AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (5) TMI 899
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mr.M.A.Mudimannan For the Petitioner in W.P.Nos.15394, 15395 & 15398 of 2021 : Mr.Hari Radhakrishnan For the Petitioner in W.P.No.14929 of 2020 : Mr.T.Ramesh For the Petitioner in W.P.Nos.2147 to 2151 of 2017 : Mr.P.Giridharan For the Petitioner in W.P.Nos.35435 & 35445 of 2019 : Mr.M.N.Bharathi For the R1 in W.P.Nos.141 of 2021 and 15394 of 2021 : Mr.S.Diwakar Senior Panel Counsel For the R2 to R4 in W.P.No.141 of 202, For R1 and R2 in W.P.No.9120 of 2019, For R1 and R4 in W.P.Nos.12976 of 2021, 15395 of 2021, 15398 of 2021, W.P.No.15394 of 2021,For Respondents in W.P.Nos.19009 of 2019 & 19011 of 2019, & For R1 to R4 in W.P.No.12467 of 2021 : Mr.V.Sundareswaran Senior Panel Counsel For the R1 & R2 in W.P.No.9118 of 2019, For Respondents in W.P.No.13476 of 2021, For R2 to R4 in W.P.No.400 of 2021, & For Respondents in W.P.Nos.2147 to 2151/2017 : Mr.Hema Muralikrishnan Senior Standing Counsel For the R1 and R2 in W.P.No.8809 of 2020, For Respondent in W.P.No.14929 of 2020, & For R2 in W.P.Nos.35435 and 35445 of 2019 : Mr.A.P.Srinivas Senior Standing Counsel and Mr.K.S.Ramasamy For the R1 in W.P.No.400 of 2021 : Mr.K.Subbu Ranga Bharathi For the R1 in W.P.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions have been filed by the importers. These petitioners have challenged the vires of Notification Nos.30/2012- ST dated 20.06.2012, Notification No.03/2017-ST, dated 12.01.2017, Notification Nos.14/2017-ST, 15/2017-ST & 16/2017-ST, all dated 13.04.2017. 5. Some of the Writ Petitioners have also challenged show cause notices issued to them while some of them have called upon the respondent to refund the service tax paid by them. The details of the writ petitions filed by these petitioners are in Table Nos.4, 5 and 6. Table No.4: Challenge to the Notification. Sl. No. W.P.No. Notifications 30/2012 dt. 20.6.12 03/2017 dt.12.01.17 14/2017 dt.13.04.17 15/2017 dt.13.04.17 16/2017 dt.13.04.17 7 141/2021 - * - * * 8 9118/2019 - * - * * 9 9120/2019 - * - * * 10 400/2021 - * - * * 11 12467/2021 - * - * * 12 19009/2019 - * * * * 13 15394/2021 - - - * * 14 35445/2019 - - * * * 15 15395/2021 * - - - - [* represents the challenge to the respective Notifications] Tabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a), the importer/consignee pays only the price for the goods. vi. When goods are imported on CIF basis, the importer/consignee does not pay for the freight. The invoice under which the importer/consignee imports the goods is a CIF invoice, i.e. is a consolidated invoice for the goods, insurance and freight. Hence, the distinct element of freight is not known even to the importer. Therefore, the basis of charge for Service Tax is unknown. Further, the importer pays Customs Duty on the CIF value of the goods imported. vii. It is submitted that, the attempt to make the steamer agent as the person liable to pay 'Service tax', who has no rational connection with the service transaction is discriminatory, violative of Article 14 of the Constitution and contrary to all established tenets of Service tax law. viii. It is submitted that, in case of FOB (Free on Board), the duty to pay freight is on the importer, who is merely recipient of the service. Hence the importer pays Service Tax directly to the vessel owner. ix. It is submitted that, the Steamer Agent is not the receiver of the service and only acts as an agent for the Vessel Owner and faci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....v. When the destination is in India, the service of transportation can be said to have been completed or provided only when the goods are landed in India. Service tax, being a destination based tax, Sec.66C of the Finance Act, 1994 grants the power to the Government to frame rules as to determining the place of provision of Service. v. It is submitted that, when a service of transportation of goods is with respect to transporting of goods to India, the said service has a 'nexus' with India and therefore service tax is leviable and payable in India as Sec.66B, Sec.66C and 68 read with Sec.64 does not restrict the levy and payment of service tax to only the service provider and service recipient. vi. The steamer agents are attempting to artificially bifurcate a single transaction of transportation of goods into two different transactions for the purpose of contending that the services provided by them are restricted to steamer agent service as defined in Sec.65(97), 65(100) and Sec.65(105(i) as they existed prior to 01.07.2012. vii.It is submitted that the service of transportation of goods /by sea is complete only when the goods cross the customs f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Umrah Tour Organiser Association vs Uol reported in MANU/SC/0921/2022 ii. Uol Vs Mohit Minerals, 2022 SCC OnLine SC 657 10. The grounds on challenge to the impugned notification by the petitioners in Category-2 are broadly as follows:- i. It is submitted that when a consolidated amount is paid for an import on CIF basis, it is not possible to determine the portion representing ocean freight. Further, both in the case of import on CIF basis or on FOB basis, the cost of freight is captured in the value of goods and on which the importer is already discharging basic customs duty. ii. It is submitted that the impugned Notifications makes an attempt to levy tax on a transaction which does not have any nexus with the Indian importer and also seeks to levy tax twice on the cost of freight. iii. It is submitted that the levy on the importer who is not even privy to the service between two foreign entities is violative of the law. iv. It is submitted that the levy of service tax on the importer through impugned notifications is violative of Section 65B(52) and 68(2) of the Finance Act, 1994 since there is no import of service and the importer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as may be prescribed at the rate specified in section 66B) and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the Service Tax in relation to such service..' ii. It is submitted that persons liable to pay tax in terms of amendment to notification on Reverse charge mechanism Vide Notification No 30/2012-Service Tax dated 20.6.2012, Government notified the 'percentage of Service Tax payable by the person providing service' and 'percentage of Service Tax payable by the person receiving the service. iii. However, this notification was amended on 01.03.2015, vide Notification No 7/2015- Service Tax, and the wordings 'percentage of Service Tax payable by the person receiving the service' was replaced by the wordings 'Percentage of Service Tax payable by any person liable for paying Service Tax other than the service provider.' iv. It is submitted that the respondent has the authority to tax when both Service Provider and Service Recipient are located outside the taxable territory since the CIF Value includes the Cost, Insurance & Freight of the Goods imported by the taxpayer. v. It is subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of service tax was never under a separate enactment. There was no standalone enactment for levy and collection of Service Tax. Chapter V A of the Finance Act, 1994 was inserted w.e.f 14.5.2003 vide Finance Act, 2003. It was levied and collected under Chapter V and VA of the Finance Act, 1994. 16. The provisions of Chapter V of the Finance Act, 1994, were initially made applicable to 3 services viz. Telephone Services, Non-Life Insurance Services and Stock Brokers' Services. The Finance Act, 1994 was periodically amended, updated and levy was expanded from time to time by successive amendments to Chapter V of the Finance Act, 1994 vide successive Finance Acts till, Finance Act, 2017. 17. Provisions of the Central Excise Act, 1944 were made applicable to provision of Chapter V and VA of the Finance Act, 1994. Powers were vested with the Central Government to issue notification to give effect to the provisions of the Act. 18. Section 64 of the Finance Act, 1994, limits the extent of the application of the provisions of Chapter V of the Finance Act, 1994. Section 64 sets the contour for Application of Chapter V of the Finance Act, 1994. As per Section 64 of the Finance Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en in any Court or tribunal established under any law for the time being in force. Explanation 1. - For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. Explanation 2.- For the purposes of this clause, the expression "transaction in money or actionable claim" shall not include - (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denominat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in Section 66B of the Finance Act, 1994. We shall refer to the same in the course of the discussion. 27. We have considered the arguments advanced by the learned counsel for the Category I & Category II Writ Petitioners. We have also considered the arguments advanced by the learned counsel for the respondents. We have also considered the provisions of Chapter V of the Finance Act, 1994 as amended from time to time. We have also considered Rule framed under the Finance Act, 1994, notifications issued thereunder and the impugned notifications. 28. Service tax was levied and collected in India under provision of Chapter V and VA of the Finance Act, 1994. Service tax was levied and collected on those services which were either provided in India or consumed in India or aid in the provision of one or more service or consumed in India. 29. Ordinarily, service tax was payable by the service provided in India. Under the scheme of the Finance Act, 1994, the burden to pay tax could be shifted on any person including a recipient of a taxable service under a notification issued under Section 68(2) of the Finance Act,1994. 30. The provisions of the Finance Act, 1994 are flexible. Wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice. Thus, even if a service was actually provided outside the territory of India and consumed outside India could be deemed to have been provided in India. 38. Under Section 68(2) of the Finance Act, 1994, Rules framed under Section 66C(1) of the Finance Act, 1994, the Central Government cannot be challenged on the ground that actual service was provided outside the territory of India. 39. In terms of Sub-Section (2) to Section 66C of the Finance Act, 1994, Rules made under Sub-Section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. Sub-Section (2) to Section 66C of the Finance Act, 1994 has been challenged in W.P No.2147 of 2017 by the Category I Writ Petitioners. 40. This is what the Central Government has done vide other impugned Notifications of the year 2017, after it withdrew the exemption granted earlier vide Sl.No.34(c) of Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. 41. Under Section 66C(1) of the Finance Act, 1994, the Central Government fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance Act, 1994. For the sake of clarity, Section 64 and Section 66C of the Finance Act, 1994 as in force during the period in dispute are reproduced below for comparison:- Table No:7 Section 64 of the Finance Act, 1994 Section 66C of the Finance Act 1994 1. This Chapter extends 1 to the whole of India except the State of Jammu and Kashmir. 2. It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. 3. It shall apply to taxable services provided on or after the commencement of this chapter. 1. The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided. 2. Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. 48. The broad definition of 'service' in Section 65B(44) of the Finance Act, 1994 with effect from 01.07.2012 was intended to fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....012 vide Notification No.23/2012 - ST dated 05.06.2012. 54. However, these developments are to be kept in mind to answer the issues before us. The Parliament was steadfast in taxing service provided from outside India and consumed in India. Thus, the Parliament introduced new provisions to Chapter V of the Finance Act, 1994 vide Finance Act, 2012. 55. Apart from amending Notifications issued under Section 68(2) of the Finance Act, 1994, the provisions of the Service Tax Rules, 1994 were also amended in 2012. Notification No.30/2012-ST dated 20.06.2012 was issued under Section 68(2) of the Finance Act, 1994 for this purpose. 56. Withdrawal of the exemption in Notification No.1/2017- dated 12.01.2017 with effect from 22.01.2017 witnessed the issue of the impugned Notification No.3/2017-ST dated 12.01.2017 with effect from 22.01.2017 for the period between 22.01.2017 and 22.04.2017 and later by Notification No.15/2017-ST dated 13.04.2017 for the period between 23.04.2017 and 30.06.2017. These Notifications amended Notification No.30/2012-ST, dated 20.06.2012 issue under Section 68(2) of the Finance Act, 1994. They shifted the burden on these petitioners to pay service tax dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oods service provided in India and services provided from outside the country. 63. Under Section 66D(p)(ii) of the Finance Act,1994, services by way of transportation of goods in an aircraft or a vessel from a place outside India to the customs station of clearance in India was in the negative list with effect from 01.07.2012. 64. Thus, such a service was outside the purview of the service tax levy under Section 66B of the Finance Act, 1994. This exclusion in Section 66D(p)(ii) of the Finance Act,1994 was later withdrawn vide Section 149 of Finance Act, 2016. 65. Sub Clause (ii) to Clause (p) to Section 66D of the Finance Act, 1994 as in force with effect from 01.07.2012 which placed "service by way of transportation of goods by an aircraft or a vessel form the a place outside India" to the Customs Station for clearance in India under the negative list was omitted from the "negative list" with effect from 01.06.2016 by Section 149(b)(ii) of the Finance Act, 2016. 66. Thus, the aforesaid service of transportation of goods through an aircraft or a vessel from a place outside India up to the Customs Station of clearance in India ceased to be excluded from the negative list....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dated 12.01.2017 with effect from 22.01.2017 by adding a proviso to the Sl.No.34 (c) of Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 with effect from 22.01.2017. 71. This withdrawal of exemption vide Notification No.1/2017-ST dated 12.01.2017 along with collateral amendments to the provisions of the Service Tax Rules, 1994 and Notification No.30/2012-ST dated 20.6.2017 vide impugned notification have made these petitioners liable to tax. Some of the petitioners have also received show cause notices which have been challenged in the Writ Petitions in Table 5 of this Order. 72. Exemption to services received from a provider of service located in a non- taxable territory by a person located in a non-taxable territory, by way of transportation of goods in a vessel from a place outside India up to the customs station of clearance in India ceased to be exempted in view of the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. Thus, there is a challenge to the impugned Notification No.1/2017-ST dated 12.01.2017 in W.P.No.2149 of 2017. 73. Therefore, services by way of transportation of goods by a vessel from a place outside India up t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... General Clauses Act an authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. From the very nature of power of exemption granted to the Government under Section 25 of the Act, it follows that the same is with a view to enabling the Government to regulate, control and promote the industries and industrial production in the country. Notification No. 66 of 1979 in our opinion, was not designed or issued to induce the appellants to import PVC resin. Admittedly, the said Notification was not even intended as an incentive for import. The Notification on the plain language of it was conceived and issued on the Central Government "being satisfied that it is necessary in the public interest so to do." Strictly speaking, therefore, the Notification cannot be said to have extended any "representation" much less a "promise" to a party getting the benefit of it to enable it to invoke the doctrine of promissory estoppel against the State. It would bear repetition that in order to invoke the doctrine of promissory estoppel, it is necessary that the promise which is sought to be enforced must be shown to be an unequivo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplication to the impugned notification issued by the Central Government in exercise of its powers under Section 25(1) of the Act in view of the facts and circumstances, as established on the record. ...... 26.In our opinion, no justifiable prejudice was caused to the appellants in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the "public interest" so demanded. Thus, in the facts and circumstances of these cases, the appellants cannot invoke the doctrine of promissory estoppel to question the withdrawal notification issued under Section 25 of the Act. 77. This view has been followed by the Hon'ble Supreme Court in the following cases also:- i. Darshan Oils Private Limited vs. Union of India, 1995 (75) E.L.T.32 (S.C.); ii. S.B.International Limited vs. Assistant Director General of F.T., 1996 (82) E.L.T. 164 (S.C.); iii. Union of India vs. Victory Plastic Private Limited, 1996 (E.L.T.) 481 (S.C.); iv. Shrijee Sales Corporation vs. Union of India, 1997 (89) E.L.T. 452 (S.C.); v. D.P.F.Textiles Limited vs. Union of India, 1997 (92) E.L.T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to fail in view of the law settled by the Hon'ble Supreme Court in Electronics Corporation of India Vs. Commissioner of Income Tax and Another, AIR 1989 SC 1707, GVK Industries Vs. Income Tax Officers, 2011 (4) SCC 36 and in Union of India Vs. Mohit Minerals Private Limited, 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.). It cannot be said that the Parliament exceeded its power under the Article 245 of the Constitution. 85. As long as there is a territorial nexus between the service being taxed and its consumption in India whether directly or indirectly, the challenge to Section 66C(2) of the Finance Act, 1994 cannot be countenanced. Consequently, challenge to provisions of the Place of Provision of Services Rules, 2012 has to fail. 86. If at all, at best, the petitioners could be aggrieved by Rule 10 of the Place of Provision of Services Rules, 2012. However, as mentioned above, Rule 10 of the Place of Provision of Services Rules, 2012 is a generic Rule. It applies to all specie of service of transportation of goods other than by way of "mail" or "courier service". 87. In this connection, it will be useful to refer to the decision of the Hon'ble Supreme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nexus with the Indian territory, the levy of tax extra-territorial must be provided by Parliament through statute and not by the Union Government through delegated legislation. We do not find any applicability of this submission to the facts at hand. As stated above, the IGST Act under Section 13(9) recognizes the place of supply of services as the destination of goods is India, the statute itself is broad enough to cover a taxable event that has extra-territorial aspects, which bears a nexus to India" 90. We therefore hold that the challenge to the vires to Section 66C(2) of the Finance Act, 1994 has to fail. Therefore, W.P No.2147 of 2017 is liable to be dismissed. For the same reason, challenge to Notification No.28/2012-ST dated 20.6.2012 vide W.P No.2147 of 2018 has also to fail. Consequently, the challenge to Notification No. 28/2012- ST dated 20.6.2012 has also to fail. 91. Thus, with effect from 01.07.2012, services provided in connection with the transportation of goods by a service provider located outside the territory of India to a person located in a "non taxable territory" were exempted under Sl.No.34(c) of Mega Exemption Notification No.25/2012-ST, dated 20.06.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o pay service tax on the "Steamer Agents" viz., Category I Writ Petitioners and later on the importer viz., Category II Writ Petitioners and results in impossibility, arbitrary and impractical levy in view of impugned Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 withdrawing the exemption under Clause 34 (C) to Mega Exemption Notification No. 25/2012-ST dated 20.06.2012. 96. The other notifications which have been challenged are detailed in the Table below. Column B gives the details of the Parent Notification. Column C lists out the Notification impugned by the Steamer Agents (Category I Writ Petitioners) and Column D lists out the Notification impugned by the Importer (Category II Writ Petitioners):- Table No.11 Sl. No. Parent Notification(s) Impugned Notifications A B C D Category I Writ Petitioners Category II Writ Petitioners. Steamer Agents Importers 1 2/1994-ST dt 28.6.1994. [STR, 1994] 2/2017-ST dt 12.1.2017 with effect from 22.1.2017 16/2017-ST dt 13.4.2017 with effect from 23.4.217 W.P.No.2150 of 2017 W.P. in Sl.No....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... They by themselves do not make the activity taxable. They merely shift the burden to pay service tax on these petitioners during the period in dispute. 98. But, for the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017, the petitioners would have no cause for complaint. The amendments to the parent notifications in the above table are only the consequential changes to the Rules and the enabling Notifications issued under Section 68(2) and Section 67A of the Finance Act, 1994. The impugned notifications were only meant to implement the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017. They by themselves do not create any liability on these petitioners. 99. To give effect to the above amendment, the definition of "person liable to pay tax" in Sub Clause (EEC) to Rule 2(1)(d)(i) of the Service Tax Rules, 1994 was inserted vide impugned Notification No.02 of 2017-ST dated 12.01.2017 with effect from 22.01.2017. It shifted the burden on the "Steamer Agents" to pay tax. Later, the Service Tax Rules, 1994 was further amended vide impugned Notification No.16/2017-ST, dated 13.04.2017 w.e.f. 23.04.2017 and ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce Tax Rules, 1994 as inserted vide Notification No.16/2017-ST, dated 13.04.2017 gave an option to the person liable for paying service tax to pay an amount calculated at the rate of 1.4% of cost, insurance and freight (CIF) value of such imported goods." 103. Thus, from 23.04.2017, a person liable to pay Sales Tax for the taxable services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall have the option to pay an amount calculated at the rate of 1.4% of the sum of cost, insurance and freight (CIF) value of such imported goods. 104. As a sequitur to the impugned Notification No.02/2017-ST dated 12.01.2017 with effect from 22.01.2017, impugned Notification No.3/2017-ST dated 12.01.2017 was issued with effect from 22.01.2017. It amended Notification No.30/2012-ST dated 20.6.2012 issued under Section 68(2) of the Act. Thus, attempt was made to shift the burden on the Steamer Agents. 105. Later, by the impugned Notification No.15/2017-ST, dated 13.04.2017, there was further amen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cated in the taxable territory; (II) The extent of service tax payable thereon by the person who provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely:- Table Sl. No. Description of a service Percentage of service tax payable by the person providing service Percentage of service tax payable by the person receiving the service 12. in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100% [Sl.No.12 inserted vide impugned Notification No.03/2017-ST, dated 12.01.2017 with effect from 22.1.2017] 108. By the impugned Notification No.03/2017-ST, dated 12.01.2017, Explanation No.IV was inserted. Realizing difficulties in collecting service tax from Steamer Agent in terms of Notification Nos.1 to 3/2017- ST dated 12.01.2017, the Government decided to shift the burden of tax in relation to goods imported into India, on the importer vide impugned Notifications in Category II with effect from 23.04.2017. 109. The amendment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Act, 1962 read with section 148 of the Customs Act, 1962 with respect to such goods by virtue of Notification No.2 of 2017-ST dated 12.01.2017 with effect from 22.01.2017 upto 22.42017 and thereafter on the importer of goods. 112. Thus, service tax initially became payable by "steamer agents" on ocean freight with effect from 22.01.2017 in view of the amendment by Notification No.1/2017-ST dated 12.01.2017. Later, by the impugned Notification No.15/2017-ST dated 13.04.2017, the burden was shifted on the importer. 113. Thus, the intention of the Government was to shift burden of tax on the "steamer agents" and later on the importers vide impugned Notification No.15/2017-ST dated 13.04.2017 with effect from 23.04.2017, wherein, an Explanation V to Notification No.30/2012-ST dated 20.06.2012 was inserted. It impacted the second Category II of Writ Petitioners namely the "importers". There were further amendments to the Explanations to vide Notification No.03/2017-ST, dated 12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017. 114. Explanation IV as inserted vide Notification No.03/2017-ST, dated 12.01.2017 impacted the Category I of the Writ Petitioners namely the "S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Point of Taxation Rules, 2011, after Rule 8A vide impugned Notification No.14/2017-ST dated 13.04.2017. It came into force on 23.04.2017 with retrospective effect from 22.01.2017. 119. The purpose of the insertion of Rule 8B of the Point of Taxation Rules, 2011 with retrospective effect from 22.1.2017 was to fix the rate of tax, value of taxable service and rate of exchange as the date of bill of lading of goods in the vessel at the port of export. 120. The impugned Notification No.14/2017-ST dated 13.04.2017 was intended to enable the Department to levy and collect service tax on the steamer agents and also the importers at the prevailing rate for the respective period. The amendment was in compliance with the requirement of Section 67(A) of the Act. Thus, not only the importer but also the "steamer agents" were liable to pay tax at the rate and value from 22.01.2017. There are no merits in the challenge to it. 121. In CIF contracts, the service of transportation of goods by vessel is received by the foreign exporters/overseas supplier from the foreign/overseas vessel owner/operator/Shipping Liners in the CIF contract. The value of all incidental services consumed in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goods. 128. In CIF contracts, the "value" of sea transportation service is not made available either to the importers or the steamer agents. There is also no privity of contract between the importers and the Overseas Shipping Liner in CIF contracts nor does an Indian importer make any payment for such ocean freight to the Overseas Shipping Liners and its ancillary service provider who services are engaged enroute. 129. The steamer agents (Category I Writ Petitioners) are already service providers and are already taxed under the provisions of the Finance Act, 1994 for the service provided by them to the shipping liners. 130. We therefore hold that service tax cannot be demanded from these petitioners as neither the "steamer agents" nor the "importers" in India are the recipient of service. They are not liable to pay tax. 131. The other impugned notifications which were issued as a consequence of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 also cannot be challenged as challenge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvice 12. in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100% 137. Sl.No.12 to Notification No.30/2012-ST dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 as amended by the impugned Notification No.3/2017- dated 12.01.2017 with effect from 22.1.2017 and Notification No.15/2017-ST dated 13.4.2017 with effect 23.4.2017 merely shifts the burden to pay service tax. 138. As per Sl.No.12 to the above notification, it is the person receiving service who has to pay 100% of the service tax although in the amendment to parent notification No.30/2012-ST dated 20.6.212 vide impugned Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017, it is the steamer agent or the importers who are liable to pay service tax during the respective period as detailed below:- Table No.16 Notification No.03/2017-ST dated 12.01.2017 Notification No.15/2017-ST dated 13.4.2017 The person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1.4% of the sum total of the cost, insurance and freight (CIF) value of the imported goods, again it is only the recipient of service who is liable to pay tax on this compounded rate if Notification No.03/2017- ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017 are applied to the petitioners during the relevant period. In our view, it is the Overseas Shipping Liner who is the recipient of service from various service providers whose services are engaged enroute. Therefore, it cannot be said that these two categories of writ petitioners are the persons receiving service within the meaning of Notification No.3/2017- dated 12.01.2017 with effect from 22.1.2017 and later under Notification No.15/2017-ST dated 13.4.2017 with effect 23.4.2017 to fasten liability on them. 144. Thus, neither of the Category of writ petitioners are liable to pay tax in view of defect in Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017. 145. While amending Notification No.30/2012-ST dated 20.06.2012 vide Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017 and the burden was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able territory" i.e. beyond India. Obviously, the Act itself is not applicable to the territories other than India and therefore the Executives cannot have any power to make Rules for territories beyond India. 32. In Paras 16 to 24 of the Union of India v. S. Srinivasan, 2012 (281) ELT 3 (SC), and in para 14 of the General Officer Commanding in Chief v. Subhash Chandra Yadav, (1988) 2 SCC 351 : AIR 1988 SC 876, the Supreme Court has held that a Rule going beyond the Rule making power conferred by the Statute was ultra vires; a Rule supplanting any provision for which power has not been conferred was ultra vires; and a Rule which was not relatable to the source of power to make such rule was ultravires. In Indian Association of Tour Operators 2017 (5) G.S.T.L. 4 (Del.), the Delhi High Court has considered validity of Rule 6A of the Service Tax Rules and held at paras 44, 47, 48 and 53 that a Rule made by the Central Government has to necessarily be only in relation to taxable services, namely, services provided in the taxable territory of India, and an essential legislative function of taxing an activity in non-taxable territory could not have been delegated to the Central ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to them. 40. First, the Indian importers like the Petitioners have contracted for purchase and delivery of goods, and under CIF contract where the lump sum amount is paid for delivery of the goods on the land mass of the country; and what the importers receive in India is the goods, and not any service. Secondly, liability to pay tax cannot be fastened on a person if the charging provision does not charge or levy the tax; because a charging section has to be strictly interpreted, and not by way of inferences or presumptions about any indirect benefit to a person. 41. .. 43. When the Respondents have admitted that the importers in India are not persons receiving service of sea transportation, and that it is the Respondent's case that the Indian importers were "indirectly" receiving such service and hence were persons liable to pay service tax on such service; it is clearly a case where the Respondents propose to charge service tax from the third parties i.e. the Indian importers by implication, and not by clear words of the charging section. The impugned provisions creating a charge of service tax on third parties though the Act of the Parliament provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fall in absence of a machinery provision for valuation of the service when tax is proposed to be recovered from a third party not having any information about the value of such service. 48. Therefore, Rule 6(7CA) amended by the Central Government is also ultra vires Section 67 and Section 94 of the Finance Act. 148. For the period, under the GST regime with effect form 01.07.2017, the Hon'ble Supreme Court has answered the issue against the revenue in Uol Vs Mohit Minerals, 2022 SCC OnLine SC 657. 149. In Kusum Ingots and Alloys Ltd. Vs. Union of India, 2004 (168) E.L.T. 3 (S.C.), it was held that an order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act. If that be so, the notices which have been challenged by the category II writ petitioner in Table 5 are also liable to be quashed. However, we would not go that far to hold all the notifications challenged as ultra-vires. 150. To implement the consequences of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reign shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules. 4.1 Thus, the condition for availing exemption under notification No. 26/2012-S.T., dated 20-6-2012 (Sl. No. 10) is not fulfilled by the foreign shipping lines. Hence, benefit of conditional exemption will not be available to them and service tax will be paid on full value of services. Further, the amount of service tax payable under the option available under Service Tax Rules, 1994 has been prescribed accordingly. 154. Notification No.26/2012-S.T., dated 20.06.2012 gave abatement. Relevant portion of Notification No.26/2012-S.T., dated 20.06.2012 reads as under:- Table No.18 Exemption from Service tax in relation to transport of goods and passengers tour operators, financial leasing, hire purchase, renting of hotels, inns, guest houses, clubs campsites or other places, chit funds, renting of cabs, construction of complex/building for sale - Notification No. 13/2012-S.T. Superseded In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), and in supersession of notific....
X X X X Extracts X X X X
X X X X Extracts X X X X
....017 on the other hand have chosen to challenge Sub-Section (2) to Section 66 C of the Finance Act, 1994 as Rule 10 of the Place of Provision of Service Rules, 2012 gets automatically attracted in view of the withdrawal of exemption. 158. Therefore, there is no necessity to declare the impugned notifications as ultra vires as there is 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 the petitioners are not either the recipients of the taxable service by way of transportation goods by a vessel from a space outside India up to the customs stations of clearance in India. They are not liable to tax as things stand. 159. There are defects in the notifications as mentioned above. They are curable defects. However, it is unwarranted, as the drift under the GST regime is also to not to burden the import with IGST under similar circumstances. Therefore challenges to Notifications in Table No.1 and Table No.4 fail and demand of sales tax on these petitioners also fail. 160. As far as refunds are concerned in Table No.6, the petitioners will have to file approp....