B K Sales Corporation (Appellant) was appointed as consignment agent by way of an Agreement by Narmada Chematur Petrochemicals Ltd. (principal). In terms of the Agreement, the principal was required to supply their product duly packed in drums on regular basis to the Appellant and the Appellant was required to sell the same in smaller lots to the customers at the prices fixed by the principal and the report of such sale was required to be given by the Appellant to their principal from time to time. The invoices were to be issued by the Appellant in the name of principal including their name as consignment agent.
The Department alleged that since the definition of Clearing and Forwarding (C&F) agent given under erstwhile Section 65(25) of the Finance Act, 1994 includes consignment agent, the Appellant is liable to discharge Service tax liability for rendering C&F services to the principal. On the other hand, the Appellant argued that the merely being a consignment agent does not bring him in the definition of C&F agent, unless such consignment agent is doing the job of C&F operations. The Agreement clearly shows that no C&F operations are being done by the Appellant and he is free to sell the goods to any other customers by raising an invoice.
The Hon’ble CESTAT, Delhi relied upon following judgments:
and held that the main activity of C&F agent is that he receives the dispatch orders from the principal and arranges clearance of the goods in terms of the directions of the principal. He is not free to sell or purchase the goods by his own choice. In the instant case, the Appellant is free to sell the goods to his customers in small lots. Such permission given to the Appellant is indicative of the fact that he is not working as C&F agent of the principal.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: email@example.com)