Custom, Excise & Service Tax Tribunal
S.N. Sunderson & Co vs Heard The Ld. Counsel For The Appellant ... on 5 December, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing/decision: 05.12.2013 Service Tax Appeal Nos. 822, 823 of 2008 Arising out of Order-in-Appeal No.32-33/ST/DLH/2008 dated 28.8.2008 passed by the Commissioner (Appeals), Central Excise, Delhi I. For Approval and Signature: Honble Mr. Justice G. Raghuram, President Honble Mr. Rakesh Kumar, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of 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? S.N. Sunderson & Co. .. Appellant Shri Provat Kumar Dutta Vs. C.S.T, Delhi .. Revenue Appearance: Present Shri P.K. Ram, Advocate for the appellant Present Ms. Ranjana Jha, A.R. (Jt.CDR) for the Revenue Coram: Honble Mr. Justice G.Raghuram, President Honble Mr. Rakesh Kumar, Technical Member Final Order No. 58495 58496/2013 Per Justice G. Raghuram: Heard the ld. Counsel for the appellant and the ld. A.R. for the respondent/Revenue. The appeals are preferred against a common order-in-appeal dated 28.8.2008 passed by the Commissioner (Appeals), Central Excise, Delhi. The appellate authority rejected appeals preferred by the appellants herein. The appeals were preferred against the order-in-original dated 28.7.2006 passed by the Joint Commissioner of Service Tax, New Delhi. The primary authority confirmed service tax demand of Rs.8,30,371/- (against the appellant company) for having provided Clearing and Forwarding Agent service during 1.9.99 to 30.9.04, besides interest and penalties under Sections 76 and 78 of the Act. Penalty of Rs.5000/- was imposed, on the appellant in the connected appeal.
2. Proceedings were initiated on the ground that the appellant company had provided the taxable Clearing and Forwarding Agency service in respect of ship0ment of coal to various thermal power plants such as the Indraprastha Power Generation Co. Ltd., Haryana Power Generation Corporation Ltd, National Thermal Power Corporation, and to other coal confirming industries like Nepa Paper Mills, Panki Fertilisers Works and others. The range of services provided by the appellant company, inter alia include a follow-up activities on behalf of consumers by way of liaison between Collieries and Railways, monitoring and witnessing of the loading and movement of coal; coordinating receipt of documents; organizing sampling etc. and associated activities.
3. In response to the show cause notice, the appellant company clearly pleaded that it did not handle the physically; that there was no priority of contract between the appellant and the Collieries; or the Railways; that freight charges were paid directly by users of the coal; and that the appellant never received coal consignment on behalf of the user companies nor warehoused the coal supplies, either on behalf of the collieries or the user companies. It was also contended that the appellant company did not procure invoices nor received coal on behalf of user companies nor received dispatch orders from the users.
4. The primary authority, on the basis of a letter No.F-109/1/03-CX.4 dated 10.12.2003 (assuming this to be a Board Circular), held that the appellant company had provided Clearing and Forwarding agency service, a taxable service; and confirmed the demand for service tax, interest and penalties, as adverted to earlier. The adjudicating authority adverted to the several types of services provided and held that the several services provided were isolated services; the several services provided by the appellant are part of a chain of activities facilitating transport of coal from the collieries to premises of the user companies; these services were directly linked with Clearing and Forwarding of the coal by the appellant company; and these activities, in the light of the letter dated 10.12.2003, fall within the fold of Clearing and Forwarding agency service.
5. The meaning and contours of the taxable Clearing and Forwarding Agency service was considered in several decisions of this Tribunal and High Court. The expression Clearing and Forwarding Agency is defined in Section 65 (25) of the Finance Act, 1994 as meaning 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. Section 65(105)(j) enumerates this taxable service as any service provided or to be provided to a client by Clearing and Forwarding Agent in relation to clearing and forwarding operations, in any manner.
6. In Prabhat Zarda Factory (India) Ltd. vs. C.C.E., Patna 2002 (145) ELT 222 (Tri-Kol.), a Division Bench of this Tribunal observed that the definition of Clearing and Forwarding Agent was wide and included any the service even if provided indirectly. In a subsequent decision in Coal Handlers Pvt. Ltd. vs. C.C.E., Kolkata I 2004 (171) ELT 191 (Tri-Kolkata), the appellant therein conceded the position that the services provided by it fall within the scope of cleaning and forwarding agent service, in view of the earlier decision in Prabhat Zarda Factory (India) Ltd. The appellant in Coal Handlers Pvt. Ltd. was engaged in pre-loading coal rakes; obtaining the same on behalf of their customers, supervising loading of the wagons, sending samples and assuring the proper quality and quantities, complying with the formalities relating to payments for freight to the coal transporters. In view of the concession by the appellant that the transactions are covered within Clearing and Forwarding Agent service; in view of the decision of this Tribunal in Prabhat Zarda Factory (India) Ltd., the Tribunal rejected the appeal by Coal Handler Pvt. Ltd.
7. Clearing and Forwarding was introduced as a taxable service with effect from 16.7.97. TRU Circular, dated 11.7.97 issued by the Board clarified that the scope of this service to be introduced comprised certain enumerated functions. These functions, according to this Circular are :
(a) Receiving goods from the factories or premises of the principal or his agents;
(b) Warehousing these goods;
(c ) Receiving dispatch orders from the principal;
(d) Arranging dispatch of goods as per the directions 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; and
(f) Preparing invoices on behalf of the principal.
8. In a subsequent Circular dated 20.4.2012, the Board clarified that normally, a Clearing and Forwarding agent receives goods from the factories or premises of the principal or his agents, stores these goods, dispatches these goods in terms of orders received from the principal or owner, arranges transport, etc. for the purpose and prepares invoices on behalf of the principal. According to Revenue , the essential characteristic for 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 principal (owner) and agent. The C & F carries out all activities in respect of the goods right from their clearances from premises of the principal to its storage and delivery to customers.
9. It also requires to be noticed that the decision in Prabhat Zarda Factory (India) Ltd. was specifically overruled by the Larger Bench (of this Tribunal) in Larsen & Toubro Ltd. vs. C.C.E.,Chennai 2006 (30 STR 321 (Tri-LB). The Larger Bench held that a person engaged in mere procurement of orders on commission basis would not be covered under Clearing and Forwarding Agent but would be covered under Business Auxiliary Service.
10. The Clacutta High Court in Karamchand Thapar & Bros (Coal Sales) Ltd. vs. UOI 2010 (20) STR 3 (Cal.) clarified the position that the activity of supervision of loading of coal falls outside the Clearing and Forwarding Agent service. The decision pointed out that the taxable Clearing and Forwarding Agent service is where the activity includes inter alia receiving goods from the factory or premises of principal or his agents; warehousing these goods; receiving orders from the principal; arranging dispatch of goods as per directions of the principal by engaging transport on his own or through the authorised transporters of the principal; and maintaining records of the receipt and dispatch of goods and the stock available at the warehouse. The Court further held that the expression Clearing and Forwarding Agent is conjunctive and not disjunctive. Only clearing activities provided would not attract service.
11. In Commissioner of Central Excise, Panchkula vs. Kulcip Medicines (P) Ltd. 2009 (14) STR 608 (P & H), the Punjab and Haryana High Court held that to constitute the taxable service of clearing and forwarding agent both services, of clearing and forwarding must be provided. The High Court decision Kulcip Medicines (P) Ltd. and the decisions in Coal Handler Pvt. Ltd. and in Prabhat Zarda Factory (India) Ltd., overruled in Larson & Toubro Ltd., were considered in C.S.T. vs. Shah Coal Pvt. Ltd. 2013 (32) STR 568 (Tri-Mumbai). The Tribunal in Shah Coal Pvt. Ltd., reiterated the scope of Clearing and Forwarding agency service, as explained in the Board Circular dated 11.7.97, to clearly indicate the contours of the taxable service and concluded that the Board Circular dated 11.7.97 being a clarification issued at the time of introduction of service amounts to a contemporaneous administrative construction; and that mere supervision of loading of coal falls outside the fold of clearing and forwarding agency service.
12. In the light of the judgment in Shah Coal Pvt. Ltd. which considered several decisions, of the High Court and of this Tribunal, including Coal Handlers Pvt. Ltd. (on which reliance is placed on behalf of Revenue before us), we are satisfied that the several services provided by the appellant company to Thermal Power Corporations and others coal users for conveyance of coal from collieries to the business premises of the users, clearly falls outside the ambit of Clearing and Forwarding agent service.
13. The letter dated 10.12.2003 appears to have been in response to representations made by three companies. The representationists appeared to have sought advice/clarifications. Para 1 of this letter (addressed by the Under Secretary to the Government of India to the representationists) states that in response to representations received by the Board, as to whether the service of coal merchants would be covered under the category of clearing and forwarding agency for applicability of service tax and in the context of the fact that coal merchants primarily act as agent of buyer and carry out such jobs/assignments as asked for by the respective consumer/buyers, the Board had examined the representations and concluded that the mode of functioning of coal merchants falls within clearing and forwarding agents and is liable to service tax, irrespective of whether the coal merchants are working as agents of buyers or sellers, in terms of definition of clearing and forwarding agents.
14. We are not persuaded that this letter amounts to a Board Circular, in terms of Section 37B of the Central Excise Act, 1944. Section 37B authorizes the Board, where it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise officers as it may deem fit. The letter dated 10.12.2003 is not a letter, instruction, or direction falling within the scope of Section 37B issued to excise/service officers as is apparent from the letter. No other statutory provision has been brought to our notice which authorizes the CBEC to issue advisories to service tax providers, academically interpreting provisions of the fiscal legislation, including of the Act. Be that as it may. In any event, the letter dated 10.12.2003 has not explored the contours of clearing and forwarding agent service either in terms of Section 65(25) or of the taxable service enumerated in Section 65(105)(j). The scope of clearing and forwarding agent service as identified by the contemporaneous executive construction set out in Board Circular dated 11.7.97 nor in the subsequent Board Circular dated 20.4.2012, issued by express invocation of Section 37B of the 1944 Act was not ever adverted to in the letter dated 10.12.2003. We therefore treat the contents of this letter to be random observations, of not amounting to an order or direction issued under Section 37B of the 1944 Act.
15. On the aforesaid analyses, the appellant is entitled to succeed. The appeals are allowed. The adjudication order dated 28.7.06 as confirmed by the order dated 28.8.2008 of the Commissioner (Appeals) is quashed. There shall however be no order as to costs.
(Justice G. Raghuram) President (Rakesh Kumar) Technical Member scd/ 1