) Sri Sabarey Enterprises vs Commissioner Of Central Excise

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI

Appeal Nos.ST/54 to 56/2005

[Arising out of Order-in-Appeal No.15/2005-ST dt.13.5.2005, OIA No.14/2005-ST dt.13.5.2005 and OIA No.13/2005-ST dt.13.5.2005 passed by the Commissioner of Central Excise (Appeals), Coimbatore]

1) Sri Sabarey Enterprises 2) Sri Vasavi Jeans 3) LNGS Pvt. Ltd. Appellant

Versus

Commissioner of Central Excise, Coimbatore Respondent

Appearance:

Shri G. Natarajan, Advocate For the Appellant

Shri K.P.Muralidharan, AC (AR) For the Respondent

CORAM :

Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member

Date of Hearing/Decision : 22.6.2015

FINAL ORDER No.40718-40720/2015

Per R. Periasami

Appeal No.E/54/2005 and No.E/55/2005 are arising out of common OIA No.14 & 15/2005 dt.13.5.2005 and Appeal No.E/56/2005 is arising out of OIA No.13/05 dt. 13.5.2005 all are passed by Commissioner (Appeals), Coimbatore. As the issue involved is common in all three appeals, they are taken up together for disposal.

2. The short issue relates to demand of service tax on the commission received by the appellants under Clearing & Forwarding Agency Service for the period September 1999 to March 2004. The adjudicating authority confirmed the demand and also equal penalty of under Sections 78 & 76 and also under 75A and 77 of the Finance Act. The LAA upheld the demand and penalty except setting aside Section 78 penalty. Hence the present appeals.

3. Heard both sides. Ld. Advocate submits that appellants have rendered the service as commission agents as per Explanation (a) of Section 65 (25) of the Act. He relied on Board's circular No.59/8/2003 dt. 20.6.2003. He particularly refers to para 2.1.2 of the circular. He has also enclosed relevant agreements in the appeal memorandum for each appeal. He refers to relevant clauses of the agreement related to sale and marketing by the appellant. The principal function of the appellants is marketing and sale for the principal manufacturer. He further submits that Explanation to definition of "Commission Agents" includes any person who acts on behalf of another person and causes sale or purchase of goods and includes handling of delivery of goods and other activities. He submits that so long as the main activity is only for sale and marketing of goods it is rightly classifiable under commission agent Service covered under BAS. He further submits that the role of C&F agents is only to receive and despatch the goods as per the advice of the principal manufacturer and C&F agents do not render any sale and marketing of goods. He relied on the following case laws :-

(i) NRC Ltd. Vs CCE Thane 2007 (5) STR 308 (Tri.-Mumbai)

(ii) CCE & ST Bangalore Vs Transasia Sales Syndicate 2007 (8) STR 467 (Tri.-Bang.)

(iii) CCE Delhi Vs D.R. Polymers 2013 (29) STR 536 (Tri.-Del.)

4. On the other hand, Ld. A.R reiterates the finding of OIA and submits that service tax has been rightly demanded under Clearing & Forwarding Agent as appellants has handled the goods and they have not acted as commission agent. He relied on page-57 of the paper book.

5. After hearing both sides, the short in this case relates to service tax demand is classifiable under Business Auxiliary Service on commission agent or clearing and forwarding agent service. We have perused the relevant agreements entered into by the appellant with their principal manufacturer. In the case of agreement dt. 23.4.2003 entered into by M/s.Sabarey Enterprises, we find that clause 7, 19 clearly stipulates that appellants to market and sale of the goods as per the value fixed by the principal manufacturer. As per clause (8) of the agreement, the appellants are entitled to a commission of 5% on the remittance amount. It is evident from the definition of "commission agent" provided under Section 65 (19) of the Act, "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. In the present case, appellant's principal activity is sale and marketing of goods on behalf of the principal manufacturer and also for carrying out storage and distribution. The lower authorities have held that the levy would fall under C&F Agent service because the appellants are handling the goods in addition to sale and marketing. In view of definition and Explanation to Section 65 (19), it is clear that appellant's principle activity is sale and marketing of the goods for their principal manufacturer, eventhough they may handle the goods for storage and distribution and forwarding of goods. The Tribunal in an identical issue in the case of CCE Vs Transasia Sales Syndicate (supra) held that service rendered by the assessee do not fall under Clearing & Forwarding service but as "Commission Agents". The relevant para-5 of the Tribunal's order is reproduced as under :-

"5.?We have gone through the records of the case carefully. Revenue has relied on the decision in the case of Prabhat Zarda Factory. However, the Larger Bench, in the case of Larsen & Toubro Ltd. v. CCE, Chennai - 2006 (3) S.T.R. 321 (Tri.-L.B.), has overruled the decision in the case of Prabhat Zarda Factory. Therefore, Revenues reliance on the above mentioned decision is not of much consequence for their case. In our view, the Mahavir Generics Order has clearly brought out the distinction between Clearing & Forwarding Agents and Consignment Agents. A Clearing & Forwarding Agent normally arranges the despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized transporters of the principal. In other words, he does not have the right to sell the goods. This is the subtle distinction between C & F Agent and the Consignment Agent. In the present case, the Consignment Agent sells the goods and gets a commission. In the Larson & Toubro case, in para 9.2, the functions of the Clearing & Forwarding Agent are furnished. It has been held that a Commission Agent engaged to procure orders and not entrusted with the work of clearing and forwarding of the goods would not be covered under C & F Agents. In the Chandan Chemicals case, the contention of the Revenue that a Commission Agent does not physically deal with goods and upon dealing with goods, he becomes a clearing and forwarding agent has not been accepted in the light of the statutory definition of Business Auxiliary Services. In the light of the above decisions, we hold that the decision of the Commissioner (Appeals) is correct. Revenues appeal has no merits and the same is rejected."

Against the above Tribunal order, Revenue filed appeal and the Hon'ble Supreme Court dismissed the Commissioner (Appeals) order.

6. In the present case, the appellant's principle activity is not related to clearing & forwarding of goods, as it is clearly evident from the agreement that the appellant was appointed as Commission Agent for marketing and sale of goods. Therefore, the demand under C&F service is not sustainable as held in the above Tribunal's decision in CCE Vs Transasia Sales Syndicate (supra) which has been upheld by Hon'ble Supreme Court as reported in 2014 (33) STR J126 (SC).

7. By respectfully following the Hon'ble Supreme Court order and the Tribunal's decision (supra) the service tax demand confirmed under C&F service is not sustainable. Accordingly, the impugned orders are set aside and appeals are allowed.

(Dictated and pronounced in open court)

(P.K. CHOUDHARY) (R. PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER

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