Customs, Excise and Gold Tribunal - Ahmedabad
C.C.E. vs Parekh Apparels on 25 October, 2007
Equivalent citations: 2008[9]S.T.R.87, (2007)10VST607(CESTAT-AHD)
ORDER Archana Wadhwa, Member (J)
1. The issue involved in the present appeal of the revenue is as to whether the respondent M/s Parekh Apparels, the 'Wills Life Style Store' can be considered as Clearing and Forwarding Agent so as to be pliable to payment of service tax. Commissioner (Appeals), by accepting the respondent's pleas and after going through the agreement between them and M/s ITC Ltd. has held that they cannot be called as C & F agent. The respondents have raised the following grounds before the Commissioner (Appeals):
(i) They did not warehouse goods for ITC Ltd. nor did it received dispatch orders from ITC Ltd. or indeed dispatch the goods under the direction of ITC Ltd.
(ii) They do not maintain records of receipt and dispatch of the goods and stock available.
(iii) They under Agreement with ITC Ltd. display the ITC Ltd.'s goods in its showroom and sol them by raising its own invoices and did not raise invoices in the name of ITC Ltd.
In view of above, unless a consignment agent renders services relating to clearing and forwarding agency, it would not come within the definition of a clearing and forwarding agent as contemplated under the Act and that in view of the fact that none of the activities rendered by them under the agreement are related to either directly or indirectly to that a clearing and forwarding agency, they cannot be construed to be a consignment agent as provided in Finance Act and cannot be subject to service tax under the Finance Act.
2. The appellate authority has considered the terms of agreement between the appellant and M/s ITC Ltd. and has noticed following the relevant clauses:
(i) Principal will subject to the availability of the goods consign and deliver or cause to be consigned/delivered at its cost to the showroom from time to time.
(ii) The goods so consigned by the principal to the appellants shall not be deemed to be sale by the principal to the appellant but shall only be a transfer of stock from the principal to appellants for the purpose of sale by the appellants on behalf of the principal.
(iii) The appellants shall sell the goods at the retail price (RP) specified by the principals.
(iv) The RP may be amended/modified by the principal in writing from time to time at its sole discretion. The appellants shall properly account every sale.
(v) During the terms of agreement the appellants shall be entitled to a commission of 2% on the basic sale price of the goods.
(vi) The appellants shall carry out activities in the showroom aimed at promoting the sale of the goods when called upon to do so and in a manner prescribed by the principal. The principal will reimburse the costs of such promotional campaign based on copies of the relevant vouchers to be submitted.
(vii) The goods consigned under this agreement by the principal shall vest at all times with the principal until goods are sold by the appellants and until such sale, the goods shall remain in the custody of the appellants and the appellants shall be the custodian of the same.
3. Accordingly, he has observed as under:
The agreement with specific reference to the clauses quoted above would show that the appellants neither receiving dispatch orders from the principal nor arranging dispatch of goods as per the direction of the principal by engaging transport on his own nor preparing invoices on behalf of the principal. In this case, admittedly, the appellants are providing storage facilities to the principal. However, the Board vide Circular No. 37B Order No. 2/1/2002-ST dated 24.4.2002 wherein it has been clarified that merely allowing storage facilities does not amount to services of a 'clearing and forwarding agents'. Thus, activities carried out by the appellants does not fall within the ambit of services of clearing and forwarding agents and as detailed of the activities mentioned in Mumbai Commissioner ate Trade Notice. Unless their services can be treated as one to a client by clearing and forwarding agent in relation to clearing and forwarding operation in any manner the services cannot be taxed.
As such, by relying on the decision of the Tribunal in the case of Mahavir Generics , he has held that products of principal supplied to appellant on consignment basis and sold by the appellant to customers, the activity cannot come within services provided to client by Clearing and Forwarding agent. The said order of the Commissioner (Appeals) is appealed before the Tribunal.
4. The revenue in their grounds of appeal have themselves observed that M/s ITC Ltd. has appointed the respondent as consignment agent for stocking, display, and sale exclusively from the showroom of the consignor branded apparel. It is also admitted in the appeal memo, that the respondent is to sell the goods at the retail price for a commission of 2%. There is no denial to the fact that such sales is under the respondent's invoices and can be to any person. The Larger Bench of the Tribunal in the case of Larsen & Toubro Ltd. v. C.C.E. Chennai 2006 (3) STR 321 (Tri-LB) has held that commission agent is not covered by the definition of clearing and forwarding Agent services. Clearing and forwarding agents forward the goods on behalf of the principal to the customer directed by the principal only and are not free to sell the same to any person. This is not the case here. Merely because the ownership of the apparels does not pass on the respondent does not mean that respondent becomes the Clearing are Forwarding agents. The scope of the said service stands clarified by the Board and various circulars of the Commissionerates. Reference may be made to Mumbai Commissionerate's Trade Notice No. 59/99 dated 4.10.99 which we would like to reproduce below:
Normally there is a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the clearing and forwarding agent is entitled. A clearing and forwarding agent normally undertakes the following activities -
a) Receiving the 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,
f) Preparing invoices on behalf of the principal.
As is clear from the above that C & F agent normally receives the dispatch order from the principal and arranges dispatch of the goods as per the direction of the principal and prepares invoices on behalf of the principal. All these factors are missing in the present case. The respondent is merely a shopkeeper who is selling the goods to M/s ITC Ltd. under his invoice. We do not find any infirmity in the view taken by the Commissioner (Appeals). Accordingly, the appeal filed by the revenue is rejected.
(Pronounced in the open Court on 25.10.2007)