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2023 (9) TMI 182 - AT - Service TaxLevy of service tax on ocean freight - reverse charge (RCM) - Matter is pending before the Supreme court, whereas no stay has been granted - Constitutional Validity of N/N.15/2017-ST and Notification No.16/2017-ST making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules - inserting Explanation- V to reverse charge notification No.30/2012-ST as ultra vires of Section 64, 66B, 67 and 94 of Finance Act, 1994 - Power of Central Government under Section 94 of the Finance Act for charging and collecting tax on extraterritorial events - HELD THAT - Neither the SLP filed by the revenue has been admitted nor any stay has been granted by the Hon ble Apex Court against the said order of the Gujarat High Court. That being so the appeal filed by the Revenue contesting the order of Hon ble Gujarat High Court before this tribunal is devoid of any merits. It is settled law that if certain provisions of law or any notification issued under the statute is held ultra vires by any High Court in the country the same is valid law in the jurisdiction of all the High Courts of the country, unless and until jurisdictional High Court or some other High Court gives a contrary view. On specific query as to whether there is any contrary order of any High Court or jurisdictional High Court in the matter which may support the case of the Revenue learned Authorized Representative was not able to point out the same. It is settled law that law as declared by the Hon ble Gujarat High Court is law of land as on date today. The order of Commissioner (Appeal) which follows the said decision cannot be faulted with - Appeal dismissed.
Issues Involved:
1. Legality of service tax on ocean freight. 2. Validity of the show cause notice and refund claim rejection. 3. Authority of Central Government to levy and collect service tax on extra-territorial events. 4. Delegation of legislative functions to the Central Government. 5. Machinery provisions for valuation of services. Summary: 1. Legality of Service Tax on Ocean Freight: The Commissioner (Appeal) concluded that the amounts deposited by the appellant during the audit, which included service tax on ocean freight, interest, and penalty, were merely deposits and not taxes. The retention of these amounts by the department was without legal authority. The Gujarat High Court in the case of M/s Sal Steel Ltd. vs. Union of India declared the levy of service tax on ocean freight as ultra vires. 2. Validity of Show Cause Notice and Refund Claim Rejection: The show cause notice proposing the rejection of the refund and the recovery of Cenvat credit was deemed misconceived. The adjudicating authority exceeded the scope of the show cause notice, and the rejection of the refund claim violated the instructions in the Board's Circular No.1053/2017-CX. The appellant was entitled to a refund of the entire amount deposited against ocean freight. 3. Authority of Central Government to Levy and Collect Service Tax on Extra-Territorial Events: The Gujarat High Court held that the Central Government lacked the power under Section 94 of the Finance Act to charge and collect tax on extra-territorial events. The court emphasized that essential legislative functions of taxing activities in non-taxable territories could not be delegated to the Central Government. 4. Delegation of Legislative Functions to the Central Government: The Gujarat High Court found that the rule-making power under Section 94 did not permit the Central Government to make rules for recovering service tax from third parties who are neither service providers nor receivers. The court declared Rule 6(7CA) of the Service Tax Rules as ultra vires. 5. Machinery Provisions for Valuation of Services: The Gujarat High Court noted the absence of machinery provisions for valuing services in cases where the service value is not known to the petitioner or the Revenue Officer. The court held that the scheme of taxation would fail without such provisions, rendering Rule 6(7CA) unenforceable. Conclusion: The appeal by the revenue was dismissed due to the lack of merit, and the stay application was disposed of as not maintainable. The decision of the Gujarat High Court, which struck down the relevant notifications and rules as ultra vires, was upheld, establishing it as the prevailing law.
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