Whether activity of identifying vendors fall under BAS or C&F?

PJ/Case Law /2016-17/3230

Case:-COMMR. OF C. EX., GHAZIABAD VERSUSINTERNATIONAL ELECTRON DEVICES LTD.

Citation:-2016 (41) S.T.R. 479 (Tri. - Del.)

Brief Facts:-The appeal is filed by Revenue challenging the impugned order passed by Commissioner (Appeals) which set aside the levy of Service Tax on ‘Clearing and Forwarding Agents’ services alleged to have been rendered by the appellants. Brief facts are that the respondents entered into an agreement with Lucky Exports, a partnership firm engaged in Merchant exports. As per the agreement, respondents were appointed as agents to assist procuring at best possible price and identifying vendors for medical equipment products. The respondents received commission for these activities. A show cause notice was issued alleging that these services would fall within the definition of ‘Market Research Agency’, Clearing and Forwarding Agency, Company Secretary, Engineering Consultancy Service, Management Consultant, or Scientific, Technical Consultancy. The notice finalized in the Order-in-Original which confirmed service tax demand and penalty classifying the services under the category of “Clearing and Forwarding Agent” Services. In appeal the Commissioner (Appeals) set aside the same observing that the appellants have not performed any activities of C&F agents. Aggrieved the Revenue is before tribunal.

Appellant’s Contention:-The learned DR vehemently argued that the services would fall within the ambit of C & F agents. He drew attention to the agreement and urged that activities of the respondents included procurement of the goods and execution of order which are activities coming under C & F agents service.

Respondent’s Contention:-Against this, the submissions on the side of respondents is that their activities would fall under Business Auxiliary Service which was not taxable during the relevant period. They also contended that from the show cause notice it is not clear under which category exactly they are sought to be taxed, as several categories are mentioned in the show cause notice. That their activities as an agent would not fall under any of these alleged services.

Reasoning Of Judgement:-The tribunal have perused the records and considered the submissions made by both sides. The basic issue is whether during the period 2001-02 the activities for which the respondents received Commission would fall within the category of C & F agents service. On going through the agreement entered between respondents and Lucky Exports it is seen that respondents were appointed as agents exclusively for assisting in procuring the specified products at most attractive prices, by identifying suitable vendors. In consideration of such services, a commission at the rate of 8% of the purchase amount was agreed between them. The description of activities in this agreement clearly falls within the definition of BAS. But BAS services provided by Commission agents were outside the purview of levy of service tax till 8-7-2009. Further, in the cross-objection filed by the respondents it is brought out that the demand is barred by limitation. The show cause notice was issued on 23-3-2007 for the periods 1999-2000 to 2001-2002. The Commissioner (Appeals) has therefore rightly set aside the demand raised in the Order-in-Original. They do not find any material that calls for interference in the impugned order. From the foregoing, the appeal filed by Revenue is dismissed. The cross-objection is also dismissed.

Decision:-Appeal dismissed.

Comment:- The gist of the case is that the assessee engaged in the activity of identifying vendors on behalf of service recipient for procuring goods at attractive prices would clearly falling under Business Auxiliary Service and not under Clearing and Forwarding Agent Service. But, during relevant period, since the BAS were out of purview of Service Tax law, no tax is payable by the assessee. The demand was also time barred.

Prepared By-Neelam Jain

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PJ/Case Law /2016-17/3230

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