Custom, Excise & Service Tax Tribunal
M/S. V.S.Distributors vs Cce, Jaipur on 20 July, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Block No.2, R.K.Puram, New Delhi-110066.
Principal Bench, New Delhi.
ST/151/06
(Arising out of Order-in-Appeal No.132(HKS)ST/JPR-II/2006 dt.6.3.06 passed by Commissioner(Appeals), Jaipur)
M/s. V.S.Distributors Appellant
Versus
CCE, Jaipur . Respondent
, Appearance Ms. Asmita Nayak, Adv. For Appellant Sh. Sunil Kumar, DR for Respondent Coram: Honble Mr. D.N.PANDA, JUDICIAL MEMBER Honble Mr. RAKESH KUMAR, MEMBER (TECHNICAL) Date of decision: 20.7.09 Order No._______________________________ Per D.N.Panda:
Ld. Counsel Ms. Asmita Nayak submits that the appellant had agreement with BPCL for storage of lubricants of that concern. There was no clearing activity carried by the appellant to fall under the category of Clearing & Forwarding services. She has relied upon page No.17 to show that the agreement was between BPCL and the appellant. She submits that even though payments were linked to quantity and the loading and unloading charges were paid as per paragraph 19 of the agreement, that does not relate to clearing and forwarding activity. Therefore, following the decision of the Honble High Court of Punjab & Haryana in the case of CCE, Panchkula vs M/s. Kulcip Medicines(P) Ltd. reported in 2009-TIOL-202-HC-P&H-ST, the appellant is entitled to succeed in its appeal.
2. Ld. DR Shri Sunil Kumar brings to our notice that the agreement at page 17 has not been signed by BPCL. To this objection, Ld. Counsel replies that BPCL has signed at the end of the document and that cannot be doubted when the authorities all along have leaned over the same. It was at page 23 of the appeal folder. Ld. DR further submits that reading of the document enabled the authorities below to hold that the appellant is providing clearing and forwarding services.
3. Heard both sides for some time. We have asked the appellant to show each of the documents that was subject matter of adjudication. Ms. Asmita, Ld. Counsel has taken us to SCN which is appearing at page 28 to 34 of the appeal folder. She submits that contents of the agreement at page 17 is reproduced at page 29 of the appeal folder to exhibit the scope of the activity carried out by the appellant. The authorities have also not brought out whether theyhave examined the invoices of the appellant depicting the nature of service provided to get consideration for such services. We are unable to understand how the authorities without identifying the documents on which
4. While agreeing with my learned brothers finding that the authorities have not examined the invoices issued by the Appellants for ascertaining the nature of their service as discussed below, I am of the view that from the Appellants agreement with BPCL at page 17 to 23 of the appeal paper book, it is clear that the Appellants activity is not covered by the definition of C&F Agents service.
5. On going through the Appellants agreement with their client BPCL at page 17 to 23 of the Appeal paper book, which mentions the Appellant as Commission Operated Depot Operator (COD operator) it is seen that
(a) para 2 of the agreement mentions the Appellants activity as operating lube godown for storage and selling of lubricants at A-61, Subhashnagar Bhilwara;
(b) Clause 1,2,3,4,5,16,17 & 18 of para 2 of the agreement are about maintenance of the godown at A-61, Subhashnagar, Bhilwara employing the necessary staff, providing security, providing electricity, telephone connection etc. and arranging the receipt and storage of the lubricants dispatched by BPCL at the godown at the Appellants expenses;
(c) clause 6,7 and 15 of para 2 of the Agreement mention that BPCL will make arrangements to deliver the lubricants at the godown and all expenses of transportation upto the godown will be on BPCLs account and the Appellants responsibility in respect of dispatches of lubricants by BPCL is only keeping track of the dispatches and reporting any delay in receipt promptly to BPCL;
(d) clause 8,9,11,12,13 & 14 of para 2 of the agreement mention that
(i) all the sales of lubricants from godown will be against advance payments by cheque/DDs;
(ii) all billing to be done by the Appellant for sale ex-godown is taken in the name of BPCL at the prevailing general trade rate;
(iii) all cheques/DDS received during the day will be deposited in BPCLs account with SBI, Main, Branch Bhilwara on the same day or at the most, the next day; and
(iv) Appellants are to maintain an account of receipt of lubricants at the godown and sale as per the procedure advised by BPCL;
(e) clause 19 of para 2 of the agreement mentions the rate of remuneration to the Appellant, which is dependent upon the Appellant achieving a certain minimum volume of sale per month; and
(f) clause 30 of para 2 mentions that if the minimum assured offtake of 40 kl. Per month is not achieved, BPCL could be free to terminate this agreement.
5.1 From the above mentioned features of the Appellants agreement with BPCL, it will be seen that
(a) the Appellants are not involved at all the clearance of the goods from BPCLs factories godown ; and
(b) the Appellants activity is receiving the lubricants dispatched by BPCL at the godown at A-61, Subhash Nagar, Bhilwara, arranging its safe storage and sale on behalf of BPCL at the BPCLs prices and conditions and the remuneration being received by the Appellant from BPCL is dependant upon achieving certain minimum sale volume, 5.1.1 The point of dispute is as to whether the above activity of the Appellant is covered by Section 65(105)(j) read with Section 65(25) of the Finance Act,1994.
6. Section 65(25) and Section 65(105)(j) are reproduced below:
Section 65(25) 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 person and includes a consignment agent.
Section 65(105(j) Taxable service means any service provided or to be provided, to any person, by a clearing and forwarding agent in relation to clearing and forwarding operations in any manner.
6.1 As per Trade Notice No.87/97/10/Service Tax/97 dt.14.7.97 of Madurai-II Commissionerate and Boards Circular No.2/1/02-ST dt.20.4.02, -
Normally, a C&F agent receives the goods from the factories or premises of the Principal or his Agents, stores the goods, dispatches the goods as per orders received from Principal or owners, arranges transport etc. for the purpose and prepares invoices on behalf of the Principal. For this service, the C&F Agent receives Commission on the basis of agreed terms. Therefore, an essential characteristic of any services, to fall in the category of C&F Agent, is that the relationship between the service provider and the receiver should be in the nature of principal(owner) and agent. The C&F agent carries out all the activities in respect of goods right from the stage of their clearance from the premises of the principal to its storage and delivery to the customers.
6.1.1 The Board vide clarification No.2/1/02-ST dt.24.4.02 issued under Section 37B of the Central Excise Act,1944, made applicable to Service Tax by Section 83 of the Finance Act,1994, has clarified that the service of providing only storage facility and charging sent for that is not covered by the definition of C&F Agents service.
6.2 The Board in circular No.59/8/03-ST dt.20.6.03, while explaining the difference between a consignment agent (included in the definition of C&F agent) and Commission agent (whose services are covered by the definition of Business Auxiliary Services)has clarified that while a consignment agents job is to receive the goods from the principal and dispatch the same as per the directions of the Principal, a commission agents job is to cause sale/purchase on behalf of another person.
6.3 From the above mentioned circulars of the Board regarding the C&F Agents service, it is clear that the C&F Agents services involve movement of the goods from the Principals factory or warehouse as per the Principals directions, in which the warehousing of the goods or issue of invoices on behalf of the Principal are only incidental activities. A Larger Bench of the Tribunal in the case of L&T Ltd. vs CCE, Chennai reported in 2006(3)STR-321 observing that clearing and forwarding has a very specific connotation in the context of movement of goods from the supplier to their destination and agents undertaking clearing and forwarding operations may never have been concerned with procurement of orders for the goods which are cleared and forwarded, has held that mere procuring or booking orders for the principals by an agent on payment of commission basis would not amount to providing C&F Agents service within the meaning of definition of this expression on Section 65(25) of the Finance Act,1994. Applying the ratio of the judgment, it can be said that the activity of mere sale of goods on behalf of the Principal, would not be covered by the definition of C&F Agents service. The C&F Agents are involved in movement/distribution of the goods as per their Principals directions and sale of goods or procuring orders for sale of goods on behalf of their principals is not their main activity, while a Commission Agent, covered by the definition of Business Auxiliary Service is involved in causing sale or purchase of goods on behalf of another person for a consideration.
7. In the present case, the Appellants are neither involved in clearing activity nor in forwarding activity. They only arrange for receipt, storage and sale of the lubricants on behalf of their principals and hence it is erroneous to treat them as clearing and forwarding agents. The judgment of Tribunal in case of CCE, Jaipur vs Chopra Brothers reported in 2005(186)ELT.381(Tri-Del) cited by the Learned DR is a single member bench judgment and prior to the Larger Benchs order in case of L&T Ltd. vs CCE, Chennai(Supra). Tribunal in case of CCE, Allahabad vs Chandan Chemical reported in 2007(7)STR.578(Tri-Del.) has held that the Respondents activity of receipt, storage and sale of goods for which they receive a commission, is not covered by the definition of C&F Agents service.
8. In view of the above discussion, the impugned order upholding the service tax demand against the appellant and imposition of penalty on them by treating their service as C&F Agents service covered by Section 65(105)(j) read with Section 65(25) of the Finance Act,1994 is not sustainable and the same is set aside.
(Rakesh Kumar) Member Technical km