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M/s. Coal Handlers Private Limited Versus Commissioner of Central Excise, Range Kolkata I

2015 (5) TMI 249 - SUPREME COURT

Classification of service - Clearing and forwarding agent service - whether the services were liable to service tax under the provisions of the Act - held that:- Larger Bench of the Tribunal in the said case has rightly interpreted the definition of 'clearing and forwarding agent' contained in Section 65(25) of the Act. Notwithstanding the aforesaid dicta of the larger Bench, learned senior counsel appearing for the Revenue submitted that judgment in Prabhat Zarda (2002 (2) TMI 4 - CEGAT, KOLKAT .....

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warding agent' contained in Section 65(25) of the Act.

In order to qualify as a C&F Agent, such a person is to be found to be engaged in providing any service connected with 'clearing and forwarding operations'. Of course, once it is found that such a person is providing the services which are connected with the clearing and forwarding operations, then whether such services are provided directly or indirectly would be of no significance and such a person would be covered by the defini .....

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is supposed to perform.

There is no role of the appellant in getting the coal cleared from the collieries/ supplier of the coal. Movement of the coal is under the contract of sale between the coal company and Ambuja companies. Even the coal is loaded on to the railway wagons by the coal company. The goods are not under any legal detention from which they need to be freed by the appellant. Not only this, destination of the goods is known to the coal company and the railway rakes are p .....

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en undertake any loading operation. The primary job of the appellant, as per the contract between the appellant and the Ambuja companies, is of supervising and liaisoning with the coal company as well as the Railways to see that the material required by Ambuja companies is loaded as per the schedule. - services rendered by the appellant would not qualify as C&F Agent within the meaning of Section 65(25) of the Act - Decided in favour of assessee. - Civil Appeal No. 7215 of 2004, Civil Appeal No. .....

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mp; Forwarding Agents (for short, 'C&F Agents') and, thus, make them liable to service tax in accordance with the Finance Act, 1994 (hereinafter referred to as the 'Act'), as amended from time to time. Since the issue to be decided in both the appeals is identical and also arises almost in the same factual background, it would serve our purpose if we reproduce the facts from Civil Appeal No. 7215 of 2004. 2) The appellant in this case is providing certain services as Agent. S .....

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ies, Government of India with their requirements. The Ministry of Industries, after enquiry, recommends to the Ministry of Coal the quantity that is required to be supplied to such industries. Thereafter, the Ministry of Coal, as per the norms prescribed, allots the coal to these industries through the Long Term Linkage Committee indicating the coal companies and the location from which coal can be made available to them. While fixing the locations from where the coal is to be supplied to such c .....

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cy agreement, the appellant was required to undertake the following activities on behalf of the Ambuja companies: (i) following up the allotment of coal rakes by the Railways; (ii) expediting and supervising the loading and labeling of rail wagons; (iii) drawing the samples of coal loaded on the wagons; (iv) complying with the formalities relating to payments for freight to the Railways; and (v) dispatching of rail receipts to Ambuja companies. 3) The issue that arose for consideration was as to .....

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5(48)(j) of the Act in relation to service of C&F Agent means 'any service provided to a client, by a clearing and forwarding agent in relation to clearing and forwarding operations in any manner'. 4) It so happened that the appellant had filed an application for registration in Form ST-I under Section 69 of Chapter V of the Act on November 17, 1999 for the service of 'handling agents' (C&F Agent). Certification of Registration was granted on November 18, 1999. Thereafter .....

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ies would be covered by Section 65(25) of the Act and, therefore, exigible to service tax. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner of Central Excise (Appeals), Kolkata, which was also dismissed by the Commissioner on November 05, 2002. This order was challenged by the appellant before the Customs, Excise & Service Tax Appellate Tribunal (for short, 'CESTAT'). 5) The CESTAT has also dismissed the appeal by the impugned order dated May 24, .....

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after Finance Act of 2003 was introduced and the new service, viz. 'Business Auxiliary Service' appearing in Section 65(19) was introduced. The said service is in relation to promotion or marketing of service provided by the client; any customer care service provided on behalf of the client and any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includ .....

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at the issue involved stands decided in the case of Prabhat Zarda Factory (India) Ltd. (Supra). The Tribunal under the said judgment has observed that as per definition of clearing and forwarding agent, he is a person who is engaged for providing any service, either directly or indirectly connected with clearing and forwarding operations in any manner to any other person and includes a commission agent. The use of the expression any and indirectly in the said definition of clearing and forwardin .....

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er their services in all the sections of pre load of the coal rakes i.e. obtaining consent on behalf of their customers, sanctions from the office of Executive Director-Rail Movement, supervising loading of the wagons, sending samples and assuring the proper quality and quantities, complying with the formalities relating to payments for freight. As such, it is quite clear that the appellant is covered by the definition of clearing and forwarding agent, as interpreted by the Tribunal in the above .....

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rovided by the appellant cannot be equated to the above. It is also seen that the expression 'commission agent' has been explained by the Notification dated 20th June, 2003 reported in 155 ELT N-171, vide paragraph 2.1.3 it has been clarified that C&F agents work on commission basis do not fall under the definition of 'Business Auxiliary Service', in as much as they are substantially covered within the definition C & F service. It has, further, been clarified that under S .....

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Insurance services and C & F Services are more specific description and were also subjected to service tax prior to imposition of tax on business auxiliary service, the insurance agents, C & F agents working on commission basis would fall under those respective categories. From this, it follows that a particular service can be taxed only under one head of service. 6) As is clear from the reading of the aforesaid extracted portion of the order, the Tribunal has rested its impugned decisi .....

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a (supra) has been overruled by it. The judgment of the Full Bench is known as Larsen & Toubro Ltd. v. Commissioner of Central Excise, Chennai 2006 (3) STR 321 (Tri.-LB) :: 2006 (110) ECC 634 :: 2006 ECR 634 Tri Delhi. It gets revealed from the decision of the larger Bench that after taking note of the definition of 'clearing and forwarding agent' (which has already been extracted above), the larger Bench observed that the service should be connected with clearing and forwarding oper .....

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ng on the movement of goods. It also mentioned that normally a C&F Agent undertakes the following activities: (i) receiving the goods from the factories or premises of the principal or his agents; (ii) warehousing these goods; (iii) receiving despatch orders from the principal; (iv) arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized transporters of the principal; (v) maintaining records of the receipt and despatch of .....

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llows: 9.3 An agent engaged only for procuring purchase orders for the vendor on commission basis does not engage in any of the above activities, directly or indirectly. Commission agent engaged to procure orders and not entrusted with the work of clearing and forwarding of the goods would be a person who, in the ordinary course of business, makes contracts for sale or purchase of goods for others. The definition of "commission agent" in Section 2(aaa) of the Central Excise Act, 1944, .....

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of goods, or provision or receipt of services, for consideration, and includes any person who, while acting on behalf of another person: deals with goods or services or documents of title to such goods or services; or collects payment of sale price of such goods or services; or guarantees for collection or payment for such goods or services; or undertakes any activities relating to such sale or purchase of such goods or services. This clearly shows that the activity of mere procurement of purcha .....

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he principal, only by virtue of that agency, to carry out clearing and forwarding operations in respect of the goods which are to be supplied pursuant to the orders so procured. 10. It appears to us that the expressions "directly or indirectly" and "in any manner" occurring in the definition of "clearing and forwarding agent" cannot be isolated from the activity of clearing and forwarding operations. A person may undertake to provide service of procurement of orders .....

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ist on also providing services as clearing and forwarding agent in respect of those goods and it would be open for the principal to engage some other person for the purpose of forwarding such goods. In cases where the buyer is under an obligation to take delivery of the goods from the vendor's premises, there would not be even any need on the part of the vendor to engage any forwarding agent, nor can a person engaged for the purpose of clearing and forwarding operations, insist on procuring .....

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2 (145) ELT : 2002 (50) RLT 326 (CEGAT-KOL.). The decision in Prabhat Zarda Factory (Pvt.) Ltd. stands overruled to the extent of the aforesaid ratio laid down thereunder. The reference is answered accordingly. All these appeals will now be placed before the concerned Division Bench for decision on merits in the light of this judgment and in accordance with law. (emphasis added) 9) Significantly, the Revenue accepted the aforesaid decision in the case of Larsen & Toubro (supra) and did not f .....

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said that Prabhat Zarda (supra) 'stands overruled to the extent of the aforesaid ratio laid down thereunder'. His endeavour was to demonstrate that in the present case the Tribunal in the impugned judgment had rightly relied upon Prabhat Zarda (supra) and when the services rendered by the appellant are looked into, it would clearly fall within the definition of 'clearing and forwarding agent' contained in Section 65(25) of the Act. Let us, therefore, examine whether services ren .....

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tage of lower freight rates. The Penguin Business Dictionary defines this expression in the following words: Forwarding agent. A GENERAL AGENT who specializes in moving goods from a factory or port of entry to their proper destination. Such an agent normally owns the transport necessary for this work and often arranges FREIGHT and customs formalities for his principal. In Fourth Edition of Halsbury's Laws of England (Volume 5), the characteristics of 'forwarding agents' are narrated .....

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ners, road hauliers, railway authorities and air carriers, and to make arrangements, so far as they are necessary, for the intermediate steps between the ship and the rail, the customs or anything else. Although there is a clear distinction between a forwarding agent and a carrier, the same person may carry on both activities at once, and contract sometimes as one and sometimes as the other. The fact that a person describes himself as a forwarding agent is not conclusive: and it is a question of .....

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e nature of the carriage, the language used by the parties in describing the role of the person concerned, and any course of dealing between the parties will be relevant factors. Persons properly described as shipping and forwarding agents frequently act as carriers themselves with respect to part of the carriage, for example, by performing collection and delivery services between the customers' premises, their own depots, and warehouses, docks and carriers' depots. In such cases they wo .....

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ces. He is liable for failure to make proper arrangements for the carriage and for ancillary matters which he has undertaken, such as customs clearance. He is not liable for the failings of persons with whom he makes contracts on behalf of his principal, unless he know of those failings and ought to have taken action either to remedy them or at least to inform his principal so that damage might be avoided or mitigated: thus he is under no duty to supervise the actions of carriers whom he reasona .....

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whom he engages to carry the gods on behalf of his principal; but there is a custom of the London freight market that forwarding agents incur personal liability to shipowners for the payment of freight or of dead freight for booked space left unfilled. A forwarding agent who tenders dangerous goods to carriers without warning them of their nature or of the precautions which should be taken in their carriage is personally liable to the carriers for any resulting damage through breach of the impli .....

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ith the clearing and forwarding operations, then whether such services are provided directly or indirectly would be of no significance and such a person would be covered by the definition. Therefore, we have to see as to what would constitute clearing and forwarding operations. As is clear from the plain meaning of the aforesaid expression, it would cover those activities which pertain to clearing of the goods and thereafter forwarding those goods to a particular destination, at the instance and .....

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the goods as per the instructions of the principal by engaging transport on his own or through the transporters of the principal, maintaining records of the receipt and dispatch of the goods and the stock available on the warehouses and preparing invoices on behalf of the principal. The larger Bench rightly enumerated these activities which the C&F Agent is supposed to perform. 12) On the facts of the present case, we find that none of the aforesaid activities are performed by the appellant. .....

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aid destinations. The destination is the factories of the principal itself, namely, Ambuja companies, where the coal is to be delivered by the coal company as per pre-determined/agreed covenants between them. Therefore, there is no occasion for Ambuja companies to instruct the appellant to dispatch/forward the goods to a particular destination which is already fixed as per the contract between the coal company and the Ambuja companies. The appellant does not even undertake any loading operation. .....

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