Appellant not liable for service tax on ocean freight under CIF contract; Notifications 15/2017 and 16/2017-S.T. deemed unconstitutional.

The court held that the appellant was not liable to pay service tax on ocean freight under a CIF contract. It declared Notifications 15/2017 and 16/2017-S.T. unconstitutional, rendering payments made under them invalid. The appellant was granted a refund under Section 142 of the CGST Act, 2017, as the tax was not legally due. The court set aside the previous order, allowing the appeal with consequential benefits.

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Issues Involved:
1. Liability to pay Service Tax on ocean freight.
2. Impact of CIF (Cost, Insurance, and Freight) vs. FOB (Free on Board) contracts on service tax liability.
3. Validity of payments made under Notification Nos. 15/2017 and 16/2017-S.T.
4. Entitlement for refund under Section 142 of the CGST Act, 2017.

Detailed Analysis:

Issue 1: Liability to Pay Service Tax on Ocean Freight
The appellant argued that they were not liable to pay service tax on ocean freight as they imported goods on a CIF basis, meaning they were not the service recipient of the shipping company. This argument was supported by several judicial decisions indicating that such tax was not payable.

Issue 2: CIF vs. FOB Contracts and Service Tax Liability
The judgment elaborated on the distinction between CIF and FOB contracts. Under a CIF contract, the overseas supplier arranges and pays for the transportation of goods, making the supplier the recipient of the transportation service, not the importer. This distinction is crucial because, under FOB contracts, the importer engages the vessel for transportation, making them liable for service tax.

Issue 3: Validity of Payments Under Notification Nos. 15/2017 and 16/2017-S.T.
The appellant paid the service tax under these notifications, which were later declared unconstitutional by the Gujarat High Court in the case of Mohit Minerals Pvt. Ltd. The court found that the notifications lacked legislative competency and were ultra vires the Integrated Goods and Services Tax Act, 2017. Consequently, any payments made under these notifications were not valid.

Issue 4: Entitlement for Refund Under Section 142 of the CGST Act, 2017
The appellant sought a refund under Section 142(3) and 142(6)(a) of the CGST Act, 2017. The court noted that the service tax paid was not legally due, and retaining the amount would unjustly enrich the department. The court also discussed the transitional provisions under Section 140(1) of the CGST Act, 2017, and noted that the restrictive amendments regarding Krishi Kalyan Cess (KKC) had not been operationalized.

Conclusion:
The court concluded that the appellant was entitled to a refund of the service tax paid on 17.10.2018. The order under challenge was set aside, and the appeal was allowed with consequential benefits. The judgment emphasized that the tax was not payable in the first place, and thus, the refund should be granted.

Key Takeaways:
- The appellant was not liable to pay service tax on ocean freight under a CIF contract.
- Notifications 15/2017 and 16/2017-S.T. were declared unconstitutional, making any payments under them invalid.
- The appellant was entitled to a refund under Section 142 of the CGST Act, 2017, as retaining the amount would unjustly enrich the department.

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