TMI Blog2023 (5) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was to shift burden of tax on the steamer agents and later on the importers vide impugned Notification No.15/2017-ST dated 13.04.2017 with effect from 23.04.2017, wherein, an Explanation V to Notification No.30/2012-ST dated 20.06.2012 was inserted. It impacted the second Category II of Writ Petitioners namely the importers . There were further amendments to the Explanations to vide Notification No.03/2017-ST, dated 12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017. Rule 8B was inserted to the Point of Taxation Rules, 2011, after Rule 8A vide impugned Notification No.14/2017-ST dated 13.04.2017. It came into force on 23.04.2017 with retrospective effect from 22.01.2017 - the purpose of the insertion of Rule 8B of the Point of Taxation Rules, 2011 with retrospective effect from 22.1.2017 was to fix the rate of tax, value of taxable service and rate of exchange as the date of bill of lading of goods in the vessel at the port of export. The impugned Notification No.14/2017-ST dated 13.04.2017 was intended to enable the Department to levy and collect service tax on the steamer agents and also the importers at the prevailing rate for the respective period. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other collateral notifications which have been challenged in these writ petitions are merely incidental and only consequential to withdrawal of exemption in Mega Exemption Notification No.25/2012- ST dated 20.06.2012 vide impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. They have been issued with a view to implement the changes on account of withdrawal of exemption under impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. There is a flaw in the above Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017. It is the foreign liner who engages the service of various other persons in the course of transport of service. It is the foreign shipping liner who receives service who can be taxed and not the importers or the steamer agents although by virtue of the above two notifications, the person liable to pay tax has been also declared as the person who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods between 22.01.2017 and 22.04.2017 and thereafter the importer as defined under Clause (26) of Section 2 of the Customs Act, 1962 of such good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/4/2017-ST dated 12.4.2017 in W.P.No.14643 of 2017 as null and void and ultravires the various provisions of the Constitution and ultra vires Section 83 of the Finance Act, 1994, Section 37B of the Central Excise Act, 1994 as made applicable to Finance Act, 1994 as well as Notification No.26/2012-ST dated 20.06.2012. There is no necessity to declare the impugned notifications as ultra vires as there is no proper machinery provided under the impugned notifications issued under Section 68(2) of the Finance Act, 1994 to shift the burden to pay service tax on the petitioners as the petitioners are not either the recipients of the taxable service by way of transportation goods by a vessel from a space outside India up to the customs stations of clearance in India. They are not liable to tax as things stand - Challenge to Notification No.01/2017-ST dated 12.01.2017 has to fail in the light of the decision of the Hon ble Supreme Court in Kasinka Trading vs. Union of India , [ 1994 (10) TMI 64 - SUPREME COURT ] . The challenges to other notifications are unnecessary. As far as refunds are concerned in Table No.6, the petitioners shall file refund applications within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S.Ramasamy For the R1 in W.P.No.400 of 2021 : Mr.K.Subbu Ranga Bharathi For the R1 in W.P.Nos.35435 35445 of 2019 : Mr.Venkataswamy Babu Senior Panel Counsel COMMON ORDER By this common order, all these 22 cases are being disposed. Broadly, there are 2 categories of Writ Petition. Details of the Writ Petitions are given below:- Category No.1 : Steamer Agents 2. These Writ Petitions have been filed by and on behalf of Steamer Agents. These petitioners have challenged the vires of Notification No.28/12-ST dated 20.6.2012, Notification Nos.1/2017-ST, 02/2017-ST 03/2017-ST, all dated 12.01.2017 and Section 66C(2) of Chapter V of the Finance Act, 1994 (as amended) as ultra vires provision of the Constitution. They have also challenged the clarification of the Board in Para 4 4.1 of the Circular No.206/4/2017 Service Tax, dated 13.04.2017. 3. Table Nos.1, 2 and 3 below give the details of the writ petitions filed by these writ petitioners wherein vires of these notifications, provision and the circulars have been challenged. Table No.1 : Notifications under Challenge. Sl. No. W.P. Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refund the service tax paid by them. The details of the writ petitions filed by these petitioners are in Table Nos.4, 5 and 6. Table No.4: Challenge to the Notification. Sl. No. W.P.No. Notifications 30/2012 dt. 20.6.12 03/2017 dt.12.01.17 14/2017 dt.13.04.17 15/2017 dt.13.04.17 16/2017 dt.13.04.17 7 141/2021 - * - * * 8 9118/2019 - * - * * 9 9120/2019 - * - * * 10 400/2021 - * - * * 11 12467/2021 - * - * * 12 19009/2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming fiction under Sec 66B and 66C of Chapter V of the Finance Act is used to justify the levy. iii. It is submitted that there is no rational connection between levy of Service tax on international ocean freight when both the service provider and service recipient are located outside India, on the steamer agent who only performs limited functions as authorized under the Customs Act once the goods reach the customs frontiers of India. iv. It is submitted that, Service tax is sought to be levied on the steamer agent qua the freight element which is subject to levy of customs duty as part of the value of the imported goods in terms of Section 14 of the Customs Act, 1962 read with the provisions of Rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. Therefore, the imposition of service tax on goods already subject to Customs Duty is unconstitutional Customs Duty. v. It is submitted that in all cases of transportation by CIF basis (Cost Insurance and Freight), (which is the basis on which cargo is imported into India), the importer/consignee pays only the price for the goods. vi. When goods are imported on CIF basis, the importer/consign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the Steamer Agent is very limited, i.e. comply with the provisions of the Customs Act. 7. Broadly the Writ Petitions in Category-1 are opposed by the respondents. :- i. It is submitted that, the contention of the petitioners is on the wrong notion that the liability to pay service tax cannot be fastened on them as they are not service recipient was incorrect more particularly in view of the recent decision of the Apex Court in the case of Uol Vs Mohit Minerals , 2022 SCC OnLine SC 657. ii. It is submitted that the service provided by the foreign shipping line is a service of transportation of goods in a vessel. The said service is completed only when the goods are offloaded from the vessel (ship) to a land mass in the country. iii. The service of transportation of goods cannot be said to have been provided or completed when the goods are put on board the vessel. It is the responsibility of the shipping liner to deliver the goods safely to the port of destination. iv. When the destination is in India, the service of transportation can be said to have been completed or provided only when the goods are landed in India. Service tax, being a destination based tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 render any of the other sections or Rules in the Act, redundant or otiose nor does it authorize the levy of service tax on any event that takes place outside the whole of India. 8. The learned counsel for the Petitioners in Category- 1 has relied on the following case laws:- i. Imagic Creative Pvt Ltd v. CCT , (2008) 2 SCC 614 ii. BSNL v. Union of India , 2006 (2) STR 161 iii. All India Federation of Tax Practitioners v. Union of India , (2007) 7 SCC 527 iv. K Damodaraswamy Nadar and Bros V. State of Tamil Nadu , AIR 1999 SC 3909 v. United Shippers Ltd v. CCE , 2015 (37) STR 1043 (T-Mum) vi. CCE v. United Shippers , 2015 (39) S.T.R. J369 (S.C.) vii. Gujarat Ambuja Cements v. UOI , 2005 (182) ELT 33 (SC) viii. Uol Vs Mohit Minerals , 2022 SCC OnLine SC 657 9. The learned counsel for the Respondent in Category- 1 has relied on the following case laws:- i. All India Haj Umrah Tour Organiser Association vs Uol reported in MANU/SC/0921/2022 ii. Uol Vs Mohit Minerals , 2022 SCC OnLine SC 657 10. The grounds on challenge to the impugned notification by the petitioners in Category-2 are broadly as follows:- i. It is submitted that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. However, the cases were argued and written submission were filed. Broadly the writ petitions in Category-2 are opposed by the learned counsel for the department on the ground that:- i. The person liable to pay Service Tax as per Section 68 of the Finance Act, 1994 shall be such person as may be notified by the government and in such manner as may be prescribed. Section 68 of the Finance Act, 1994 reads as under:- (1) Every person providing taxable service to any person shall pay Service Tax at the rate specified in section/66B) in such manner and within such period as may be prescribed and (2) Notwithstanding anything contained in subsection (1), in respect of such taxable services as may be notified by the Central Government in the Official Gazette, the Service Tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66B) and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the Service Tax in relation to such service.. ii. It is submitted that persons liable to pay tax in terms of amendment to notification on Reverse charge mechanism Vide Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Vodafone International Holdings B.V v. Union of India and Anr. , (2012) 341 ITR 1. ix. All India Federation of Tax Practioners v. Union of India (2007) 7 SCC 527 x. Govind Saran Ganga Saran v. Commissioner of Sales Tax and Others (1985) 60 STC 1. 13. In support of these writ petitions, the learned counsel for the Respondent has relied on the following case laws:- i. Union of India v. VKC , C.A No. 4810 of 2021 ii. Godfrey Philips India ltd v. State of UP , (2005) 5 SCC 515. 14. To understand the scope of the challenge to the impugned notification, provision and circulars and the dispute, it will be useful to refer to a brief history of the Finance Act, 1994. The Chapter V of the Finance Act, 1994 came into force way back in 1994. 15. The levy of service tax was never under a separate enactment. There was no standalone enactment for levy and collection of Service Tax. Chapter V A of the Finance Act, 1994 was inserted w.e.f 14.5.2003 vide Finance Act, 2003. It was levied and collected under Chapter V and VA of the Finance Act, 1994. 16. The provisions of Chapter V of the Finance Act, 1994, were initially made applicable to 3 services viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the period in dispute, the definition of Service in Section 65(B)(44) of the Finance Act, 1994read as under:- (44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution; or (iii)a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to, (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 66 B of Finance Act, 1994 is the charging provision for levy of Service Tax. It reads as under:- SECTION 66B. Charge of service tax on and after Finance Act, 2012. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 26. It will suffice to keep in mind that under Section 66B of the Finance Act 1994, no service tax was chargeable on those services which were in the negative list in Section 66B of the Finance Act, 1994. We shall refer to the same in the course of the discussion. 27. We have considered the arguments advanced by the learned counsel for the Category I Category II Writ Petitioners. We have also considered the arguments advanced by the learned counsel for the respondents. We have also considered the provisions of Chapter V of the Finance Act, 1994 as amended from time to time. We have also considered Rule framed under the Finance Act, 1994, notifications issued thereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994 read with the provisions of the Service Tax Rules, 1994. 36. Further, elasticity was provided under Section 66C(1) of the Finance Act, 1994. Though a generic provision, it applied not only to service provided in India but also provided outside India. 37. Under Section 66C(1) of the Finance Act, 1994, the Central Government, by a fiction, under Rules, could determine the place of provision of service to fasten service tax liability on any person including a recipient of service. Specifically, under the provisions Section 66C(1) of the Finance Act, 1994, the Central Government can, having regard to the nature of service, determine the place of the provision of service. Thus, even if a service was actually provided outside the territory of India and consumed outside India could be deemed to have been provided in India. 38. Under Section 68(2) of the Finance Act, 1994, Rules framed under Section 66C(1) of the Finance Act, 1994, the Central Government cannot be challenged on the ground that actual service was provided outside the territory of India. 39. In terms of Sub-Section (2) to Section 66C of the Finance Act, 1994, Rules made under Sub-Section (1) shall not be inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange to the provision of the Finance Act, 1994. Apart from the introduction of definition of service , for the first time under Section 65B(44) of the Finance Act, 1994, several new provisions were introduced to suit the new ecosystem under which service tax was to be levied and collected with effect from 01.07.2012 under the Finance Act, 1994. One of the important introductions was under Section 66C of the Finance Act, 1994 vide Finance Act, 2012. Section 66C of the Finance Act, 1994 was to complement the other provisions of the Finance Act, 1994 under the changes brought to it vide the Finance Act, 2012. 47. In a way, Section 66C of the Finance Act, 1994 diluted Section 64 of the Finance Act, 1994. For the sake of clarity, Section 64 and Section 66C of the Finance Act, 1994 as in force during the period in dispute are reproduced below for comparison:- Table No:7 Section 64 of the Finance Act, 1994 Section 66C of the Finance Act 1994 1. This Chapter extends 1 to the whole of India except the State of Jammu and Kashmir. 2. It shall come into force on such date as the Central Government may, by notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 66A of the Finance Act, 1994, the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 was also issued under Sections 93 94 of the Finance Act, 1994 vide Notification No.11 of 2006-ST dated 19.04.2006. 52. Notifications under Section 68(2) of the Finance Act, 1994 which were issued were also amended from time to time to suit the changes and thus give teeth to the Central Government to levy tax on the recipient of imported service. 53. These amendments to the provisions of the Finance Act, 1994, in 2005 and 2006 and the provisions of the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 are not relevant for the period in dispute as Section 66A of the Finance Act, 1994 ceased to apply with effect from 01.07.2012 vide Notification No.23/2012 ST dated 05.06.2012. 54. However, these developments are to be kept in mind to answer the issues before us. The Parliament was steadfast in taxing service provided from outside India and consumed in India. Thus, the Parliament introduced new provisions to Chapter V of the Finance Act, 1994 vide Finance Act, 2012. 55. Apart from amending Notifications is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 61. Under Rule 10 of the Place of Provision of Services Rules, 2012, the place of provision of services of transportation of goods, other than by way of mail or courier , shall be the place of destination of the goods. Rule 10 of the Place of Provision of Services Rules, 2012 reads as under:- Table No.8 Rule 10. Place of provision of goods transportation services. - The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods: Provided that the place of provision of services of goods transportation agency shall be the location of the person liable to pay tax. 62. Rule 10 of the Place of Provision of Services Rules, 2012 applies without any distinction between inland transportation of goods service provided in India and services provided from outside the country. 63. Under Section 66D(p)(ii) of the Finance Act,1994, services by way of transportation of goods in an aircraft or a vessel from a place outside India to the customs station of clearance in India was in the negative list with e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India; 68. A specie of transportation service was in the negative list in Section 66D of the Finance Act, 1994 with effect from 01.07.2012 and therefore no service tax was leviable under Section 66B of the Finance Act, 1994 with effect from 1.7.2012 on services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India. 69. Simultaneously, under Sl.No.34(c) of the Mega Exemption Notification No.25/2012 - ST dated 20.06.2012, services received from a provider of service located in a non-taxable territory by a person located in a non-taxable territory was withdrawn vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017 was exempted. 70. This exemption vide Sl.No.34(c) to Mega Exemption Notification No.25/2012-ST dated 20.6.2012 with effect from 01.07.2012 was withdrawn vide the impugned Notification No.1/2017- ST dated 12.01.2017 with effect from 22.01.2017 by adding a proviso to the Sl.No.34 (c) of Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 with effect from 22.01.2017. 71. This withdrawal of exemption vide Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. The liability to pay customs duty or additional duty under the Act arises when the taxable event occurs. They are then subject to the payment of duty as prevalent on the date of the entry of the goods. An exemption notification issued under Section 25 of the Act had the effect of suspending the collection of Customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty etc., wholly or partially and subject to such conditions as may be laid down in the Notification by the Government in public interest . Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revokation of an exemption notification, in the public interest , is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act. Under the General Clauses Act an authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. From the very nature of power of exemption granted to the Government u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was implicit in it that it could be rescinded or modified at any time if the public interest so demands and secondly it is not permissible to postpone the compulsions of public interest till after 31st March 1981 if the Government is satisfied as to the change in the circumstances before that date. Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn it was free to act in the manner it did. It would bear a notice that though Notification 66/79 was initially valid only upto 31-3-1979 but that date was extended in public interest , we see no reason why it could not be curtailed in public interest. Individual interest must yield in favour of societal interest. 24 . In our considered opinion therefore the High Court was perfectly right in holding that the doctrine of promissory estoppal had no application to the impugned notification issued by the Central Government in exercise of its powers under Section 25(1) of the Act in view of the facts and circumstances, as established on the record. 26. In our opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtation of goods by a service provider located outside the territory of India to a person located in a non taxable territory was exempted with effect from 01.07.2012 vide Sl.34(c) to Mega Exemption Notification No.25/2012- ST dated 20.06.2012. 82. Challenge to 66C(2) of the Finance Act, 1994 is perhaps on account of the fact that the challenge to Rule 10 of the Place of Provision Rules, 2012 is barred under Section 66C(2) of the Finance Act, 1994. 83. This challenge to Section 66C of the Finance Act, 1994 is long after it was incorporated into the Finance Act, 1994 after the withdrawal of exemption by amendment to Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. 84. Therefore, challenge to Section 66C(2) of the Finance Act, 1994 has to be answered against the petitioners. Challenge to Section 66C(2) of Finance Act, 1994 has to fail in view of the law settled by the Hon'ble Supreme Court in Electronics Corporation of India Vs. Commissioner of Income Tax and Another , AIR 1989 SC 1707, GVK Industries Vs. Income Tax Officers , 2011 (4) SCC 36 and in Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be contemplated in a foreign State, it can, nonetheless, be enforced by the courts of the enacting State to the degree that is permissible with the machinery available to them. They will not be regarded by such courts as invalid on the ground of such extraterritoriality. 88. The Hon'ble Supreme Court in GVK Industries Vs. Income Tax Officers , 2011 (4) SCC 36 has clearly held that the Parliament has power to legislate over events which occur outside the territory of India provided that such an event has a real nexus/connection with event in India. 89. In fact, dealing with an identical situation under the GST Regime under Section 13(9) of the Integrated Goods and Service Tax Act, 2017, the Hon'ble Supreme Court in Union of India Vs. Mohit Minerals Private Limited , 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.) held as follows:- 109.As an alternative, the respondents submitted that though the levy may have a nexus with the Indian territory, the levy of tax extra-territorial must be provided by Parliament through statute and not by the Union Government through delegated legislation. We do not find any applicability of this submission to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Note: The above Proviso as it read when Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 was introduced w.e.f. 01.07.2012 Note: The above Proviso as amended by Notification No.1/2017, dated 12.01.2017 effect from 22.01.2017. 93. As mentioned in the earlier part of this order, the other notifications which have been issued are only consequential notifications issued to shift the burden of tax on the Steamer Agents [ Category I Writ Petitioners ] for a period between 22.01.2017 and 22.04.2017 and thereafter on the Importers [ Category II Writ Petitioners ] between 23.04.2017 and 30.06.2017. 94. The activity of transportation of goods qualified as a service within the meaning of Section 65B(44) of the Finance Act, 1994 and provision of service in India in view of Rule 10 of the Place of Provision of Services Rules, 2012 . Such an activity was merely exempted in terms of Sl.No.34(c) of Exemption Notification No.25/2012-ST dated 20.06.2012. 95. We will therefore, examine whether on account of the withdrawal of the exemption, the Central Government was justified in shifting the burden to pay service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 15/2017-ST dt 13.4.2017 with effect from 23.4.217 W.P.No.2151 of 2017 W.P. at Sl.Nos.7 to 14 of Table 4 The parent notification 30/2012-ST dated 20.6.2012-with effect form 1.7.2012 was issued under Section 68(2) of the Finance Act, 1994 to shift the burden. Impugned Notifications 3/20170ST dt dt12.1.2017 with effect from 22.1.2017 15/2017-ST dt 13.4.2017 with effect from 23.4.217 give effect to the above amendments in the Notification in Column C D as above to parent Notification No. 30/2012-ST dated 20.6.2012-with effect form 1.7.2012 issue under notification issued under Section 68(2) of the Finance Act, 1994 by shifting the burden to pay service tax. Person Liable to pay Tax The person who complies with the provision of Section 29, 30 or 38 of the Customs Act,1962 ie. Steamer Agents .) The importer. 3 28/2012-ST dated 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not.No.2/2017-ST, dated 12.01.2017, w.e.f. 22.01.2017 Not.No.16/2017-ST, dated 13.04.2017, w.e.f. 23.04.2017 2(1) In these rules, In these rules, unless, the context otherwise requires:- (d) person liable for paying service tax :- (i) in respect of the taxable services notified under sub-section (2) of Section 68 of the Act, means;- (EEC) in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods; (EEC) in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in nontaxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the importer as defined under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2012 issued under Section 68(2) of the Finance Act, 1994 prescribed the extent of service tax payable by person liable to pay tax for the purpose of Section 68(2) of the Act. 107. Relevant portion of Notification No.30/2012- ST, dated 20.06.2012 as it stood after the impugned Notification No.3/2017-ST dated 12.01.2017 during the period in dispute reads as follows:- Notification No.30/2012- ST, dated 20.06.2012 I.The taxable services, In exercise of the powers conferred by subsection (2) of section 68 of the Finance Act, 1994 (32 of 1994) and in supersession of (i) notification of the Government of India in the Ministry of Finance (Department of Revenue), No.15/2012-Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part Ii, Section 3, Sub-Section (i) vide number G.S.R 213(E) dated the 17th March, 2012 and (ii) notification of the Government of India in the Minsitry of Finance (Department of Revenue) No.36/204, Service Tax, dated the 31st December, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R.849(E) dated the 31st December, 2004, except as respects things d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No.15/2017-ST, dated 13.04.2017 Explanation III .- The business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services for the purpose of this notification. Explanation IV.- For the purposes of this notification, in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying service tax other than the service provider shall be the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods . . Explanation IV.- For the purposes of this notification, non-assesse online recipient has the same meaning as assigned to it in clause (ccba) of subrule 1 of rule 2 of Service Tax Rules, 1994. Explanation V.- For the purposes of this notification, in respect of services provided or agreed to be provided by a person located in non-taxable territory to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 67A of the Finance Act, 1994 vide Notification No.18/2011-ST dated 01.03.2011 was also amended. 116. Section 67A of the Finance Act, 1994 and Rule 8B of Point of Taxation Rules, 2011 as inserted vide impugned Notification No.14/2017-ST dated 13.04.2017 read as under:- Table No.14 Section 67A of the Finance Act, 1994 Rule 8B of the Point of Taxation Rules, 2011 Date of determination of rate of tax, value of taxable service and rate of exchange. (1) The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. For the purposes of this section, rate of exchange means the rate of exchange determined in accordance with such rules as may be prescribed. (2) The time or the point in time with respect to the rate of service tax shall be such as may be prescribed. Determination of point of taxation in case of services provided by a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the import goods. Customs duty is already paid by the importers on these values. To that extent, there is no justification to burden the importers who will be forced to bear the incidence of the levy on again. 122. The transaction value for the purpose of custom duty and additional duty of custom equivalent to the excise duty (ADC), includes the value of ocean freight. Therefore, importers cannot be mulcted with the double tax on the ocean freight either directly or indirectly particularly in a CIF contracts. 123. The value of incidence of such intermediate services availed by the Shipping Liners will be passed on by the Shipping Liners to the Foreign Shippers and eventually to the importers. This value gets taxed in the case of CIF Contract. In the case of FOB contracts, the importers have to in any event include the value under Section 14 of the Customs Act, 1962. Thus, to tax, the overseas freight twice is also uncalled. 124. Such cost of such transportation is factored into the price of the shipment and such cost of such shipment gets built into the transaction value of the import goods at the time and place of importation. Computation of service tax in CIF cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The, Central Government had devised a mechanism, whereby, apart from those activities which were specifically excluded from the definition of service in Section 65B(44) of the Finance Act, 1994, few services were placed in the negative list in Section 66D of the Finance Act, 1994 while few services were specifically exempted with effect from 01.07.2012 under Mega Exemption Notification No.25/2012-ST dated 20.06.2012 with effect from 01.07.2012. 133. Along with these notifications, the Service Tax Rules, 1994 issued vide Notification No.2/1994 dated 28.6.1994 was amended first vide Notification No.2/2017-ST dated 12.01.2017 with effect from 22.01.2017 and by the impugned Notification No.16/2017-ST dated 13.04.2017 with effect from 23.4.2017 for the respective period. Those amendments vide the impugned notifications were intended to declare these petitioners as persons liable to pay tax . 134. Thus, a statutory framework for shifting the burden to pay tax was made. However, the Notification No.3 of 2017-ST, dated 12.01.2017 had defects right from the time of its inception. 135. The other collateral notifications which have been challenged in these writ petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods. The importer as defined under clause (26) of Section 2 of the Customs Act, 1962 (52 of 1962) of such goods. 139. There is a flaw in the above Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017. It is the foreign liner who engages the service of various other persons in the course of transport of service. It is the foreign shipping liner who receives service who can be taxed and not the importers or the steamer agents although by virtue of the above two notifications, the person liable to pay tax has been also declared as the person who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods between 22.01.2017 and 22.04.2017 and thereafter the importer as defined under Clause (26) of Section 2 of the Customs Act, 1962 of such goods between 23.04.2017 and 30.06.2017. 140. The demand are incapable of being enforced in view of the above defects pointed out in the amendment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No.30/2012-ST dated 20.06.2012 vide Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017 and the burden was shifted on these writ petitioners by virtue of the amendment to the provisions of Service Tax Rules, 1994 vide Notification No.02/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and later by Notification No.16/2017 dated 13.04.2017 w.e.f. 23.04.2017, the demand of service tax on these petitioners cannot be countenanced for the foregoing reasons. 146. The impugned notifications had a very short life with effect from 22.01.2017 upto 30.06.2017. With effect from 01.07.2017, the respective Goods and Service Tax Act, 2017 (GST Act, 2017) came into force and subsumed several indirect taxes including Chapter V of the Finance Act, 1994. 147. In Sal Steel Ltd. Vs. Union of India , 2019 SCC OnLine Guj 3706 : (2020) 37 GST1, the Division Bench of the Gujarat High Court held as follows:- 22. In the case on hand, indisputably, the overseas sellers/suppliers of the goods have made contracts with the shipping line/shipper for sea transportation of the goods, and such overseas sellers/suppliers have made payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable territory of India, and an essential legislative function of taxing an activity in non-taxable territory could not have been delegated to the Central Government. Rule 6A has been struck down as ultra-vires the Rule making power of Section 94 by the Delhi High Court. 33. The impugned provisions are also ultra vires the Rule making power of Section 94 of the Finance Act. 34. As observed above, the person receiving service of sea transportation in CIF contracts is the seller-supplier of the goods located in a foreign territory. The Indian importers like the writ applicants are not the persons receiving sea transportation service, because they receive the goods contracted by them, and they have no privity of contract with the shipping line nor does the Indian importer make any payment of ocean freight to the service provider. But the impugned provisions make such importer liable to pay service tax; and therefore such provisions allowing the Central Government to recover service tax from a third party are ultra vires the statutory provisions of the Finance Act, as discussed below. .. 38. But the importers in CIF contracts i.e. the writ applicants herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The impugned provisions creating a charge of service tax on third parties though the Act of the Parliament provides for levy and collection of tax either from the person providing service or from the person receiving service are beyond the charging provision, and also beyond the Rule making power of Section 94 of the Finance Act. No machinery provision: 44. Even if it is assumed that service tax can be recovered from a third party like the Indian importers in CIF contracts, there is no machinery provision for valuation of the service, and therefore also the impugned Rules and Notifications are unenforceable. It is an admitted position of fact that the Petitioners do not have any information about the actual amount of ocean freight paid by the overseas sellers/suppliers to shipping lines. The invoices and purchase orders (Annexure- D to SCA No. 20785/2018) clearly show that the price of the goods was fixed on basis of quantity (i.e. DMT-Dry Metric Tton) for CIF Mundra Port basis. When service tax is to be computed and assessed on the value of the service as laid down under the machinery provision of Section 67 of the Finance Act, no service tax can be assessed and charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that far to hold all the notifications challenged as ultra-vires. 150. To implement the consequences of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, the burden to pay service tax was attempted to be shifted for a part of the period between 22.01.2017 and 22.04.2017 on the Steamer Agents (Category I W.Ps) and for the period between 23.04.2017 and 30.06.2017 on the Importer (Category II W.Ps) vide other impugned Notifications which have been challenged in these batch of the writ petitions. 151. Category I Writ Petitioners have also challenged the vires of para 4 and 4.1 of Circular No.206/4/2017-ST dated 12.4.2017 in W.P.No.14643 of 2017 as null and void and ultravires the various provisions of the Constitution and ultra vires Section 83 of the Finance Act, 1994, Section 37B of the Central Excise Act, 1994 as made applicable to Finance Act, 1994 as well as Notification No.26/2012-ST dated 20.06.2012. 152. Impugned Circular No. 206/4/2017-ST dated 12.4.2017 was issued in the background of withdrawal of exemption for services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012-S.T. Superseded In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), and in supersession of notification number 13/2012- Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 211(E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely:- Sl. No. Description of taxable service Percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notifications as mentioned above. They are curable defects. However, it is unwarranted, as the drift under the GST regime is also to not to burden the import with IGST under similar circumstances. Therefore challenges to Notifications in Table No.1 and Table No.4 fail and demand of sales tax on these petitioners also fail. 160. As far as refunds are concerned in Table No.6, the petitioners will have to file appropriate refund applications for refund of the amounts which are said to have been paid by them in accordance with the law laid down by the Hon ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India , 1997 (89) E.L.T.(S.C.). 161. In the light of the above discussion, the challenge to Section 66(2) of the Finance Act, 1994 and Circular dated 13.04.2017 bearing Circular No.206/4/2017-ST in Writ Petitions in Table No.2 and Table.No.3 respectively fails. 162. Challenge to Notification No.01/2017-ST dated 12.01.2017 has to fail in the light of the decision of the Hon ble Supreme Court in Kasinka Trading vs. Union of India , 1995 (1) SCC 274, 1994 (74) E.L.T.782 (S.C.). The challenges to other notifications are unnecessary. 131. In the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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