2022 (10) TMI 735 - AT - Service Tax

Levy of service tax - appellant paid IGST on ocean freight alongwith custom duty at the time of import - reverse charge mechanism - period from 23.04.2017 to 30.06.2017 - Exemption Notification no. 25/2012-ST dated 20.06.2012 as amended vide Notification no. 1/2017-ST dated 12.01.2017 - HELD THAT - Admittedly, the appellant have purchased fertilizers which is their inputs, at CIF value which includes the ocean freight element. Thus, the demand under service tax is not attracted. It is further found that the show cause notice is also on wrong facts as the date of filing of two Bills of Entry is on 6/7/2017 and 14/7/2017, but it is wrongly alleged that these have been filed on May June 2017. Thus, the show cause notice is also erroneous on this score. The appeal is allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of service tax on ocean freight under Reverse Charge Mechanism (RCM).

Analysis:
The appellant, a manufacturer and trader, imported fertilizers and paid IGST on ocean freight along with custom duty. A Show Cause Notice was issued demanding service tax alleged to be short paid on ocean freight services during a specific period. The demand was based on the amendment of Exemption Notification no. 25/2012-ST, which withdrew exemption on transportation of goods by vessel from outside India to the Customs station in India. Importers were made liable to pay service tax on Reverse Charge basis from a certain date. Additionally, a new rule was inserted into the Point of Taxation Rules, 2011, specifying the point of taxation for such services. Despite paying IGST on ocean freight, the revenue demanded service tax under Reverse Charge Mechanism, citing the filing dates of Bills of Entry during the service tax regime.

The appellant argued that as they had paid custom duty on CIF value, which included the ocean freight element, there should be no demand for service tax on the purchase price of goods, even under Reverse Charge Mechanism. The appellant appealed the decision of the Commissioner (Appeals) who had dismissed the appeal. The General Manager of the appellant contended that the show cause notice contained errors in facts regarding the dates of filing Bills of Entry.

After considering the contentions, the Member (Judicial) held that the appellant purchased fertilizers at CIF value, including the ocean freight element, making the service tax demand not applicable. The Member also noted errors in the show cause notice regarding the dates of filing Bills of Entry. Consequently, the appeal was allowed, the impugned order was set aside, and the appellant was entitled to consequential benefits as per the law. The appeal was allowed, providing relief to the appellant.