2021 (9) TMI 582 - AT - Service Tax

Refund of the amount of tax with interest paid - Ocean Freight Charges - double taxation - Reverse charge mechanism - HELD THAT - The transaction value for Custom duty and Excise duty (CVD), includes the ocean freight, and accordingly it is held that the appellant has suffered the double taxation, by again paying the service tax on the ocean freight as demanded by the Revenue. The appellant is entitled to refund of service tax amounting to ₹ 3,51,199/- plus the amount of interest deposited ₹ 41,599/-, and /or the total the amount of ₹ 3,92,798/-. This amount should be refunded to the appellant within a period of 45 days alongwith interest as per the provisions of Section 11BB of the Central Excise Act - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on reverse charge basis on freight amount.
2. Claim for refund of service tax paid on freight.
3. Adjudication of the show cause notice regarding the refund claim.
4. Rejection of the refund claim by the Commissioner (Appeals).
5. Appeal before the Tribunal challenging the rejection of the refund claim.

Analysis:

1. The appellant, a chemical manufacturer, imported raw materials and paid customs duty along with CVD on the CIF price. An audit pointed out liability to pay service tax on reverse charge basis on freight prior to 30.06.2017. The appellant deposited the amount but later filed a refund application, contending that since customs duty was already paid on the import price including freight, they should not be required to pay service tax again on the freight.

2. The show cause notice was issued as the appellant deposited the tax but did not claim they were not liable to pay service tax. The appellant argued that paying service tax on ocean freight, already included in the value of goods for customs duty and CVD, led to double taxation. The Adjudicating Authority noted the liability under reverse charge mechanism and observed that the appellant admitted liability but sought a refund due to inability to take credit under GST provisions.

3. The Commissioner (Appeals) rejected the refund claim, stating that admitting liability and lack of cenvat credit availability were insufficient grounds. The appellant appealed to the Tribunal, arguing that the issue of taxability under reverse charge was not addressed, and they had deposited the tax under a mistaken belief, seeking a refund based on the double taxation principle.

4. The Tribunal found that the transaction value for customs duty and CVD included ocean freight, leading to double taxation when paying service tax on the freight as demanded by the Revenue. Consequently, the Tribunal allowed the appeal, directing a refund of the service tax amount along with interest, emphasizing the appellant's entitlement to the refund due to the double taxation suffered.

5. In conclusion, the Tribunal set aside the Commissioner's decision, granting the refund and interest to the appellant within 45 days as per the provisions of the Central Excise Act. The appeal was allowed, highlighting the appellant's right to the refund based on the principles of double taxation and the inclusion of freight in the transaction value for customs duty and CVD.