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New Delhi CESTAT on section 65 of the Finance Act, 1994

Court :

Brief :
Section 65 of the Finance Act, 1994 – Clearing and forwarding agent’s service – Assessee was a consignment agent – As per agreements entered into with its clients, assessee was very much concerned with safe delivery of consignments dispatched by rail, road, air or water, besides being answerable to compliance with sales tax obligations – Whether activities performed by assessee under said agreements, howsoever subtle and sketchy as they might appear, certainly qualified to be taxed under category of ‘clearing and forwarding agent’s service’ – Held, yes [Para 5]

Citation :
Commissioner of Central Excise v. ADH Agencies [IN APPEAL NO. ST/216/2005]

FACTS The assessee was a consignment agent. The revenue raised demand against the assessee in category of ‘Clearing and forwarding agent’s services’ on ground that some of the activities undertaken by the assessee amounted to carrying out clearing and forwarding operations. On appeal, the Commissioner (Appeals) was of view that the assessee was neither consignment agent nor clearing agent nor forwarding agent nor the services provided by a consignment agent had been made taxable. He further held that the assessee was a consignment stockist and, hence, not liable to pay service tax. Accordingly, he set aside the demand of service tax along with penalty imposed by the Deputy Commissioner. On revenue’s appeal : HELD As per the agreement entered into by the assessee with ‘B’ Ltd. on 1-7-1999, the assessee was very much concerned with the safe delivery of goods, besides being answerable to compliance with tax obligations. [Para 3] In yet another agreement made on 18-3-2002 between the assessee and SRF Polymers Ltd., one could further gauge that the assessee was made fully responsible for the consignment dispatched by rail, road, air or water besides being assigned with the task of the sale promotions as well. [Para 4] A plain reading of these two agreements amply made it clear that the assessee-consignment agent was also responsible for the movement of goods dealt with by it in the manner as prescribed in various clauses of the said agreements which would fully qualify it to be a C&F agent. It had been explicitly stated in the said agreements that the company, i.e., ‘B’ Ltd. and SRF Polymers Ltd. shall not be liable for any short delivery of/or damages to the said products after delivery of the said products was taken by the assessee-consignment agent or for any delay for supply to others. In an identical situation, in Medpro Pharma (P) Ltd. v. CCE [2006] 4 STT 341 (New Delhi – CESTAT LB), the Larger Bench of this Tribunal had compared the C&F operation to an orchestra performing a Mahler’s symphony. The loud thud of a drum cannot erase the soft whispers of a flute which also forms a part of the orchestra. Even if the mellifluous tra-la-la of the flute is dominated by the thundering drums, for all practical purposes, the former does not cease to be the part and parcel of the orchestra. In the same analogy, the activities performed under the agreements, howsoever, subtle and sketchy as they might appear would certainly qualify to make them taxable activities of clearing and forwarding. [Para 5] In view of the above reasoning, the order-in-appeal was to be set aside and the order-in-original stood restored. [Para 6] CASE REVIEW: Medpro Pharma Pvt. Ltd. v. CCE [2006] 4 STT 341 (New Delhi – CESTAT LB) followed. [Para 5]

CA Pawan Goswami
on 18 September 2008
Published in Service Tax
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