2024 (10) TMI 1349 - AT - Service Tax

Liability of appellant to discharge the service tax under reverse charge mechanism - transportation of imported goods by a vessel (Ocean Freight) from the place outside India to custom station in India - HELD THAT - This issue is no longer res-integra as the same is settled by the Hon ble Gujarat High court in the case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA 2019 (9) TMI 1315 - GUJARAT HIGH COURT wherein the Hon ble high court has 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 and set aside.' Following the above judgment, in another case of COMMISSIONER OF SERVICE TAX, AHMEDABAD VERSUS KIRI DYES AND CHEMICAL LIMITED 2023 (3) TMI 1400 - CESTAT AHMEDABAD , this Tribunal held that ocean freight is not taxable. In the present case the demand on ocean freight is not sustainable. Hence, the impugned order is set aside - Appeal allowed.

Summary

Issues:
Whether the appellant is liable to discharge service tax on transportation of imported goods by vessel (Ocean Freight) under reverse charge mechanism.

Analysis:
The Hon'ble Gujarat High Court in the case of SAL Steel Ltd Vs. Union of India held the taxability of ocean freight as ultra vires. The appellant relied on various judgments and circulars to support their case. The issue in the present case pertains to the taxability of ocean freight for the import of goods through a vessel. The Tribunal noted that the issue has been settled by the Hon'ble Gujarat High Court in the SAL Steel Ltd case. The High Court held that the service of transportation of goods up to the Indian Port, which includes sea transportation, is an extraterritorial event and cannot be taxed under the Finance Act, 1994. The Tribunal emphasized that the Parliament has restricted the provisions of Chapter-V of the Finance Act to events occurring in the taxable territory, i.e., India. Therefore, any attempt to levy service tax on services rendered and consumed outside India is ultra vires the Act. The Tribunal referenced the judgment in Commissioner of Service Tax, Ahmedabad Vs. Kiri Dyes and Chemicals Limited, where it was held that ocean freight is not taxable, a decision upheld by the Supreme Court.

The Tribunal found the demand on ocean freight in the present case not sustainable based on the settled legal position. Consequently, the impugned order was set aside, and the appeal was allowed. The judgment was pronounced in open court on 24th October 2024.