TMI Blog2024 (3) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Similar issue as fell for consideration before the Madras High Court in the case of Chennai Ennore Ports Steamer Agents Association Vs. Union of India [ 2023 (5) TMI 899 - MADRAS HIGH COURT] , in such decision the Court had considered the decision of the Division Bench of the Gujarat High Court in SAL Steel Ltd. 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 impugned Notifications at Exhibits-A and F are held to be illegal as held by the Gujarat High Court in SAL Steel Ltd - Petitioner would accordingly be entitled to the refund of duty, however, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012. Under such amendment, Section 66 D(p) was incorporated to deal with Services by way of transportation of goods . It is contended that sub-clause (ii) thereof was omitted by the Finance Act, 2016 w.e.f. 1st June 2016. It is the case of the Petitioner that transportation of goods in a vessel provided by a person located in non-taxable territory to the person located in non-taxable territory was exempted from service tax available vide Sl. No. 34 of the Notification No. 25/2012-ST and the same was made inapplicable w.e.f. 22nd January 2017, vide Notification No. 1/2017-ST dated 12.01.2017. It is further contended that Service Tax Rules, 1994 were amended by Service Tax (Amendment) Rules, 2017, vide Notification No. 2/2017-ST dated 12th January 2017, wherein Rule 2 sub-rule (1), clause (d) and sub-clause (i) was amended to insert a new item (EEC) for taxing ocean freight w.e.f. 22nd January 2017. It is further contended that Notification No. 30/2012-ST dated 20th June 2012 providing for Reverse Charge System was amended vide Notification No. 3/2012-ST dated 12th January 2017 to insert entry to prescribe Reverse Charge Mechanism for the transportation of goods in a vessel. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46A. (b) Issue a Writ of Certiorari or any other appropriate writ or direction under Article 226/227 of the Constitution of India declaring the impugned notifications (Exhibit A) issued under Finance Act, 1994 dated 28/6/1994 being ultra vires and contrary to the provisions of Section 68(2) read with Section 66B and Section 64(1) of the Finance Act, 1994 to the extent challenged herein. (c) Issue a Writ of Declaration or certiorari or any other appropriate writ or direction under Article 226/227 of the Constitution of India declaring the impugned notifications (Exhibit - F) to be ultra vires and contrary to the provisions of Section 5 of the IGST Act to the extent challenged herein. (d) Issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ order or direction, directing the Respondents not to recover Service Tax/IGST from the Importer on the service of transportation of goods, in a vessel provided by a person located in a non-taxable territory to a person located in a non-taxable territory and further to refund taxes with interest where already recovered; (e) issue a writ of Prohibition or a writ in the nature of Prohibition or any other appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Division Bench of Gujarat High Court in SAL Steel Ltd. vs. Union of India whereby the notification has been quashed and set aside and the petitioner was granted all consequential benefits. 2. We are also informed that the decision in SAL Steel Ltd. (supra) was followed by the Tribunal in the case of Commissioner of Service Tax, Ahmedabad vs. Kiri Dyes and Chemical Ltd. The decision of the Tribunal in Kiri Dyes and Chemical Ltd. was carried in appeal by the department before the Supreme Court. The Supreme Court confirmed the decision of the Tribunal by dismissing the appeal filed by the department in the case of Commissioner of Service Tax vs. Kiri Dyes and Chemicals Ltd. 3. Insofar as the Notification (Exhibit F) is concerned, learned counsel for the petitioner would submit that the same is the subject matter of prayer clause (c) as also partly prayer clause (a) would stand covered by the decision of the Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd. 4. However, as we have noted that there is deficiency in the memo of the petition on the count that the relevant facts are not pleaded, we grant an opportunity to the petitioner to place on record the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 35. The charging section 66B provides for levy of service tax on the value of services , other than those specified in the Negative List. The term service is defined under Section 65B(44) to mean any activity carried out by a person for another for consideration. Thus, service is an activity carried out by a person (i.e. the service provider) for another person (i.e. the receiver of service). Only two parties are recognized by the Parliament in regard to service viz. the service provider and the recipient of service. 37. By virtue of Sub Section (2) of Section 68, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiving service are beyond the charging provision, and also beyond the Rulemaking power of Section 94 of the Finance Act. 45. A charging provision and the machinery provision are two sides of the same coin. A substantial provisions of chargeability and the machinery provisions of valuation have a navel relationship of cause and effect with the result that one cannot survive without the other, and they are inseparable pillars of an integral tax code. The observations of the Mumbai High Court at para 41 in Satellite Television Asian Region Ltd. reported in MANU/IU/0002/2006 , and by the Supreme Court at para 10 in CIT Bangalore V/s. B. C. Srinivas Setty, AIR 1981 SC 1972 are relevant in this regard, because it is held in these cases that if the computation provision cannot be applied, then the substantial provisions of chargeability become redundant. 46. In the present cases, since the value of ocean freight is not available, Sub Rule (7CA) is inserted in Rule 6 of the Service Tax Rules thereby giving an option to the importer to pay service tax on 1.4% of CIF value of imported goods. But this insertion of Sub Rule (7CA) in Rule 6 is also ultra vires the machinery provision of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Shri R. R. Dave, learned Consultant appearing on behalf of the respondent/ Assessee submits that learned Commissioner (Appeals) following the judicial discipline by relying upon the Hon'ble Gujarat High Court in the case of SAL Steel Limited allowed the appeal of the respondent therefore, there is no infirmity in Order-in-Appeal and the Revenue's appellant is not maintainable. As regards the Revenue's contention that the Revenue's appeal is pending before the Hon'ble Supreme Court in the case of SAL Steel Limited, he submits that there is no stay against the Hon'ble Gujarat High Court order. He placed reliance on the Hon'ble Supreme Court decision in the case of Union of India v. Mohit Minerals Pvt. Limited 2022 (61) GSTL 257 (SC). 4. I have carefully considered the submissions made by both the sides and perused the record. I find that the issue whether Ocean Freight/Sea Transportation service is liable to service tax or otherwise has been decided by jurisdictional High Court of Gujarat in the case of SAL Steel Limited. As regards the Revenue's appeal pending before the Hon'ble Supreme Court against the aforesaid decision, I find that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contract is impossible. That apart, in view of the Division Bench of the Gujarat High in Sal Steel Ltd Vs. Union of India, (2020) 37 G.S.T.L. 3/[2020] 117 Taxmann.com 619, no tax can be demanded on an ocean freight or importers. 125. Neither the importer in India who imports the goods at the place of destination in India will have an idea as to the cost of such services which are in built and borne by the foreign shipping liners nor the steamer agents who book cargo for and behalf of a shipping liner. 126. Further, in the case of contracts on a CIF (Cost, Freight and Insurance) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, there is no justification in the impugned Show Cause Notices in Table-5. These show cause notices are therefore quashed. iv. The respondents shall also not issue any show cause notices to the importers and steamer agents for the period covered by this order i.e. for the period between 22-1-2017 and 30-6-2017 for similar activity. v. As far as refunds in Table 6 are concerned, the petitioners are directed to file refund claims within 30 days from the date of receipt of a copy of this order, if no claim has already been made. vi. All the refund claims shall be disposed of within a period of 60 days or 90 days, as the case may be, 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.). 14. We find ourselves in complete agreement with the view taken by the Division Bench of the Gujarat in SAL Steel Ltd.(supra) as also by the Division Bench of the Madras High Court in Chennai Ennore Ports Steamer Agents Association (supra). Thus, the Petitioners challenge to the impugned notifications as prayed for in prayer clause (a) needs to succeed on the ground that the said notifications were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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