Service Tax on Bending, Bundling & Stock Verification Cannot be Levied under “Clearing & Forwarding” Head: Calcutta HC [Read Order]
The High Court held that bending, bundling and stock verification services cannot be taxed under the “Clearing and Forwarding” category
The Calcutta High Court held that service tax on bending, bundling and stock verification services cannot be levied under the head of “Clearing and Forwarding” services, and quashed the demand raised under that category.
Naresh Kumar & Co. had agreements with TISCO and TRL not only for receiving, storing and forwarding goods, but also for bending and bundling of steel products and for helping in stock verification of goods in the godown. Separate payment was made for these works.
The show cause notice demanded service tax under the head “Clearing and Forwarding services” even for bending and bundling charges of Rs. 3,71,610 and stock verification charges of Rs. 80,402 for the period September 1999 to March 2004.
The appellant’s counsel argued that bending and bundling and stock verification are different services and not part of clearing and forwarding. The counsel said these works go beyond just receiving and sending goods.
The Division Bench of Justice Rajasekhar Mantha and Justice Ajay Kumar Gupta observed that clearing and forwarding mainly means receiving goods, storing them and dispatching them as per instructions of the principal. The court explained that small related acts like warehousing or arranging transport may come under it.
The court observed that bending and bundling change the shape and nature of the goods. A clearing and forwarding agent is not supposed to change the goods, but only handle and send them. On this ground, the court set aside the service taxdemand of Rs. 3,71,610 raised for bending and bundling under the clearing and forwarding head.
For stock verification, the court observed that it involved checking quality and teaching company staff about the goods which is more than simple storage or dispatch. So, the Court set aside the demand of Rs. 80,402 raised under clearing and forwarding for stock verification also.
The court said that the department can still tax these services under the correct tax head if allowed by law. The appeal was disposed of with these directions.
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