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2019 (6) TMI 629

..... ncipal and Agent and further satisfies the definition of ‘Clearing and Forwarding’ Agent under Section 65 (25) ibid. Consequently, we are of the view that during the period 1997-1999, M/s. IES would be liable for payment of Service Tax on Reverse Charge Basis - In the light of the validating amendments vide Finance Act, 2000, subsequent to the order of the Hon’ble Supreme Court in Laghu Udhog [1999 (7) TMI 1 - SUPREME COURT], Service Tax paid under the category of ‘C & F’ Agent Service, will not be refundable. Demand of Service Tax under the category of ‘Clearing and Forwarding Agent’ service - Time limitation - HELD THAT:- M/s. ICI has acted as C & F Agent of M/s. IES for providing clearing and forwarding agent service. Since the agreement has continued during the dispute period, the classification of the service will continue under the Clearing and Forwarding Agent Service. Hence, M/s. IEL will be liable for payment of Service Tax as a service provider in terms of the agreement and we uphold the demand for Service Tax. Time Limitation - HELD THAT:- The service, “Clearing and Forwarding Agent Service” has been the subje .....

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..... vice Tax on Reverse Charge basis in respect of Goods Transport Operators as well as C & F Agent Service, was the subject matter of a longstanding dispute which came to be decided by the Hon ble Supreme Court in the case of Laghu Udyog Bharati Vs. Union of India reported in 1999 (112) E.L.T. 365 (S.C.). The Hon ble Supreme Court held the relevant provisions of Service Tax Rules providing for payment of Service Tax on Reverse Charge Basis as ultravires. Consequent upon the decision of the Apex Court, M/s. IES applied for refund of Service Tax paid on Reverse Charge basis, totally amounting to ₹ 64,94,422/-. 4. By Finance Act, 2000, the Government brought about amendment through Section 116 and 117 of the Act and made validation of certain action taken under the Service Tax Rules. The net effect of such validating provisions was that any Service Tax already paid under the disputed categories on Reverse Charge Basis would continue to remain with the Government and any Refund Claims for such tax will not be entertainable. Consequent upon the amendments by Finance Act, 2000, the Jurisdictional Assistant Commissioner rejected the refund claim filed by M/s. IES vide his Order-in- .....

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..... red to the impugned order dated 06/10/2009 which was passed in the Denovo Proceedings. He submitted that the remand directions of the Tribunal in its order dated 03/10/2007 was for the Appellate Authority to examine the entire fact with reference to the agreement between the parties and the real nature of the arrangement and come to a conclusion whether ICI Ltd. was a Clearing and Forwarding Agent. He argued that the Ld. Commissioner (Appeals) had passed the impugned order in a mechanical manner without appreciating and discussing the various terms of the agreement and giving reasons for his decision. He further submitted that the second order cannot be considered as speaking order. 9. With reference to appeal No. ST/105/2008 following arguments were advanced:- (i) It was submitted that the Show Cause Notice dated 21/04/2006 had been issued by invoking the extended period of limitation to cover the demand for the period 2000-2001 to 2003-2004. He submitted that the demand for the above period under the category of C & F Agent Service has been made on the basis of the agreement dated 29/08/1996 which was also the subject matter of the earlier dispute which is the subject matter .....

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..... alysis and findings with reference to the various clauses of the agreement which should have been done in compliance with the directions of the Tribunal. Hence, we are left with no option but to examine the various clauses of the agreement for coming to a conclusion about the nature of the service. 13. In terms of the agreement dated 29th August, 1996 the appellant engaged M/s. ICI (India) Ltd. as their Consignment, Distribution and Selling agent. Clause 2.1 of the said Agreement defined the relationship of both parties. Duties of the agent were defined by clause 3 of Agreement. Such agent in terms of clause 3.2 of the agreement was to use its best endeavour to promote and market the products of the appellant. Clause 3.3 required the Agent to promote, market and sell the products of the appellant. According to clause 3.2.1 of the Agreement, the Agent was required to accept orders from the customers for effecting sale of the products. Clause 3.14 required the Agent to bear all distribution costs including customers servicing, credit evaluations, selling, advertising, marketing, transportation, transit losses and delivery cost pertaining to the products. As per para 7.2 of Agreement, .....

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..... of Principal and Agent and further satisfies the definition of Clearing and Forwarding Agent under Section 65 (25) ibid. Consequently, we are of the view that during the period 1997-1999, M/s. IES would be liable for payment of Service Tax on Reverse Charge Basis. In the light of the validating amendments vide Finance Act, 2000, subsequent to the order of the Hon ble Supreme Court in Laghu Udhog (supra), Service Tax paid under the category of C & F Agent Service, will not be refundable. Hence, we find no infirmity in the decision of the First Appellate Authority vide its impugned order dated 06/10/2009, up-holding the rejection of refund claim. We uphold the decision and reject the appeal No. ST/314/2009. 16. Next, we turn to Appeal No. ST/105/2008, the demand has been raised by Show Cause Notice dated 21/04/2006 for payment of Service Tax under the category of Clearing and Forwarding Agent service. The Lower Authority has examined the agreement dated 29/08/1996 (the same agreement which was examined in the other dispute covered appeal ST/314/2009). He has concluded that the activity is covered under the category of clearing and forwarding agent service and hence, liable for p .....

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..... e Tribunal concluded that the appellant in that case was entitled to bonafide belief that the Service Tax was not liable under clearing and forwarding Agent Service, in view of the fact that two divergent views of the CESTAT were prevalent during the relevant period. The observations of the Tribunal are reproduced below:- 7. We take up the appellant s contention on limitation first. The submission of the learned Counsel is that facts noted in the impugned order itself would show that the failure to pay tax, if at all, is the result of a bona fide belief by the appellant that the service in question was not taxable as clearing and forwarding agency service. Reference in this connection is made to para 26 of the Commissioner s order where the Commissioner has noted as under :- I find that two opposite views of the CEGAT/CESTAT are available on the issue of taxability of consignment agents i.e. the cases of Prabhat Zarda Factory and Mahavir Generics. Hon ble Supreme Court in the cases of Liberty Oil Mill Pvt. Ltd. v. CCE [1995 (75) E.L.T. 13 (S.C.)J and Novopan India Ltd v. CCE [1994 (73) E.L.T. 769 (S.C.) = 1994 (6) J.T. 80] have issued guidelines for interpreting the taxing statute. .....

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..... Joint CDR would, however, contend that the Commissioner has considered the facts carefully and he has reached a sound conclusion on the applicability of extended period and that finding is required to be confirmed. 11. We have already noted the observations of the Commissioner that I conflicting views had been taken by the Tribunal on the issue of taxability of consignment agent as clearing and forwarding agent. It is well settled that when different views are prevalent about the applicability of a tax, extended period is not available to the revenue for the purposes of raising demands. The present is such a case. The Tribunal itself had rendered conflicting decisions and the issue was subsequently decided by a Larger Bench [2007 (3) S.T.R. 321 (Tri. - LB)]. In this factual situation, we are of the opinion that the procedural failure on the part of the appellant was the result of bona fide belief that it was not liable to pay the tax and that extended period is not applicable in the facts of the case. 12. In view of what is stated above, the Appeal No. 25/06 of M/s. Bharat Aluminium Co. is allowed on the ground of limitation with consequential relief, if any. 19. The decision of t .....

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