Whether assessee obtaining orders for principal before 2005 is C&F agent or Del credere agent

PJ/Case Laws/2010-11/1103

Case: Commissioner of Service Tax, Bangalore v/s N.K Agencies Pvt. Ltd

Citation: 2010 (20) S.T.R 176 (Kar.)

Issue:- Assessee obtaining orders for principal and marketing of goods during 01.10.1999 to 30.09.2004 prior to amendment in definition of BAS in 2005 – whether C&F agent or Del credere agent?

Brief Facts:- Respondents had entered in to an agreement with M/s Reliance Industries Ltd (RIL) on certain terms and conditions. The respondent had obtained orders from the customers and passed them on to RIL and goods were directly dispatched to the customers from the factory of RIL. The respondent had received commission for rendering the above services.

According to Revenue, the services rendered by the respondent fell under the category of Clearing and Forwarding Agent Services and was therefore taxable under the provision of Service Tax. Revenue issued show cause notice to the respondent and also corrigendum contending that service tax was liable in respect of the services rendered by the respondent.

Respondent replied that they were not liable to pay the service tax or interest and penalty. The Adjudicating Authority confirmed the demand of service tax and also imposed penalty.

In appeal, the Commissioner (Appeal) set aside the order of the Adjudicating Authority. Aggrieved by the said order, Revenue went in appeal before the Tribunal. The Tribunal by its order rejected the appeal. Against the order of the Tribunal, present appeal has been preferred before the High Court. Following questions of law have been raised:

1)         Whether under the facts and circumstances of the case, the Tribunal is right in holding that the activity of the respondent cannot be brought within scope of taxable services, viz, “Clearing and Forwarding Agent Services” as defined under Finance Act, 1994?

2)         Whether under the facts and circumstances of the case, the Tribunal is right in allowing the Appeal relying on a judgment made in M/s Raja Rajeshwari International Polymers Pvt. Ltd v/s CCE [2006 (3) STR 561 (Tribunal)], inspite of the fact that it has not reached its finality and pending before this Hon’ble Court in CEA. No. 41/2006?

3)         Whether under the facts and circumstances of the case, the Tribunal is right in holding that the services rendered by the respondent does not fall under the category of Clearing and Forwarding Agents inspite of the fact that Circulars stated otherwise?

Reasoning of Judgment:- Reference was made to the judgments given in Commissioner of Service Tax, Bangalore v/s Sreenidhi Polymers (P) Limited [2010 (18) STR 385 (Kar)] and in CST, Bangalore v/s Raja Rajeshwari International Polymers (P) Limited [2010 (18) STR 390 (Kar)] wherein the question of laws which are identical to the issues raised in the present appeal were answered against the Revenue and in favour of the assessee.

The High Court perused the definitions of “clearing and forwarding agent” and the meaning of ‘Del Credere Agent’ and the amendment brought about in the year 2005, whereby a del credere agent is included in the category of business auxiliary service prior to the said amendment could not have been brought within the scope of the definition of “clearing and forwarding agent” under the Finance Act.

It was held that in the instant case, the respondent who rendered service was not a clearing and forwarding agent for RIL and that he was a del credere agent and he was not liable to pay any service tax. It was held that this was apparent from the terms and conditions of the agreement entered between respondent and RIL.

It was held that as the period in question was from 01.10.1999 to 30.09.2004 which was prior to the amendment of “Business Auxiliary Service” which is w.e.f. 16.06.2005. Therefore, following the judgments relied upon, the question answered in favour of assessee and against the Revenue.

Decision:- Appeal dismissed.

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PJ/Case Laws/2010-11/1103

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