2025 (10) TMI 1162 - HC - Service Tax

Notifications under Section 68(2) Finance Act, 1994 taxing ocean freight exceed statute and violate Articles 14, 19(1)(g), 245, 269A

M/s. Tamil Nadu News Print and Papers Limited, Represented by its General Manager (Finance), M.S. Sridhar Versus Union of India, The Joint/Additional Commissioner of CGST and Central Excise, The Joint Commissioner (Audit), Coimbatore

HC held that notifications issued under Section 68(2) of the Finance Act, 1994 purporting to impose service tax on ocean freight exceeded statutory scope ... Service tax on Ocean Freight - Constitutional validity of N/N. 14/2017, 15/2017 and 16/2017 dated 13.04.2017 issued by the Secretary, Ministry of Finance - the notifications traverse beyond the scope of Section 68(2) of the Finance Act, 1994 and thereby offending Articles 14, 19(1) (g), 245 and 269A of the Constitution of India - HELD THAT:- This Court in Chennai and Ennore Ports Streamer Agents Association Vs. Union of India [2023 (5) TMI 899 - MADRAS HIGH COURT] dealt with an identical challenge, and adopted a slightly different approach, although arriving at the same conclusion as in the above matters - The Bench held that there was no proper machinery provided under the impugned notifications issued under Section 68(2) of the Finance Act, 1994, to shift the burden to pay service tax on the petitioners, as they are not recipients of the taxable service by way of transportation of goods by a vessel from a place outside India up to the customs stations of clearance in India, and hence they are not liable to tax. The Bench, however, did not find it necessary to declare the impugned notifications as ultra vires. The impugned notifications are quashed. As a result, the show cause notices are also quashed - Petition allowed. Writ petitions challenged Notification Nos.14/2017, 15/2017 and 16/2017 dated 13.04.2017 issued under Section 68(2) of the Finance Act, 1994 as beyond legislative competence and violative of Articles 14, 19(1)(g), 245 and 269A. Reliance was placed on prior High Court decisions including Sal Steels, Gujarat and Santhan Textile, Bombay, and a Madras decision (Eastman Spinning Mills), which found the impugned notifications to traverse beyond Sections of the Finance Act and lacked proper machinery to shift tax liability to alleged recipients. The operative holding in Sal Steels was quoted: '58. In view of the aforesaid discussion, the writ application succeeds and is hereby allowed. The Notification Nos.15/2017-ST : MANU/DSTX/0016/2017 and 16/2017-ST MANU/DSTX/0017/2017 making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reserve charge Notification No.30/2012-ST : MANU/DSTX/0070/2012 is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and enquiries for collecting service tax them as importers on sea transportation service in CIF contracts are hereby quashed and set aside with all consequential reliefs and benefits.' Applying those precedents, the impugned notifications and attendant show cause notices were quashed.