By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Classification of service – essential character. Storage Charges integral part of Clearing and Forwarding Service, hence taxable under Clearing and Forwarding Service and not under Storage and Warehousing Service.
Facts:
The Appellant entered into an agreement with HLL to provide services of cold storage/clearing and forwarding operations of frozen products. Tax, interest and penalties were demanded for the said service which was confirmed by the adjudicating authority and also by the Commissioner (Appeals).
The Appellant contended that charges towards cold storage facility were distinct and different from holding of the goods which may take place during clearing and forwarding operation and were in the nature of rental for providing cold storage facility and thus incidental to the services of Clearing and Forwarding Services. Relying on CCE vs. Kulcip Medicines (P) Ltd. – 2009 (14) STR 608, they contended that the activity did not fall under C&F service. The respondents contended that the Appellant acted as a consignment agent and thus, activity of storage was an integral part of the operation of Clearing and Forwarding service.
Held:
Referring to the definition of Clearing and Forwarding service and the agreement entered by the Appellant, it was held that the Appellant was its principal’s agent. Since, the Appellant was required to maintain specific temperature for storage of frozen goods before dispatching the same as per direction of HLL, the storage of the goods in cold storage was an inseparable part of Clearing & Forwarding activity undertaken by the assessee. The essential character being Clearing and Forwarding service, referring to section 65A(2)(b), the storage charges were to be included in the taxable value and chargeable to service tax.
