By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Classification of Service – Commission received for procuring orders and peripheral activities – dominant nature of service – Not a C&F Agent Services.
Facts:
The respondent assessee was an authorized dealer of M/s. Maruti Udyog Ltd (‘MUL’). Apart from procuring orders from the Government department like BSF, CRPF & State Police etc., it conducted pre-delivery inspection, giving coupons for free after-sales services, etc. and also arranged waybill or entry permit required for the dispatch of the vehicle and received commission from MUL for such services rendered. Revenue sought to tax the activities under Clearing and Forwarding Agent’s Services stating that definition of C&F agent service was wide enough to cover these activities. Commissioner (Appeals) decided in favor of the assessee.
Held:
The Hon’ble Delhi Tribunal held that it is an accepted fact that one of the crucial elements of C&F agent service is that it works on the direction of the principal. In the present case the respondent was actually taking orders from the Government departments and therefore it was basically facilitating the supply of cars to them and earning commission from MUL. Therefore, this crucial element was absent. This fact was also clear from the observations made by the Commissioner (Appeals). It was also noted that before the Commissioner (Appeals), assessee vehemently contended that they have never physically received and stored the goods in their premises but the goods were physically delivered by MUL to the customers. In this factual background and relying upon the decision of the Delhi Tribunal (LB) in the case of Larsen & Toubro vs. CCE 2006 (3) S.T.R. 321 (Tri. – LB), it was concluded that procuring the order from the Government departments was the main element of the impugned service and any peripheral aspects thereof would not bring it within the scope of C&F Agent Service. Note: It appears that Tribunal has taken a view that activity concerning supply of cars was in fact a service to Government departments from which assessee did not receive any consideration. The commission received from MUL was only for procuring the orders. In Larsen & Toubro’s case (supra) it was held that, clearing and forwarding activities do not flow directly or indirectly from mere procurement of orders. The activity of procuring orders is treated separately by Parliament under Business Auxiliary Service and independent of clearing and forwarding operations. This case has also been affirmed by the Hon’ble Punjab & Haryana High Court in 2008 (10) STR 229. Reader may also refer to the Tribunal decision in Transasia Sales Syndicate case which is affirmed by Hon’ble SC in [2014] 50 taxmann.com 438 (SC).
