Whether, co-operative society providing platform for the sellers and buyers to meet in a common place, providing a storage facility to the manufacturer, and organising of the sale of the products etc is liable for service tax under “clearing and forwarding” service? Held, No.
Facts:
The respondent a registered co-operative society formed with the object of improvement of tapioca cultivation and tapioca sago and starch industry and of the economic condition of tapioca cultivators and sago and starch manufacturers in some area. Their activities involved in the case were as under:
Members of the society sent their products to the society’s premises by making their own arrangements for loading, transport and unloading of the goods. The said goods were weighed and sent to the godown maintained by the society. Samples were drawn for quality testing as well as for display in the tender hall. On receipt of the tenders from the registered merchants, who also happened to be members of the society, the higher rate offered for each lot was displayed. On confirmation of the price by the principal, the buyer was intimated suitably to make his arrangements to lift the stock. Thereupon the society prepared the statement of bill to the members, wherein, deductions were made towards advance paid, interest payable, godown services charges, godown rent, unloading charges, marking charges, bank service charges and courier charges etc. According to the society, it acted as agent between the members and buyers; provided warehousing facility and gave advance money to the members before sale if so requested by the members
As contended by the Revenue, the society received the goods from principal, effected sales only after obtaining the concurrence of the principal; they maintained the records for receipts, despatches and the stock available with them in the warehouse and therefore tax was sought to be levied under “clearing and forwarding service” and it was confirmed in the first appeal.
The Tribunal allowed the assessee’s appeal holding that the consignments of sale were brought by the principal to the premises of the society for auction and that the society did not clear the consignments from its premises. After the sale, the goods were delivered to the buyer at the sales premises by the owner/principal. As such there was no forwarding took place. Referring to the decision in Mahavir Generics vs. CCE [2007] 6 STT 523 (New Delhi-CESTAT) the Tribunal held that the assessee was not doing forwarding services and consequently, there was no liability to pay the service tax. Before Hon. High Court, the Revenue placed reliance on the CBEC Circular in F.No. B/43/7/97 TRU dated 11-07-1997 which the society contested and placed reliance on section 65A(2) (b) of the Finance Act that even assuming that there is a combination of different services, the Revenue must find out the essential character of the service to bring the society within the framework of the activity of clearing and forwarding.
High Court held as under:
• There is no evidence to show that the assessee had a responsibility of arranging despatch of goods purchased by the buyer in the auction nor had responsibility to collect the goods from the principal’s premises. It is only the principal who brought their products on the society’s premises to make use of the common market platform of the Society for its members and on the request of the principal, the society offered the storage facility.
• On reading of the nature of activity rendered by the society, it is clear that except for receiving the goods which were brought to its doorsteps by its principal and displaying the goods received for sale, practically, nothing else was done by the society in the matter of taking the goods from the principal and for further despatching of the goods to the buyer by engaging transporter or on its own. The conduct of the society, handling the goods on receipt raising invoices on sale or maintaining records as to the stock availability, rate at best, indicates it only as an agency offering storage facility. This act, per se, does not convert the assessee’s transaction as that of a clearing and forwarding agency. The essential character of the activity of providing a platform for the sellers and buyers to meet in a common place, providing a storage facility to the manufacturer, the financial help etc. do not, take the society anywhere near the activities discharged by a clearing and forwarding agent. The incidental services offered in the transaction in arranging the transporting of the goods to the buyer would not, decide the nature of the transaction as one of clearing and forwarding agency.
(Note: It may be noted that, decision of Mahaveer Generics relied upon by the Tribunal has been approved by P&H High Court in the case of CCE vs. Kulchip Medicines 2009 (14) STR 608, however it has been subsequently reversed by Hon’ble Karnataka High Court in the case of Commissioner of C.Ex (Bangalore) vs. Mahaveer Generics 2010 (17) STR 225 (Kar) distinguishing the said decision of P&H High Court (supra).
