Landmark Service Tax Judgment - Clearing and Forwarding Agent Services 

According to Section 65 (105) (j), any service provided or to be provided to any person, by a clearing and forwarding agent in relation to clearing and forwarding operations in any manner, is a ‘taxable service’.

According to Section 65 (25), “clearing and forwarding agent” means any person who is engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consignment agent.

The clearing and forwarding agents are engaged / appointed by manufacturer of goods (both excisable and non-excisable goods), producers and distributors of goods and shall also include such agents appointed for agricultural and mineral goods. Normally, there would be a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C & F agent is entitled. If factories or persons are engaging brokers for sending their goods directly to their customers, on the basis of orders procured by them, services rendered by brokers would amount to services provided by a Clearing& forwarding Agents and would be liable for payment of Service Tax.

A clearing and forwarding agent normally undertakes the following activities:

(i)   Receiving the goods from the factories or premises of the principal or his agents;

(ii)  Warehousing these goods;

(iii) Receiving dispatch orders from the principal;

(iv) Arranging dispatch of goods as per the directions of the principal by engaging transport on his own or through the authorized transporters of the principal;

(v)  Maintaining records of the receipt and dispatch of goods and the stock available at the warehouse; Service Tax is payable on above services.

For the services rendered, the C & F agent receives commission or remuneration, which usually consists of two components:

1. Minimum commission on a flat rate or turnover basis depending on the packages / consignments handled, and

2. A variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal.
The above two constitute the remuneration or commission paid to the C & F agent by the principal.

(a)  Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 8/2008-ST dated 01.03.2008)

(b)  Services provided to the United Nations or International Organisations

(c)  Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d)  Services which are exported as per ‘Export of Services’ Rules

(e)  Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f)  Services provided to Reserve Bank of India

(g)  Out of total value of service provided proportionate value of goods and material provided by the Service Provider

Service Tax Notification No.  33/2008-S.T. Dated 07/12/2008 Amends 

Garibdasji Distributors Vs Commissioner of Central Excise, Coimbatore (STO 2009 CESTAT 428)

C.C.E.S.T., BANGALORE Vs OKS SPECIALITIES LUBRICANTS (I) PVT. LTD. (STO 2007 CESTAT 1213)

BINLAS DUPLUX LTD. Vs COMMISSIONER OF CENTRAL EXCISE, MEERUT (STO 2007 CESTAT 580)

SAVINO DEL BENE FREIGHT FORWARDERS (I) P. LTD. Vs C.C.E., MUMBAI-IV (STO 2006 CESTAT 707)

PRATAP SINGH & SONS Vs COMMISSIONER OF C. EX., MUMBAI-I (STO 2006 CESTAT 635)