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Commissioner of Central Excise Versus M/s Tehri Pulp & Paper Ltd.

2017 (12) TMI 286 - ALLAHABAD HIGH COURT

Clearing and forwarding agency services - certain contracts entered into by the assessee, amongst others with Rampur Distillery and Holosticks India Pvt. Ltd. being in the nature of commission agency contracts also involving, in some parts, supervision of transportation of goods in certain circumstances - Whether the agreement entered into by the party for providing host of services viz. Supervision of transportation, Arranging transportation, Commission on Sale & Follow-up of Payment, would not .....

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o conclude that the assessee was engaged in 'clearing and forwarding' service are such activities as are not involved either with clearing of goods or with forwarding of any goods to any destination or person. Rather, those activities are only ancillary or supplementary to the activity of commission agency as they only seek to ensure prompt placement of orders; prompt supply of goods and prompt payment against such supplies etc. These are all arising from contract of commission agency. In any ca .....

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M.P. Devnath, Sri Vivek Sharma and Nishant Mishra, learned counsel for the respondent. This appeal under Section 35 G of the Central Excise Act, 1994 has been filed by the revenue against the order of the Customs, Excise & Service Tax Appellate Tribunal dated 06.07.2007 raising the following question of law:- "Whether the agreement entered into by the party for providing host of services viz. Supervision of transportation, Arranging transportation, Commission on Sale & Follow-up of .....

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s also involving, in some parts, supervision of transportation of goods in certain circumstances. The terms of contracts as extracted by the Tribunal in the impugned order are quoted herein below:- "8. As regards, the services provided to the two customers, we find that in respect of Rampur Distilleries, the appellants have been appointed as commission agent from 01.09.1999 by an appointment letter and the same arrangement was continued by another letter dated 10.07.2000. The relevant claus .....

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s 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 prospect .....

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orders given by the Commission Agent from time to time." 9. We find from records that appellant entered into an agreement with the said Rampur Distillery on 31st March, 2001 for providing essential and related supervision of transport services to M/s Rampur Distillery. The relevant portion that for arise for consideration are as follows:- "1.2 "Supervision of transportation for the dispatches of Products" means the supervision of transportation for the dispatches of Contessa .....

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hereunder contained, for the purpose of co-ordinating and providing supervision of transportation for dispatches of Products to its buyers and for providing such other essential and incidental supervision as are specified herein below or as may be specified from time to time by RAMPUR DISTILLERY. 3.1 The Representative shall determine that the transport is transporting the goods from RAMPUR DISTILLERY's factory at Rampur or such other place of dispatch as RAMPUR DISTILLERY may intimate from .....

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rejudicially affect the reputation or credit of RAMPUR DISTILLERY, or which may infringe upon any law or rule framed there under, or any local order passed by any duty constituted Authority in this behalf. 3.5 The Representative. i) Shall co-ordinate the dispatches from RAMPUR DISTILLERY's factory in such a manner that the dispatches in one region are dispatched at the same time in order to enable RAMPUR DISTILLERY to consolidate its dispatches and effect economies in transportation. ii) The .....

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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 period 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 consideratio .....

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payment and shall depend upon the due realization of all goods, due to RAMPUR DISTILLERY upon the supplies made. 4.3 The present rate of such charges shall be Rs. Ten only (₹ 10/-only) per case on dispatch of Contessa Rum." 10. As regards, the agreement entered with on of the other parties i.e. M/s Holosticks India Ltd, we find the terms of agreement between both the parties are as under: "2.1 HIL hereby appoints the Commission Agent, as its non exclusive agent on Commission basi .....

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it of HIL, or which may infringe upon any law or rule framed behalf. 3.3 The Commission Agent shall not vary the terms of payments for the supplies made, without the prior consent of HIL. The payments shall be made in such manner as may be specified by HIL from time to time whether by means as HIL, may specify in this behalf. HIL reserves the right to specify different terms and conditions for different customers. 3.4 It is understood that the schedules given by the Commission Agent on behalf of .....

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erves 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 .....

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r-in-original (adjudication order). The order of the Commissioner (Appeals) was challenged by the assessee in appeal before the Tribunal. A difference of opinion had arisen between two members of the Tribunal. The Judicial Member of the Tribunal who had first heard the appeal, allowed the appeal of the assessee relying on a trade circular issued by the Central Board of Excise & Customs as also a larger bench decision of the Tribunal in the case of Larsen & Toubro Ltd. Vs. Commissioner of .....

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of the assessee came to be allowed. Learned counsel for the revenue submits, services provided by the petitioner were a bundle of services which amongst others included service of commission agency to procure orders. He further submits, other than that as has been noted by the Tribunal, the assessee was engaged in providing supervision of transportation as also supervising supplies to be made by the Rampur Distellery and Holosticks India Pvt. Ltd. He therefore submits that the said activities t .....

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SC) wherein the Supreme Court has specifically dealt with the issue in the following terms:- "9. Significantly, the Revenue accepted the aforesaid decision in the case of Larsen & Toubro (supra) and did not file any appeal there against. Even otherwise, we find that the 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 Be .....

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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 rendered by the appellant would qualify it as C & F Agent? 10. It would be relevant to point out the definition of 'forwarding agent', as known in legal parlance, from Black's Law Dictionary (Seventh Edition), which is as under:- "forwarding agent. 1. A person or .....

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owns the transport necessary for this work and often arranges FREIGHT and Customs formalities for his principal." In Fourth Edition of Halsbury's Law of England (Volume 5), the characteristics of 'forwarding agents' are narrated in the following manner: "442. Characteristics of forwarding agents:- A forwarding agent is one who carries on the business of arranging for the carriage of goods for other people. It must be clearly understood that a forwarding agent is not, in gen .....

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en 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 fact to be decided according to the circumstances of each case whether a person, normally carrying on business as a forwarding agent contracts solely as agent so as to establish a direct contractual link between his customer and a carrier (or po .....

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ently act as carries 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 would have the rights and duties of carriers with respect to such carriage as they undertake personally, but the rights and duties of forwarding agents with respect to the remainder of the transit. 443. Rights and liabilities of forwarding agents:- .....

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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 reasonably and properly expects to perform their normal obligations competently. In ordinary transactions a forwarding agent is not liable for failing to insure the goods, in the absence of instructions from his customer to do so: but he may, in certa .....

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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 implied warranty that the goods are fit for carriage." 11. From the reading of the definition contained in the aforesaid provision, together with its dictionary meanings contained in Legal and Commercial dictionaries, it becomes apparent that .....

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stitute 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 on the directions of the principal. In the context of these appeals, it would essentially include getting the coal cleared as an agent on behalf of the principal from the supplier of the coal (which would mean collieries in the presen .....

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preparing invoices on behalf of the principal. The Larger Bench rightly enumerated these activities which the C & F Agent is supposed to perform." (emphasis supplied) Relying on the above reasoning of the Supreme Court, he therefore submits, the decision of the larger bench of the Tribunal in the case of Larsen & Toubro Ltd. Vs. Commissioner of Central Excise reported in 2006 (3) STR 321 and also Trade Circular relied upon by the Judicial Member in the order impugned in this appeal .....

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ions of the principal by engaging transport on his own or through transporters of the principal agency, maintaining records of the receipt and dispatch of the goods and stock available at the warehouse and prepared invoices. According to him, the observation made in this regard made by the larger bench of the Tribunal in the case of Larsen & Toubro Ltd. (supra) was specifically approved by the Supreme Court inasmuch as it was observed that the larger bench rightly enumerated activities that .....

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reafter as to facts, it has been held that in the instant case, the assessee was engaged merely in procurement of purchase orders for it's principal on commission basis which service became taxable only upon an amendment made to the Act and by introduction of new service being 'business auxiliary service', under Section 65(19) of the Act w.e.f. 01.09.2009. The Judicial Member further found that the assessee had not rendered any service in respect of receiving goods or warehousing tho .....

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s not the 'clearing and forwarding' service. Upon difference of opinion, the Third Member further held that the revenue did not lead any evidence to show that the appellant had received other consideration except for commission for procurement of orders. The Technical Member who had differed from the Judicial Member amongst others, has reasoned as below:- "23. From the agreements and from the statements of Shri Virendra Singh, it emerges that the appellant has performed/has bound th .....

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.2004); and (v) In respect of the commission received from the various other parties, with whom no agreements were made, the authorized signatory in his statement dated 17.02.2004 has admitted the following tasks: (a) procurement of orders, (b) ensuring execution, (c) pursuing the customers for making payment of supplies made (vi) The authorized signatory in his statement dated 17.02.2004 has also described the responsibility under agreement dated 31.03.2001 with M/s Rampur Distillery by referri .....

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