Custom, Excise & Service Tax Tribunal
M/S Suresh Kumar & Company vs Cce, Jaipur-I on 26 April, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
COURT NO. III
Service Tax Appeal No. 684 of 2011
[Arising out of Order-In-Appeal No. 61(DKV)ST/JPR-I/2011 dated 21.02.2011 passed by Commissioner (Appeals) of Central Excise, Jaipur-I]
For approval and signature:
Honble Ms. Archana Wadhwa, Judicial Member
Hon'ble Mr. Rakesh Kumar, Technical Member
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s Suresh Kumar & Company Appellant
Vs.
CCE, Jaipur-I Respondent
Coram:
Honble Ms. Archana Wadhwa, Judicial Member Hon'ble Mr. Rakesh Kumar, Technical Member Appearance:
Mr. Yogender Aldak, Advocate for the Appellants Mr. V.P. Batra, AR for the Respondent Date of Hearing: 22.03.2013 Date of Decision: 26.04.2013 FINAL ORDER NO . 56194/2013_________ Per Ms. Archana Wadhwa After hearing both sides, we find that service tax of Rs. 4,75,819/- stand confirmed against the appellant for the period October, 2000 to March, 2005 on the finding that he had provided services of clearing and forwarding agent to various principal tea manufacturers. In addition, penalty also stand imposed upon them. The appellant was receiving tea from approximately 10 companies under the cover of their proforma invoices with a forwarding letter for sale of the goods and such tea was being sold by them on their own invoices on which the appellant was paying sales tax. After the sale of entire consignment, accounts were being sent to principals incorporating details of sale realization of whole consignment and details of expenditure etc. They were also remitting the realization amount after deducting the expenses as also their commission along with F form of Rajasthan Sales Tax.
2. During the course of adjudication the appellant submitted that they were only acting as commission agents for their principals inasmuch as the tea in question is being sold by them under their own invoices and to the independent buyers of their choice. Unlike Clearing and forwarding agents they are not directed by the principals to raise the invoices to the principals customers. In such a scenario, they cannot be held to be a clearing and forwarding agent but are simply selling the tea on commission basis.
3. The above stand of the appellant was not accepted by the lower authorities who confirmed the demand and also imposed penalty. On appeal, the said order of the adjudicating authority was upheld. Hence, the present appeal.
4. For better appreciation, we reproduce the submissions made by the appellant before Commissioner (Appeals) and as detailed by him in the impugned order:
i) that the moot question is whether the activities of appellant fall under commission agent or consignment agent.
ii) that the service of commission agent is included in the definition of Business Auxiliary service. Under this category the service provided by the appellant as commission agent is exempt by virtue of Notification no. 13/2003 dated 1-7-2003 & 8/2004 dated 9-7-2004 wherein tea is included in the definition of agriculture produce. As against this consignment agent is included in the definition of clearing & forwarding agent.
iii) that it is relevant to look to the definition of commission agent and consignment agent.
(a) The Commission agent is defined in the Explanation given under clause 65(19) under Business Auxiliary Service as under:-
Commission agent means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person-
(i) deals with goods or services or documents of title to such goods or services or
(ii) collects payment of sale price of such goods or services; or
(iii) guarantees for collection or payment for such goods or services; or
(iv) undertakes any activities relating to such sale or purchase of such goods or services;
(b) The consignment agent is though included in the definition of clearing and forwarding agent, not defined in the context of service tax in the Finance Act. The Clearing & forwarding Agent Service is defined in clause (25) of section 65, as follows:-
Clearing and forwarding agent means any person who is engaged in providing any service either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent The term consignment is defined in Blacks Law Dictionary as follows:-
The act or process of consigning goods; the transportation of goods consigned; an article or collection of goods sent to a factory; goods or property sent, by the aid of a common carrier, from one person in one place to another in another place; something consigned and shipped. Entrusting of goods to another to sell for the consignor. A bailment for sale.
The term consignment used in a commercial sense ordinarily implies an agency and denotes that property is committed to the consignee for care or sole. As per the Champers English Dictionary the term consignment means the act of consigning; the things consigned: a set of things consigned together A consignment agent thus acts as intermediary between the seller and the purchaser, receiving the goods from the seller (the consignor) on behalf of the purchaser (the consignee) and then transmitting the goods to the purchaser.
iv) that Section 65(105) defines taxable service. Under sub clause (j) taxable services of clearing and forwarding agent is defined as under:-
Section 65(105)- taxable service means any service provided-
(j) to a client, by a clearing and forwarding agent in relation to clearing and forwarding operation in any manner. The definition of taxable service provides that services provided by a clearing and, forwarding agent in relation to clearing and forwarding operation are taxable. Since the Consignment agent is included in the definition of clearing & forwarding agent and thus where a consignment agent provides any service in relation to clearing and forwarding operation, then only it is taxable under this category. Mere consignment sales cannot be taxed under this category. The department has also clarified that since the consignment agent provide service in respect of clearing and forwarding of a consignment, the services provided by it is chargeable to tax as C&F Agents. The services which are undertaken/performed under clearing and forwarding (C&F) operations are as follows:-
a. Receiving the goods from the factories or premises of the principal;
b. Warehousing these goods;
c. Receiving dispatch order from the principal;
d. Arranging dispatch of goods as per direction of the principal by engaging transport on his own or through the authorized transporters of the principal;
e. Maintaining records of the receipt and dispatch of goods and the stock available at the warehouse;
f. Preparing invoices on behalf of the principal
v) that in present case there is agreement made between the appellant and the principal companies who sends tea to appellant for sale in the state of Rajasthan. This agreement is known as Agent Agreement. Copy of few of such agreements is enclosed in the paper book. [PB 22-49]
vi) that the important terms and conditions mentioned in these agreements and the activities performed by the appellant during sale of tea of principal companies are as under:-
a. The tea is dispatched by the principal company to appellant through transport. The companies used to send the Performa invoice with the goods. On receipt of goods at Jaipur appellant makes payment of freight to the transporter which is reimbursed from the companies.
b. Appellant warehouse the goods in their own god own or godown taken on rent by them in its own name. The godown rent is being paid by appellant. Appellant gets reimbursement of rent fixed for per bag irrespective of actual expenditure on rent.
c. The appellant takes insurance of goods and this expenditure is debited in P&L account of appellant.
d. Appellant do not receive any dispatch order from principal. The goods are sold to various customers by the appellant at their own through brokers. Brokerage is being paid by appellant. Appellant gets reimbursement of brokerage at fixed rate from the companies whether goods sold through, broker or otherwise.
e. The goods are being sold at the rate decided by appellant which is finalized after mutual discussion/bargaining with customer. Appellant have full liberty to sell the goods to any of the customer at rate decided between them. There is no influence/control of principal companies in this matter.
f. Appellant sells goods to various customers/parties. The goods are generally sold on ex-godown/ex-shop price. For local transportation of goods from godown to the office of transport company cartage is being charged from the customer in the sale bill. The freight is being paid by the respective customers. There is no control of appellant as well as of principal company over dispatch of goods. Neither principal companies issue any direction, nor any transporter is authorized by them nor appellant pays the freight.
g. For the goods sold to customers appellant prepare invoice on their own bills. Sales tax is charged from the customers by the appellant and is deposited with the sales tax department.
h. The realization from debtors is being made by appellant at their own level.
The principal has no concern over it. These are debtors of appellant and not of principal. Any bad debts, if any, happens out of these debtors is loss of appellant and not of principal. The remittance to companies is to be made irrespective of any claim, bad debts or delayed realization from the debtors.
i After receiving goods from principal company the risk of goods passes to appellant. Insurance of goods, warehousing of goods, selling of goods is matter of appellant and there is no influence in this matter of the principal companies.
j. Any loss or damage to tea in course of handling, unloading or clearing and during storage of tea, qualitatively or quantitatively is loss of appellant and not of principal.
k. The payment to principal company for the goods sent by them is made normally within 30 days. In some cases even advance payment is being made to the companies. In case of advance payment, appellant gets benefit of cash discount.
l. As per the agency agreement, appellant is liable for any dispute arises in course of sale of tea. The principal has no concern/liability over it.
m. Further the liability of sales tax, turnover tax payable to the state government is of the appellant. Principal companies have nothing to do with it. It is clearly stated in the agreement.
vi) that from the above it can be noted that working of appellant is not as of C&F agent or consignment agent engaged in clearing or forwarding operations. A consignment agent receives the goods from the principal, stores them on behalf of the principal and when sale is made by the principal then dispatches the goods. to the customers on the direction of the principal. Whereas a commission agents job is to cause sale/purchase on behalf of another person. This is an essential difference between the two agents. In case of appellant tea is received from the consignor (principal company) but not on behalf of the consignee (purchaser). The consignee is not identified by the consignor (principal companies). Appellant does not receive any direction from principal (consignor) regarding dispatch of goods. Appellant only causes sale of goods on behalf of the principal. Thus activities performed by the appellant cannot be treated as Consignment agent rather it is of the nature of commission agent. Thus the appellant does not perform the activities specified by the department in case of a C&F.
5. On appreciating the submissions made by both sides, we find that sole question required to be decided in the present appeal is as to whether the appellant can be held to be clearing and forwarding agent of their principals. The appellants have categorically stated that they have been selling their tea under their own invoices on which sales tax was being paid by them. They have also relied upon the Boards circular No. 43/07/97-TRU dated 11.7.97 clarifying that Clearing and forwarding agents are receiving despatch orders from the principal and arranging despatch as per directions of the principals. The Commissioner (Appeals) while assailing the above stand of the appellant have observed that it is not essential for a person to cover in the ambit of clearing and forwarding agents to perform all those activities as specified by Board and even if one or two of such activities are not performed by such person, he cannot be debarred from the definition of clearing and forwarding agents for the simple reason that he has not performed one or two of the activities described by the Board.
6. We do not find any merit in the above reasoning of the Commissioner (Appeals). The definition and scope of clearing and forwarding agents stand clarified by the Board in the above circular, which has also been the subject matter of various decisions of the Tribunal as also of various High Courts. Infact instead of referring to all those decisions of the Tribunal, we would refer to latest decision of the Tribunal in the case of CCE vs. DR PL 2013-TIOL-161-CESTAT-DEL wherein, after taking into account the entire law on the subject, as also Boards circular, it was held that clearing and forwarding agents only receives despatch orders from the principals and prepares the invoices on behalf of the principals. He is not free to sell the goods on its own. Inasmuch as the appellant in that case was selling the goods received from the principal, on his own and under the cover of his invoices and was paying sales tax on the same Tribunal held that he cannot be considered to be clearing and forwarding agent of the principal.
7. However the Appellants stand from the very beginning has been that the service being provided by them, is the service of Commission agents included in the definition of Business Auxiliary Service and as they are acting as Commission agents in respect of tea, which is an agriculture produce, their service is fully exempt from tax under Notification no. 13/2003-ST, dt 01.07.2003 as amended by 8/2004-ST dt 10.09.2004 while in going through the Appellant agreements with Tea companies. We are of the view that the service being provided by them, is the service of commission agents covered in the definition of Business Auxiliary Service. However their plea that they are fully exempt from service tax vide Notification no 13/2003-ST are amended by Notification no 8/2004-ST dt 10.09.2004 on the ground that tea is an agriculture produce is oppossed by the learned DR citing the judgment of Hon'ble Madras High Court in case of contain Tea & Commodities is Commissioner of Service Tax, Salem, reported in 2011(22) STR-3(Mad.). However since the taxability of Appellants service as Business Auxiliary Service (Commissioner Agent) and whether during the period w.e.t. 10/09/04, they would be eligible for exemption under Notification no. 13/03-ST as amended by Notification no. 8/04-ST dt. 10/09/04 had not been considered by the Commissioner (Appeals), for this purpose the matter will have to be remanded to Commissioner of Central Excise (appeals). However if service tax is chargeable on the Appellants service by treating the same as Business Auxiliary Service, in view of the circumstances of the case, longer limitation period would not be applicable and service tax would be demandable only for normal limitation period. For the same reason, penalty under Section 76 and 78 would be liable to be waived under Section 80 and as such no penalty would be imposable.
8. In view of the above discussion, while setting aside the impugned order and holding that the service provided by the Appellant is the service of Commission agent included in the definition Auxiliary Service, we remand the matter to Commissioner of Central Excise (Appeals) for:-
(a) examining the Appellants plea regarding eligibility for exemption under Notification no 13/03-ST dt. 1/3/03 are amended by Notification no 8/04-ST dt. 10/9/04 in respect of period w.e.f. 10/09/04; and
(b) qualification of Service tax demand which would be receivable only for normal limitation period, if it is held that the Appellant are not eligible for exemption vide Notification No. 13.03-ST as amended by Notification No. 8/04-ST dt. 10/09/04.
(Pronounce in the open Court on 26.04.2013) (Archana Wadhwa) Member (Judicial) (Rakesh Kumar) ss/Jyoti Member (Technical) ??
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