CLEARING AND FORWARDING AGENT’S SERVICES
HIGH COURT OF PUNJAB AND HARYANA
v.
United Plastomers
SATISH KUMAR MITTAL AND RAKESH KUMAR GARG,
JJ.
CE APPEAL NO. 116 OF 2006
February 20, 2008
Section 65 of the Finance Act, 1994 - Clearing and forwarding agent’s services - Period August 1999 to November 2001 - Assessee was acting as commission agent of one ‘I’ and was receiving commission - Department demanded service tax from assessee under category of clearing and forwarding agent - Assessee’s case was that ‘commission agents’ have been brought under the category of ‘Business auxiliary service’ with effect from 1-7-2003 and therefore, it was not liable to pay service tax for period in question - Whether assessee’s case was to be accepted - Held, yes
Circulars and Notifications:
Circular No. 341/11/98 - TRU,
dated 23-8-1999.
FACTS
The assessee was acting as commission agent of one ‘I’ and also as consignment agent. It was receiving commission as commission agent as well as C&F agent (consignment agent). The department raised demand of service tax from the assessee under the category of clearing and forwarding agent along with interest. Penalties under sections 76 and 77 were also imposed. Commissioner vide Order-in-Original confirmed the demand of service tax along with interest and penalties. On appeal the Commissioner (Appeals) vide his order upheld the order-in-original confirming the demand of service tax on the commission received by the assessee as C&F agent (consignment agent). However, as regard service tax on commission received by the assessee as commission agent under the category of C&F agent, he held that the service tax does not appear to be leviable on such service. However, the Commissioner (Appeals) held that penalty was leviable only with the respect of service tax leviable on the commission earned as consignment agent and thus, he reduced the penalty. On cross appeal, the Tribunal rejected the appeal of department for enhancement of penalty which was reduced by the Commissioner (Appeals) on the ground that the commission received for services rendered as commission agent was not liable for service tax under the category of C&F agent. The Tribunal also set aside the penalty levied on the service tax amount on the ground that the service tax amount was deposited by the assessee before the issue of the show cause notice.
On appeal, the assessee’s case was that the ‘commission agents’ have been brought under the category of ‘Business Auxiliary Service’ with effect from 1-7-2003 and therefore, it was not liable to pay service tax for the period in question.
HELD
While passing the impugned order, the Tribunal had concluded that the case of assessee was clearly covered by the ratio of the decision in Raja Rajeshwari Intl. Polymers (P.) Ltd. v. CCE [2005] 1 STT 94 (Bang. - CESTAT) conclusions/observations in above decision stands settled by a Larger Bench of the Tribunal in Larsen & Toubro Ltd. v. CCE [2006] 4 STT 231 (New Delhi - CESTAT) wherein it had been held that services of commission agent are included in the definition of ‘business auxiliary service’ from 1-7-2003 and mere procuring or having orders for the principal by an agent on payment of commission basis would not amount to providing services as ‘clearing and forwarding agent’, within the meaning of the definition of that expression under section 65(25). 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 clearing and forwarding operations and an agent 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. [Para 13]
In view of Board’s Circular No. 341/11/98 TRU dated 23-8-1999 and the various judicial pronouncements, the order of Larger Bench of the Tribunal Delhi in Larsen & Toubro Ltd.’s Case (supra) has been accepted by the revenue. [Para 14]
The appeal was to be dismissed. [Para 15]
CASE REVIEW :
Larsen & Toubro Ltd. v. CCE [2006] 4 STT 231 (New Delhi - CESTAT) - Followed