The Supreme Court in its latest judgment has held that for being liable to service tax under section 65(25) of the Finance Act, 1994, as Carry and Forwarding Agent, such person must be engaged in providing any service connected with 'clearing and forwarding operations' and merely supervising and liaisoning would not qualify them to be labeled as C&F Agent.

Case Details:
Civil Appeal No. 7215/2004 with Civil Appeal No.5159/2013 and Civil Appeal No. 9967/2014
M/s. Coal Handlers Private Limited ..Appellant(s) vs. Commissioner of Central Excise, Kolkata-I ..Respondent(s)
Judgment date: 05-05-2015
Coram: J. A. K. Sikri; J. Rohinton Fali Nariman

Question Involved
The issue was as to whether the services of constant liaison with the Railways for the actual placing of coal rakes to companies requiring coals are covered within the meaning of Clearing & Forwarding(C&F) Agents and, thus, make them liable to service tax under section 65(25) of the Finance Act, 1994.

Facts of the Case:
In case No. 7215/2014, M/s. Gujarat Ambuja Cements Limited and M/s. Ambuja Cements Eastern Limited who needed coal for producing cement had appointed the appellants for the providing the following services:

(i) following up the allotment of coal rakes by the Railways; (ii) expediting and supervising the loading and labeling of rail wagons; (iii) drawing the samples of coal loaded on the wagons; (iv) complying with the formalities relating to payments for freight to the Railways; and (v) dispatching of rail receipts to Ambuja companies.

The appellant was initially registered under service tax for the service of 'handling agents' (C&F Agent). However on 30-05-2000, they surrendered the said Registration Certificate on the ground that they were not covered by Section 65(25) of the Act. Their application for surrender was, however, rejected by the Service tax Department and later on 24-05-2004, CESTAT relying on its earlier judgment in M/s. Prabhat Zarda Factory (India) Ltd. v. Commissioner of Central Excise, Patna [2002 (145) ELT 222], also dismissed their appeal.

However the Apex Court observed that the Full Bench of the Tribunal had overruled the judgment in Prabhat Zarda case.The larger Bench in Larsen & Toubro Ltd. v. Commissioner of Central Excise, Chennai [2006 (3) STR 321 (Tri.-LB) :: 2006 (110) ECC 634 :: 2006 ECR 634 Tri Delhi] observed that the service as per the definition of 'clearing and forwarding agent' should be connected with clearing and forwarding operations. The 'clearing and forwarding' operations would be various activities having bearing on clearance of goods, which would involve documentary processes and arrangements for transfer of goods to their destination, which process may also involve clearance at subsequent stages during forwarding operations. The larger Bench concluded that the mere procuring purchase orders for vendor on commission basis in absence of aforesaid activities would not constitute it as C&F agent.

The Apex Court also observed that the Revenue had accepted the aforesaid decision in the case of Larsen & Toubro and did not file any appeal against the same.

Excerpts from the Judgment:
11) From the reading of the definition contained in the aforesaid provision, together with its dictionary meanings contained in Legal and Commercial dictionaries, it becomes apparent 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. Therefore, we have to see as to what would constitute clearing and forwarding operations. As is clear from the plain meaning of the aforesaid expression, 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 these appeals, it would essentially include getting the coal cleared as an agent on behalf of the principal from the supplier of the coal (which would mean collieries in the present case) 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. The larger Bench rightly enumerated these activities which the C&F Agent is supposed to perform.

12) On the facts of the present case, we find that none of the aforesaid activities are performed by the appellant. There is no role of the appellant in getting the coal cleared from the collieries/ supplier of the coal. Movement of the coal is under the contract of sale between the coal company and Ambuja companies. Even the coal is loaded on to the railway wagons by the coal company. The goods are not under any legal detention from which they need to be freed by the appellant. Not only this, destination of the goods is known to the coal company and the railway rakes are placed by the coal company for the said destinations. The destination is the factories of the principal itself, namely, Ambuja companies, where the coal is to be delivered by the coal company as per pre-determined/agreed covenants between them. Therefore, there is no occasion for Ambuja 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 Ambuja companies. The appellant does not even undertake any loading operation. The primary job of the appellant, as per the contract between the appellant and the Ambuja companies, is of supervising and liaisoning with the coal company as well as the Railways to see that the material required by Ambuja companies is loaded as per the schedule. At no stage custody of the coal is taken by the appellant or transportation of the coal, as forwarders, is arranged by the appellant. We are, thus, of the clear opinion that the services rendered by the appellant would not qualify as C&F Agent within the meaning of Section 65(25) of the Act.

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