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TMI Blog2024 (3) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ing imported by the Petitioner from the foreign suppliers under CIF (Cost, Insurance and Freight) Contract, wherein the entire cost of transportation of goods upto the customs station in India is incurred by the foreign supplier. 2. It is the Petitioner's case that, during the period from 23rd April 2017 to 30th June 2017, the Petitioner imported required raw materials and spare parts for machinery under different bills of entry, the description of which is set out in paragraph no. 3.3 of the Petition. The bills of entry are 10 in number and are issued between 15th May 2017 to 24th June 2017. It is contended that Respondent No. 3 conducted an audit and issued final report No. 52/2018/-19 dated 16th May 2018 demanding payment of service tax Rs. 26,04,895/-, for the period April 2017 to June 2017 on the value of the imports as set out in the chart contained in Paragraph 3.3 of the Petition. It is contended by the Petitioner that accordingly, for Unit No. 1, the Petitioner has paid service tax of Rs. 23,10,961/-(service tax of Rs. 21,56,897/-, SBC Rs. 77,032/- and KKC Rs. 77,033/-) along with interest of Rs. 2,93,934/- vide GAR-7, Challan dated 2nd May 2018. 3. The Petitioner conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transportation of goods, by a vessel from a place outside India upto the customs station for clearance in India. 5. On the above premise, the contention of the Petitioner is to the effect that IGST on the transportation of goods in a vessel from a place outside India upto the customs station of clearance in India on the importer, on reverse charge basis, is arbitrary and illegal. It is contended that levy of service tax on the importer, who is neither the service provider nor the service receiver, is sought to be made in terms of the power conferred under sub-section (3) of Section 5 of the IGST Act. It is contended that, in any event, levy and collection of service tax/IGST from an Indian importer in respect of goods (in respect of CIF contracts), on service rendered outside India, in a non-taxable territory, is unconstitutional. The service tax on ocean freight payable by the importer under reverse charge mechanism would not be legal and valid. Thus, raising such challenge the Petitioner has prayed for the following reliefs:- "(a) Issue a Writ of Certiorari or any other appropriate writ or direction under Article 226/227 of the Constitution of India declaring the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and ad-interim reliefs in terms of prayer (f) above; (i) for costs of the Writ Petition and orders thereon; and (j) for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case." 6. Reply Affidavit is filed on behalf of the Respondents opposing the Petition. 7. We had heard the proceedings on the earlier occasion, when the learned Counsel for the Petitioner had contended that the notifications as impugned in the Petition were subject matter of adjudication before the Division Bench of the Gujarat High Court in the proceedings of SAL Steel Ltd. Vs. Union of India 2020 (37) G.S.T.I.. 3 (Guj.) as also such decision of the division bench was considered by the Tribunal in the case of Commissioner of Service Tax, Ahmedabad vs. Kiri Dyes and Chemicals Ltd (2023) 10 Centax 134 (Tri.-Ahmd). The Tribunal following the decision of the division bench had accepted the Assessee's contention in regard to the service tax on ocean freight under reverse charge as payable by the importer to be illegal. Such decision of the Tribunal was confirmed by the Supreme Court in dismissing the Revenue's Appeal. This Court according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We have perused the record. 9. At the outset we may observe that the division bench of the Gujarat High Court in SAL Steel Ltd. (supra) had considered the challenge to the impugned notifications in the context of the service tax on transportation of goods by a vessel from a place outside India. The impugned provisions were held ultra vires of Section 64, 65(B), 44, 66(B), 67 and 68 and 94 of the Finance Act, 1994. It was held that importers in CIF contracts were neither service providers nor service receivers in respect of transport of goods by vessel from place outside India, and that service tax cannot be recovered from third party who is neither the service provider nor the service receiver. 10. In such context, the observations as made by the Court are required to be noted which reads thus:- "31. A perusal of Section 94 shows that there is no power conferred upon the Central Government to make any Rules or Notifications for extra territorial events; or in other words, for services rendered and consumed beyond the "taxable territory" i.e. beyond India. Obviously, the Act itself is not applicable to the territories other than India and therefore the Executives cannot have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transportation of goods by a vessel from a place outside India upto the Customs station of clearance in India. Section 68(1) and also the reverse charge Notification under Section 68(2) permit the Central Government to collect and recover service tax only from the person providing the service or from the person receiving the service, and not from a third party. The rulemaking power of section 94 also does not permit the Central Government to make rules for recovering service tax from a third party who is neither the service provider nor the service receiver. 39. Therefore, the impugned provisions i.e. Rule 2 (1)(d)(EEC) and Explanation-V to Notification No. 30/2012-ST are ultra vires Section 65B(44) defining "service" and Section 68, and also Section 94 of the Finance Act. 43. When the Respondents have admitted that the importers in India are not persons receiving service of sea transportation, and that it is the Respondent's case that the Indian importers were "indirectly" receiving such service and hence were persons liable to pay service tax on such service; it is clearly a case where the Respondents propose to charge service tax from the third parties i.e. the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a third party not having any information about the value of such service. 58. In view of the aforesaid discussion, the writ application succeeds and is hereby allowed. The Notification Nos. 15/2017-S.T. and 16/2017-S.T. making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reverse charge Notification No. 30/2012-S.T. is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and enquiries for collecting service tax from them as importers on sea transportation service in CIF contracts are hereby quashed and set aside with all consequential reliefs and benefits." 11. Following the decision of the division bench in SAL Steel Ltd. (supra), the Central Excise and Service Tax Appellate Tribunal in the case of Commissioner of Service Tax, Ahmedabad (supra) dismissed the Revenue's Appeal passed the following Order:- "The issue involved in the present case is whether the appellant is liable to pay service tax on the service on Ocean Freight or otherwise. 2. Shri Sanjay Kumar, learned Superintendent (AR) appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Vs. Union of India (2023) 10 Centax 135 (S.C.), in such decision the Court had considered the decision of the Division Bench of the Gujarat High Court in SAL Steel Ltd. (supra) in considering the issue namely, whether the members of the Petitioner were liable to pay service tax on the service of ocean freight. Rejecting the case of the Revenue and accepting the case of the Assessee, the Madras High Court, making the following observations, allowed the Writ Petitions by setting aside the show cause notices issued to the respective Petitioners. The Relevant observations of the Court which require to be noted, read thus:- "121. In CIF contracts, the service of transportation of goods by vessel is received by the foreign exporters/overseas supplier from the foreign/overseas vessel owner/operator/Shipping Liners in the CIF contract. The value of all incidental services consumed in the course of import of goods is built into the import value 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he territory of India subject of course to the applicability of the Act. If that be so, the notices which have been challenged by the category II writ petitioner in Table 5 are also liable to be quashed. However, we would not go that far to hold all the notifications challenged as ultra-vires. 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.). 164. In the result, it is held as follow:- i. The challenges to Section 66(2) of the Finance Act, 1994, impugned Circular No. 206/4/2017-Service Tax, dated 13.04.2017 and impugned Notifications issued by the Central Government under the provisions of the Finance Act, 1994 fail. Therefore, Writ Petitions in Table, 1,2,3 4 are liable to be dismissed and are accordingly dismissed. ii. These petitioners are however not the recipient of service for the purpose of the impugned Notification No. 3/2017-ST dated 12.01.2017 amending Notification No. 30/2012- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction was in violation of principles of 'composite supply' enshrined under Section 2(30) read with section 8 of the GST Act. Since the Indian importer is liable to pay IGST on the 'composite supply' comprising of supply of goods and supply of services of transportation, insurance etc. in CIF contract, a separate levy on the Indian importer for the 'supply of services' by the shipping line would be violative of Section 8 of the GST Act. There is no dispute that such relief as prayed for stands covered by the decision of the Supreme Court in Union of India Vs. Mohit Minerals Pvt. Ltd(supra). 16. Mr. Mishra's contention that the Petitioner had voluntarily deposited the amount and hence the Petitioner would not be correct in seeking any refund, is also not acceptable. Any such deposit or even demand would certainly be without authority in law and therefore violative of Article 265 of the Constitution. The observations in this regard as made by the Madras High Court, following the decision of the Supreme Court in Mafatlal Industries Vs. Union of India MANU/SC/1203/1997, in our opinion, are apposite. It would be thus necessary that the Petitioner makes a refund application claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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