[2015] 57 taxmann.com 402 (SC)-Coal Handlers (P) Ltd vs. Commissioner of Central Excise Range Kolkata-I

Facts:
The assessee is providing services to various cement companies under agency agreement for following up allotment of coal rakes by railways, expediting and supervising loading and labeling of rail wagons, drawing samples of coal loaded on wagons, paying freight to railways and dispatching rail receipts to cement companies. Department contended that the said services amount to Clearing and Forwarding Agent’s Service. The Tribunal decided against the assessee relying upon the decision of Prabhat Zarda Factory (India) Ltd [2002 taxmann.com 1307 (CEGAT – Kolkata)].

Held:
The Supreme Court observed that Prabhat Zarda’s case relied upon by the Tribunal has been overruled by the Larger Bench of the Tribunal in Larsen & Toubro Ltd.’s case 2006 (3) STR 321 (Tri- LB) and that, department has accepted the decision of Larger Bench and did not file appeal against the same. The Court also considered definition of “clearing and forwarding agent” under erstwhile section 65(25) of the Finance Act, 1994 and also dictionary meaning of the word forwarding agent and its characteristics and held that in order to qualify as a C&F Agent, such a person is to be found to be engaged in providing any service connected with “clearing and forwarding operations”. Of course, once it is found that such a person is providing the services which are connected with the “clearing and forwarding operations”, then whether such services are provided directly or indirectly would be of no significance and such a person would be covered by the definition.

As regards what constitutes “clearing and forwarding operations”, the Court held that, it would cover those activities which pertain to clearing of the goods and thereafter forwarding those goods to a particular destination, at the instance and on the directions of the principal. In the context of present appeals it would essentially include getting the coal cleared as an agent on behalf of the principal from the supplier of the coal (i.e. collieries) and thereafter dispatching/ forwarding the said coal to different destinations as per the instructions of the principal. In the process, it may include warehousing of the goods so cleared, receiving dispatch orders from the principal, arranging dispatch of the goods as per the instructions of the principal by engaging transport on his own or through the transporters of the principal, maintaining records of the receipt and dispatch of the goods and the stock available on the warehouses and preparing invoices on behalf of the principal.

Having explained the scope of clearing and forwarding operations, the Apex Court held that, that assessee did not play a role of getting coal cleared from collieries. Movement of coal is under contract of sale between coal company and cement companies. Even the coal is loaded on to the railway wagons by the coal company. There is no occasion for cement companies to instruct the appellant to dispatch/forward the goods to a particular destination which is already fixed as per the contract between the coal company and the cement companies. The railway rakes are placed by the coal company for the said destinations. The appellant does not even undertake any loading operation as the primary job, as per the contract, is of supervising and liasoning with the coal company as well as the railways to see that the material required by cement companies is loaded as per the schedule. At no stage the custody of the coal is taken by the appellant or transportation of the coal, as forwarders, is arranged by them. In these circumstances, Apex Court held that, the services would not qualify as C&F Agent within the meaning of section 65(25) of the Finance Act, 1994.