THIRD MEMBER ON REFERENCE : SHRI M.V. RAVINDRAN, MEMBER (J) HARDIK INDL. CORPORATION Vs. COMMISSIONER OF C. EX., DAMAN

JUDGEMENT

(1.) THE issue involved in this appeal is whether the service provided by the appellants can be held liable to service tax by treating them as Clearing and Forwarding (C&F) agents.

(2.) HEARD both the sides. Shri Sandeep Sachdeva, ld. Chartered Accountant on behalf of the appellants submitted that the agreement between IPCL and the appellants clearly provides that appellants are treated as a distributor and the agreement for distribution of the products of IPCL and not for providing C&F service as held by the ld. Commissioner in his order. In this connection he submits a copy of the letter issued by M/s. Reliance Industries Ltd. (with whom IPCL has amalgamated) wherein they have stated that IPCL was transferring goods from its manufacturing factories to the stock point of M/s. Hardik Industries Corporation and the transportation charges including unloading charges incurred in transferring the goods from factory to the stock point was borne by the IPCL. According to the ld. Chartered Accountant this shows that appellants were not performing the service of clearing the goods from IPCL. He drew out attention to Clause 8 of the agreement between the parties which provides the company shall indicate from time to time to the distributor its recommended list prices for the sale of said products. The distributor shall be at liberty to sell the said products at prices lower than the said list prices. If the distributor sells the said products at prices lower than the said list prices, the difference between the list price and the price at which the said products are sold by the distributor shall be to the account of the distributor. He submits that this shows clearly that the appellants were selling goods unlike a C&F agent, who does not actually sell the goods on his own account. He also drew our attention to illustrative copies of the invoices which show that the bill was raised in the name of the appellant. He also submitted that the payment was received by them and then they made the payment to IPCL. According to him this also shows that there was actually a sale between appellant and the buyers which would not be the case in case of clearing and forwarding. He also submits that appellants were required to make payments after the sales were made to IPCL which once again shows that they were acting as a distributor and not as a C&F agent. He also cited several decisions of the Tribunal in support of his argument that the appellants were not acting as a C&F agent but were actually a distributor.

(3.) LD . Jt. CDR on behalf of the Revenue submitted that even though agreement mentioned the appellants as a distributor, the activities carried out by the appellants were nothing but clearing and forwarding. She cited decisions of Larger Bench of the Tribunal in M/s. Medpro Pharma Pvt. Ltd. [2006 (3) S.T.R. 355 (Tri. -LB)] in support of her contention that it is not necessary that a C&F agent should carry out all operations which are meant to be carried out by a C&F agent. She submitted that appellants were in fact clearing the goods from the IPCL. The letter issued by Reliance Industries Ltd. does not take away the fact that what was carried out when the goods were removed from IPCL to the appellants premises was of clearing operation in view of the specific provisions in the agreement. She drew our attention to Clause 16 of the agreement which provides that the company shall pay the distributor a service charge of Rs. 350/ - PMT. She submitted that the fact that what was paid to the appellants was a service charge and not a trade discount shows that what was provided was a service. She also drew our attention to Clause 20 of the agreement which provides that property in and title to the stock of the said products lying with the distributor unsold shall continue to vest in the company. The company is entitled to recall such unsold stock at any time. This confirms the view that the operation of transfer of goods is basically a clearing operation and only a transfer of goods in view of the fact that property in the goods and the title of the goods remain with the IPCL till the same are sold. She further drew our attention to Clause 4 of the agreement which provides that IPCL shall arrange to take insurance cover in respect of the products lying in the custody of the distributor against various risks of fire theft, riot, malicious damages, etc. also shows that the appellants were not acting as distributor but only as an agent. The requirement in the agreement in Clause 11 that the distributor has to regularly report a true and correct account of sales as well as that of stocks as may be prescribed by IPCL from time to time also shows that relationship between the two parties to the agreement was that of an agent and a principal and not of two principals. It also shows that the operations carried out by the appellants were that of an agent providing services of C&F. The agreement also allows inspection of the books of accounts, registers and records of the appellant by the companys authorized representative which again shows that the relationship was not that of a distributor and the supplier. The provision in Clause 17 of the agreement that the distributor shall sell the products as per the distribution norms/supply policy of the company communicated to them from time to time also shows that appellants were not at liberty to sell the goods as they want. This clause according to the Jt. CDR enables IPCL to give directions to the distributor to sell the goods to the customers according to the schedule and the norms prescribed by them. While the appellants may be free to canvass and obtain orders, this clause restricts their ability to supply. According to the ld. Jt. CDR when we consider all these clauses of the agreement between the two parties, what comes out is the fact that the services provided by the appellant to IPCL are nothing but the services of C&F. The only exception that can be made out is that the appellants prepared bills in their own name but even in these bills she points out that the appellant have disclosed the name of IPCL with their logo. She also drew our attention to the fact that in the invoice, appellants declared themselves as consignment stockists of IPCL which is nothing but the service of C&F. Even though the agreement shows that appellants are distributors, in reality and also in the eyes of the trade, the appellants were consignment stockist which again supports the case of the Revenue.