Tribunal Rules No Service Tax on Ocean Freight for Services Outside India, Citing Gujarat HC Precedent.

The Tribunal set aside the impugned order, allowing the appeal by determining that the appellant is not liable to discharge service tax on ocean freight under the reverse charge mechanism. The Tribunal relied on the Gujarat HC's ruling in SAL Steel Ltd, which deemed taxing ocean freight as ultra vires, confirming that such services rendered outside India cannot be taxed under the Finance Act, 1994. The judgment was pronounced on 24th October 2024.

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Issues:
Whether the appellant is liable to discharge service tax on transportation of imported goods by vessel (Ocean Freight) under reverse charge mechanism.

Analysis:
The Hon'ble Gujarat High Court in the case of SAL Steel Ltd Vs. Union of India held the taxability of ocean freight as ultra vires. The appellant relied on various judgments and circulars to support their case. The issue in the present case pertains to the taxability of ocean freight for the import of goods through a vessel. The Tribunal noted that the issue has been settled by the Hon'ble Gujarat High Court in the SAL Steel Ltd case. The High Court held that the service of transportation of goods up to the Indian Port, which includes sea transportation, is an extraterritorial event and cannot be taxed under the Finance Act, 1994. The Tribunal emphasized that the Parliament has restricted the provisions of Chapter-V of the Finance Act to events occurring in the taxable territory, i.e., India. Therefore, any attempt to levy service tax on services rendered and consumed outside India is ultra vires the Act. The Tribunal referenced the judgment in Commissioner of Service Tax, Ahmedabad Vs. Kiri Dyes and Chemicals Limited, where it was held that ocean freight is not taxable, a decision upheld by the Supreme Court.

The Tribunal found the demand on ocean freight in the present case not sustainable based on the settled legal position. Consequently, the impugned order was set aside, and the appeal was allowed. The judgment was pronounced in open court on 24th October 2024.

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