2023 (12) TMI 843 - AT - Central Excise

Levy of Service tax on Ocean freight - Refund pertaining to SB Cess and KK Cess - appellants did not file refund of the Service tax amount paid but only for the amount available as credit to the appellants - inapplicability in view of section 148(8)(a) of CGST Act. Whether Service Tax demand on Ocean freight is sustainable? - HELD THAT - It is found from the facts of the case that the Appellant pursuant to Audit findings have voluntarily paid the Service Tax on Ocean Freight along with interest - The issue of Service Tax on Ocean Freight was the subject matter of dispute in the case of M/S ASIATIC DRUGS PHARMACEUTICALS PVT LTD VERSUS COMMISSIONER CGST-ALWAR 2022 (6) TMI 305 - CESTAT NEW DELHI where it was held that I find that the transaction value for Customs duty and Excise duty (CVD), includes the Ocean Freight , and accordingly I hold that the appellant has suffered the double taxation, by again paying the service tax on the Ocean Freight, as demanded by the Revenue - thus, the recovery of Service Tax on Ocean freight is not legally justified and hence the demand is not maintainable. Whether the appellants are eligible for sanction of refund of Service Tax paid on Ocean Freight and on licence fee paid to Government under Reverse Charge basis paid for the period prior to 01.07.2017, under Section 142(3) of CGST Act,2017? - whether the said refund becomes inapplicable in view of section 148(8)(a) of CGST Act? - HELD THAT - The refund claim has been rejected by Commissioner (Appeals) by resorting to Section 142(8)(a) of GST Act, 2017 - it is found that similar issue was analyzed by the Tribunal regarding the issue of sanction of refund of Service Tax paid during the GST era in M/S INDO TOOLING PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX CENTRAL EXCISE, INDORE (M.P) 2022 (3) TMI 1100 - CESTAT NEW DELHI wherein it was held that from a conjoint reading of sub-sections (3), (5) and (8)(a) of the CGST Act, it is evident that an assessee is entitled to claim refund of service tax under RCM paid after the appointed day under the existing law and such claim has to be disposed of according to the provisions of the existing law. As the appellant was entitled to Cenvat credit of the said amount of Rs. 9,85,827/-, which is now no longer available due to GST regime, they are entitled to refund of the said amount. The rejection of refund claims cannot be justified - the impugned order is set aside and appeal is hereby allowed.

Summary

Issues Involved:
1. Whether Service Tax demand made on Ocean freight paid is justified?
2. Whether the appellants are eligible for sanction of refund of Service Tax paid on Ocean freight prior to 01.07.2017, under Section 142(3) of CGST Act, 2017, and whether the said refund becomes inapplicable in view of section 148(8)(a) of CGST Act?

Summary:

Issue 1: Whether Service Tax demand on Ocean freight is justified?

The Tribunal analyzed whether the appellants were rightly called upon to pay service tax on Ocean Freight paid on imports during May and June 2017. It was noted that the appellant had voluntarily paid the service tax along with interest pursuant to audit findings. The Tribunal referenced the case of M/s. Asiatic Drugs and Pharmaceuticals Vs. Commissioner of CGST Alwar [2022 (67) GSTL 473( Tri.-Del.)], where it was held that paying service tax on Ocean Freight amounts to double taxation since the transaction value for Customs duty and Excise duty (CVD) includes Ocean Freight. Consequently, the Tribunal concluded that the recovery of Service Tax on Ocean freight is not legally justified and hence, the demand is not maintainable.

Issue 2: Whether the appellants are eligible for sanction of refund of Service Tax paid on Ocean Freight prior to 01.07.2017, under Section 142(3) of CGST Act, 2017, and whether the said refund becomes inapplicable in view of section 148(8)(a) of CGST Act?

The Tribunal examined whether the appellants are entitled to a refund of the service tax paid on Ocean Freight and on license fee paid to the Government under Reverse Charge Mechanism (RCM) for the period before 01.07.2017. The Commissioner (Appeals) had rejected the refund claim by resorting to Section 142(8)(a) of CGST Act, 2017. However, the Tribunal referred to several judicial pronouncements, including INDO TOOLING Pvt. Ltd. Vs. Commissioner, CGST & Central Excise, INDORE [2022 (61) G.S.T.L. 595 (Tri. - Del.)], which clarified that an assessee is entitled to claim a refund of service tax under RCM paid after the appointed day under the existing law. The Tribunal also cited the case of TEREX INDIA Pvt. Ltd. Vs. Commissioner of GST & C.E., Salem [2022 (63) GSTL 238(Tri-Chennai)], which held that Section 142(8)(a) deals with recovery of arrears under the erstwhile law after the implementation of the CGST Act, 2017, and does not apply to the present case where the tax was paid based on audit findings rather than an assessment or adjudication.

The Tribunal concluded that the rejection of the refund claim by referring to Section 142(8)(a) of CGST Act, 2017, is misplaced. The appellants are entitled to a refund under Section 142(3) of CGST Act, 2017, as the tax was paid under the erstwhile law. The Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, as per the law.

Conclusion:

The Tribunal ruled that the demand for Service Tax on Ocean freight is not legally justified and that the appellants are entitled to a refund of the service tax paid on Ocean Freight under Section 142(3) of CGST Act, 2017. The impugned order was set aside, and the appeal was allowed with consequential relief.