TMI Blog2007 (7) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. Relevant ledger account and commission received by the appellant for the period 1999-2000 to 2003-2004 (up to December, 2004) was scrutinized by the authorities and they issued a show cause notice to the appellant directing them to show cause as to why the service tax amount due from the commission received by the appellant be not demanded and penalty be not imposed and why interest should not be recovered, as receiving the commission is in respect of the services provided by the appellant will fall under the category of C F agent services. (clearing and forwarding agent) within the purview of Clause 25 of Section 65 of Finance Act, 1994. 3. The appellant resisted the show cause notice on the ground that they are not providing any clearing and forwarding agent services and the commission received by them is in respect of the procurement of purchase orders by them for their parties. The adjudicating authority did not accept the contentions of the appellant and confirmed the demand imposed penalty and directed for recovery of interest. On an appeal, Commissioner (Appeals) also concurred with the findings of the adjudicating authority and upheld the order-in-original. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders and pursuing the customers for early payment. 6. Considered the submissions made at length by both sides and perused records. In order to appreciate the rival claims, it is required that the definition of clearing and forwarding agent services has to be read. We may read the same :- Clearing and Forwarding Agent' means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent . 7. In order to get covered under the ambit of clearing and forwarding agent, it has to be shown that the appellant has provided the services in respect of clearing and forwarding agent to their customers. It can be noticed from the records that since the appellant did not have any agreement with 19 parties, their scope of work was limited to merely procuring the orders. This is clearly coming out from the allegations in the show cause notice which read as under '9. And whereas, Shri Virendra Singh, authorized signatory of M/s. Pulp Paper Limited, Muzaffarnagar in his aforesaid statement dated 17- 2-2004 inter alia stated that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Tehri Pulp Paper Ltd. as Commission Agent, as its non-exclusive agent on commission basis on the terms from a provisions and covenants hereunder contained, for the purpose of sale of products on behalf of Rampur Distillery. 3. The appointment does not confer any exclusive right upon the Commission Agent and that Rampur Distillery is at liberty to appoint more agent on commission basis on such conditions as it may decide, or to carry out the work specified herein for and on its own behalf. 4. Commission Agent shall not make any representations about the Products or Rampur Distillery terms of supply including prices to prospective customers save and except as expressly communicated in 'writing to it by Rampur Distillery'. 5. Commission : In consideration of the services rendered by the Commission Agent under this letter, Rampur Distillery shall pay to the Commission Agent a commission of Rs. 1/- (Rupee One only) per B,L. in case of Extra Neutral Alcohol (ENA) Rectified Spirit (RS) or at the rates which will be decided after mutual consent of both the parties, on the sales of the products as against orders given by the Commission Agent from time to time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and effect economies in transportation. (ii) The representative shall ensure that RAMPUR DISTILLERY'S goods reach customer in a good condition and that claims for damages of short supplies are restricted to the minimum possible. (iii) The representative shall co-ordinate with the customers for getting the payments released within such time, as may have been agreed to by RAMPUR DISTILLERY, and also ensuring that the said payments reach RAMPUR DISTILLERY'S designated officer within shortest possible period. RAMPUR DISTILLERY has the right to impose the penalty in case of non-recovery of payments from the customers or delay in getting the payments within the agreed period due to fault of the representative. (iv) The REPRESENTATIVE shall not vary the terms of payments for the supplies made, without the prior consent of RAMPUR DISTILLERY. The payments shall be made in such manner as may specify, in this behalf, RAMPUR DISTILLERY reserves the right to specify different terms and conditions for different customers. 4.1 In consideration of the supervision of transportation for the despatches of Products by the Representative under this Agreement, RAMPUR DISTILLERY sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of HIL. HIL reserves the right to vary the commission from time to time as mutually agreed. Necessary deduction shall be made towards TDS. 4.2 The rate of commission may be different in some special cases and these would be agreed upon by mutual consent for such special cases, but in no, case it may exceed 10% of total invoice amount. 4.3 The commission shall become due for payment and shall depend upon the due realization of all moneys, due to HIL upon the supplies made. In case of delay in the realization of the payments within the prescribed period, suitable deduction shall be made from commission payable towards the interest for the delayed period if it is more than 90 days. 11. It can be noticed from the above re-produced portions of the agreement between the appellant and Rampur Distillery and Holosticks India Ltd. that the appellants were appointed as commission agent for the purpose of procuring the orders and in addition to that supervising the transportation, ensuring the execution of orders and pursuing for payment. It was argued on behalf of the revenue that these additional activities as done by the appellant in respect of Rampur Distilleries and Holo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Trade Notice No. 87/97 10/Service Tax/97 of the Madurai-2 Commissionerate dated 14th July, 1997, in which it was observed that normally there was a contract between the principal and the clearing and for warding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C F agent is entitled. A clearing and forwarding agent normally undertakes the following (a) Receiving the goods from the factories or premises of the principal or his agents; (b) Warehousing these goods; (c) Receiving despatch orders from the principal; (d) 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; (e) Maintaining records of the receipt and despatch of goods and the stock available at the warehouse; (f) Preparing invoices on behalf of the principal. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents undertaking clearing and forwarding operations may never have been concerned with procurement of orders for the goods which are cleared and forwarded. A person entrusted with the work of commission agent for procuring orders for the principal cannot insist 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 orders for the principal in the absence of any stipulation to that effect.' 14. We find that the Larger Bench has categorically laid down the ratio that the services of commission agent are included in the definition of business Auxiliary services w.e.f. 1-7-03 i.e. to say that the services of commission agent were not covered under any other category of services and more so in the clearing and forwarding agent services. The Lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts as clearing and forwarding agent. 15. It can be noticed that the services rendered by Larsen Tubro under the agreement, was more than mere procurement of services but still the Division Bench held that these services could not get attracted under the provisions of clearing and forwarding agent services. We find that the ratio of the decision and the Larger Bench and Division Bench of the Tribunal squarely covers the issue before us. 16. Accordingly, we find that the appellants have made out a case in their favour. In the facts and circumstances, as mentioned above, the impugned order is liable to be set aside and we do so. Impugned order is set aside and appeal allowed with consequential relief, if any. (Pronounced in the open court on_____________) Sd/- Sd/- (T.V. Sairam) (M.V. Ravindran) Member (T) Member (J) 17. The main thrust of argument from the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : ...that the product of these parties were sold through them and for which they were paid commission, that the activities that were undertaken by them in this regard were procurement of orders on behalf of their parties, ensuring execution of orders procured by them, pursuing the customers for making payment of supplies made through them etc. (EMPHASIS SUPPLIED) 20. Further, in respect of the agreement entered into by them with M/s. Rampur Distillery, he had the following to state: they were given the responsibility of supervising the transportation of despatches of products of M/s. Rampur Distillery and the supervision of transportation of products of M/s Rampur Distillery was ensured by them by making necessary arrangements for transportation of their products as and when reguired. (EMPHASIS SUPPLIED) 21. The agreement dated 31-3-2001 between M/s. Rampur Distillery and the appellant indicates the tasks entrusted to the appellant under the agreement: And whereas, Clause-III Representatives Obligation of the agreement dated 31-3-2001 entered into between M/s. Rampur Distillery and M/s. Tehri Pulp and Paper Limited provides that the said M/s. Tehri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under agreement dated 31-3-2001 with M/s. Rampur Distillery by referring to the task, namely, supervising the transportation of despatches including making necessary arrangement for transportation of the products of M/s. Rampur Distillery as arid when required . 24. Further, the agreement dated 31-3-2001 between M/s. Rampur Distillery and the appellant provides the following tasks: (i) Keeping track of and coordinating the despatches once the goods leave M/s. Rampur Distillery and until the time it reaches the customers; (ii) Ensuring that the goods reaches the customers in good condition and the claim for the short supply or damages or restricted to the minimum possible; (iii) Coordination with the customers for getting the payments released in time; (iv) Ensuring that the payments reached M/s. Rampur Distillery designated office in shortest possible time; and (v) Being liable to a penalty in case of non-recovery of payments or de lay in payments due to fault of the appellant. 25. It is relevant here, therefore, to examine, whether the tasks undertaken by the appellant and enumerated in legal documents/statements referred to above would hold them to be so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk which has to be viewed in the context of an over-all impact which result in 'Clearing and Forwarding Operations' rather than isolating them to decide whether each of the activities would amount to 'Clearing Forwarding Operations'. An extract of the said paragraph reads: '31 We are, therefore, of the view that even if one segment of activities is not demonstrated to be performed, it cannot be held that the appellants were not engaged in taxable service. Due to their orchestrated nature of work, such isolated activity can also be covered under C F Operations . Merely, because the bassoon was not played in one of the movements of a symphony, it does not cease to be otherwise a part of the orchestra.' 27. The tasks enumerated in the agreements/MOU/statement available on the record, in my view, are to be perceived through the momentum involved in their performance which could result in clearing and forwarding operations. It appears from the agreement that the appellant has not been merely procuring the orders for the customers as contended before us, but engaged in a host of activities in \ addition to apart from procuring orders which lend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant also relied upon the Trade Notice No. 87/97- 10/Service Tax/97 where it has been observed that normaly there was a contract between the Principal and Clearing and forwarding agent in respect of the terms and conditions and which also indicate the commission to which the C F agent is entitled. A clearing and forwarding agent normally undertakes the following (a) Receiving the goods from the factories or premises of the principal or his agents; (b) Warehousing these goods; (c) Receiving despatch orders from the principal; (d) Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized trans porters of the principal; (e) Maintaining records of the receipt and despatch of goods and the stock available at the warehouse; (f) Preparing invoices on behalf of the principal. 32. The contention is that the appellants are not warehousing the goods or taking any steps for clearance of the goods from the manufacturer's place. Therefore, they are not undertaking any activity as clearing and forwarding agent. The contention is that during the period in dispute, only with two parties, the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms and conditions of the written agreements, it is clear that the appellants were appointed as commission agent for the purpose of procuring orders. The Revenue had not produced any evidence to show that the appellants had received other consideration except for commission for procurement of orders. In view of the above discussion, I agree with the view taken by Hon'ble Member (Judicial) and the impugned order is liable to be set aside and appeal is allowed with consequential relief, if any. (Order dictated and pronounced in the Open Court) Sd/- (S.S. Kang) Vice-President 37. In view of the majority order, the impugned order is set aside and appeal is allowed with consequential relief if any. Sd/- Sd/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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