AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 1030
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....ons, the appointment of the vessel as well as payment of transportation charges are borne by the overseas supplier. It is these transportation charges incurred in transporting goods by a vessel or ship which is commonly known as ocean freight. In the case of a Free On Board [FOB] contract, the solitary distinction is that the ocean freight liability is to be borne by the local importer. 2. By virtue of the provisions contained in the Finance Act, 1994 [1994 Act] and the amendments made therein which came into effect from 01 July 2012, a list of negative services came to be collated and which was ordained to be not taxable. The effect of that list of negative services was that except for those services, others were made taxable. The service of transportation of goods by an aircraft or vessel came to be placed in the negative list in terms of the provisions contained in Section 66D (p) (ii) of the 1994 Act. The said clause, however, came to be omitted with effect from 01 June 2016. Accordingly, services by way of transportation of goods by an aircraft or vessel from a place outside India up to customs stations of clearance became chargeable to service tax with effect from 01 June ....
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....t apposite to extract the following passages from the decision of the Supreme Court in Mohit Minerals: "14.5. Imposition of IGST on ocean freight will lead to double taxation: (a) Section 3 (7) of the Customs Tariff Act states that goods imported into India will be subject to IGST under Section 5 of the IGST Act, on the value as determined by Section 3 (8) and Section 3 (8)(a). Under Section 3 (8), the value includes value of freight; and (b) Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 includes cost of transportation and insurance in the value of goods, which forms the basis of the levy of IGST under the proviso to Section 5 of the IGST Act. The impugned levy of IGST on ocean freight would thus amount to double taxation on the same transaction. xxxx xxxx xxxx 96. In determining the vires of the impugned notifications, a few preliminary contentions raised by the respondents would have to be addressed. The respondents have argued that no charge has been created for the ocean freight transaction to be taxed in the hands of the importer. It has been alleged that only Section 5(1) is a charging prov....
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....omputing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of charge. Thus the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section." (emphasis supplied) xxxx xxxx xxxx D.4. Taxable event : Is an ocean freight transaction for import of goods a valid category of supply of services under Section 5(3) of the IGST Act? 106. The other limb for contesting the validity of the impugned notification is with respect to its identification of a "taxable event". The question that falls for the determination is whether the impugned notifications issued in 2017, under Section 5(3) of the IGST Act, validly prescribe a taxable event that constitutes an inter-State supply of goods and services with the importer being a recipient of shipping services in CIF transactions. 107. The analysis of whether import of goods under CIF contracts constitutes a valid import of service has to be answe....
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.... be artificially vivisected by the delegated legislation to once again levy the GST on the supply on which the tax is already collected. *** 216. Thus, having paid the IGST on the amount of freight which is included in the value of the imported goods, the impugned notifications levying tax again as a supply of service, without any express sanction by the statute, are illegal and liable to be struck down." (emphasis supplied) 170. We are in agreement with the High Court to the extent that a tax on the supply of a service, which has already been included by the legislation as a tax on the composite supply of goods, cannot be allowed." 7. Our attention has also been drawn to a judgment rendered by the Ahmedabad Bench of the Customs Excise and Service Tax Appellate Tribunal [Tribunal] in Commissioner of Service Tax vs. Kiri Dyes and Chemicals Limited Final Order No. A/10507/2023 dated 23 March 2023 and which came to be dismissed in the following terms: "The issue involved in the present case is whether the appellant is liable to pay service tax on the service on Ocean Freight or otherwise. 2. Shri Sanjay Kumar, learned Superinten....
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.... Section 11B of the Central Excise Act, 1944 [Central Excise Act] and which stands adopted under the 1994 Act. It was submitted that the prayer for refund for the period April 2017 to June 2017 has been raised for the first time by the writ petitioners by way of the present action and is thus not only barred in light of the limitation as erected in terms of Section 11B of the Central Excise Act but even otherwise in light of the provisions of the Limitation Act, 1963 [Limitation Act], which would apply. 10. Mr. Ramachandran submitted that insofar as the decision in Sal Steel is concerned, the same is yet to attain finality and consequently, the claim for refund is not liable to be countenanced. It was further asserted that the claim is barred by limitation not only when tested on the anvil of Section 11B of the Central Excise Act, but also in light of the provisions contained in the Limitation Act and more particularly Section 17 (1) (c) thereof. Mr. Ramachandran sought to draw sustenance for the aforesaid submissions by relying upon the following passages as they appear in the judgment of the Constitution Bench in Mafatlal Industries Ltd. vs. Union of India (1997) 5 SCC 536. Ou....
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.... the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court. (ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: Where a person approaches the High Court ....
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.... forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched. (iv) It is not open to any person to make a refund claim on the basis of a decision of a court or tribunal rendered in the case of another person. He cannot also claim that the decision of the court/tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a....
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....be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal [1959 SCR 1350 : AIR 1959 SC 135 : (1958) 9 STC 747] have also been wrongly decided to the above extent. This declaration - or the law laid down in Propositions (i) to (vii) above - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an authority, Tribunal or Court or otherwise. (ix) The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and the Customs Act are constitutionally valid and are unexceptionable. (x) By virtue of sub-section (3) to Section 11-B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the....
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.... find the objections as raised to be wholly unmerited for reasons which we assign hereinbelow. As is evident from a reading of the principles which came to be enunciated by the Constitution Bench in Mafatlal Industries, a claim for refund founded on the ground of a provision of the statute having been struck down as unconstitutional would clearly fall outside the purview of the enactment itself. The Constitution Bench thus held that in such a case the claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution as also in terms of Section 72 of the Contract Act, 1872 [Contract Act]. It was in that context that the Supreme Court further observed that in all such cases, the period of limitation would have to be calculated taking into account the principles enshrined in Section 17 (1) (c) of the Limitation Act. 12. It is, however, pertinent to note that Mafatlal Industries in unequivocal terms holds that where the refund is claimed consequent to a declaration of invalidity having been rendered, it would clearly fall outside the purview of the principal enactment and could be claimed either by way of suit or by way of a writ petition. Once it ....
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....thority of law is not considered as tax collected by them and, therefore, Section 54 is not applicable. In such circumstances, Section 17 of the Limitation Act is the appropriate provision for claiming the refund of the amount paid to the Revenue under mistake of law, which is as under: "Section 17(1) of the Limitation Act, 1963 (1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act,- (a) the suit or application is based upon the fraud of the defendant or respondent or his agent; or (b) *** (c) the suit or application is for relief from the consequences of a mistake; or (d) ***" 8. This Court, in the case of Binani Cement Ltd. v. Union of India, (2013) 288 ELT 193 (Guj), held that where the duty is collected without any authority of law, such collection of duty is considered as collected without authority of law and, therefore, is opposed to Article 265 of the Constitution of India and, thus, unconstitutional. It is held that the assessee is not bound by the limitation prescribed under the special law for claiming the refund of the excess duty or duty collected illeg....
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.... ELT 21 (Guj), wherein this Court held that the statutory time limit provided under Section 11B of the Central Excise Act is not applicable to the claim of refund of duty paid under mistake as the same was paid under mistake of law and, therefore, such claim is considered as outside purview of enactment. It was held that general provisions provided under the Limitation Act is applicable to claim refund of such duty. The relevant paragraphs of the decision are given as under: "14.4 Thus, in view of the principles enunciated by the Supreme Court in Salonah Tea Co. Ltd. v. Superintendent of Taxes, Nowgong (supra), in case where money is paid by mistake, the period of limitation prescribed is three years from the date when the mistake was known. Besides, section 17 of the Limitation Act inter alia provides that when a suit or application is for relief from the consequences of a mistake, the period of limitation would not begin to run until the plaintiff or applicant has discovered the mistake, or could, with reasonable diligence, have discovered it. Therefore, in case where money is paid under a mistake, the limitation would begin to run only when the applicant comes to know o....
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....and contrary to the law laid down by this court in Commissioner v. Sahakari Khand Udyog Mandli Ltd. (supra). - *** - *** - In the facts of the present case, the refund is claimed on the ground that the amount was paid under a mistake of law and such claim being outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. The petitioner was, therefore, justified in filing the present petition before this court against the order passed by the adjudicating authority rejecting its claim for refund of the amount paid under a mistake. - Since Oil Cess is not a duty of excise, the amount paid by the petitioner by way of Education Cess and Secondary and Higher Secondary Education Cess, cannot in any manner be said to be a duty of excise inasmuch as what was paid by the petitioner was not a duty of excise calculated on the aggregate of all the duties of excise as envisaged under the provisions of section 93 of the Finance Act, 2004 and section 138 of the Finance Act, 2007. Thus, the amount paid by the petitioner would not take the character of Education Cess and Secondary and Higher Secondary Education Cess but i....
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....e service tax paid under mistake of law is to be returned to the assessee irrespective of the period covered under the refund application. It was held that refusing to return the amount would go against the mandate of Article 265 of the Constitution of India. The relevant paragraphs of the decision are as under: "12. Further, the claim of the respondent in refusing to return the amount would go against the mandate of Article 265 of the Constitution of India, which provides that no tax shall be levied or collected except by authority of law. 13. On an analysis of the precedents cited above, we are of the opinion, that when service tax is paid by mistake a claim for refund cannot be barred by limitation, merely because the period of limitation under Section 11B had expired. Such a position would be contrary to the law laid down by the Hon'ble Apex Court, and therefore we have no hesitation in holding that the claim of the Assessee for a sum of Rs. 4,39,683/- cannot be barred by limitation, and ought to be refunded. 14. There is no doubt in our minds, that if the Revenue is allowed to keep the excess service tax paid, it would not be proper, and against ....