Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs Sua Explosives And Accessories on 16 May, 2008
ORDER P.G. Chacko, Member (J)
1. This appeal of the Revenue is against an order of the Commissioner (Appeals) setting aside an order of the original authority demanding service tax from the respondents by treating them as "Clearing and Forwarding Agents" for the period 25.02.2000 to 03.02.2003. In the impugned order, the learned Commissioner (Appeals) found as follows:
(a) There is a separate lease agreement between the appellants and the principals in respect of the place of storage of goods. The principals store their goods independently on payment of rent.
(b) The goods are delivered from the above premises by the principals directly to the customers.
(c) The appellants prepared invoices/delivery notes in respect of the goods dispatched.
(d) They have been appointed as "Sole Marketing Agents" by the principals for their products i.e., for marketing the products and for collection of the amounts from the customers.
The appellate authority proceeded to find that the party did not undertake (a) clearing goods from the factory of their principal; (b) storing the goods in their premises; or (c) dispatching the goods to the buyers. The learned Commissioner (Appeals), on the above basis, held that the appellants before him (present respondents) were only 'Commission Agents' and not clearing and Forwarding Agents'. Hence the dropping of demand of service tax.
2. In the present appeal of the Revenue, the aforesaid findings of the lower appellate authority, barring the last mentioned one, are not under challenge. The appellant submits that the respondents were indeed functioning as Clearing and Forwarding Agents rather than Commission Agents. The appellant relies on the Tribunal's decision in Prabhat Zarda Factory (P) Ltd. v. Commissioner . The learned SDR reiterates the grounds of the appeal. The learned Counsel for the respondents submits that the decision in Prabhat Zarda Factory case was overruled by the larger Bench of the Tribunal in Larsen and Toubro Ltd. v. Commmr. of CCE, Chennai 2006 (3) S.T.R 321 (Tri-LB). Para 9.3 of the order of the larger Bench is reproduced below:
An agent engaged only for procuring purchase orders for the vendor on commission basis does not engage in any of the above activities, directly or indirectly. Commission agent engaged to procure orders and not entrusted with the work of clearing and forwarding of the goods would be a person who, in the ordinary course of business, makes contracts for sale or purchase of goods for others. The definition of "commission agent" in Section 2(aaa) of the Central Excise Act, 1944, 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 Sub-section (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 tide 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 or 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 and forwarding agent. Activity of procuring orders is thus independent of clearing and forwarding operations. The agents doing these activities can be different. Moreover, clearing and forwarding operations do not flow directly or indirectly from mere procurement of orders. There is no obligation on the person procuring orders as a commission agent for the principal, only by virtue of that agency, to carry out clearing and forwarding operations in respect of the goods which are to be supplied pursuant to the orders so procured.
3. I find that, on the very facts recorded by the lower appellate authority, which have not been challenged, the respondents can only be held to be Commission Agents in the light of the larger Bench decision. It is also pertinent to note that the case law relied on by the appellant is no longer good law as the same was overruled by the larger Bench.
4. In the result, the Revenue's appeal gets dismissed.
(Dictated and pronounced in open court)