M/S Brindco Sales Ltd vs Cst., Delhi

Arising out of the Order-in-Original No.PKJ/CCE/ADJ/09 dated 30.3.2009 passed by the Commissioner of Central Excise (Adjn.), New Delhi.

For approval and signature:

Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Technical Member

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s Brindco Sales Ltd.  Appellant

Vs.

CST., Delhi . Respondent

Appearance:

Present Shri Arshad Hidayatullah, Senior Advocate with Shri Jitendra Singh, Advocate for the appellants

Present Shri Ranjan Khanna , A.R. for the respondent

Coram: Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Technical Member

Final Order No. 52857/2015

Per R.K. Singh:

Appeal has been filed against Order-in-original dated 30.3.2009 in terms of which service tax demand of Rs.77,73,213.00 along with interest and penalty was confirmed. It also confirmed the demand of Rs.2,07,579.00 (which was the amount of Cenvat Credit wrongly taken) along with interest.

2. The facts of the case are as under:

The appellant was engaged in sale and retail redistribution of IMFL/beer/other drinks for its clients which were various liquor companies apart from undertaking marketing of imported liquor on its own behalf. The appellant was maintaining depot/warehouse on behalf of its clients. The primary adjudicating authority after scrutiny of the agreements which the appellant had entered into with its clients held that the appellant was providing Business Auxiliary Services and was not eligible for the benefit of Notification No.13/2003-ST , dated 20.6.2003 and accordingly confirmed the impugned service tax demand along with interest and penalty. As regards the demand pertaining to inadmissible Cenvat Credit the appellant is not contesting the same and has already reversed the principal amount (Rs.2,07,579.00).

3. Appellant has contended that it is evident form the various agreement that it was a commission agent within the meaning of Notification NO.13/2003-ST and it is an admitted fact that it was providing Business Auxiliary Services to its clients and therefore it was clearly eligible for the benefit of the said Notification.

4. The ld. DR contended that (i) appellant was much more than a mere commission agent (ii) its main/primary function was not that of a commission agent and therefore it was not eligible for the benefit of Notification No. 13/2003-ST.

5. We have considered the contention of both sides. We also perused a representative agreement that the appellant entered into with Konkan Agro Marine Industries (P) Ltd., Delhi in terms of which the appellant agreed to perform the under-mentioned functions:

(a) To procure all orders independently and arrange for completion of necessary excise formalities /payment of excise duties prior to dispatch frm KAM distillery, where necessary.

(b) To make all arrangements for distributing the products in the Territory as instructed by KAM.

(c) To raise the invoices on behalf of KAM for all sales effected.

(d) To collect payment from customers on due dates of invoices.

(e) To obtain Delhi Excise Licence on behalf of KAM as may be required and to renew the same from time to time for operating a depot in the Territory for stocking, trading and distribution of its products.

(f) To register KAM under the local Sales Tax Act (LST) and also under the Central Sales Tax Act (CST).

(g) To ensure compliance by KAM with various regulations of Local and Central Sales Tax Acts and Rules, COMMISSION AGENT agrees to maintain statutory records at the depot and also to attend to various functions/matters as mentioned in Annexure A.

(h) To adhere to the general procedure of operation as described by KAM in Annexure B.

(i) To maintain statutory and proper books of account and records, and to submit appropriate reports/returns as required under any local laws or regulations in force and which KAM is required to comply with. Besides, COMMISSION AGENT shall on a periodic basis submit reports and reconciliation.

COMMISSION AGENT undertakes to employ enough manpower at its own cost to ensure smooth functioning of the stocking and distribution of the products. KAM shall however be free to engage additional manpower that may be required with a cost to be borne by KAM.

9. COMMISSION AGENT undertakes to invest/fund amount (required to be deposited for issue of Transport Passes to Trade/Institutions) at any point of time. Further COMMISSION AGENT undertakes to provide more funds (if mutually agreed) considering the growth in the volume or change in excise levies.

10. COMMISSION AGENT shall obtain such permissions, licenses and /or registrations and comply with such regulations as may be required from the Government/Local Bodies or any other Authority.

11. COMMISSION AGENT shall forthwith forward to KAM all documents, papers, orders, notices, etc. addressed to KAM and received by the COMMISSION AGENT for necessary action.

12. COMMISSION AGENT shall bear and pay all rents, electricity , water and other charges and outgoing including local and municipal taxes and levies in respect of the Depot.

Paragraph (c) of the Agreement reads as under:

c) In consideration of the above functions, to be carried by COMMISSION AGENT on behalf of KAM and in attending to the day to day administration of the Depot storage facilities and effecting sales/collections on KAMs account, KAM agrees to pay COMMISSION AGENT the brand wise fixed commission of Rs.125/- per case on Smirnoff Vodka, Smirnoff Twist, Archers, Brakc & White and Vat 69 only and Rs.35/- per case on Gilbeys Gln on total monthly sales, brand wise of each of the product (subject to condition of tax at source, if applicable under the Indian Income Act) on all sales effected from the Depot under this Agreement. The brandwise commission fixed above ,can however be varies after mutual discussion agreements for any/all the brands and such changes will be formalized in writing.

As the essential issue involved in this case is whether the appellant was entitled for the benefit of Notification No.13/2003-ST it is convenient to reproduce the said Notification here:

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the business auxiliary services provided by a commission agent from the service tax leviable thereon under sub-section (2) of section 66 of the said Act.

Explanation.- For the purposes of this notification, commission agent means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase.

2.?This notification shall come into force on the 1st day of July, 2003.

[Notification No. 13/2003-S.T., dated 20-6-2003]

It is evident from the Explanation contained in the said Notification that the Commission Agent means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase.

It is evident from the provisions of the agreement quoted above that the appellant was causing sale or purchase of goods on behalf of its clients (liquor company). It is also evident that the consideration received by the appellant was based on the quantum of the goods sold. Therefore it satisfied the requirements of being categorised as commission agent as per the definition given in the said Notification. Though, admittedly, the appellant was rendering several other services also (all of which have been held to be covered under BAS by the adjudicating authority) that would not debar it from being called commission agent as the said Notification neither expressly nor impliedly states that a commission agent should not render any service which is not within the purview of a commission agent.

6. The notification exempts business auxiliary services provided by a commission agent. In other words, so long as the appellant provided business auxiliary services (even if such services did not strictly fall within the purview of the role of a commission agents) it was eligible for the benefit of the said notification.

7. We find that primary adjudicating authority has denied the benefit of Notification No.13/2003-ST to the appellant essentially by noting as under:

21.2  However, if a service provider is primarily engaged in business promotion and sale is just a consequence of the various activities undertaken by him, it could not be considered that he is a commission agent primarily causing sale. The definition of commission agent in this notification would not cover a person who is primarily engaged in business promotion and not confined to sale of the goods.

21.3 However, in the present case, the various activities undertaken by M/s BSL are beyond the scope of function of commission agent. They are providing promotional activities , infrastructural support , promotional event management. . Further since BSL was acting as Del Crederer for its clients, it stood as guarantor about the solvency of purchaser. These activities are taxable under Business Auxiliary Services It is not a case that M/s BSL were just supplementing the efforts of the clients for business promotion rather they were mainly responsible for undertaking the aforesaid promotional activities. These activities are beyond the scope of the function of commission agent as defined in the notification.

21.4 .Thus, the eligibility to the Notification is to be determined strictly in terms of the definition of commission agent provided in the Notification itself. This definition cannot be made wider by including activities which are not provided in the definition.

21.5 Thus, I hold that M/s BSL were providing services taxable under the category Business Auxiliary Services but they were not eligible for the benefit of Notification No.13/2003 dated 20.6.2003.

The aforesaid observations/ inferences of the primary adjudicating authority are fallacious/ untenable because

(i) The definition of commission agent in Notification No. 13/2003-ST nowhere stipulates that a commission agent should primarily cause sale.

(ii) There is nothing in the said Notification to imply that a commission agent to be eligible for the benefit of the said notification should not render business auxiliary services which are beyond the scope of function of commission agent.

(iii) The adjudicating authority has in effect conceded that the appellant has provided certain business auxiliary services which are clearly within the ambit of the role of a commission agent. The notification exempts business auxiliary services provided by a commission agent (and not merely those business auxiliary services which are provided as a commission agent).

8. In the wake of the analysis above, as the appellant qualified to be called a commission agent and admittedly rendered business auxiliary services, it was squarely eligible for the benefit of Notification No. 13/2003-ST even if one resorts to (the so-called) strict interpretation of the said Notification. In our view the wording of Notification No. 13/2003-ST does not suffer from any ambiguity and readily lends itself to plain and straight forward interpretation rendering recourse to interpretational discourse unnecessary.

9. While CESTAT judgments in the cases of CST, Ahmedabad vs. Somani Exports  2009 (13) STR 562 (Tri. Ahmd.) and CCE, Allahabad vs. Chandan Chemicals  2007 (7) STR 578 (Tri. Del.) are supportive of the above analysis, the analysis itself is so internally consistent, logical and rational as to require no such support for sustenance.

10. In the light of the foregoing we set aside the impugned demand of Rs.77,73,213/- and the interest and penalty relating thereto and allow the appeal to that extent.

(Justice G. Raghuram)

President

(R.K. Singh)

Technical Member

scd/

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