Clearing & Forwarding Agent Liable to Pay Service Tax on Main Services & Transportation Charges: Calcutta HC [Read Order]
Calcutta High Court held that a clearing and forwarding agent is liable to pay service tax on its main services as well as on transportation charges forming part of the remuneration.
The Calcutta High Court held that a clearing and forwarding agent is liable to pay service tax on the main clearing and forwarding services provided to its principals and also on transportation charges forming part of the remuneration and it upheld the service tax demand on these components..
Naresh Kumar & Co. filed an appeal challenging the Tribunal’s order which held that it had provided clearing and forwarding services to TISCO and TRL between September 1999 and March 2004.
Under the agreements, the appellant was required to receive and unload materials, transport them, arrange storage, and ensure that the goods were forwarded to customers of the companies. It also bore the transportation expenses.
After a search in April 2002, the appellant took service tax registration in May 2002. Later, it deposited Rs. 5,32,744 and Rs. 20 lakhs towards past service tax dues. A show cause notice dated 13 September 2004 demanded service tax for the period from September 1999 onwards including tax on transportation expenses.
The appellant’s counsel argued that it was not a clearing and forwarding agent and that transport charges were only reimbursable expenses. The revenue counsel argued that the appellant received goods, stored them, arranged transport and ensured delivery, so it clearly provided clearing and forwarding services.
The Division Bench of Justice Rajasekhar Mantha and Justice Ajay Kumar Gupta observed that clearing and forwarding includes receiving goods, storing them and dispatching them as per the principal’s instructions. The court observed that the appellant did all these activities and even bore transport cost.
The court upheld the service tax demand of Rs. 49,27,918 and Rs. 48,396 under clearing and forwarding services and also upheld Rs. 36,56,555 on transportation expenses. The appeal was disposed of with directions on interest and penalty.
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