2024 (11) TMI 1080 - AT - Service Tax

Refund claim for ocean freight service tax upheld following unconstitutional ruling under Notification 12/2013-ST

ADANI POWER MUNDRA LIMITED Versus Commissioner of Central Excise and Service Tax - AHMEDABAD-I

CESTAT Ahmedabad upheld appellant's refund claim for ocean freight service tax. Following Gujarat HC's decision in SAL Steel Limited case declaring ocean ... Refund claim on ocean freight - non taxability of service of ocean freight covered by judgment of SAL Steel Limited [2019 (9) TMI 1315 - GUJARAT HIGH COURT] on the ground that the matter is pending before the Supreme Court - HELD THAT:- Since the service of ocean freight was held by the Hon’ble Jurisdictional High Court of Gujarat[supra} as unconstitutional and appellant was not liable to pay service tax on ocean freight, they are eligible for refund claim without following the refund process under Notification No.12/2013-ST. Revenue’s contention that the Revenue’s appeal is pending before the Hon’ble Supreme Court in the case of SAL Steel Limited [supra] Hon’ble Supreme Court decision in the case of Union of India vs. Mohit Minerals Pvt. Limited [2022 (5) TMI 968 - SUPREME COURT] as find that there is no stay against the said High Court judgment. In view of this position, I find no infirmity in the impugned order which was passed relying on the jurisdictional High Court judgment in the case of SAL Steel Limited. Accordingly, following the Hon’ble Gujarat High Court decision in the case of SAL Steel Limited, the impugned order is upheld and the Revenue’s appeal is dismissed Thus, as the ocean freight is not liable to service tax, appellant is eligible for the refund only on the ground of the non taxability of the ocean freight itself. Appellant is eligible for the refund. Issues Involved:1. Whether the Commissioner (Appeals) was correct in remanding the refund claim concerning ocean freight without addressing the non-taxability issue as decided in the SAL Steel Limited case by the Gujarat High Court.2. The applicability of Notification No.12/2013-ST for SEZ units in the context of ocean freight service tax refunds.3. The impact of pending Supreme Court proceedings on the refund claim based on the SAL Steel Limited judgment.4. The eligibility for a refund based on the non-taxability of ocean freight as per the Gujarat High Court's decision.Issue-wise Detailed Analysis:1. Remanding the Refund Claim Without Addressing Non-Taxability:The core issue in the judgment was whether the Commissioner (Appeals) erred in remanding the refund claim of Rs.5,03,71,491/- for reconsideration under Notification No.12/2013-ST without conclusively addressing the non-taxability of ocean freight services. The appellant argued that the ocean freight was not taxable based on the Gujarat High Court's decision in SAL Steel Limited. The Tribunal agreed with the appellant, stating that if ocean freight is deemed non-taxable, the refund should not be processed under Notification No.12/2013-ST. The Tribunal highlighted that the Commissioner (Appeals) should have decided the refund claim based on the non-taxability of ocean freight as established by the Gujarat High Court.2. Applicability of Notification No.12/2013-ST:The Tribunal examined the applicability of Notification No.12/2013-ST, which provides service tax exemptions for services received by SEZ units. The Commissioner (Appeals) had remanded the matter to verify compliance with this notification. However, the Tribunal clarified that since the ocean freight service was declared non-taxable by the Gujarat High Court, the refund claim should not be contingent upon the conditions of Notification No.12/2013-ST. The Tribunal emphasized that the notification is relevant only when the service tax is statutorily applicable, which was not the case here.3. Impact of Pending Supreme Court Proceedings:Another significant issue was whether the pending appeal in the Supreme Court against the Gujarat High Court's decision in SAL Steel Limited affected the refund claim. The Tribunal noted that despite the pending appeal, there was no stay on the Gujarat High Court's judgment. Therefore, the Tribunal found no legal impediment in processing the refund claim based on the High Court's ruling. The Tribunal referenced previous judgments where similar reasoning was applied, indicating that pending appeals do not automatically negate the applicability of a lower court's decision unless stayed.4. Eligibility for Refund Based on Non-Taxability:The Tribunal concluded that the appellant was entitled to a refund solely on the basis of the non-taxability of ocean freight services as per the Gujarat High Court's ruling. The Tribunal reiterated that the service tax levy on ocean freight was deemed unconstitutional, thus making the appellant eligible for a refund without the need to adhere to Notification No.12/2013-ST. The Tribunal's decision was supported by previous judgments, including those by the Supreme Court and other High Courts, which upheld the non-taxability of ocean freight and the consequent entitlement to refunds.Conclusion:The Tribunal allowed the appeal, modifying the impugned order, and granted the refund of Rs.5,03,71,491/- to the appellant. The decision underscored that the refund should be processed based on the non-taxability of ocean freight, independent of the procedural requirements of Notification No.12/2013-ST, and without being affected by the pending Supreme Court proceedings.