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2024 (3) TMI 241
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....t and machinery. Such raw materials, spare parts and accessories for machinery are being imported by the Petitioner from the foreign suppliers under CIF (Cost, Insurance and Freight) Contract, wherein the entire cost of transportation of goods upto the customs station in India is incurred by the foreign supplier. 2. It is the Petitioner's case that, during the period from 23rd April 2017 to 30th June 2017, the Petitioner imported required raw materials and spare parts for machinery under different bills of entry, the description of which is set out in paragraph no. 3.3 of the Petition. The bills of entry are 10 in number and are issued between 15th May 2017 to 24th June 2017. It is contended that Respondent No. 3 conducted an audit and issued final report No. 52/2018/-19 dated 16th May 2018 demanding payment of service tax Rs. 26,04,895/-, for the period April 2017 to June 2017 on the value of the imports as set out in the chart contained in Paragraph 3.3 of the Petition. It is contended by the Petitioner that accordingly, for Unit No. 1, the Petitioner has paid service tax of Rs. 23,10,961/-(service tax of Rs. 21,56,897/-, SBC Rs. 77,032/- and KKC Rs. 77,033/-) along with inter....
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....ble to pay IGST on the services supplied by persons located in non-taxable territory by way of transportation of goods, by a vessel from a place outside India upto the customs station for clearance in India. 5. On the above premise, the contention of the Petitioner is to the effect that IGST on the transportation of goods in a vessel from a place outside India upto the customs station of clearance in India on the importer, on reverse charge basis, is arbitrary and illegal. It is contended that levy of service tax on the importer, who is neither the service provider nor the service receiver, is sought to be made in terms of the power conferred under sub-section (3) of Section 5 of the IGST Act. It is contended that, in any event, levy and collection of service tax/IGST from an Indian importer in respect of goods (in respect of CIF contracts), on service rendered outside India, in a non-taxable territory, is unconstitutional. The service tax on ocean freight payable by the importer under reverse charge mechanism would not be legal and valid. Thus, raising such challenge the Petitioner has prayed for the following reliefs:- "(a) Issue a Writ of Certiorari or any other appr....
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.... (g) direct the respondent no. 3 to grant refund of service tax/IGST, if any paid by the petitioner under protest; (h) for interim and ad-interim reliefs in terms of prayer (f) above; (i) for costs of the Writ Petition and orders thereon; and (j) for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case." 6. Reply Affidavit is filed on behalf of the Respondents opposing the Petition. 7. We had heard the proceedings on the earlier occasion, when the learned Counsel for the Petitioner had contended that the notifications as impugned in the Petition were subject matter of adjudication before the Division Bench of the Gujarat High Court in the proceedings of SAL Steel Ltd. Vs. Union of India 2020 (37) G.S.T.I.. 3 (Guj.) as also such decision of the division bench was considered by the Tribunal in the case of Commissioner of Service Tax, Ahmedabad vs. Kiri Dyes and Chemicals Ltd (2023) 10 Centax 134 (Tri.-Ahmd). The Tribunal following the decision of the division bench had accepted the Assessee's contention in regard to the service tax on ocean freight under reverse charge as pay....
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....he present proceedings finally and an endeavour would be made to dispose of the petition." 8. It it on the above backdrop, the proceedings are before us today. We have heard learned Counsel for the parties. We have perused the record. 9. At the outset we may observe that the division bench of the Gujarat High Court in SAL Steel Ltd. (supra) had considered the challenge to the impugned notifications in the context of the service tax on transportation of goods by a vessel from a place outside India. The impugned provisions were held ultra vires of Section 64, 65(B), 44, 66(B), 67 and 68 and 94 of the Finance Act, 1994. It was held that importers in CIF contracts were neither service providers nor service receivers in respect of transport of goods by vessel from place outside India, and that service tax cannot be recovered from third party who is neither the service provider nor the service receiver. 10. In such context, the observations as made by the Court are required to be noted which reads thus:- "31. A perusal of Section 94 shows that there is no power conferred upon the Central Government to make any Rules or Notifications for extra territorial events; or in o....
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....the primary charge is on the person providing taxable service by virtue of Sub Section (1) of Section 68. 38. But the importers in CIF contracts i.e. the writ applicants herein are neither service providers nor service receivers in respect of transportation of goods by a vessel from a place outside India upto the Customs station of clearance in India. Section 68(1) and also the reverse charge Notification under Section 68(2) permit the Central Government to collect and recover service tax only from the person providing the service or from the person receiving the service, and not from a third party. The rulemaking power of section 94 also does not permit the Central Government to make rules for recovering service tax from a third party who is neither the service provider nor the service receiver. 39. Therefore, the impugned provisions i.e. Rule 2 (1)(d)(EEC) and Explanation-V to Notification No. 30/2012-ST are ultra vires Section 65B(44) defining "service" and Section 68, and also Section 94 of the Finance Act. 43. When the Respondents have admitted that the importers in India are not persons receiving service of sea transportation, and that it is the Res....
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....ion, then there is void because actual value of this service i.e. ocean freight is not known even to the Revenue officers. Therefore, the scheme of taxation would fail and 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. 58. In view of the aforesaid discussion, the writ application succeeds and is hereby allowed. The Notification Nos. 15/2017-S.T. and 16/2017-S.T. making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reverse charge Notification No. 30/2012-S.T. 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 from them as importers on sea transportation service in CIF contracts are hereby quashed and set aside with all consequential reliefs and benefits." 11. Following the decision of the division bench in SAL Steel Ltd. (supra), the Central Excise and Service Tax Appellate Tribunal in the case of Commissioner of Service ....
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....rvice Tax, Ahmedabad (supra), dismissed the Civil Appeal filed by the Revenue by an Order dated 01.09.2023 passed on Civil Appeal Diary No. 2146/2023. 13. We may observe that the similar issue as fell for consideration before the Madras High Court in the case of Chennai & Ennore Ports Steamer Agents Association Vs. Union of India (2023) 10 Centax 135 (S.C.), in such decision the Court had considered the decision of the Division Bench of the Gujarat High Court in SAL Steel Ltd. (supra) in considering the issue namely, whether the members of the Petitioner were liable to pay service tax on the service of ocean freight. Rejecting the case of the Revenue and accepting the case of the Assessee, the Madras High Court, making the following observations, allowed the Writ Petitions by setting aside the show cause notices issued to the respective Petitioners. The Relevant observations of the Court which require to be noted, read thus:- "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 service....
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....y tax. 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. 160. As far as refunds are concerned in Table No. 6, the petitioners will have to file appropriate refund applications for refund of the amounts which are said to have been paid by them in accordance with the law laid down by the Hon'ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India, 1997 (89) E.L.T.(S.C.). 164. In the result, it is held as follow:- i. The challenges to Section 66(2) of the Finance Act, 1994, impugned Circular No. 206/4/2017-Service Tax, dated 13.04.2017 and impugn....