TaxTMI 
TaxTMI 
2019 (8) TMI 1302
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.... I impose penalty of Rs. 100/- per day till the payment of service tax under Sec 76 of the Act. However, the penalty should not exceed the service tax confirmed as above. I impose penalty of Rs. 1000/- under Sec 77 of the Act. I impose penalty of Rs. 14,86,779/- under Sec 78 of the Act." 2.1 Acting on the intelligence that appellants are depot keepers/ depot agent providing taxable services under the category of "Clearing and Forwarding Agents Services", to various yarn manufacturing mills, without obtaining registration and payment of service tax, investigations were undertaken by the department. 2.2 After completion of investigations a show cause notice dated 20.05.2004 was issued to the appellants asking them to show cause as to why;- (i) The service tax amounting to Rs. 14,86,779/- (Rupees Fourteen lakhs eighty six thousand seven hundred and seventy nine only) leviable on the consideration/ commission/ remuneration amounting to Rs. 2,82,57,464/- received by tem during the period Sept 99 to Sept 2003 should not be recovered from them under Section 68 of the Act and Rule 6 of the Rules read with Section 73(1)(a) of the Act; (ii) ....
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....he premises of the principals or from the depot/godown they will not be covered by the definition of Clearing and Forwarding agent. The remuneration received for unloading and transporting the goods from the railway station or any other place where the goods are unloaded from the carrier to the warehouse would not be covered in the meaning of services rendered by a clearing and forwarding agent. (v) The warehousing of the goods does not come under either clearing operation or forwarding operation. However a clearing and forwarding agent may render the warehousing services as a ancillary operation. (vi) Further the definition of clearing and forwarding agent includes consignment agent. At the same time, the taxable service has been defined to be "in relation to Clearing & Forwarding operations in any manner". Therefore, only if a person acting as a consignment agent and rendering the services of in relation to Clearing & Forwarding operations would he be liable to pay service tax on such services provided by him. (vii) The trade notice referred to by the Additional Commissioner is not applicable to present facts of case. (viii) The issue on merits....
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....vocate for the appellant and Shri D M Shinde, Assistant Commissioner, Authorized Representative for the revenue. 4.2 Arguing for the appellants learned Advocated submitted that- • Appellants are only the "Depot Agent" and not the consignment agents. They are undertaking only "Forwarding Operations" from the depot and are in no way concerned with the "Clearing Operations" which is carried out by the mill owners on the their own account and the goods are brought and delivered at the depot by them at their own cost and on their own. • For categorizing the services rendered under the category of "clearing and forwarding services" it is essential that service should be that clearing and forwarding both. In case the service provider is not providing both the services of clearing and forwarding then the services rendered will not be classifiable under this category. As have been held in following decisions:- • Kulcip Medicines [2009 (14) STR 608 (P&H)] & {2012 (25) STR J127 (SC)] • Shreenath Roadways [2018 (16) GSTL 239 (Raj)] • Novacare Drug Specialities Pvt Ltd [2014 (34) STR 247 (T-Mum)] • Narottam & Compa....
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....he purpose of place of removal. For the purpose of managing the affairs of depot, the mills had appointed the appellants as depot agents. • Trade Notice No 59/99 dated 04.10.1999 of Service Tax - I Mumbai Commissionerate clarified what are the activities under taken by the Clearing and Forwarding Agents. When the activities undertaken by the appellant as per the agreements are mapped with the activities as specified by the trade notice, it is evident that appellant's will fall within the definition of clearing and forwarding agent. • Thus appellants are engaged in both the activities i.e. clearing the goods from the sales depot of the Mills and forwarding the goods as per the instructions of the Mills, by way of dispatching these goods to their buyers. Hence are covered by the definition of Clearing and Forwarding Agent as defined by Section 65(25) of the Finance Act, 1994. • Failure on the part of appellants to comply with the provisions of Finance Act, 1994 and Rules made thereunder, also make them liable for penal actions as prescribed. 5.1 We have considered the impugned order with the submissions made in appeal and during the course of....
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....vice 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 tax to the exchequer. 2.4 Further under the Finance Act, 1997 the value of taxable service rendered by a clearing and forwarding agent has been defined as the gross amount charged by such agent from the client for the services of clearing and forwarding operations in any manner. However, under Service Tax Rules it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent (Notification No. 27/97-S.T. refers.) 2.5 For the services rendered, the C&F agent receives commission or remuneration which usually consists of two components : (I) Minimum commission on a flat rate or turnover basis depending on the packages/consignments handled; (II) A variable commission based on performance which is computed on the performa....
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....OLYESTER STAPLE FIBRE YARN and will send the documents directly to the Depot Agent. Interest at 12% (twelve percent only) per annum will paid by the Mills to the depot Agent on the whole advance amount and will be settled yearly. Such advance amounts shall be liable to be adjusted at the discretion of the Mill against all or any amount due from or accountable under this agreement by the Depot Agent to the Mills from time to time. 4. That the Depot Agent shall at all times during the continuance of this Agreement carry out and observe all directions and instructions which may be given to them by Mills concerning the sale or disposal of the goods or otherwise relating to and in the course of business under this Agreement. 5. (a) THAT THE MILLS shall dispatch goods to the destination of the Depot areas and forward the related documents to the Depot Agent direct and that the Depot Agent shall sell the goods and remit the sale proceeds to MILLS by TT OR DD immediately within 7 days (seven days) from the date of sale. (b) For Belated payments, the Mill will be charging interest @ 24% on the Depot Agent which will have to be paid by the Depot Agent. Credit shall....
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....a) THAT the Depot Agent will sell the goods in Cases/ Bags/ Bales actually received and not those which are in transit. (b) Though the Excise duty will be paid by the Mills while dispatching the goods, the Depot Agent has to collect the same from the buyers and reimburse to the Mills. 17. THAT the Depot Agent will solely be responsible for any loss that may be incurred by any credit of such sales or damages/ shortages of the goods at the Depot. 18. THAT the Depot Agent will send by post to the Mills daily sales particulars everyday along with the copies of Invoices, Delivery orders and Stock statements. 19. THAT the daily sales effected at the Depot have to be communicated to the Mills telegraphically/ fax. Similarly, remittances effected to Mills should also be communicated to the Mills telegraphically/ fax. 20. THAT the Depot Agent shall not be entitled for any remittance if the goods are sold for export through a party of the above area by the Mills. 21. THAT the Depot Agent will prepare the yarn invoice in quadruplicate and post three copes direct to the Mills and by the next day available post. 22. THAT the Depot A....
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....with the above preposition, because when service tax was levied under this taxable category, CBEC (TRU), has clarified the scope of services sought to be taxed under this category. Hon'ble Supreme Court has in case of Kajaria Tiles [2005 (191) ELT 20 (SC)] held that "28.The Circular can be read as a contemporaneous understanding and exposition of the intention and purport of the Notification. Courts have treated contemporary official statements as contemporary exposition and used them as aids' to interpret even recent statutes." Further Hon'ble Apex Court has in case of Ajay Gandhi vs B Singh [2004 (167) ELT 257 (SC)] held as follows: "16. In CORPUS juris secondum, Volume 82, PP. 761, it is stated that the controlling effect of this aid which is known as 'executive construction' would depend upon various factors such as the length of time for which it is followed, the nature of rights and property affected by it, the injustice resulting from its departure and the approval that it has received in judicial decisions or in legislation. 17. In Francis Bennion Statutory Interpretation, Fourth Edition, the law is stated in the following terms at page 596 : ....
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....aveer Generics, Bangalore wherein also, the terms of the relationship was similar and the Tribunal held vide its order ST F. No. 12/04-NB(A), dated 27-4-2004 [2004 (170) E.L.T. 78 (Tribunal)] that no Service Tax was attracted. The learned Counsel strongly relied upon on this decision in support of his case. 4. The learned Departmental Representative's contention is that there is no dispute that the appellant is a C&F Agent of Cipla. It is his contention that once the person is admittedly a C&F Agent, it is not open to him to argue that the services rendered by him is not the services of C&F Agent. Learned Departmental Representative, therefore, submitted that matter is to be treated as settled. 5. The taxable service in the present case is "any service provided to a client, by a clearing and forwarding agent, in relation to clearing and forwarding operation in any manner" [Sub-clause (j) of Section 65(105) of Finance Act, 1994]. A perusal of this definition makes it clear that, in order to attract the levy, the services must be "in relation to clearing forwarding operation". Thus, the definition makes it clear that all services rendered by the clearing and forward....
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....inst that decision. Mr. Gurpreet Singh could not disagree that the decision has attained finality and no appeal has been filed by the revenue." The decision of tribunal in case of Mahaveer Generics was set aside by the Karnataka High Court as reported at [2010 (17) STR 225 (Kar)]. While setting aside the order, Karnataka High Court took note of decision of Punjab and Haryana High Court in case of Kulcip Medicines also. The relevant paragraphs of the said decision are reproduced below: 6. The learned counsel appearing for the appellant would contend that authorities were fully justified in rejecting the claim of the assessee who had sought for surrendering of the registration Certificate on the ground that it did not come within the purview or category of clearing & forwarding agents and the authorities had taken a holistic view in interpreting the Section 65(25) of the Finance Act which defines the activity of clearing and forwarding agent and as such the reversal of the said orders by Tribunal, by interpreting the definition "C & F Agent" on the basis of dictionary meaning is erroneous and liable to be set aside. 7. Sri Raghavendra B., learned counsel for the ....
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....identical to the activity carried on by the present assessee and the Punjab & Haryana High Court [2009 (14) S.T.R. 608 P&H)] having taken a view that the activity carried out by the assessee therein was of commission agent and submits that while examining the said issue the order of CESTAT in Mahavir Generics (present case) also came up for consideration & came to be approved and prays this Court should also fall in line with the said Judgment and seeks for answering the question of law against the revenue and in favour of the assessee. He would also bring to our notice the definition of "Commission Agent as defined under Section 2(19)(a) to contend that respondent would fall within the purview of said definition and the Circular bearing No. 59/8/2003 S.T., dated 20-6-2003 issued by the Department wherein the definition of Commission Agent with reference to clearing and forwarding agent has been clearly spelt out and the nature of activity carried on by the present assessee is in consonance with the meaning assigned in the said Circular and thus the activity carried on by the assessee falls outside the purview of clearing and forwarding agent and as such prays that the question of ....
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....944, would apply in relation to service tax as it applies in relation to duty of excise by virtue of sub Section(121) or Section 65 of the Act. Services of Commission agent are included in the definition of "business auxiliary service" under sub-Section(19) of Section 65 w.e.f. 1-7-2003, which includes service of a Commission agent. As defined in explanation (a) to subsection (19) of Section 65 Commission agent is a person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for consideration, and includes any person who, while acting on behalf of another person: deals with goods or services or documents of title to such goods or services; or collects payment of sale price of such goods or services; or guarantees for collection or payment for such goods or services; or undertakes any activities relating to such sale of purchase of such goods or services. This clearly shows that the activity of mere procurement of purchase orders for the principal on commission basis of a Commission agent is treated separately by the Parliament from the activities of a clearing & forwarding agent. Activity of procuring orders is thus indepen....
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....d Toubro case of the Larger Bench of the Tribunal having been relied upon it has been held in paragraph 13 in Kulcip's case to the following effect :- "13............. and mere procuring or having orders for the principal by an agent on payment of commission basis would net amount to providing services as "clearing and forwarding agent", within the meaning of the definition of that expression under Section 65(25) of the Finance Act, 1994. While reaching to this conclusion the Tribunal has observed that the expression "directly or indirectly" and "in any manner" occurring in the definition of "clearing and forwarding" agent cannot be isolated or the activity of dealing and forwarding operations and an agent it engaged only for procuring purchase orders for the vendor on commission basis does not engage in any of the activities connected with clearing and forwarding operations directly or indirectly." And thus found on facts that it was mere procuring the orders for the principal by an agent on payment of commission basis and thus would fall outside the purview of clearing and forwarding agent. The said decision would be inapplicable to the facts of the case as we h....
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....nd forwarding agent. In this context, it would be of benefit to extract the Judgment of the Hon'ble Supreme Court of India in the case of KPTCL supra at paras 12, 13 & 14 which reads as follows : "12. Lord Watson in Dilworth v. Commissioner of Stamps (1899) AC 99 made the following classic statement : "The word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; end when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things, which the interpretation clause-declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined, It may be equivalent to "mean and include", and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions." ....
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.... In our view Karnataka High Court has in this decision considered all the argument including the case laws advanced by the appellants before us and have rejected the same. 5.8 In case of Medpro Pharma Pvt Ltd [2006 (3) STR 355 (T-LB)], a larger bench of tribunal has already rejected the arguments in relation to use of word "and" in the definition and has held as follows: "31. We have heard both sides and perused the record. On a fresh look at the whole issue and after taking into account the various newfangled arguments and nascent lines of thinking, upwrapping before us, as discussed in the fore-going paragraphs, we find ourselves in a better position to appreciate the wisdom in the words of Jules Romains when he said : "What I say below represents only conclusions with which I would identify myself, if I were obliged to stop thinking today". The underlying wisdom in these words has greatly encouraged us in this inquest to appreciate the emerging facts and scenario in a proper perspective. Crucial key-word in the definition of taxable services, namely, "C&F Operations" needs to be viewed afresh in this scenario. The whole "operations" involved in "C&F Operations" now....
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....egendary Trishanku, the word "and" is dangling between "clearing" and "forwarding" - neither divorcing from the Heavens, nor from the Earth. In such a positioning, it is not possible to segregate the holistic concept of "clearing and forwarding" into divisible activities, either or both of which can be provided for answering the customers' needs. 34. It has also been argued before us at length that whenever any ambiguity exists, the decision should be in favour of the assessee. Thanks to the competent assistance available from the rival parties, the expression "C&F Operations" appears no longer esoteric. Hence, there is no case to extend any benefit of doubt to the assessee. 35. In new of the above discussion and findings, we hold that the "C&F Operations" cannot be dissected into "Clearing" and "Forwarding" as they fall in the common category and hence all or any of the services of that category will be services provided by a "C&F Agent", connected with "C&F Operations" and would attract levy of service tax under Section 65(23). Question No. 1 referred to us is accordingly answered in the affirmative and the question No. 2 in the negative." 5.9 Tribunal has in....
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....delivery and transportation thereof to various destinations as per directions from the company. (v) Ownership of the goods is fully with the company and C&F Agent merely acts as a custodian of the goods. (vi) Goods are dispatched as advised by the company. (vii) The noticee is fully responsible for collection of the payments for goods and deposit the same in the principals' account. (viii) Noticee shall comply with all statutory and legal requirements such as registration/license for operation of C & F agency and for any other legal requirements that may be applicable to the operations of the C & F agency. It is clear from the provisions of the above-quoted agreement that as per the agreement itself the appellant was to act as clearing and forwarding agent for the purpose of receiving, storing and forwarding of goods. It was to unload, load and stock and store the merchandise sent by the service recipient and the ownership of the goods remained with the service recipient and the appellant merely acted as a custodian of the goods and dispatched them as per the advice of the service recipient. It is thus obvious that the appellant cleared ....
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.... H High Court in its judgment in the case of Kulcip Medicines (supra) took note of the assertion of Madhav Rao, ld. Counsel that the CESTAT judgment in the case of Mahavir Generics [2006 (3) S.T.R. 276 (Tribunal)] was not appealed against by Revenue which was factually incorrect as the judgment of CESTAT in the case of Mahavir Generics was appealed against before Karnataka High Court. Indeed as per the agreement under which the appellant rendered service all the ingredients required for coverage of the service under C & F agent service are so clearly present that there was no scope for any confusion or ambiguity with regard to the taxability of the said service and therefore the appellant's contention that it had bona fide belief about the non-taxability of service rendered by it is totally untenable. Bona fide belief is not a hallucinatory belief; it is a genuine belief of a reasonable person operating in an appropriate environment. When the terms of the agreement were so clear, any reasonable person operating in an appropriate environment would have no basis to entertain a belief that the service rendered by it in terms of the agreement cited above by any stretch of imagination w....
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....he person, who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate ........" The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional." Similar views have been expressed in the following decisions: a) Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] b) TCP Limited [2006 (1) STR 134 (T-Ahd)] c) Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] d) Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)] Thus we uphold the demand of interest made under Section 75 of the Finance Act, 1994. 5.12 It i....
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....erson has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mensrea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of....
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.... same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under S. 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences. However, no circumstances are either pleaded or proved for invocation of the said Section also. In any event we are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, we are of opinion that the learned Single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under S. 76. Therefore, the judgment of the learned Single Judge, to the extent it directs the first appellant to modify Ext. P1 by withdrawing penalty levied under S. 76, is liab....