2024 (12) TMI 530 - AT - Service Tax

Service tax refund allowed on ocean freight after voluntary payment without legal liability under amended provisions

CESTAT Ahmedabad dismissed revenue's appeal regarding refund of service tax paid on ocean freight during May-June 2017. The appellant had paid service tax ... Refund of Service tax paid on Ocean Freight during May, 2017 and June 2017 - rejection of refund claim filed by the respondent on ground of CBEC Circular No. 206/4/2017 dtd. 13.04.2017 stating the benefit of the exemption would not be available in case where the services are rendered by a foreign shipping line as much as the said shipping lines are not registered in India and do not follow the provisions of Cenvat Credit Rules, 2004. HELD THAT:- The appellant filed refund claim for differential service tax paid on ocean freight during may 2017 and June 2017, since they have paid service tax on full value of the transportation service of goods in vessel without availing of exemption under Sr. No. 10 of Notification No. 26/2012-ST dtd. 20.06.2012 as amended. It is found that Vide Notification Nos. 15/2017-S.T. and 16/2017-S.T. respectively dated 13th April, 2017, the importer of goods as defined in the Customs Act, 1962 has been made liable for paying service tax in cases of services of transportation of goods by sea provided by a foreign shipping line to a foreign charterer with respect to the goods destined for India. This change has come into effect from 23rd April, 2017. The Shipping/steamer agents are no longer liable to pay the service tax for the services provided on or after 23rd April, 2017. Thus in view of the Notification No. 16/2017 –ST dtd. 13.04.2017 read with Notification No. 15/2017 –ST dtd. 13.04.2017, the importer was liable for payment of Service tax @1.4% on the CIF Value of the imported goods. As regard the disputed condition of Sr. No. 10 of Notification No. 26/2012-ST dtd. 20.6.2012 it is found that the said condition provide that “CENVAT Credit on inputs, Capital Goods and input services, used for providing the taxable services, has not been taken under the provisions of the Cenvat Credit Rules, 2004. Ld. Commissioner (Appeals) in this context has considered the Judgment of Hon’ble Apex Court in the case of SRF Ltd [2015 (4) TMI 561 - SUPREME COURT] vis-a-vis disputed condition and dealt with the applicability of the said condition in the present matter. There are no reasons to interfere with the impugned order. It is found that on the identical dispute allowing the refund claim on service tax paid on ocean freight the Tribunal in the matter of Panasonic Energy India Co. Ltd. Vs. Commr. Of Cus. C.Ex. & CGST, Indore [2021 (8) TMI 630 - CESTAT NEW DELHI] held that 'It is thus eminently clear from the aforesaid observations made in the impugned order that the duty, which was paid by the petitioner, which was otherwise not payable on the exported goods and therefore, rebate of such duty was not admissible in terms of Rule 18 of the Central Excise Rules. However, the duty, which was paid by the petitioner is held to be treated as voluntary deposit. As per Section 142(3) of the GST Act, every claim for the refund filed by any person before, on or after the appointed day i.e. 1-7-2017 for refund of any amount of Cenvat credit, duty, tax, interest or any other amount paid under the existing law, should be disposed of in accordance with the provisions of existing law and any amount eventually accruing to such person should be paid in cash.' It is also found that High Court of Gujarat in Mohit Minerals Pvt. Ltd. v. Union of India & 1 ors.[2018 (2) TMI 770 - GUJARAT HIGH COURT] held that no tax is leviable under the Integrated Goods and Services Tax Act, 2017, on ocean freight, for services provided by a person, located in a non-taxable territory, by way of transportation of goods on a vessel from a place outside India up to Customs station of clearance in India. However, the said judgment is pertaining to the GST but ratio of said judgment also applicable in Service tax matter. Thus, no grounds have been made to interfere with the order passed by the Learned Commissioner (Appeals). Accordingly, the appeal filed by revenue is dismissed. Issues Involved:1. Entitlement to refund of service tax paid on ocean freight.2. Applicability of exemption under Notification No. 26/2012-ST.3. Validity and applicability of CBEC Circular No. 206/4/2017.4. Impact of subsequent notifications (Nos. 15/2017-ST and 16/2017-ST).5. Jurisdiction and legislative competency concerning service tax on ocean freight.Issue-wise Detailed Analysis:1. Entitlement to Refund of Service Tax Paid on Ocean Freight:The core issue revolves around the respondent's claim for a refund of service tax paid on ocean freight for the months of May and June 2017. The respondent had paid service tax on the full value of transportation services without availing the exemption under Sr. No. 10 of Notification No. 26/2012-ST. The Commissioner (Appeals) allowed the refund, setting aside the lower adjudicating authority's rejection of the claim. The Tribunal upheld this decision, affirming that the respondent was entitled to a refund as they had paid service tax on 100% of the transportation value, whereas only 30% was taxable under the relevant notification.2. Applicability of Exemption under Notification No. 26/2012-ST:Notification No. 26/2012-ST provides an exemption on 70% of the value of services for transportation of goods in a vessel, subject to the condition that CENVAT credit on inputs and capital goods has not been taken. The Tribunal noted that the exemption was applicable as the notification had not been withdrawn or amended to exclude foreign shipping lines from its purview. Thus, the respondent was eligible for the exemption, and the service tax paid on the remaining 70% was refundable.3. Validity and Applicability of CBEC Circular No. 206/4/2017:The Revenue's argument was based on CBEC Circular No. 206/4/2017, which stated that foreign shipping lines did not fulfill the exemption conditions due to non-registration in India and non-compliance with CENVAT Credit Rules. However, the Tribunal found that this circular was contrary to the Apex Court's judgment in the SRF case and therefore not binding. The Tribunal emphasized that the circular could not override the statutory provisions of the notification, which remained applicable.4. Impact of Subsequent Notifications (Nos. 15/2017-ST and 16/2017-ST):Subsequent notifications shifted the liability to pay service tax on ocean freight to the importer, effective from April 23, 2017. The Tribunal noted that these notifications did not amend or withdraw Notification No. 26/2012-ST, which continued to provide the exemption. Therefore, the respondent's liability was correctly assessed at 30% of the service value, and the refund of the excess payment was justified.5. Jurisdiction and Legislative Competency Concerning Service Tax on Ocean Freight:The Tribunal referred to various judgments, including those from the Supreme Court and High Courts, which addressed the legislative competency and jurisdictional issues related to service tax on ocean freight. It was highlighted that service tax could not be levied on transactions where the service was provided by a person in a non-taxable territory to another person in a non-taxable territory. The Tribunal concluded that the legislative framework did not support the Revenue's position, and the refund claim was valid.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s order to refund the service tax paid by the respondent on ocean freight. The decision emphasized the applicability of the exemption under Notification No. 26/2012-ST and rejected the validity of the CBEC circular in light of higher judicial precedents. The Tribunal's judgment reinforced the legal principle that statutory notifications prevail over administrative circulars in determining tax liabilities.