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2019 (1) TMI 327 - HC - Service TaxValidity of Notification dated 13.4.2017 - liability of importer to make payment of service tax in respect of ocean freight - whether notification is ultra vires the provisions of section 66B and section 68(2) of the Finance Act, 1994 - Held that - Issue Notice returnable on 6th February, 2019. By way of ad-interim relief, further proceedings pursuant to the impugned show cause notice dated 28.6.2018 (Annexure-H to the petition) are hereby stayed.
Issues involved:
Challenge to impugned notification under Finance Act, 1994 regarding service tax liability for transportation of goods by vessel from non-taxable territory to India. Analysis: 1. The petitioners challenged the impugned notification dated 13.4.2017, which made the importer liable for paying service tax for transportation of goods by vessel from a place outside India up to the customs station in India. The notification introduced amendments to the Service Tax Rules, 1994, retroactively from 22.1.2017. The petitioners argued that in a CIF contract, the importer is neither the service provider nor the recipient of the service. 2. The petitioners referred to section 66B of the Finance Act, 1994, which is the charging section for service tax. They contended that the section only allows for the levy of tax between the service provider and the recipient in the taxable territory. They argued that tax cannot be levied on a person other than the service provider or recipient and only if the service is provided within the taxable territory. 3. Reference was made to section 65B(52) which defines "taxable territory" as the territory to which the provisions of the Act apply. It was argued that since the Act extends to the whole of India except Jammu and Kashmir, no service tax can be levied on services provided outside India. This was used to challenge the validity of the impugned notifications. 4. The petitioners contended that the impugned notifications, making the importer liable for service tax on ocean freight, are ultra vires the provisions of section 66B and section 68(2) of the Finance Act, 1994. They argued that the notifications exceed the scope of the Act and impose tax liability where it is not intended. 5. Section 94 of the Finance Act empowers the Central Government to make rules, but the petitioners argued that fixing the tariff value of any service is not within the purview of the government's power under this section. They claimed that the notification providing for an option to pay a calculated amount for imported goods is beyond the government's authority under the Act. 6. Referring to section 67 of the Act, which deals with the valuation of taxable services for charging service tax, the petitioners argued that the power to fix tariffs, as done through the impugned notification, goes beyond the provisions of the Act. They contended that such tariff-fixing is not a part of the machinery provision. 7. The court noted various submissions made by the petitioners but did not delve into them deeply at that stage. 8. Considering the arguments presented, the court issued a notice returnable on 6th February, 2019. As an interim measure, further proceedings based on the impugned show cause notice dated 28.6.2018 were stayed. 9. Direct service was permitted to all respondents except the Union of India, indicating the procedural steps to be followed in the case.
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