1. The stay application is directed against service tax demand on the finding that the appellant rendered the service of "clearing and forwarding". The orders themselves are not of much help in understanding the nature of service rendered. Order-in-Original points out that the appellant has not candidly revealed facts about nature of service provided by it. The service mentioned and highlighted in the order is "activities of promoting sales and purchase of goods". The appellant's own contention is that it is a mere Sales Promotion commission agent.
2. The service is rendered by the appellant in terms of a written agreement. The appellant's principal is M/s. Unimers India Limited.
Clause 1 describes the appellant's service as "have to sell" single phase and three phase electricity energy meters manufactured by the principal. Clause 2 states that the appointment is initially for one year "for procuring orders from Maharashtra State Electricity Board, Mumbai". The commission is 7% of the value (ex. works) of order procured and is payable at two stages - 3.5% on "procurement of order" and 3.5% on "confirmation of order".
3. The clause suggestive of some connection with clearing or forwarding (Clause 8) reads as under :- Once the order is received, DISL shall have to carry out all the coordination activities with customer, co-ordination with Air/Transporting/Railways for delivery of goods to customers etc.
DISL shall provide all the assistance required by the customer for the company's electronic energy meters and its proper functioning.
4. The above clause casts some co-ordination responsibility on the appellant with regard to transport. But that responsibility is way short of clearing or forwarding of goods. The taxable service is the service provided "to a client by a clearing and forwarding agent in relation to clearing and forwarding operations". Further, Clearing and Forwarding Agent has been defined as "any person who is engaged in providing any service... connected with clearing and forwarding operations in any manner to any other person". As already noted, no evidence has been brought on record by the Revenue that the appellant is functioning as a clearing and forwarding agent, that the seller or buyer is his 'client' in relation to clearing and forwarding the goods etc. Therefore, evidence is totally lacking to fasten the duty demand.
In my view, total stay is called for.
5. With respect, I am unable to agree with the view expressed by my noble and esteemed brother on the question of pre-deposit for the following reasons :- There is a concurrent finding of the original appellate authority that the service rendered by the appellant was identifiable as that of a clearing and forwarding agent. The agreement dated March 15, 2002, under which the applicant rendered service is on record. Under Clause 2 of that agreement, the appellant was appointed for procuring orders for the products in question. By Clause 3 it was required to operate its agency from its own showroom/office and was required to bear all the expenses for such agency work. Under Clause 4 it was required to bear all the expenses in getting purchase order, and to have a regular follow up with the Board and also bear all expenses.
6. Clause 6 provided for commission payable to the applicant, for providing various sales/services facilities contained in this agreement. The applicant was to be paid commission on the basic/Ex works price at which orders were received from the Electricity Board, as per the terms and conditions specified thereunder. This was the mode agreed upon for working out the commission for various sales and service facilities, which were to be provided by the appellant under the agreement. Clause 8 of the agreement which has a direct bearing on the nature of services required to be rendered by the applicant reads as under :- Once the order is received, DISL shall have to carry out all the coordination activities with customer, co-ordination with Air/Transporting/Railways for delivery of goods to customers etc.
DISL shall provide all the assistance required by the customer for the company's electronic energy meters and its proper functioning.
7. It is evident from Clause 8 that it was the applicant's responsibility after the order was received to co-ordinate all activities with the customers as well as with the Air/Transport/Railways for transport and delivery of goods to the customers. This clause clearly suggests that the services of the applicant included the work of forwarding the goods for delivery to the customers. It is not the case of the applicant that the customers themselves took delivery of the goods from its factory or that the arrangement for transport of the goods to them from the applicant was to be made by them. The agreement clearly required it to be made by the applicant. The goods were to be transported from the factory premises through any mode of transport or carriage indicated in the agreement, to the customer. Therefore, by the very nature of things such a service will be concerned with clearing the goods from the transport agency i.e. Air, Transport or Railways and forwarding the goods to the customers. The arrangements with the Air/Transport/Railways described as co-ordination activities would necessarily include clearing and forwarding operations for delivery of the goods to the customer.
8. As per the definition of the expression "clearing and forwarding agent," under Section 65(23) [now Sub-section (25)], these words mean "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".
9. It is, thus clear from the nature of the agreement that the agency of the applicant was not only for procurement of orders, but it was also for coordinating the activity of transport of goods from the producer to the customer which necessarily involved clearing and forwarding operations. The applicant was required to arrange despatch of goods by engaging transport on his own.
10. It is evident from the record that the applicant did not furnish any details with regard to any service that they rendered. There was documentary evidence, such as balance sheet etc. that led the adjudicating authority to the conclusion that the applicant had earned commission as a middleman for providing services in between the principal and the customer and vice-versa, as observed in Para 6 of the order-in-original. The nature of services rendered by the applicant as clearly reflected in Clause 8 of the agreement itself, would be binding on the applicant, and the obligation to render services of clearing and forwarding agent emanating from a written agreement cannot be set at naught, especially when the obligation under that clause has not been denied by applicant during the proceeding.
11. I am, therefore, of the opinion the applicant has absolutely no prima facie and there is no occasion for waiving the pre-deposit. The application deserves to be rejected.
12. In view of difference of opinion amongst us on the question of pre-deposit, this application will be now placed before the third Member, for deciding: Whether any order of waiver of pre-deposit of the amount of Rs. 33,74,590/- being the service tax and penalty payable under the impugned order, or part thereof, is warranted in this appeal. (C.N.B. Nair) (Justice R.K. Abichandani) Member (T) President 14. In view of the difference of opinion between the Hon'ble President and Hon'ble Member (Technical) on the question of pre-deposit, the matter was referred to the third Member.
15. In this case the demand of Service tax is confirmed on the ground that the applicant is rendering the service of clearing and forwarding agent.
16. The contention of the applicant is that they are only commission agent and they are not rendering any service regarding clearing and forwarding of the goods. The applicant relied upon the terms and conditions of the agreement entered with the manufacturers of electric meters. The applicant also relied upon the Board's Circular No. B.43/7/97-TRU, dated 11-7-1997 whereby the board has clarified that clearing and forwarding agent normally undertakes the following activities: (a) Receiving the goods from the factories or premises of the principal or his agents; (d) Arranging dispatch 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 dispatch of goods and the stock available at the warehouse; The contention of the applicant is that the applicants are not undertaking all the activity mentioned in the above circular, therefore, they cannot be termed a clearing and forwarding agent. The contention of the applicant is also that when there is a difference of opinion between the Hon'ble Members in such a situation the applicants are entitled for waiver of pre-deposit of whole of the demand and penalties.
17. The contention of the Revenue is that as per Section 65 of Finance Act, 2003 the expression clearing and forwarding agent covers any person who is engaged in providing any service, either directly or indirectly connected with clearing and forwarding operations in any manner to any other persons and includes a consigning agent. The contention is that as per the agreement the applicants are marketing Electronic Energy meters and once the order is received, the applicant shall have to carry out the co-ordination activities with customer i.e.
co-ordination with Air/Transport/Railways for delivery of goods to customers etc. The applicants are also to provide all the assistance required by the customer for the company's electronic energy meters and its proper functioning. The Revenue relied upon the decision of the Tribunal in the case of Prabhat Zarda Factory (India) Ltd. v. CCE reported in 2002 (145) E.L.T. 222. The contention of the Revenue is that, in this case the assessee is appointed as agent for the purpose of co-ordination of manufacturers production and for functioning of managing and developing of market and the agent was also, act as attorney. The contention of the Revenue is that the Tribunal further held that even if the service are indirect but the same are clearing and forwarding operation in any manner of the other person, he would be covered by the definition of clearing and forwarding agent.
18. In the present case, the contention of the applicant is that they are not covered under the expression clearing and forwarding agent and are not liable to pay Service tax in respect of the services provided by them. I have gone through the agreement entered between the manufacturer and the application. The relevant provisions of the agreement are as under :- 3.DISL will operate the agency from its showroom/office with a clear understanding that it will be dealing exclusively for the products of GENUS and refrain from taking up Agency of other brand or make Single Phase and Three Phase Static/Electronic Meters without specific prior written permission of GENUS. DISL will have to bear all the expenses for such agency work viz. keep showroom, office premises, staff, etc. at its level.
7. For providing various sales/services facilities contained in this letter, DISL shall be paid a commission on the basic/Ex Works price at which GENUS receive order from the above Board, as per terms and conditions specified hereunder.
8. DISL shall market Electronic Energy meters of GENUS by Mailing Literature, Personal Contacts, Constant Follow-ups with the concerned Board.
9. Once the order is received, DISL shall have to carry out all the co-ordination activities with customer, co-ordination with Air/ Transport/Railways for delivery of goods to customers etc. DISL shall provide all the assistance required by the customer for the company's electronic meters and its proper functioning.
The definition of clearing and forwarding agent as provided under the Finance Act covers any person who is engaged in providing any service, either directly or indirectly connected with clearing and forwarding operations in any manner to any other person and includes a consigning agent. As per the terms and conditions of the agreement the applicants are responsible to receive the orders and thereafter to carry out all the co-ordination activities with Air/Transport/Railways for delivery of the goods to the customers. The said services are definitely comes under the expression the clearing and forwarding operation in respect of goods manufactured by the manufacturer. Further, I find that the Tribunal in the case of Prabhat Zarda Factory (supra) relied upon by the Revenue taking into consideration the similar terms and conditions of the agreement held that activity undertaken by assessee is covered under the definition of clearing and forwarding agent.
19. The contention of the appellant is also that if there is difference to opinion of different Benches the assessee is entitled for waiver of duty. In the present case, in view of the decision of the earlier Division Bench in the case of Prabhat Zarda Factory (supra) which is applicable on the facts of the present case and no contrary decision brought to my notice by appellant, therefore, I find there is no difference of opinion among the benches in respect of the of clearing and forwarding agent as provided under the Finance Act. In these circumstances, I agree with the view taken by the Hon'ble President and the application for waiver of pre-deposit of duty deserves to be dismissed. The Registry is directed to place the appeal papers before the regular bench.
20. The application for waiver of pre-deposit is rejected and the applicant is directed to make pre-deposit within eight weeks from today.