 22 (Tri. - Bang.) supports their case instead of the Revenue. 3.23 The ld. Advocate referring to the meaning fraud, wilful mis­statement, collusion, etc. submitted that the present demand is barred by limitation. In this connection he has Referred to the judgments of the Hon'ble Apex Court in the case of Cosmic Dye Chemical v. CCE - 1995 (75) E.L.T. 721 (S.C.), Pushpam Pharmaceuticals Co. v. CCE - 1995 (78) E.L.T. 401 (S.C.), and Anand Nishikawa Co. Ltd. v. CCE - 2005 (188) E.L.T. 149 (S.C.). The ld. Advocate further submitted that the appellant at all material time were under the bona fide belief that the nature of its activities and services rendered to its clients viz. State Electricity Boards as well as industrial consumers of coal being purely in the nature of supervision or liaison work in relation to the loading of coal into wagons, in order to ensure that the coal loading by the coal companies in the Railway wagons, is of stipulated specifications, quality and quanti....
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....n the clearance of coal from the collieries. These activities also result in the forwarding of coal so cleared to the destination of the coal consumers. It is Noticee No.-1 who maintains liaison, ensures the timely placing of wagons, supervises loading, ensures quantity, size and quality, ensures safe transit, ensures that goods are not lost in transit, informs the coal consumers of the receipt and dispatch, ensures that the required quantity of coal be supplied to the coal consumers and pays freight. There should not be any doubt that such activities belong to the realm and definition of clearing and forwarding operations. It is Noticee No.-1 who is responsible for the movement of coal from the collieries to the customers' premises. There is no warrant in the claim that unless a person takes custody of the goods belonging to another or handles such goods, he cannot be treated as a clearing and forwarding agent. A clearing and forwarding agent is one who ensures the clearing or forwarding or both clearing and forwarding of goods and is responsible for such act. Therefore I have no hesitation in holding that the activities undertaken directly or indirectly, or in any manner involvin....
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....intent to evade payment of tax. I am of the considered opinion that in the facts and circumstances detailed and discussed hereinabove, the longer period of limitation has been correctly invoked. [Pg - 91 of the Paper Book - Vol-1]." 4.2 In response to the preliminary objection raised on behalf of the appellant, that the Commissioner lacks jurisdiction to decide the case, the ld. Sr. advocate for the Revenue has submitted that the point of jurisdiction was never taken by the appellant in their reply to SCN or before the Adjudicating Authority, hence, the appellant should not be allowed to agitate the point of jurisdiction before this Tribunal as such an issue involves determination of facts. Nevertheless, it is his argument that the Commissioner of Service Tax, Kolkata has full jurisdiction over the Appellant's activities as their whole accounting system was centralized at Kolkata and such centralized accounting system is a jurisdictional fact; the Service Tax Rules, 1994 had provided centralized registration after inserting amendment to the said Rule w.e.f. 28-2-1999. Thus, the appellant's argument that no part of cause of action arose within the jurisdiction of Commissioner ....
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....n "any" and "indirectly" in the said definition of clearing and forwarding agent, indicative of the fact that the scope of the services to be provided by clearing and forwarding agent, is very wide; he is not the person who actually deals with the goods to be termed as clearing and forwarding agent, but even if the services are indirectly and if the same are connected with clearing and forwarding operations, in any manner, to the other persons, would be covered within the scope of the said definition. It is his submission that the appellant in the instant case render their services in all sections of pre-load of the coal rakes i.e. obtaining consent on behalf of their customers, sanctions from the office of Executive Director-Rail Movement, supervising loading of the wagons, sending samples and assuring the proper quality and quantity, complying with the formalities relating to payments towards freight. As such, it is quite clear that the appellant is covered by the definition of clearing and forwarding agent. He has further submitted that the definition of clearing and forwarding agent being wide cannot be restricted to interpretation as given by the appellant as the same would de....
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....itted that the Board's Circular No. B. 43/7/1997-TRU, dated 11-7-1997 clearly included the contractual work of the Appellant under clearing and forwarding agent; the said circular is one of the examples of clearing and forwarding agent and not exclusive of other action and job which would amount to clearing and forwarding agent. He has submitted that the appellant has not given any ground, nor any evidence which would show that they could not have been carrying out clearing and forwarding work and as such the action was bona fide. 4.7 He has further submitted that the principles of law laid down in Chemphar Drug's case - 1989 (40) E.L.T. 276 (S.C.) and Cosmic Dye Chemicals' case (supra) by the Hon'ble Supreme Court are not applicable to the present case as the facts of the said cases are different from the present case. Distinguishing the said cases, he has submitted that there were High Court decisions which led to the bona fide belief of the assessee and supported the assessee's contention, why they had not disclosed their manufactured product. Further, he has submitted that all the authorities/decisions from 1997 to 2004 cited by the Appellant were against them, so it is n....
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....ue of jurisdiction could be raised at any stage of the proceeding, but, simultaneously, it also cannot be denied that when the territorial jurisdiction, is an issue, it becomes a mixed question of fact and law, hence, the same should have been raised at the threshold of the proceeding, so as to enable the adjudicator to record a finding on the facts. However, from the records and arguments advanced by both sides, we find that the facts relevant to decide the issue of jurisdiction, now raised before this forum, are not in dispute and available on record. In these circumstances, we are of the opinion that it is prudent to decide the said issue, instead of remanding it, to the lower authority for determination. 5.3 Undisputedly, the services were rendered by the appellant from their various branch offices/locations other than Kolkata, pursuant to the contracts entered by the said offices with the clients, and also corresponding invoices were raised and payments received from the clients at the respective locations. However, Service Tax Registration was not obtained at the said locations. 5.4 Now, looking in to the provisions, we find, by virtue of Rule 3 of the Service Tax....
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....I during the course of investigation. The Appellant furnished the necessary data from time to time as per the direction of the said officers. In these circumstances, we do not find merit in the argument of the ld. Sr. Advocate for the Appellant that the Commissioner would assume jurisdiction only when they exercise option for centralized Registration, on account of either having centralized billing system or centralized accounting system, in adjudicating the allegation of non-payment of Service Tax on the gross taxable value of the services received and recorded in their consolidated Profit & Loss account, prepared at the Head Office at Kolkata. As per Section 66 of the Finance Act, 1994 Service Tax is chargeable on the value of taxable service received by the assessee and the appellant's registered office being at Kolkata and their profit and loss account and balance sheet had been accordingly, prepared at the Kolkata office, on the inputs received in the form of Trial balances from the respective branch offices, as per the provisions of Companies Act, hence, there cannot be any doubt that there has been a centralized accounting system at Kolkata. Thus, we are of the opinion that ....
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....ith Railways Authorities for placement of wagons at the colliery siding for loading of coal and co-ordinate with the Local Railway yards for supply of inspected wagons to avoid or minimize the Railway claims on account of detachment of wagons during transit; (vii) To supervise coal loading and to ensure dispatch of quality coal, as far as possible. In case of quality complaint KCT have to take up the matter suitably with the respective authority of Coal Companies for necessary corrective steps; (viii) To supervise the weighment of each and every wagon at the weighbridge and to take all corrective steps to ensure the quantity of the coal; (ix) To undertake all such other acts/works to ensure proper planning and movement of coal rakes as per the requirements of their principals; (x) To monitor the movement of loaded wagons/rakes; (xi) To do all the liaison job on behalf of their principals including the refund/claims till the claims are settled with the Coal Companies/Railways; (xii) To keep regular monitoring and building up an information system to ensure better coal management. Regular report to be submitted to their principals....
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.... Chowdhary for the Revenue, on the other hand, submitted that the meaning of the said expression cannot be restricted or narrowed down as the intention of the legislature was to provide a wider meaning to the expression 'clearing & forwarding agent', defined under the Finance Act, which Is apparent from the use of the words 'directly', 'indirectly, 'connected with' 'any manner', etc.. 5.13 On a simple reading of the definition of 'Clearing and Forwarding Agent' at Section 65(25) of the Finance Act, it is clear that the same consists of following ingredients, namely : (i) Any person who is engaged in providing any service; (ii) either directly or indirectly; (iii) connected with the clearing and forwarding operations, in any manner; (iv) to any other person; and (v) includes a consignment agent. 5.14 Undisputedly, the Appellant are engaged in providing various services under contracts/agreements with their clients viz. the Electricity Boards, cement companies, etc., for movement of the coal from the collieries to the premises of their clients. We find that it is not the claim of eith....
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....f coals have been fixed and known in advance both to the buyer and seller of the coal, the railway rakes were accordingly placed for the said destinations and hence there had been no occasion for their principals i.e. power houses, cement companies to instruct the Appellant about the destinations for the delivery of coal; besides, at no point of time the Appellant took over the custody/possession of the coal, hence, the activities carried out by the Appellant, do not match with services rendered by a forwarding agent. Further, it is his argument that the list of activities normally carried out by a clearing & forwarding agent as mentioned in the Circulars issued by the Mumbai Commissionerate and by the CBEC from time to time, had also not been carried out by the Appellant, and accordingly, the services rendered by the Appellant fall outside the scope of the definition of clearing & forwarding Agent. 5.17 The argument of the Revenue, on the other hand is that the evidences show that approval, consent or permissions are required before coal could be loaded and allowed to be transported; clearances from the Railways in the allotment of wagons for carrying coal are also required ....
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....nt for their principal, to receive only the agreed quality of coal and reject the coal which are not conforming to the specifications sold by the collieries to their principals. No doubt after the coal were loaded in the wagons, the same move to the destinations already fixed, but all related services till the coal reaches its destination were rendered by the Appellant. Thus, we find force in the argument advanced by Shri Roy Chowdhary, ld. Adv. for Revenue that the services rendered by the Appellant are connected with clearing and forwarding operations. 5.20 From the meaning and scope of Forwarding Agent, as per Halsbury's Laws England (Fourth Edn. - Vol. V), (Referred to by the Appellant in their Grounds of Appeal) in forwarding the goods, a forwarding agent need not always take possession of the goods, he acts as an agent for movement of the goods. It reads as : "A forwarding agent is one who carries on the business of arranging for the carriage of goods for other people. It must be clearly understood that a forwarding agent is not, in general, a carrier; he does not obtain possession of the goods; and he does not undertake the delivery of them at the other end. All that ....
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....ions in any manner to any other person and includes a commission agent. The use of the expression "any" and "indirectly" in the said definition of clearing and forwarding agent, is indicative of the fact that the scope of the services to be provided by clearing and forwarding agent is quite wide. He is not only the person who is actually dealing with the goods, which has to be termed as clearing and forwarding agent, but even if the services are indirect and if the same are connected with the clearing and forwarding operations in any manner of the other persons, he would be covered within the scope of the said definition. The appellants in the instant case render their services in all the sections of pre load of the coal rakes i.e. obtaining consent on behalf of their customers, sanctions from the office of Executive Director - Rail Movement, supervising loading of the wagons, sending samples and assuring the proper quality and quantities, complying with the formalities relating to payments for freight. As such, it is quite clear that the appellant is covered by the definition of clearing and forwarding agent, as interpreted by the Tribunal in the above referred case of Prabhat Zar....
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....ry of the goods from the vendor's premises, there would not be even any need on the part of the vendor to engage any forwarding agent, nor can a person engaged for the purpose of clearing and forwarding operations, insist on procuring orders for the principal in the absence of any stipulation to that effect." 5.24 The ratio of the said judgment is that use of expression like "directly" or "indirectly", "and in any manner" in the definition of clearing and forwarding agent cannot be construed an activity unconnected with clearing and forwarding operations. Applying the said principle, to the facts of the case, it was concluded that mere procuring of booking orders for the principal by an agent on payment of commission basis would not amount to provide services as clearing and forwarding agent within the meaning of the definition of that expression under Section 65(25) of the Finance Act, 1994. Consequently, the decision of Prabhat Zarda Factory (P) Ltd. was overruled to that extent. At para 11 of the said judgment it is observed as : "11. We, therefore, hold that mere procuring or booking orders for the principal by an agent on payment of commission basis would not amoun....
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.... to the fact of the present case. Also, we do not feel the necessity of discussing various judgments cited by both sides for the reasons that the facts and circumstances involved in those cases are totally different and have scant relation to the services rendered by the Appellant in the present case. In our view, the facts of the present case, are closely comparable only with the facts of the Coal Handler's case (supra) where this Tribunal has categorically observed that the services rendered for movement of coal from collieries to its place of consumption would come within the definition of clearing and forwarding agent. We also do not find substance in the argument of the ld. Advocate for the Appellant that to fall within the definition and scope of clearing & forwarding agent, it is necessary for a person to undertake all the activities/services narrated in the Mumbai Commissionerate Trade Notice. In our view the activities/services mentioned in the said Circular which was based on the Notification issued by the Board bearing F. No. 43/7/97-TRU, dated 11-7-1997, are only illustrative in nature and not exhaustive, as is clear from the use of the expressions, "normally", "usually....
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....nerate Trade Notice in the year 1997 that no Service Tax would be payable on the services rendered by them to Electricity Boards, cement companies, etc., accordingly, neither did they take registration nor paid Service Tax under the category of clearing and forwarding agent w.e.f. 1-9-1999 to 31-3-2004. The contention of the Revenue, on the other hand, is that the Appellant had not disclosed and/or suppressed the material documents, specially the contracts between them and power houses wilfully to avoid payment of Service Tax on the services of clearing & forwarding agent rendered by them. Further, it is submitted that the list of services mentioned in the Board's Circular No. B43/7/1997-TRU, dated 11-7-1997 were the examples of services rendered by a clearing & forwarding agent, and were not exclusive of other action and job which would amount to rendering of taxable service by a clearing & forwarding agent within the definition of Sec. 65 (25) of Finance Act, 1994. Both sides placed reliance on the judgments of Hon'ble Supreme Court in Chemphar Drugs and Cosmic Dye Chemicals case (supra) besides other judgments referred by each of them. 5.29 The relevant provision dealing w....
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.... has been significant in the sense that for invoking five years period, the act of omission or failure, have been replaced with acts like fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions or of the rules made thereunder, with intent to evade payment of Service Tax. In other words, the recovery provision under Service Tax has been aligned with that of Central Excise Act. Hence, the principles of law laid down on the said subject, under central excise laws, would be relevant for the present purpose. 5.31 The Hon'ble Supreme Court in the case of Collector of Central Excise v. HMM Ltd. - 1995 (76) E.L.T., 497 (S.C.) observed that mere non-declaration of waste generated, in the classification list, would not result into an inference, in a routine manner that it was due to mis­statement or suppression etc.. The department is required to disclose the facts in the Show Cause Notice for reaching such an inference of wilful misstatement, suppression of facts etc. against the assessee. Their Lordships observed as : "......The mere non-declaration of the waste/by-product in their classification list cannot establish any wilfu....
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....isclosure of material facts and contraventions of the provisions of Chapter V of the Finance Act, 1994 and Service Tax Rules made thereunder. We find that these allegations were confirmed by the ld. Commissioner verbatim without recording any reasons in the impugned Order. 5.33 The principle for invoking extended period of limitation as prescribed under Section 11A(1) of the Central Excise Act, 1944 laid down by the Hon'ble Supreme Court in Chemphar Drug's case (supra) extensively referred in almost all cases involving the issue extended period of limitation, reads as under : "8..........In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or consc....
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....ta, learned senior counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of non-payment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or willful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso." 5.36 Further elucidating the meaning of "wilful", their Lordships in the above case have observed as : "22. We are not persuaded to agree that this observation by the Commissioner, unfounded on any material fact or evidence, points to a finding of collusion or suppression ....
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.... However, in the Show Cause Notice, analyzing the statement of one Shri Kalyan Banerjee, General Manager of the Appellant, it has been alleged that right steps were not taken by him to pay the Service Tax on the services rendered by the principals, which clearly indicates negligence on the part of Shri Banaerjee to comply with the law. We do not find merit in the said allegation of negligence in payment of Service Tax, could result in wilful misstatement or suppression of facts, thus, warranting invitation of extended period of limitation. On the other hand, we find force in the argument of ld. Advocate for the Appellant for harbouring a bona fide belief for non-payment of Service Tax on the services rendered by them to their clients. It is contended that the principal reason for such a belief has been due to the Notification of CBEC, dated 11-7-1997 and subsequent Mumbai Commissionerate Trade Notice, which have been accepted by the judiciary, even though in the context of other services, but, while interpreting the scope of C&F Agent under the Finance Act, 1994. We find, it may be correct to say that the said Circulars listed few activities of C& F agent, which may not be exhausti....