Ocean freight service tax under reverse charge was not payable by the importer; prior High Court rulings were followed.

Service tax on ocean freight under the reverse charge mechanism was held inapplicable to the importer where the levy depended on notifications already struck down by High Courts. The Tribunal noted that the impugned notifications had been found to lack legal basis, that one of the rulings had been affirmed by the Supreme Court, and that the other had not been stayed. Applying judicial discipline, it followed those decisions and treated the importer as not liable for service tax on ocean freight for transport from outside India to the customs station of clearance. The demand was therefore correctly dropped and the departmental appeal failed.

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Issues: Whether service tax under reverse charge mechanism was payable by the importer on ocean freight for transportation of goods by vessel from a place outside India up to the customs station of clearance in India, in view of the impugned notifications and the binding effect of the prior High Court decisions.

Analysis: The Tribunal noted that the levy of service tax on ocean freight had been introduced through amendments to the service tax regime by the relevant notifications, making the importer liable in specified import transactions. It further noted that the validity of those notifications had already been struck down by the High Courts in the cited decisions, holding that the importer could not be fastened with liability on ocean freight and that the impugned notifications lacked legal basis. The Tribunal also observed that one of those decisions had been affirmed by the Supreme Court and the other had not been stayed, and therefore judicial discipline required those rulings to be followed.

Conclusion: The importer was not liable to pay service tax on ocean freight under reverse charge mechanism, and the demand was correctly dropped; the departmental appeal failed.

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