Export of Educational Books are Classifiable under ‘clearing and forwarding agent service’ and Not under ‘BAS’: CESTAT Quashes Service Tax Demand [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand on the export of educational books and classified the service under the category of ‘clearing and Forwarding agent services’. 

Enbee Education Centre Pvt Limited, the appellant assessee was engaged in the business of providing services of ‘Commercial Training or Coaching Services’ as defined under Section 65 of the Finance Act,1994 the assessee received from service providers based outside India and who have not office in India and also the assessee was engaged in the export of educational books. 

The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand of Rs. 45,94,496/- on ‘Business Auxiliary Services’ (BAS) along with interest penalty under Section 78, 76, and 77(1)(a) of the Finance Act. 

Ansal Jain, the counsel for the assessee contended that the assessee was not providing Business Auxiliary Services and the subsidiary company of the assessee was acting as consignment cum clearing and forwarding agent and the payment made by the assessee to the subsidiary company was shown in the books of account of the appellant as Commission on Sales (Export). 

Also submitted that the subsidiary company of the assessee was not causing the sale of books sent by the assessee and merely clearing the goods in the USA and forwarding the same to the customers of the assessee based on the directions given by the assessee, therefore, the activity undertaken by the assessee will be properly classifiable under the clearing and forwarding agent’s service. 

R K Agarwal, the counsel for the department relied on the decisions made by the lower authorities and contended that the service provided by the assessee was classified under the category of ‘Business Auxiliary Services’ and the demand raised by the revenue was as per the law and liable to be sustained. 

The Bench observed that the Consignment agent deals with the goods, when he receives the same from the principal and dispatches them on the direction of the principal, to the ultimate customer and the agent may not be even associated with the procurement of orders or does not directly deal with the sale purchase and acting on behalf of the principal and deals with the movement of the goods as per the direction of the principal. 

The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) held that the assessee is liable to pay service tax under the taxable service ‘Business Auxiliary Services’ cannot be sustained and liable to be quashed while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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