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2010 (3) TMI 333 - HC - Service Tax
C & F Agent versus as a Del Credere Agent service rendered by the assessee to the IPCL. is more in the nature of an indemnifier as the assessee as to indemnify to the value of the goods sold by the IPCL to its customers and that the assessee shall ensure the proper repayment of the value of the goods sold by the IPCL to its customers - revenue contended that service rendered by the respondent to the IPCL has to be considered as clearing and forwarding Agent as defined under the Finance Act 1994 Held that - . Combined reading of the definition of C&F agent under the Finance Act under Section 65(25) and the meaning of Del Credere Agent and the amendment brought into in the year 2005 whereunder Del Credere Agent is also included would clearly establishes that prior to the amendment the service rendered by a Del Credere Agent had been excluded from service tax. Therefore we are of the view that since the respondent-assessee was not a C&F Agent for IPCL as it was a Del Credere Agent the respondent-assessee is not liable to pay service tax
Issues: Classification of service as C & F Agent or Del Credere Agent for service tax liability.
Analysis:
1. The appeal challenged the order passed by the Customs, Excise and Service Tax Appellate Tribunal regarding the classification of service provided by the respondent-assessee as either a C & F Agent or a Del Credere Agent for service tax liability.
2. The respondent-assessee contended that they acted as a Del Credere Agent for M/s. IPCL, not a C & F Agent, and therefore should not be liable to pay service tax. The Asst. Commissioner initially ordered the payment of service tax, which was partially upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal where the decision favored the respondent-assessee. The revenue appealed against this decision.
3. The main substantial question of law was whether the service provided should be classified as that of a C & F Agent or a Del Credere Agent, and if categorized as the latter, whether the revenue could levy tax under the Service Tax Act.
4. The appellant argued that the service provided by the respondent should be considered that of a clearing and forwarding agent as defined under the Finance Act, justifying the imposition of service tax.
5. On the contrary, the respondent's counsel argued that the service fell under the category of a Del Credere Agent, emphasizing an amendment to the Finance Act in 2005 that included Del Credere Agents under business auxiliary service, making them liable for service tax.
6. The court examined the definitions of Del Credere Agent and C & F Agent to determine the nature of the service provided. The Del Credere Agent guarantees the solvency of the purchaser and indemnifies the principal in case of default, while the C & F Agent is involved in clearing and forwarding operations.
7. Considering the definitions and the 2005 amendment, which included Del Credere Agents in service tax liability, the court concluded that the respondent was not a C & F Agent but a Del Credere Agent, thus not liable for service tax as ordered by the Asst. Commissioner.
8. The court found that the Tribunal correctly distinguished between C & F Agent and Del Credere Agent based on the agreement between the parties and the nature of service provided, leading to the decision in favor of the respondent-assessee.
9. Consequently, the court ruled in favor of the assessee, dismissing the appeal and holding that they were not liable for service tax based on their classification as a Del Credere Agent.