2022 (6) TMI 305 - AT - Service Tax

Rejection of Refund claim - Ocean Freight - double taxation - case of appellant is that they had already paid customs duty, CVD etc. on the import price, which includes ocean freight, the appellant was not required to pay service tax again on the freight (under reverse charge) - 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 Rs. 11,31,601/- Interest Rs. 2,91,590/- Penalty Rs. 1,69,740/-, totalling Rs. 15,92,931/-. This amount should be refunded to the appellant within a period of 45 days alongwith interest as per the provisions Section 11BB of the Central Excise Act - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of refund claim collected on ocean freight.

Analysis:
The appellant, engaged in manufacturing, filed a refund claim for service tax, interest, and penalty paid on ocean freight under reverse charge mechanism for the period April 2017 to June 2017. The appellant argued that since customs duty and CVD were paid on the import price, including ocean freight, they should not be liable to pay service tax again on the freight. The appellant contended that paying service tax on ocean freight would result in double taxation. The appellant also highlighted the inability to avail CENVAT Credit under the GST regime due to the timing of payment. The refund claim was filed on the grounds that the appellant could not utilize the input tax credit of the service tax paid on reverse charge basis.

The Adjudicating Authority noted that as per relevant notifications, the importer was liable to pay service tax on transportation services from a place outside India to the customs station in India under reverse charge mechanism. The tax deposited by the appellant related to the specified period and the appellant admitted liability to service tax but claimed the refund due to the unavailability of CENVAT Credit under GST provisions. The Authority observed that the appellant failed to provide supporting documents to substantiate their claim.

The Commissioner (Appeals) rejected the appellant's appeal. However, upon considering the contentions, the Tribunal found that the transaction value for customs duty and CVD already included the ocean freight. Therefore, the Tribunal held that the appellant had suffered double taxation by paying service tax on ocean freight demanded by the Revenue. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and directing the refund of service tax, interest, and penalty amounting to Rs. 15,92,931 within 45 days along with applicable interest as per the provisions of the Central Excise Act.

In conclusion, the Tribunal's decision favored the appellant, emphasizing the principle of avoiding double taxation and ruling in favor of the refund claim related to service tax paid on ocean freight.