Change of Legal Position on Classification of Nature of Clearing and Forwarding Agent Service: CESTAT orders Fresh Adjudication [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ordered fresh adjudication as there was change in legal position via judicial decision on classification of nature of clearing and forwarding agent service.

The appellant, M R Patel and Sons is engaged in providing the taxable service as Business Auxiliary Service and Renting of Immovable Property Service. During the course of audit, it was observed that the appellant is providing services to Gujarat State Electricity Corporation (GSECL) in the nature of clearing and forwarding agent service and cannot be classified under the category of Business Auxiliary Service.

The issue of classification of services provided by the appellants to GSECL was examined as to whether the services provided by the appellants were classifiable under the category of Clearing and Forwarding Agent Service or under Business Auxiliary Service. Accordingly, it was concluded that the services provided by the appellants to GSECL to be classified under Clearing and Forwarding Agent Service and is taxable from 16.07.1997.

 Accordingly, a Show cause Notice was issued to the appellant which was adjudicated whereby after adjusting the service tax paid on Business Auxiliary Service remaining amount was confirmed. Aggrieved by the order of the Commissioner (Appeals), the present appeal has been preferred.

S.J. Vyas, Counsel appearing on behalf of the appellant submitted that the appellant’s activity is identical to the activities involved in the case of Coal Handlers Pvt Ltd decided by the Tribunal. However, on the appeal filed by the appellant in the above case, the Supreme Court has allowed the appeal reversing the decision of the Tribunal which was reported as Coal Handlers. The Counsel submitted that in the case of Coal Handlers there are additional activities involved despite that it was held that the services do not fall under Clearing and Forwarding Agent Service.

A Division Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member held that “We are of the view that since the identical facts and law point is involved, the learned Commissioner (Appeals) has to reconsider the matter in the light of the change of legal position between the Tribunal’s decision in Coal Handlers and the Apex Court decision in the same case. Since the facts are also need to be compared and verified between this case and the case of Coal Handlers, we are of the view that the matter should be remanded back to the Commissioner (Appeals) to decide afresh.”

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