Top Stories Activity of Loading and Unloading Cements does not fall under ‘Clearing and Forwarding Agent’ Services: CESTAT [Read Order] The bench set aside the impugned order and allowed the Appeal By Yogitha S. Yogesh – On December 26, 2024 5:26 pm – 3 mins read The Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that loading and unloading cement does not fall under ‘Clearing and Forwarding Agent’ services. The bench set aside the impugned order and allowed the Appeal.  M/s Vijayalaxmi Transport Company, appellant a proprietary concern, was discharging service tax on the services provided to M/s Vasavadatta Cements under the category of “Clearing and Forwarding Agent” services.  The appellant received cement in wagons at Hubli Railway Station and by engaging Hubli Railway Union personnel they unloaded the cement from the wagons, and the said cement was stacked in the railway goods shed. The appellant thereafter engaged the Hubli Local Lorry Owners association to transport the cement.

The workers of the Hubli Railway Union loaded the said cement on to the lorries from the Railway goods shed and the cement bags are either sent to the Vasavadatta Cement’s Company godown or to their client’s place directly as directed by M/s Vasavadatta Cements. Thereafter, the goods were unloaded from the lorries by the workers of Vasavadatta cement at their respective godowns. The appellant was paid an amount of Rs.11 per Metric Tonne for unloading and Rs.11 for Metric Tonne for loading to Hubli Railway Union and was also paid Rs.2 as station charges to casual labourers for cleaning the Railway Wagons. Simplify Tax Settlements with Vivad se Vishwas Insights – Click here to Register The Appellant paid Rs.63/- towards transportation charges to the Hubli Local Lorry Owners Association. The appellant submitted that the amount paid to Hubli Railway Union, station charges and Hubli Local Lorry owners Association were reimbursed to them by their principal, M/s. Vasavadatta Cements. The department has issued a issued show cause notice for the period April 2002 to December 2006 because the taxable value is the gross amount of remuneration paid to the Clearing and Forwarding Agency by the client and includes all expenses incurred by the agent towards handling and forwarding and they are includable for the computation of the service.  Hence,  loading, unloading and station charges including the godown unload and direct party unload charges, are includable in the taxable value.

The appellant in his statement dated 11.08.2004 has stated that their services would fall under the category of ‘Cargo Handling Service’. The adjudication authority confirmed the demand along with interest and imposed penalty. The appellant’s appeal before Commissioner (Appeals) was dismissed. The appellant in their submissions have contended that; the activities carried by them are not classifiable under the ‘Clearing and Forwarding Agent’ services as they were not undertaking any custodial warehousing operation, receiving despatch or delivery orders from the principal or preparing invoice on behalf of the principal, etc.

The appellant relied on the following 2(two) orders passed by the Commissioner (Appeals), Mangalore, wherein on identical facts it was held that the such activity would fall under ‘Cargo Handling Service’ and not under ‘Clearing and Forwarding Agent’ Services. Simplify Tax Settlements with Vivad se Vishwas Insights – Click here to Register The appellant further submitted that they are not liable to pay service tax in respect of loading and unloading elements as per the Board Circular MF (DR) F.No.B11/1/2002-TRU dated 01.08.2002, wherein it was clarified that where individuals hire labour for loading and unloading of goods in their individual capacity, such activity will not come under the purview of service tax as a ‘Cargo Handling Agency’ and the Circular is binding on the department authorities.

The appellant has provided the service of loading, unloading and cleaning of the railway wagons, when the cement bags are unloaded from the railway wagons into the godown and loading of the cement bags onto the trucks at the railway station. The appellant has received reimbursement of the expenses incurred towards loading, unloading and cleaning of the railway wagons from M/s. Vasavadatta Cements. They have contended that they followed  Rule 6(8) of the Central Excise Rules, 1994 prevalent during their relevant time and immediately after omission of the rule on 19.04.2006 they have started paying tax on the reimbursement portion also.

Further the appellant has raised the issue of limitation since the show cause notice was issued on 03.10 2007 for the period April 2002 to March, 2005. Further the appellant submitted that for computing the service tax they have included the service tax of Rs. 2,21,015 paid by them for the period April 2006 to December 2006. Simplify Tax Settlements with Vivad se Vishwas Insights – Click here to Register A division P. A. Augustian (Judicial) and Mr. Pullela Nageswara Rao, Member (Technical), viewed that the loading and unloading cement does not fall under ‘Clearing and Forwarding Agent’ services. The bench set aside the impugned order and allowed the Appeal. To Read the full text of the Order CLICK HERE