Custom, Excise & Service Tax Tribunal
Yes vs Unknown on 25 June, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT AHMEDABAD COURT: II Appeal No. ST/13/08 Arising out of Order-in-Appeal No.ID/69/Daman/2007, dt.18.12.07 Passed by: Commissioner of Central Excise & Customs (Appeals), Daman. For approval and signature: Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3 Whether their Lordships wish to see the fair copy of the order? : Seen 4 Whether order is to be circulated to the Departmental authorities? : Yes Appellant/s Respondent/s
M/s Ganpati Petrochemicals Vs CCE, Vapi Represented by Represented by Ms. Aparna H., Adv.
Shri Sameer Chitkara, SDR CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing:
25.06.08 Date of Decision:
25.06.08 ORDER No. /WZB/AHD/2008 Per: Mr. B.S.V. Murthy, Member (Technical) The issue involved in this case is as to whether services of Del-credre agency provided by the appellant is covered under the category of Clearing and Forwarding (C&F) agency service and leviable to service tax. The appellants are registered as C&F agent from Sept.99. The appellants entered into two separate agreements in 1999 with M/s Haldia Petrochemicals Ltd. (hereinafter referred to as HPL). One agreement was for appointment as Consignment Stockist Agent and another agreement was for appointment as Del Credre agent. Both were renewed by fresh agreements in 2002. Relevant paragraph of two agreements which give an idea about the type of services to be rendered by the appellant are extracted below for convenience.
Paras 2, 3 & 4 of the Consignment Stockist Agreement:
2. Subject to the production and availability of the said Product, the COMPANY shall make available to the Consignment Stockist the said Product, from its factory/warehouse for distribution/sale by him on the terms and conditions herein contained and the procedure/policy already prescribed or to be prescribed by the COMPANY from time to time for stocking and selling the said product. The Consignment Stockist shall store at his cost a reasonable stock of the said Product to meet the requirements of the market. Nothing herein contained shall preclude or hinder the COMPANY from appointing any other Consignment Stockists for the said Product the Company shall be entitled to discontinue the arrangement herein recorded if for any reason the Consignment Stockist fails or neglects to comply with any of his obligations herein contained. The brand or brands of the said Product to be marketed at any place and the brand of the Product to be supplied to the Consignment Stockist shall be determined/fixed from time to time at the sole discretion of the COMPANY.
3. The COMPANY will transfer the said Products to the Consignment Stockist from time to time as aforesaid through stock transfer invoices at prices determined by the COMPANY based on prevailing market prices. The Consignment Stockist will be responsible to sell the Products as per instructions of the COMPANY at prefixed list prices of HPL declared and intimated to the Consignment Stockist by the COMPANY from time to time.
4. Storage Facilities The Consignment Stockist confirms that it has a good, suitable and sufficiently large godown/warehouse/business establishment accommodation at his depot(s) situated at Daman, Silvassa, Bhiwandi & Mumbai (hereinafter called the said Depot) duly approved by the COMPANY. The changes therein at the advice of the COMPANY and to the satisfaction of the COMPANY. Para 2 A & B of the Del Credre Agent Agreement:
2. PROCEDURE The terms and conditions subject to which promotional activities and the sale of the said product are to be carried and effected are:
A. Ganapati Petrochemicals shall cultivate and maintain good relationship with customers and potential customers in accordance with sound commercial practice and make best efforts to inspire the customers to purchase the said Product from HPL or through Ganapati Petrochemicals. In carrying out its obligations under this Agreement, Ganapati Petrochemicals Limited shall use promotional, advertising and other materials which are supplied or approved by HPL from time to time.
B. HPL shall make available to Ganapati Petrochemicals a format of indent/order for securing order from the Customer. The Customer shall fill in and sign the indent/order acceptance and submit to HPL directly or through Ganapati Petrochemicals. HPL shall raise necessary delivery challans and invoices and other documents on the customers for the sale of the said Product. HPL may at its option sell and supply the said Product to the Customers/Buyers on ex-Warehouse Basis for delivery to the Customer or Buyer. HPL, however, shall raise necessary delivery challan and invoices and other documents on the Buyer/Customer to whom the said Product is to be supplied/sold. In the event of bills/ invoices drawn by HPL directly in favour of the Customer/Buyer are handed over to Ganapati Petrochemicals undertakes not to part with the said delivery order/invoices and other documents till the payment due in respect of the said invoices are received/collected by Ganapati Petrochemicals.
2. A show cause notice was issued on 17.12.2004 proposing to levy service tax on the services provided on the basis of second contract wherein the services to be provided was shown as Del-credre agent from Oct.99 to June03 amounting to Rs.12,75,715/- which resulted in confirmation by the lower authorities. Further, penalty under Section 76, 77 were also imposed besides requiring the appellant to pay interest on the tax involved.
3. Heard both the sides. Ms. Aparna, learned advocate on behalf of the appellant stated that lower authority failed to recognize the fact that there were two types of services being rendered and there were two separate contracts for the same. First contract required appellants to maintain facilities for stocking and selling the product and also collect the payment for which they were getting Rs.450 per M.T., whereas in case of second contract, they were required to procure orders and submit to HPL and after the supply is made ensure that payment is received by HPL and for this service they would get 350 per M.T. The appellants have been paying service tax on the amount received by them for service rendered as Consignment Stockist from Feb.99 i.e. right from the commencement of agency business and there is no dispute. They were not paying service tax on Del-credre agency since it was not covered under C&F service. She also cited following judgments in support of their contention that Del-credre agency would not be covered under C&F agency services.
a) Mahavir Generics - 2004 (170) ELT 78 (T)
b) Raja Rajeshwari Intl. - 2005 (180) ELT 448 (T)
c) United Plastomers - 2006 (1) STR 194 (T)
d) Sreenidhi Polymers P.Ltd. - 2005 (186) ELT 195 (T)
e) Gemini Associates 2007 (5) STR 304 (T)
f) A.K. Multimetals P.Ltd. 2006 (3) STR 735 (T)
g) Sri Ventakteswara 2006 (4) 250 (Commr.Appl.)
h) N.K. Agencies Pvt. 2006 (4) STR 174 (Commr.Appl.)
i) Sowbhagya Polymers 2006 (4) STR 246 (Commr.Appl.)
j) C.S. Survarna 2007 (7) 174 (t).
4. She also submitted that issue was referred to Larger Bench of the Tribunal in case of L&T Limited and Tribunal has held that mere procuring order on commission basis, would not be covered under C&F Agent service. The commission agency service came to be covered under business auxiliary services w.e.f. 1.7.03 only. Learned SDR reiterates the order passed by the lower authority.
5. The observations of the Jt. Commissioner and also Commissioner (Appeals) relating to the agreements shows that there was no clarity regarding the two contracts and the type of work done by the appellant and terms and conditions of agreement and the nature of the agreement. The Jt. Commissioner in his OIO observed as follows:
This agreement made on this 1st day of July 2002, between Haldia Petrochemicals Ltd. having its registered office at 1, Auckland Palace, Calcutta- 700 017 (herein after called company which expression shall included its successors and assigns) of the one part and M/s Ganapati Petrochemicals, a proprietary firm having its registered office at 152, Sanay Building No.6, Mittal Industrial Estate, Andheri-Kurla Road, Marol, Andheri (East), Mumbai-400 059 represented by Mr. Hitesh Rasiklal Shah (hereinafter referred to as the Consignment Stockist) which expression shall include its successor) of the other part. From the above, it is very clear that both the agreements have been made for Consignment Stockist only and nowhere there is mention about appointment of Del Credre Agent. Thus, I find that M/s Haldia have appointed M/s Ganapati as its consignment Stockist Agent only on the terms and conditions as stipulated in the consignment stockist agreements. Some of the terms and conditions as contained in the said agreements are that the consignment stockist shall store at his cost a reasonable stock of the product to meet the requirements of the market. That the company will transfer the said products to the consignment stockist from time to time through stock transfer invoices at prices determined by the company based on prevailing market prices. The consignment stockist will be responsible to sell the products as per instructions of the company at prefixed list prices of M/s Haldia declared and intimated to the consignment stockist by the company from time to time. That the Consignment Stockist confirms that it has a good, suitable and sufficiently large godown/ware house/business establishment accommodation at its depot duly approved by the Company. That the consignment stockist shall keep adequate records as per Companys requirement for receipt, sale and stock. That the Consignment Stockist shall comply with the requirement of all statutes, laws and regulations for the storage and the sale of the products to the customers and shall exclusively be liable for the collection and payment of all taxes, dues and levies. That while effecting sale of the products, the consignment stockist shall disclose that he is a consignment stockist of the Company. That in consideration of the services rendered by the consignment agreement, the company shall pay to the consignment stockist a commission at the rate of Rs.450/- per M.T. From the foregoing facts, I hold that M/s Ganapati were appointed as Consignment Stockist Agent by M/s Haldia and not as Del-Credre Agent.
6. This shows that Jt.Commissioner totally missed to consider the second agreement and he only looked into the first agreement relating to consignment stockist agent. The observations of the Commissioner (Appeals) are as follows:
I find that primarily the appellants were registered as Consignment Agent from September 1999 for M/s Haldia Petrochemicals. They provided two types of services, one as Consignment Agent as Del Credre Agent used to receive commission on the basis of per Metric Tonne from M/s Haldia Petrochemicals as per agreement dt.5.2.99. M/s Haldia Petrochemicals (Principal Supplier) and M/s Ganapati Petrochemicals (an agent) the conditions/norms were prescribed on the basis of quantum of sale or purchase of goods on Rs.350/- per Metric Tonne basis. As per the conditions of the agreement made between the agent and the Principal, the agents main responsibilities were to organize, propagate and promote the sale of products manufactured by the principal.
Another agreement made on 1.7.02 between Haldia Petrochemicals and M/s Ganapati Petrochemicals have been made for consignment Stockist only and nowhere there is a mention about the appointment of Del Credre agent. Thus, I find that M/s Haldia Petrochemicals have appointed M/s Ganapati Petrochemicals as its consignment stockist agent only. It is very clear that the agreement have been made for consignment stockist only. The nature of the services and norms and conditions of consignment stockist is similar just like the service of Clearing & Forwarding agent.
The consignment stockist shall maintain a large godown business establishment accommodation at its depot and appropriate stock at its cost of the dealing product to meet the requirements of the market. The company will transfer his product to the consignment stockist from time to time through stock transfer invoices at prices determined by the company based on prevailing market prices. The consignment stockist will be responsible to sell the products as per instructions of the company at prefixed list prices of M/s Haldia Petrochemicals, which were declared and intimated to the consignment stockist by the company from time to time. The consignment stockiest will comply all statutes, laws and regulations for the company and liable for the collection and payment of all taxes, dues and levies. The company (M/s Haldia Petrochemicals) shall pay to the consignment stockist (M/s Ganapati Petrochemicals) a commission @ Rs.450/- per MT. Thus, it is very clear that during the material period of time, the services of consignment stockiest agent was covered under the category of Clearing & Forwarding Agent and were liable to pay service tax under the category of Clearing & Forwarding Agent.
7. From the above, it can be seen that Commissioner (Appeals) has correctly noticed that there were two agreements in 1999, but when it came to 2002, he looked into one agreement and made the observations that nowhere there is a mention about the appointment of Del-credre agency services rendered by the appellant.
8. From the two relevant paragraphs extracted from the agreements in the beginning of this order, it is quite clear that appellants were rendering two types of services and they have paid service tax correctly on Clearing & Forwarding Agent services and they are not liable to pay service tax on Del Credre agency service prior to 1.7.03 as understood by them. We also find that the judgments cited by them to be relevant and applicable to facts of this case. Therefore, the appeal is allowed with consequential relief.
(Pronounced in Court)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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