By TIOL News Service

MUMBAI, DEC 12, 2013: THE appellants are engaged in providing services to M/s. Ford India Ltd., in Chennai by entering into an agreement with the said Company. The appellants were issued various SCNs covering their activity under the ‘Clearing and Forwarding Agents” services in terms of the Finance Act, 1994. The said show-cause notices were confirmed by original authority as also first appellate authority.

So, the appellant is before the CESTAT and inter alia submits -

+ their activities are not covered under the “Clearing and Forwarding Agents” service but covered under the “Business Support Services” which came into existence from01.05.2006 and they are paying the service tax thereafter under the said classification. Their contention is that the warehouse, where the spare parts of motor vehicles being manufactured by M/s. Ford India Ltd., are kept and their activities being carried out, belongs to M/s. Ford India Ltd., and not to them. In addition, M/s. Ford India Ltd. had provided computers with related software to carry out their day to day operations. Further, they were not arranging the transport for receiving or dispatching the goods and in view of this position, their activities cannot be covered under the definition of “Clearing and Forwarding Agents” Services.

+ the said warehouse is located in Chengalpattu in Chennai, Tamil Nadu and the Commissioner of Central Excise, Pune does not have any jurisdiction in Tamil Nadu. The show-cause notice has been issued by the Pune Commissionerate and is answerable to the Pune Commissionerate authorities. Since Pune Commissionerate has no jurisdiction over Chengalpattu, Tamil Nadu, the show-cause notice as well as the whole adjudication proceedings in the Pune Commissionerate are required to be set aside.

+ the demands have been raised on the basis of bills raised and not on receipt as stipulated under the law and if demand is worked out on recipient basis, the same will be substantially reduced.

The Revenue representative reiterated the findings of the lower authorities and also submitted that the various terms of the agreement would leave no doubt that the appellants were doing the clearing and forwarding agents service; the fact that the warehouse is owned by Ford India Ltd. or that the Ford India Ltd. is providing certain software, computers etc. will not make any difference for Clearing and Forwarding Agents Service. Onthe question of jurisdiction, it was stated that the appellants took registration in 2001 at Pune and no registration was taken at Chengalpattu in Chennai, Tamil Nadu due to centralized billing system and hence the jurisdiction is correctly invoked. As regards invocation of the extended period of limitation, it was informed that although the appellants took registration in December 2001 they did not pay any service tax thereafter or filed any returns and hence suppression of facts is proved.

The Bench extracted portions from the agreement in question and concluded -

"4.3 Examining the various activities undertaken by the appellants with reference to the definition of “clearing and Forwarding Agent” service, we do not have any doubt in our mind that the appellants are providing Clearing and Forwarding Agents service. The appellants were receiving goods from various sources, warehousing the goods, receiving orders and based upon the orders the goods were being packed for outbound transportation. We are, therefore, of the considered view that the activities carried out by the appellants are covered within the definition of “Clearing and Forwarding Agent” service. The fact that the warehouse or the place of activity is owned or provided by M/s. Ford India Ltd. will not make any difference in the nature of service. Similarly, the fact that the transports are arranged by Ford India Ltd. will not make any difference. The service is broadly receiving the goods, warehousing these goods, receiving dispatch orders from Ford India Ltd., arranging dispatch of goods, maintaining records of the incoming shipments and deliveries. We, therefore, hold that the service provided by the appellant is Clearing and Forwarding Agents Services. The appellants have also stated that they are paying tax under Business Support Service from 01.05.2006. This will not make any difference as during the period in dispute "Business Support Service” was not in existence in the list of taxable services and after 01.05.2006 the classification of the activities will have to be made as per Section 65A of the Finance Act, 1994."

On the question of jurisdiction, the Bench noted that although the Parts Distribution Centre was located at Chengalpattu in Tamil Nadu, the appellants having an office in Pune themselves took Registration in 2001 under Clearing and Forwarding Agents Service and by taking a separate registration in 2006 the position for the past period cannot be changed. Holding that the demand notice as well as the proceedings have been held in the correct jurisdiction,the appellant's plea relating to jurisdiction was rejected.

In the matter of limitation, the Bench observed that the demand is from October 1999 onwards and the appellant had taken registration only in December 2001 and although registered did not pay service tax or filed any returns. However, after sometime they started correspondence disputing the leviability of service tax. Holding that this conduct of the appellants was a clear-cut suppression of activities before 2002 and later-on also inasmuch as the act of correspondence, not filing the returns etc. clearly indicated the willful intention to evade service tax and, the CESTAT held that the extended period was correctly invoked and penalties were correctly imposed.

As regards the demands being based upon the bills raised, the Bench observed that since the payments in respect of all the bills were received by the appellant albeit with a delay as admitted by them, the same would not make any difference in the liability except shifting the dates. The aforesaid contention was also rejected.

On the question of extending the benefit of cum-tax, the Bench observed -

"We do not find merit in the contention of the appellants. Since the amount collected is for various components of services, amount collected cannot be considered as including service tax and hence benefit of cum duty cannot be extended in terms of Section 67 (2) of the Finance Act, 1994."

In the result, the appeals were dismissed.

In passing : More… in the days to come!

(See 2013-TIOL-1852-CESTAT-MUM)