By TIOL News Service

NEW DELHI, SEPTEMBER 30, 2014: THE appellant had entered into an agreement with M/s. Narmada Chematur Petrochemicals Ltd. and in terms of which they were appointed as a consignment agent. The principal is required to supply their product duly packed in drums on regular basis to the appellants and the appellant is required to sell the same in smaller lots to the customers at the prices fixed by the principal and the report of such sale is required to be given by the appellant to their principal from time to time. The invoices are to be issued by the appellant in the name of principal including their name as consignment agent.

A Service Tax demand of Rs.78,068/- stands confirmed along with imposition of penalties on the ground that the appellant had allegedly provided ‘Clearing and Forwarding' services to their principal .

The appellant is before the CESTAT and submits that merely being a consignment agent does not bring him in the definition of C & F agent unless such consignment agent is doing the job of clearance and forwarding operations. Inasmuch as no clearing and forwarding operations are being done by the appellant and they are free to sell the goods to any other customers by raising an invoice.

The AR submitted that since the definition of clearing and forwarding agent included consignment agent and as the appellant is admittedly the consignment agent, they would get covered under the definition.

The Bench noted that the issue has been the subject matter of various decisions as below -

+ MedproPharma Pvt. Ltd. 2006-TIOL-848-CESTAT-DEL-LB held against the assessee but the said decision stands over-ruled by the Punjab and Haryana High Court in the case of CCE, Panchkula vs. Kulcip Medicines (P) Ltd. 2009-TIOL-202-HC-P&H-ST .

+ Videocon TV Manufacturer (P) Ltd. vs. CCE NOIDA 2013-TIOL-1031-CESTAT-DEL - By referring to Larger Bench decision in Larsen & Toubro Ltd. vs. CCE, Chennai 2006-TIOL-814-CESTAT-DEL-LB held that inasmuch as the assessee is working on commission basis and is not engaged in the activity of receiving goods from the factory or premises of principal, warehousing these goods, receiving despatch orders, arranging despatch of goods as per the direction of the principal, maintaining records of the receipt and despatch of goods & preparing invoices on behalf of the principal cannot be held to be clearing and forwarding agent.

The CESTAT thereafter observed -

+ The main activity of clearing and forwarding agent is that he receives the despatch orders from the principal and arranges clearance of the goods in terms of the directions of the principal. He is not free to sell or purchase the goods by his own choice.

+ As already observed, the appellant is free to sell the goods to his customers in small lots. Such permission given to the assessee in the present case is indicative of the fact that he is not working as clearing and forwarding agent of the principal.

Holding that no service tax liability would arise against the appellant, the order was set aside and the appeal was allowed with consequential relief.

(See 2014-TIOL-1900-CESTAT-DEL)