Case: M/S. Coal Handlers Pvt. Ltd Vs. Commnr. Of Central Excise, Kolkata

2) The appellant in this case is providing certain services as Agent. Such services are provided to M/s. Gujarat Ambuja Cements Limited and M/s. Ambuja Cements Eastern Limited (hereinafter collectively referred to as Ambuja companies). At the material time, these were public sector undertakings under the Government of Gujarat. These industries need coal as a raw material for production of cement, which is the main manufacturing activity undertaken by the said companies. Industries that need coal as a raw material generally approach the Ministry of Industries, Government of India with their requirements. The Ministry of Industries, after enquiry, recommends to the Ministry of Coal the quantity that is required to be supplied to such industries. Thereafter, the Ministry of Coal, as per the norms prescribed, allots the coal to these industries through the Long Term Linkage Committee indicating the coal companies and the location from which coal can be made available to them. While fixing the locations from where the coal is to be supplied to such companies, the Committee takes into account the Railways commitment for movement of the coal. The Railways is responsible for placing of rail rakes according to the programme. To maintain constant liaison with the Railways for the actual placing of coal rakes, such companies generally appoint its Agents. The aforesaid Ambuja companies, for this purpose, had appointed the appellant for this purpose and a contract was entered into between the said Ambuja companies and the appellant. Under this Agency agreement, the appellant was required to undertake the following activities on behalf of the Ambujafollowing 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 AmbujaThe issue that arose for consideration was as to whether aforesaid services were liable to service tax under the provisions of the Act. By the said Act, sub-section (25) was inserted in Section 65, which defines C&F Agent asg and forwardingmeans any person who is engaged in providing any service, either directly or indirectly, connected with theoperations in any manner to any other person and includes a consignmentmay also note that the taxable service as provided in Section 65(48)(j) of the Act in relation to service of C&F Agent means any service provided to a client, by aagent in relation tooperations in anyIt so happened that the appellant had filed an application for registration in Form ST-I under Section 69 of Chapter V of the Act on November 17, 1999 for the service of handling agents (C&F Agent). Certification of Registration was granted on November 18, 1999. Thereafter, on May 30, 2000, the appellant surrendered the said Registration Certificate on the ground that services rendered by them were not covered by Section 65(25) of the Act. The application for surrender was, however, rejected by the Superintendent of Central Excise (SCE), Service Tax Cell, Kolkata-I, Commissionerate on February 08, 2001 by passing the Order-in-Original. The SCE, in that order, took the view that the services rendered by the appellant under the aforesaid contract with Ambuja companies would be covered by Section 65(25) of the Act and, therefore, exigible to service tax. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner of Central Excise (Appeals), Kolkata, which was also dismissed by the Commissioner on November 05, 2002. This order was challenged by the appellant before the Customs, Excise & Service Tax Appellate Tribunal (for short, CESTAT).5) The CESTAT has also dismissed the appeal by the impugned order dated May 24, 2004 by observing that the matter is covered by its own judgment in the case of M/s. Prabhat Zarda Factory (India) Ltd. v. Commissioner of Central Excise, Patna (2002 (145) ELT 222). The Tribunal has noted in this behalf that in the said case the Bench of the Tribunal had considered the definition of C&F Agent and has held that such definition was very wide and includes any service, even provided indirectly. It was also noted that the said judgment was delivered on February 09, 2002 and thereafter Finance Act of 2003 was introduced and the new service, viz. Business Auxiliary Service appearing in Section 65(19) was introduced. The said service is in relation to promotion or marketing of service provided by the client; any customer care service provided on behalf of the client and any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent. The CESTAT, however, held that the activities undertaken by the appellant were not covered by the expression Business Auxiliary Service, which include Commission Agents, and stand exempted from service tax with effect from July 01, 2003 vide Notification No. 13/2003 dated June 20, 2003. Therefore, no such exemption was available. The relevant paras of the impugned order containing the aforesaid discussion are asThe appellants have agreed that the issue involved stands decided in the case of Prabhat Zarda Factory (India) Ltd. (Supra). The Tribunal under the said judgment has observed that as per definition ofagent, he is a person who is engaged for providing any service, either directly or indirectly connected withoperations in anymanner to any other person and includes a commission agent. The use of the expressionin the said definition ofagent, is indicative of the fact that the scope of the services to be provided byng agent isquite wide. He is not only the person who is actually dealing with the goods, which has to be termed asagent, but even if the services are indirect and if the same are connected with theoperations in anymanner of the other persons, he would be covered within the scope of the said definition. The appellants in the instant case render their services in all the sections of pre load of the coal rakes i.e. obtaining consent on behalf of their customers, sanctions from the office of ExecutiveMovement, supervising loading of the wagons, sending samples and assuring the proper quality and quantities, complying with the formalities relating to payments for freight. As such, it is quite clear that the appellant is covered by the definition ofagent, as interpreted by the Tribunal in the above referred case of Prabhat Zarda.6) The appellants have alternative contention that they are covered by the new i.e. Business Auxiliary Service introduced vide Finance Act of 2003. However, we find that the said services are in the nature of promotional or marketing of the customers goods or in the nature of doing the other routine type of jobs like billing or collection of cheques, maintenance of accounts and evaluation of prospective customers and public relation services. The services being provided by the appellant cannot be equated to the above. It is also seen that the expression commission agent has been explained by the Notification dated 20th June, 2003 reported in 155 ELTvide paragraph 2.1.3 it has been clarified that C&F agents work on commission basis do not fall under the definition of Business Auxiliary Service, in as much as they are substantially covered within the definition C & F service. It has, further, been clarified that under Section 65A of Finance Act, 1994, it has also been provided that in case of overlap, a service would be classified under the head, (a) which provides most specific description, (b) in case of a composite service having combination of different taxable services, the service which give them their essential character and (c) in case the test of (a) and (b) does not resolve, the service which comes earlier in the clauses of Section 65, i.e. the service that was subjected to service tax earlier. Since Insurance services and C & F Services are more specific description and were also subjected to service tax prior to imposition of tax on business auxiliary service, the insurance agents, C & F agents working on commission basis would fall under those respective categories. From this, it follows that a particular service can be taxed only under one head of

Reasoning:
6) As is clear from the reading of the aforesaid extracted portion of the order, the Tribunal has rested its impugned decision on its earlier judgment in the case of Prabhat Zarda (supra) and the reasons contained in the said judgment are restated in support of the view taken by the Tribunal in the impugnedSince the appellant in that case was engaged only for procuring purchase orders for vendor on commission basis and was not engaged in any of the above activities, the larger Bench concluded that the services provided by the said appellant would not fall within the definition ofagent as contained in theFrom 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 withs. Of course, once it is found that such a person is providing the services which are connected with thens, 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 constituteoperations. 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 percovenants 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.