Ocean freight tax on CIF imports cannot be imposed by notification on a non-recipient importer; refund remains statutory

A notification or rule cannot fasten service tax on an importer in a CIF ocean-freight contract where the importer is neither the service provider nor the service recipient, and machinery or reverse charge provisions cannot enlarge the charging section. The text also states that later IGST notifications on transportation of goods by vessel from outside India to the customs station were treated as impermissible separate levies on the same composite supply, and that tax collected without authority of law engages Article 265. Refund cannot be denied merely because payment was voluntary, though it remains subject to the statutory refund scheme and unjust enrichment.

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Issues: (i) Whether the notifications and rules fastened service tax liability on the importer in CIF contracts for ocean freight, despite the importer not being the service provider or service recipient. (ii) Whether the IGST notifications and reverse charge levy on the importer for transportation of goods by vessel from outside India to the customs station were valid, and whether refund could be denied on the ground of voluntary payment.

Issue (i): Whether the notifications and rules fastened service tax liability on the importer in CIF contracts for ocean freight, despite the importer not being the service provider or service recipient.

Analysis: The levy under the service tax regime was examined in the light of the statutory scheme governing taxable services, reverse charge, and the rule-making power. The Court accepted the view that in CIF contracts the importer does not receive the ocean freight service from the foreign shipping line and is a third party to that service. It further accepted that a notification or rule cannot enlarge the charging provision so as to impose tax on a person who is neither the service provider nor the service recipient. The Court also treated the impugned machinery and reverse charge provisions as unsustainable to the extent they created liability on the importer for a service rendered in a non-taxable territory.

Conclusion: The challenge to the service tax notifications succeeded, and the impugned service tax levy on the importer was held illegal.

Issue (ii): Whether the IGST notifications and reverse charge levy on the importer for transportation of goods by vessel from outside India to the customs station were valid, and whether refund could be denied on the ground of voluntary payment.

Analysis: The Court held that the later GST notifications were covered by the binding ruling on reverse charge and composite supply, under which the importer was already liable on the composite supply of goods and incidental services and could not be subjected to a separate levy on ocean-freight services. It also held that any collection without authority of law attracted Article 265 of the Constitution of India, and that refund could not be refused merely because payment had been made, though the claim would still have to be examined under the law of refund, including unjust enrichment.

Conclusion: The IGST notification challenge succeeded, and refund was left open subject to filing of a refund application and adjudication according to law.

Final Conclusion: The Court granted substantive relief to the petitioner by holding the impugned notifications illegal, while limiting monetary restitution to the statutory refund process.

Ratio Decidendi: A notification or rule cannot impose a tax burden on an importer for ocean-freight services in a CIF contract where the importer is neither the service provider nor the service recipient, and a separate levy on the same composite supply is impermissible.

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