Supply & Arrangement for transportation of Coal-whether C&F Agent Service or BAS service?

PJ/Case Laws/2012-13/1055

Case: M/s KAVERI COAL SUPPLIERS Vs CCE, KANPUR

Citation: 2011-TIOL-1593-CESTAT-DEL

Issue:- Whether supply and arranging for transportation of coal covered under Clearing & Forwarding Agent Service?

Appellant registered under BAS since 2004 – Whether for prior period i.e. 2000 to 2004, the service can be said to be falling under C&F Agent Service for demanding service tax?

Brief Facts:- Appellants were providing services of coal merchants and are registered under Business Auxiliary Service since 2004. They are engaged in financing to prepare pre-paid R/R and were paying freight in advance on behalf of their customers at Ferozabad and were making payment to principal coal agent on behalf of coal buyers.

Department contended that the said service was classifiable under the category of "Clearing & Forwarding Agent" service. That the service of Clearing & Forwarding Agent was taxable w.e.f. 16.7.1997, and that the appellants had provided such services to their clients during the period 2000-01 to 2003-04 as per balance sheet and the same was liable to service tax under the category of Clearing & Forwarding Agent. On pointing out, the appellants had deposited the service tax under protest.

Therefore, show cause notices were issued proposing the confirmation of demand and appropriation of amount deposited by the appellants and imposition of penalty u/s 75A, 76, 77 & 78 of the Finance Act, 1994. The Show cause notices were adjudicated and demands along with penalty were confirmed against the appellants. Aggrieved from the said orders, the appellants are before the Tribunal.

Appellant’s Contention:- Appellants submits that they are engaged in the activity of making payment of price of coal for various persons and arrange transportation of the same by paying the freight and arranging insurance, & R/R etc. is not covered the services of Clearing & Forwarding Agent as the appellants are receiving commission from their clients, to whom they were providing finance.

It was further, submitted that on similar facts in the case of Hanuman Coal Co. vs. CCE, Kanpur [2011-TIOL-547-CESTAT-DEL this Tribunal has held that Revenue cannot contend that prior to registration under "Business Auxiliary Services", they were providing "Clearing & Forwarding Agent" services and also held that show cause notice is barred by limitation.

Respondent’s Contention:- Revenue submits that the appellants are providing services to their clients by handling coal and arranging transportation on the instruction of their clients. Therefore, the appellants are covered under the category of Clearing & Forwarding Agent and demands are rightly confirmed against them. They also relied upon the following case law.

- Coal Handlers (P) Ltd. vs. CCE, reported in 2005 (190) ELT A175 (SC)
- CCE, Bangalore vs. Mahavir Generic, reported in 2010 (17) STR 225 (Kerala)

Revenue further submitted that as the appeal of Coal Handlers (P) Ltd. is pending before the Apex Court the matter may be adjourned till final disposal of the same by the Apex Court.

Reasoning of Judgment:- The Tribunal noted that appellants are engaged in financing their clients for purchase of coal and also for arranging transportation of coal. The Tribunal perused the definition of Clearing & Forwarding Agent given in the Finance Act. It was held that the case law relied upon by Revenue are not relevant to the facts of this case as in the case of Coal Handlers (P) Ltd. services undertaken are the persons providing service on behalf of client prior to holding of coal i.e. obtaining consent of coal companies to load the coal makes, sanction from railway authorities, supervising) of loading of wagons, sending samples and assuring proper quality and quantity, arranging freight payment etc. which were held to be covered under the definition of Clearing & Forwarding Agent. In the cases before us, the appellants are only financing the purchase of coal. In the case of Mahavir Generics also the facts are different from the facts of the cases in hand. In fact, in that case also the High Court has observed that the appellant had authority to appoint dealers, stockists and agents on behalf of the principal. In that case it was services were not merely that of commission agent. But the Appellant had the responsibility to carry out activity of getting the goods stored by clearing it and then forwarding it to the stockist and dealers, if any, appointed by the Appellant himself as directed by the principal. These are not the facts in these cases. In fact, in these cases the main activity of the appellants is to arrange finance for payment of coal on behalf of their client.

Further, the Tribunal found that in the case of Hanuman Coal Co. this Tribunal on similar set of facts has held that the activity of making payment for price of coal bought by various persons and arranging transportation of the same by paying freight and arranging Railway Receipt etc. is not covered under the category of services rendered by Clearing & Forwarding Agent. Moreover, in that case for the period prior to their registration under the category of "Business Auxiliary Services" the Revenue felt that the services undertaken by them were falling under the Clearing & Forwarding Agent Services for which show cause notices were issued on 12.7.2005 proposing confirmation of demand and imposition of penalty after relying upon the decision of the Larger Bench of this Tribunal in the case of Larsen & Toubro Ltd., reported in 2006 (3) STR 321 (Tri.-LB). In that case the Larger Bench has held that expression "directly or indirectly" and “in any manner” occurring in the definition of "clearing and forwarding agent" cannot be isolated from the activity of clearing and forwarding operations. Thereafter, there are a number of decisions of the Tribunal which hold that such type of services would not be covered by service of Clearing & Forwarding Agent. This Tribunal has, further, observed that the appellants are now registered under "Business Auxiliary services" and in such a situation the Revenue cannot contend that prior to such registration they were providing services of Clearing & Forwarding Agents. The Tribunal set aside the order confirming demands under the category of "Clearing & Forwarding Agent".

The following decisions are relied upon:

- Mercedes Benz India (P) Ltd. vs. UOI, reported in 2010 (252) ELT 168 (Bombay)

- Mahadeolal Kanodia v. The Administrator General of West Bengal, AIR 1960 SC 936 (at p.941)

-Vivilon Textile Industries vs. CCE, Raigarh

- Sant Lal Gupta & ors

Considering the fact, that coordinate Bench of this Tribunal in the case of Hanuman Coal Company has also arrived at a decision and since are also of the view that the decision taken by the coordinate bench of this Tribunal is a correct view. Hence, the request for adjournment of the respondent is rejected.

It was held that the issue has already been settled in favour of the assessee by holding that the activity undertaken by the appellants in these cases is rightly covered under the category of "Clearing & Forwarding Agent". Impugned order set aside.

Decision:- Appeal allowed.

Comment:- Whenever an assessee takes the registration and pays the service tax, then the department plead that they are covered under other service and the tax is payable under that category. We have also faced many litigation on this score. This is being done as the service tax will be payable under other category from prior date.

However, this litigation will come to an end as the all services are taxable except the negative list. The classification disputes of service will not be seen henceforth.

Comments

PJ/Case Laws/2012-13/1055

Post a Comment

Query