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2024 (1) TMI 578 - AT - Service TaxSeeking refund of service tax wrongly paid on ocean freight under reverse charge mechanism - rejection of refund on the ground that since bill of entry was filed in the name of the Appellant, hence the Appellant is the service recipient - HELD THAT - The constitutional validity of Notification No.15/2017-ST dated 13.04.2017 and Notification No.16/2017-ST dated 13.04.2017 making the importer as a person liable to pay service tax on services by way of transportation of goods by a vessel from a place outside India up to the custom station of clearance in India, even in case of C.I.F contracts, was challenged before Hon ble Gujarat High Court in MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA 2019 (9) TMI 1315 - GUJARAT HIGH COURT . The validity of Circular No.206/4/2017-ST dated 13.04.2017 was also challenged in the said writ petition, where it was held that The Notification Nos. 15/2017-ST and 16/2017-ST making Rule 2(1)(d)(EEC) and Rule 6(7CA) of the Service Tax Rules and inserting Explanation-V to reverse charge Notification No. 30/2012-ST is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and enquiries for collecting service tax from them as importers on sea transportation service in CIF contracts are hereby quashed Thus, the issue involved in the present case is no more res-integra and the Appellant cannot be fastened with any service tax liability on ocean freight. By respectfully following the dicta laid down in SAL Steel Ltd., the appeal filed by the Appellant is allowed.
Issues involved:
The appeal challenges the rejection of a refund claim on the grounds of limitation, relating to the payment of service tax on ocean freight under reverse charge mechanism. Details of the judgment: Issue 1: Refund claim rejected as barred by limitation - The Appellant imported raw materials under a C.I.F basis agreement with a foreign supplier, who arranged the carriage of goods by sea to the port of destination. - Following an audit, the Appellant was directed to pay service tax on ocean freight under reverse charge mechanism, which was paid under protest. - The Appellant later discovered that, as per the C.I.F agreement, they were not the service recipient and hence not liable to pay service tax on ocean freight. - The refund claim was rejected based on the argument that the bill of entry was filed in the name of the Appellant, making them the service recipient. - The Appellant contended that they were not privy to the agreement between the foreign supplier and the shipping line, citing a decision of the Hon'ble Gujarat High Court. Issue 2: Constitutional validity of service tax on ocean freight - The constitutional validity of certain notifications making importers liable to pay service tax on ocean freight in C.I.F contracts was challenged before the Hon'ble Gujarat High Court. - The High Court held that the impugned provisions were ultra vires certain sections of the Finance Act, as importers in C.I.F contracts are neither service providers nor receivers. - The High Court further ruled that there was no machinery provision for valuation of the service, making the Rules and Notifications unenforceable. Conclusion: - The Tribunal, following the authoritative pronouncement of the Hon'ble Gujarat High Court, held that the Appellant cannot be held liable for service tax on ocean freight. - The Tribunal noted that the Appellant's specific plea regarding the C.I.F nature of the agreement was undisputed by the revenue, leading to the allowance of the appeal. - The Tribunal also highlighted that, despite the revenue's appeal against the High Court decision, the lack of a stay order meant that the High Court's ruling remained operative. - The appeal was allowed, granting the Appellant consequential relief based on the principles established in the SAL Steel Ltd. case.
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