1. This appeal has been filed against Order-in-Appeal No. 20/2006 ST dated 15.02.2006 passed by the Commissioner of Central Excise (Appeals) Cochin.
2. The appellants are registered as C & F Agents and paid service tax for the period from September 1999 to June 2004. Later on, they came to know about the CESTAT orders dated 27.04.2004, in the case of Mahavir Generics v. CCE, Bangalore by which it was held that the services of consignment agents cannot be charged to Service Tax as C&F Agent. The appellants were functioning as commission agents for some of the manufacturers of steel pipes. They get the steel pipes and tubes on consignment basis, stock them in their premises and sell the products to their customers. In view of the above decision of the CESTAT they claimed the refund of the Service Tax and penalty paid by them. But the lower authority rejected their refund claim on the ground that the appellants cannot be treated as Commission Agent. Therefore, they approached the Commissioner (Appeals) who passed the impugned order holding that the claim of the refund is not maintainable and the appellants are liable to pay service tax as C&F Agent and hence the claim for refund is not admissible. Aggrieved over the impugned order, the appellants have come before this Tribunal for relief.
3. Shri Varadarajan, learned Advocate, appeared on behalf of the appellants and Shri K. Sambi Reddy, learned JDR, represented the Revenue.
5. The Commissioner (Appeals) in the impugned order has stated that the terms and conditions of the agreements filed and written submissions made by the appellants established that they are rendering service as a Consignment Agent. The definition of C&F Agent includes a 'consignment agent.' Since the consignment agent is brought under the definition of C&F Agent under Section 65(25), the term "C&F Agent" referred to in Section 65(105)(j) has to be construed as C&F Agent only. Moreover, he has stated that the CESTAT's decision in the case of Mahavir Generics has not reached finality in view of the appeal filed by the Revenue in the High Court of Karnataka.
6. On behalf of the appellants it was submitted that they are only selling agents. The agreement clearly defines the role as selling agents and not as C&F or consignment agent. The appellant gets commission based on the sales effected by them. The goods remain the property of the appellant and the principal has no control over the goods. The appellant alone discharges sales tax burden. The appellant is not concerned with receipt of the goods from the manufacturer and also does not take any instructions from the principal. They are independent selling agents. Unlike in the cafe of C&F Agents, where the goods vest with the principal only, who issues invoices, pay sales tax etc., the appellants are independently handling the goods, issuing invoices etc., and do not take any instructions from the supplier. In terms of agreement, the appellants are merely commission agents. The service tax on commission agents was introduced w.e.f 10.09.2004. Since the period of dispute is prior to that date the appellant could not be brought under the head of commission agents. There is no demand on this ground. The appellant's case is covered by the decision of Mahavir Generics 2004 (170) E.L.T. 78 (Tri.-Del.). Further, Larger Bench in the case of Medpro Pharma Pvt. Ltd. has not overruled the Tribunal decision in the case of Mahavir Generics Ltd. as wrongly noted. The decision of the Larger Bench in the case of L&T 2006 (3) STR 321 is only applicable. The Original Authority without appreciating the clear position has held that the case law on Mahavir Generics is not applicable.
7. When the learned SDR stated that the decision of the Tribunal in the case of Medpro Pharma Pvt. Ltd. 2006 (3) STR 355 (LB) is against the appellant, the learned Advocate distinguished the facts of that case and stated that in the Medpro Case the agreement provided for Medpro to act as C&F Agent. It was contended by the party that though the agreement provided them to act as C&F Agents, they have only rendered "forwarding service" and hence they had not done any clearing and forwarding service. But the Tribunal held that C&F operations cannot be dissected into "clearing and forwarding" as they fall in the common category and hence all or any of the services of that category will be services provided by a "C&F Agent." In that case the Larger Bench has never discussed about the Mahavir Generics case nor have they given any finding to the fact that the same is overruled. It is therefore clear that Mahavir Generics case has not been set aside or overruled or distinguished by the Larger Bench.
8. The learned Departmental Representative relied on the following decisions.
a) Super Poly Fabrics Ltd. v. CCE, Ludhiana 2006 (4) STR 595 (Tri.-Del.)Commissioner of Central Excise, Chandigarh v. Adhunik Steels Ltd. 2006 (4) STR 542 (Tri.-Del.) 9. The learned Advocate distinguished the facts of the above cases from those of the present appeal. In the above cases it was submitted that the assesses were actually appointed as consignment agent which is included in the definition of C&F Agent service. But in the case of the appellant the facts are different. They are nearly selling agents do not render any of the clearing and forwarding agents service and therefore the decision of the above cases cannot be applicable to the facts of the present case.
10. The learned Advocate stated that the Larger Bench decision in the case of Larsen and Tourbo Ltd. 2006 (3) STR 321 is alone applicable to the facts of the case. The issue before the Larger Bench was whether mere booking orders for the principal by an agent of commission basis was taxable under C&F Agent Service. It was held by the Larger Bench that the activity of procuring orders are treated under Business Auxiliary Services and is independent of clearing and forwarding agents. It was further held that persons engaged in mere procurement of orders on commission basis were not covered under C&F Agency. Further, he stated that the Larger Bench decision was followed in the following cases: Appellant procuring orders for the principal on payment of commission - said activity not within the ambit of C & F agent services.
Applicants' only selling agents - working on commission basis. Prima facie case strong case in favour of applicants - predeposit waivedCCE v. A.K. Multi Metals Pvt. Ltd. 11. On going through the agreement, I find the same is entitled "consignment agreement". In terms of the agreement the appellant is appointed as selling agent w.e.f. 28.08.2002 to sell on consignment basis galvanized steel tubes/MS Steel Tubes and Pipes. The Principal has agreed to pay commission to the appellant as may be mutually agreed from time to time. From the agreement one can not conclude that the appellant is a C&F Agent. In the Larsen and Toubro case in Para 9.2, the activities of the C&F Agent have been enumerated in the following manner.
a) Receiving the goods from the factories or premises of the principal or his agents; d) Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorized transporters of the principal; e) Maintain records of the receipt and despatch of goods and the stock available at the warehouse; 12. Moreover, the Larger Bench in the L&T case has held that mere procuring or booking orders for the Principal by an agent on a payment of commission basis would not amount to providing services as clearing and forwarding agent within the meaning of definition of that expression under Section 65(25) of the Finance Act, 1994. In the present appeal there is no evidence to say that the appellant carried out clearing and forwarding activities on behalf of the Principal. They were only purchasing and selling the goods and obtained commissions at mutual agreed rates. In my view the ratio of the L&T case would be clearly applicable to the facts of the present case. Therefore, I do not find any merit in the impugned order. I allow the appeal with consequential relief.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)