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TMI Blog2023 (5) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax initially became payable by steamer agents on ocean freight with effect from 22.01.2017 in view of the amendment by Notification No.1/2017-ST dated 12.01.2017. Later, by the impugned Notification No.15/2017-ST dated 13.04.2017, the burden was shifted on the importer - Thus, the intention of the Government was to shift burden of tax on the steamer agents and later on the importers vide impugned Notification No.15/2017-ST dated 13.04.2017 with effect from 23.04.2017, wherein, an Explanation V to Notification No.30/2012-ST dated 20.06.2012 was inserted. It impacted the second Category II of Writ Petitioners namely the importers . There were further amendments to the Explanations to vide Notification No.03/2017-ST, dated 12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017. Rule 8B was inserted to the Point of Taxation Rules, 2011, after Rule 8A vide impugned Notification No.14/2017-ST dated 13.04.2017. It came into force on 23.04.2017 with retrospective effect from 22.01.2017 - the purpose of the insertion of Rule 8B of the Point of Taxation Rules, 2011 with retrospective effect from 22.1.2017 was to fix the rate of tax, value of taxable service and rate of exchange a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 1994, few services were placed in the negative list in Section 66D of the Finance Act, 1994 while few services were specifically exempted with effect from 01.07.2012 under Mega Exemption Notification No.25/2012-ST dated 20.06.2012 with effect from 01.07.2012. The other collateral notifications which have been challenged in these writ petitions are merely incidental and only consequential to withdrawal of exemption in Mega Exemption Notification No.25/2012- ST dated 20.06.2012 vide impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. They have been issued with a view to implement the changes on account of withdrawal of exemption under impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. There is a flaw in the above Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017. It is the foreign liner who engages the service of various other persons in the course of transport of service. It is the foreign shipping liner who receives service who can be taxed and not the importers or the steamer agents although by virtue of the above two notifications, the person liable to pay tax has been also declared as the person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petitioner in Table 5 are also liable to be quashed. However, we would not go that far to hold all the notifications challenged as ultra-vires. Category I Writ Petitioners have also challenged the vires of para 4 and 4.1 of Circular No.206/4/2017-ST dated 12.4.2017 in W.P.No.14643 of 2017 as null and void and ultravires the various provisions of the Constitution and ultra vires Section 83 of the Finance Act, 1994, Section 37B of the Central Excise Act, 1994 as made applicable to Finance Act, 1994 as well as Notification No.26/2012-ST dated 20.06.2012. There is no necessity to declare the impugned notifications as ultra vires as there is no proper machinery provided under the impugned notifications issued under Section 68(2) of the Finance Act, 1994 to shift the burden to pay service tax on the petitioners as the petitioners are not either the recipients of the taxable service by way of transportation goods by a vessel from a space outside India up to the customs stations of clearance in India. They are not liable to tax as things stand - Challenge to Notification No.01/2017-ST dated 12.01.2017 has to fail in the light of the decision of the Hon ble Supreme Court in Kasinka Tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 435 35445 of 2019 : Mr.Venkataswamy Babu Senior Panel Counsel COMMON ORDER By this common order, all these 22 cases are being disposed. Broadly, there are 2 categories of Writ Petition. Details of the Writ Petitions are given below:- Category No.1 : Steamer Agents 2. These Writ Petitions have been filed by and on behalf of Steamer Agents. These petitioners have challenged the vires of Notification No.28/12-ST dated 20.6.2012, Notification Nos.1/2017-ST, 02/2017-ST 03/2017-ST, all dated 12.01.2017 and Section 66C(2) of Chapter V of the Finance Act, 1994 (as amended) as ultra vires provision of the Constitution. They have also challenged the clarification of the Board in Para 4 4.1 of the Circular No.206/4/2017 Service Tax, dated 13.04.2017. 3. Table Nos.1, 2 and 3 below give the details of the writ petitions filed by these writ petitioners wherein vires of these notifications, provision and the circulars have been challenged. Table No.1 : Notifications under Challenge. Sl. No. W.P. Nos. Notifications 28/12 dt.20.6.12 01/2017 dt.1201.17 02/2017 dt.12.01.17 03/2017 dt.12.01.17 1 2148/2017 * - - - 2 2149/2017 - * - - 3 2150/2017 - - * - 4 2151/2017 - - - * ( * Represents challenge to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount Sl. No. W.P.No. Amount 21 8809/2020 Rs.47,26,342/- [Ocean Freight Service Tax of Rs.36,50,054/- + interest of Rs.10,76,288/- ] 22 15398/2021 Rs.14,72,796/- [Service Tax of Rs.12,58,605/- + interest of Rs.2,14,191/- ] 6. The grounds on challenge to the impugned notifications by the petitioners in Category-I are broadly as follows:- i. It is submitted that, by issuance of Notification Nos. 1, 2 and 3 of 2017. ST all dated 12.01.2017, the respondent has exceeded the powers delegated under Section 66 C (2) of Chapter V of the Finance Act, 1994 and Rule 10 of the Place of Provisions of Service Rules, 2012. ii. It is submitted that the tax cannot be imposed on a person who would never be liable for it in the first place, even if the deeming fiction under Sec 66B and 66C of Chapter V of the Finance Act is used to justify the levy. iii. It is submitted that there is no rational connection between levy of Service tax on international ocean freight when both the service provider and service recipient are located outside India, on the steamer agent who only performs limited functions as authorized under the Customs Act once the goods reach the customs frontiers of India. iv. It is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent. This goes against the principle on which Reverse Charge mechanism works, since the liability to pay the Service Tax is imposed on a person who is neither the provider of the service, nor receiver of the service or in any manner connected with such transaction. xii. Therefore, the duty to pay the service tax especially by Reverse Charge mechanism, cannot be levied on the steamer agent, since the steamer agent is neither the provider nor the receiver of the service, nor in any manner connected with such service transaction. xiii. It is submitted that the Steamer Agent is appointed only for the purposes of compliance of the provisions of the Customs Act, in terms of Sec 148 of the Customs Act. Hence, the duty of the Steamer Agent is very limited, i.e. comply with the provisions of the Customs Act. 7. Broadly the Writ Petitions in Category-1 are opposed by the respondents. :- i. It is submitted that, the contention of the petitioners is on the wrong notion that the liability to pay service tax cannot be fastened on them as they are not service recipient was incorrect more particularly in view of the recent decision of the Apex Court in the case of Uol Vs Mohit Minerals , 2022 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IF basis, it is permissible for the Government to levy customs duty on the CIF value and levy service tax on the ocean freight for transportation service. x. It is submitted that, the charging section for levy of service tax as on 31.06.2012 was service specific , under Sec.66 and Sec.66A (on recipient of services from abroad) of the Finance Act, 1994.Section 66 is charging section on forward charge and section 68(2) is the charging section on reverse charge. xi. It is submitted that all the Sections and Rules in a Statute have to be read harmoniously and in a manner that none of the Sections made redundant or made otiose. It is submitted that Sec.66C nor does or POPSR, 2012 render any of the other sections or Rules in the Act, redundant or otiose nor does it authorize the levy of service tax on any event that takes place outside the whole of India. 8. The learned counsel for the Petitioners in Category- 1 has relied on the following case laws:- i. Imagic Creative Pvt Ltd v. CCT , (2008) 2 SCC 614 ii. BSNL v. Union of India , 2006 (2) STR 161 iii. All India Federation of Tax Practitioners v. Union of India , (2007) 7 SCC 527 iv. K Damodaraswamy Nadar and Bros V. State of Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces there is no power to fix tariff as done by virtue of Notification No 16/2017 dated 13.04.2017. viii.It is submitted that the impugned Notifications are violative of Article 245 of the Constitution of India since it seeks to make laws for transactions taking place outside India. ix. It is submitted that the Gujarat High Court in the case of Sal Steel Ltd Vs Union of India (2020) 37 GSTL 3 has struck down the entries in the Notifications levying service tax on ocean freight under reverse charge mechanism when goods are imported on CIF basis. 11. No Counter has been filed in all the writ petitions. However, the cases were argued and written submission were filed. Broadly the writ petitions in Category-2 are opposed by the learned counsel for the department on the ground that:- i. The person liable to pay Service Tax as per Section 68 of the Finance Act, 1994 shall be such person as may be notified by the government and in such manner as may be prescribed. Section 68 of the Finance Act, 1994 reads as under:- (1) Every person providing taxable service to any person shall pay Service Tax at the rate specified in section/66B) in such manner and within such period as may be prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relied on the following case laws (for Category-II) : - i. Sal Steel Ltd. and Ors. vs. Union of India , (2020) 37 GSTL 3 ii. Kothari Sugars and Chemicals ltd , W. P. No. 9131 of 2019 iii. GVK Industries ltd another v. Income tax officer and Anr. , (2011) 332 ITR 130. iv. Gujarat Ambuja Cements v. Union of India , (2006) 3 STR 608. v. Kusum Ingots and Alloys Ltd v. Union of India 2004 (168) E.L.T. 3 (SC) vi. United Shippers Ltd v. CCE , 2015 (37) STR 104 vii. CCE v. United Shippers , 2015 (39) S.T.R. J369 viii. Vodafone International Holdings B.V v. Union of India and Anr. , (2012) 341 ITR 1. ix. All India Federation of Tax Practioners v. Union of India (2007) 7 SCC 527 x. Govind Saran Ganga Saran v. Commissioner of Sales Tax and Others (1985) 60 STC 1. 13. In support of these writ petitions, the learned counsel for the Respondent has relied on the following case laws:- i. Union of India v. VKC , C.A No. 4810 of 2021 ii. Godfrey Philips India ltd v. State of UP , (2005) 5 SCC 515. 14. To understand the scope of the challenge to the impugned notification, provision and circulars and the dispute, it will be useful to refer to a brief history of the Finance Act, 1994. The Chapter V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 66 of the Finance Act, 1994 at the rates prescribed for those taxable services alone. There was no definition of service in the Finance Act, 1994. 23. For the first time, the Parliament introduced a definition for the expression of Service in Section 65(B)(44) of the Finance Act, 1994 vide Finance Act,2012. The definition underwent few changes. We are not concerned in the changes in the definition in these writ petitions. 24. During the period in dispute, the definition of Service in Section 65(B)(44) of the Finance Act, 1994read as under:- (44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution; or (iii)a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, there was a paradigm shift. Any activity for consideration by a person to another person was a service . Any activity which qualified the above definition was liable to tax under Section 66B of the Finance Act, 1994, if it was provided or deemed to be provided in India. The definition of service excluded few activities from its purview. Section 66 B of Finance Act, 1994 is the charging provision for levy of Service Tax. It reads as under:- SECTION 66B. Charge of service tax on and after Finance Act, 2012. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 26. It will suffice to keep in mind that under Section 66B of the Finance Act 1994, no service tax was chargeable on those services which were in the negative list in Section 66B of the Finance Act, 1994. We shall refer to the same in the course of the discussion. 27. We have considered the arguments advanced by the learned counsel for the Category I Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from time to time. Thus, under the scheme of the Finance Act, 1994, tax can also be levied on the services rendered beyond the territory of India and consumed in India whether directly or indirectly and collected from a person under notification issued under Section 68(2) of the Finance Act, 1994 read with the provisions of the Service Tax Rules, 1994. 36. Further, elasticity was provided under Section 66C(1) of the Finance Act, 1994. Though a generic provision, it applied not only to service provided in India but also provided outside India. 37. Under Section 66C(1) of the Finance Act, 1994, the Central Government, by a fiction, under Rules, could determine the place of provision of service to fasten service tax liability on any person including a recipient of service. Specifically, under the provisions Section 66C(1) of the Finance Act, 1994, the Central Government can, having regard to the nature of service, determine the place of the provision of service. Thus, even if a service was actually provided outside the territory of India and consumed outside India could be deemed to have been provided in India. 38. Under Section 68(2) of the Finance Act, 1994, Rules framed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994 in W.P.No.2147 of 2017. The challenge made to the Sub- Section (2) to Section 66C of the Finance Act, 1994 is misconceived. The law on this aspect is clear. We shall make it clear as we discuss further. 46. In 2012, there was tectonic change to the provision of the Finance Act, 1994. Apart from the introduction of definition of service , for the first time under Section 65B(44) of the Finance Act, 1994, several new provisions were introduced to suit the new ecosystem under which service tax was to be levied and collected with effect from 01.07.2012 under the Finance Act, 1994. One of the important introductions was under Section 66C of the Finance Act, 1994 vide Finance Act, 2012. Section 66C of the Finance Act, 1994 was to complement the other provisions of the Finance Act, 1994 under the changes brought to it vide the Finance Act, 2012. 47. In a way, Section 66C of the Finance Act, 1994 diluted Section 64 of the Finance Act, 1994. For the sake of clarity, Section 64 and Section 66C of the Finance Act, 1994 as in force during the period in dispute are reproduced below for comparison:- Table No:7 Section 64 of the Finance Act, 1994 Section 66C of the Finance Act 1994 1. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 1994 substituted Explanation to Section 65(105) with effect from 18.05.2006. To implement Section 66A of the Finance Act, 1994, the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 was also issued under Sections 93 94 of the Finance Act, 1994 vide Notification No.11 of 2006-ST dated 19.04.2006. 52. Notifications under Section 68(2) of the Finance Act, 1994 which were issued were also amended from time to time to suit the changes and thus give teeth to the Central Government to levy tax on the recipient of imported service. 53. These amendments to the provisions of the Finance Act, 1994, in 2005 and 2006 and the provisions of the Taxation of Services (Provided from outside India and Received in India) Rules, 2006 are not relevant for the period in dispute as Section 66A of the Finance Act, 1994 ceased to apply with effect from 01.07.2012 vide Notification No.23/2012 ST dated 05.06.2012. 54. However, these developments are to be kept in mind to answer the issues before us. The Parliament was steadfast in taxing service provided from outside India and consumed in India. Thus, the Parliament introduced new provisions to Chapter V of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the territory of India for being made liable to tax. 61. Under Rule 10 of the Place of Provision of Services Rules, 2012, the place of provision of services of transportation of goods, other than by way of mail or courier , shall be the place of destination of the goods. Rule 10 of the Place of Provision of Services Rules, 2012 reads as under:- Table No.8 Rule 10. Place of provision of goods transportation services. - The place of provision of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of the goods: Provided that the place of provision of services of goods transportation agency shall be the location of the person liable to pay tax. 62. Rule 10 of the Place of Provision of Services Rules, 2012 applies without any distinction between inland transportation of goods service provided in India and services provided from outside the country. 63. Under Section 66D(p)(ii) of the Finance Act,1994, services by way of transportation of goods in an aircraft or a vessel from a place outside India to the customs station of clearance in India was in the negative list with effect from 01.07.2012. 64. Thus, such a service was outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 1994 with effect from 1.7.2012 on services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India. 69. Simultaneously, under Sl.No.34(c) of the Mega Exemption Notification No.25/2012 - ST dated 20.06.2012, services received from a provider of service located in a non-taxable territory by a person located in a non-taxable territory was withdrawn vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017 was exempted. 70. This exemption vide Sl.No.34(c) to Mega Exemption Notification No.25/2012-ST dated 20.6.2012 with effect from 01.07.2012 was withdrawn vide the impugned Notification No.1/2017- ST dated 12.01.2017 with effect from 22.01.2017 by adding a proviso to the Sl.No.34 (c) of Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 with effect from 22.01.2017. 71. This withdrawal of exemption vide Notification No.1/2017-ST dated 12.01.2017 along with collateral amendments to the provisions of the Service Tax Rules, 1994 and Notification No.30/2012-ST dated 20.6.2017 vide impugned notification have made these petitioners liable to tax. Some of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect of suspending the collection of Customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty etc., wholly or partially and subject to such conditions as may be laid down in the Notification by the Government in public interest . Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revokation of an exemption notification, in the public interest , is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act. Under the General Clauses Act an authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. From the very nature of power of exemption granted to the Government under Section 25 of the Act, it follows that the same is with a view to enabling the Government to regulate, control and promote the industries and industrial production in the country. Notification No. 66 of 1979 in our opinion, was not designed or issued to induce the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn it was free to act in the manner it did. It would bear a notice that though Notification 66/79 was initially valid only upto 31-3-1979 but that date was extended in public interest , we see no reason why it could not be curtailed in public interest. Individual interest must yield in favour of societal interest. 24 . In our considered opinion therefore the High Court was perfectly right in holding that the doctrine of promissory estoppal had no application to the impugned notification issued by the Central Government in exercise of its powers under Section 25(1) of the Act in view of the facts and circumstances, as established on the record. 26. In our opinion, no justifiable prejudice was caused to the appellants in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the public interest so demanded. Thus, in the facts and circumstances of these cases, the appellants cannot invoke the doctrine of promissory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 66C(2) of the Finance Act, 1994. 83. This challenge to Section 66C of the Finance Act, 1994 is long after it was incorporated into the Finance Act, 1994 after the withdrawal of exemption by amendment to Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. 84. Therefore, challenge to Section 66C(2) of the Finance Act, 1994 has to be answered against the petitioners. Challenge to Section 66C(2) of Finance Act, 1994 has to fail in view of the law settled by the Hon'ble Supreme Court in Electronics Corporation of India Vs. Commissioner of Income Tax and Another , AIR 1989 SC 1707, GVK Industries Vs. Income Tax Officers , 2011 (4) SCC 36 and in Union of India Vs. Mohit Minerals Private Limited , 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.). It cannot be said that the Parliament exceeded its power under the Article 245 of the Constitution. 85. As long as there is a territorial nexus between the service being taxed and its consumption in India whether directly or indirectly, the challenge to Section 66C(2) of the Finance Act, 1994 cannot be countenanced. Consequently, chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia provided that such an event has a real nexus/connection with event in India. 89. In fact, dealing with an identical situation under the GST Regime under Section 13(9) of the Integrated Goods and Service Tax Act, 2017, the Hon'ble Supreme Court in Union of India Vs. Mohit Minerals Private Limited , 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.) held as follows:- 109.As an alternative, the respondents submitted that though the levy may have a nexus with the Indian territory, the levy of tax extra-territorial must be provided by Parliament through statute and not by the Union Government through delegated legislation. We do not find any applicability of this submission to the facts at hand. As stated above, the IGST Act under Section 13(9) recognizes the place of supply of services as the destination of goods is India, the statute itself is broad enough to cover a taxable event that has extra-territorial aspects, which bears a nexus to India 90. We therefore hold that the challenge to the vires to Section 66C(2) of the Finance Act, 1994 has to fail. Therefore, W.P No.2147 of 2017 is liable to be dismissed. For the same reason, challenge to Notification No.28/2012-ST dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service in India in view of Rule 10 of the Place of Provision of Services Rules, 2012 . Such an activity was merely exempted in terms of Sl.No.34(c) of Exemption Notification No.25/2012-ST dated 20.06.2012. 95. We will therefore, examine whether on account of the withdrawal of the exemption, the Central Government was justified in shifting the burden to pay service tax on the Steamer Agents viz., Category I Writ Petitioners and later on the importer viz., Category II Writ Petitioners and results in impossibility, arbitrary and impractical levy in view of impugned Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 withdrawing the exemption under Clause 34 (C) to Mega Exemption Notification No. 25/2012-ST dated 20.06.2012. 96. The other notifications which have been challenged are detailed in the Table below. Column B gives the details of the Parent Notification. Column C lists out the Notification impugned by the Steamer Agents ( Category I Writ Petitioners) and Column D lists out the Notification impugned by the Importer (Category II Writ Petitioners):- Table No.11 Sl. No. Parent Notification(s) Impugned Notifications A B C D Category I Writ Petitioners Catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly shift the burden to pay service tax on these petitioners during the period in dispute. 98. But, for the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017, the petitioners would have no cause for complaint. The amendments to the parent notifications in the above table are only the consequential changes to the Rules and the enabling Notifications issued under Section 68(2) and Section 67A of the Finance Act, 1994. The impugned notifications were only meant to implement the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017. They by themselves do not create any liability on these petitioners. 99. To give effect to the above amendment, the definition of person liable to pay tax in Sub Clause (EEC) to Rule 2(1)(d)(i) of the Service Tax Rules, 1994 was inserted vide impugned Notification No.02 of 2017-ST dated 12.01.2017 with effect from 22.01.2017. It shifted the burden on the Steamer Agents to pay tax. Later, the Service Tax Rules, 1994 was further amended vide impugned Notification No.16/2017-ST, dated 13.04.2017 w.e.f. 23.04.2017 and thereby shifted the burden on the importer of the goods. 100. Relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freight (CIF) value of such imported goods. 103. Thus, from 23.04.2017, a person liable to pay Sales Tax for the taxable services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall have the option to pay an amount calculated at the rate of 1.4% of the sum of cost, insurance and freight (CIF) value of such imported goods. 104. As a sequitur to the impugned Notification No.02/2017-ST dated 12.01.2017 with effect from 22.01.2017, impugned Notification No.3/2017-ST dated 12.01.2017 was issued with effect from 22.01.2017. It amended Notification No.30/2012-ST dated 20.6.2012 issued under Section 68(2) of the Act. Thus, attempt was made to shift the burden on the Steamer Agents. 105. Later, by the impugned Notification No.15/2017-ST, dated 13.04.2017, there was further amendment to Notification No.30/2012- ST, dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 to shift the burden of paying service tax on the recipient of services on reverse charge basis. 106. Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100% [Sl.No.12 inserted vide impugned Notification No.03/2017-ST, dated 12.01.2017 with effect from 22.1.2017] 108. By the impugned Notification No.03/2017-ST, dated 12.01.2017, Explanation No.IV was inserted. Realizing difficulties in collecting service tax from Steamer Agent in terms of Notification Nos.1 to 3/2017- ST dated 12.01.2017, the Government decided to shift the burden of tax in relation to goods imported into India, on the importer vide impugned Notifications in Category II with effect from 23.04.2017. 109. The amendments to the Explanation to Notification No.30/2012 as amended by Notification No.03/2017-ST, dated 12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017 are reproduced below:- Table No.13 Notification No.03/2017-ST, dated 12.01.2017 Notification No.15/2017-ST, dated 13.04.2017 Explanation III .- The business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services for the purpose of this notification. Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to shift burden of tax on the steamer agents and later on the importers vide impugned Notification No.15/2017-ST dated 13.04.2017 with effect from 23.04.2017, wherein, an Explanation V to Notification No.30/2012-ST dated 20.06.2012 was inserted. It impacted the second Category II of Writ Petitioners namely the importers . There were further amendments to the Explanations to vide Notification No.03/2017-ST, dated 12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017. 114. Explanation IV as inserted vide Notification No.03/2017-ST, dated 12.01.2017 impacted the Category I of the Writ Petitioners namely the Steamer Agents . 115. The Point of Taxation Rules, 2011 which was introduced was issued by the Central Government in the powers vested with it under Section 67A of the Finance Act, 1994 vide Notification No.18/2011-ST dated 01.03.2011 was also amended. 116. Section 67A of the Finance Act, 1994 and Rule 8B of Point of Taxation Rules, 2011 as inserted vide impugned Notification No.14/2017-ST dated 13.04.2017 read as under:- Table No.14 Section 67A of the Finance Act, 1994 Rule 8B of the Point of Taxation Rules, 2011 Date of determination of rate of tax, value of taxable ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling rate for the respective period. The amendment was in compliance with the requirement of Section 67(A) of the Act. Thus, not only the importer but also the steamer agents were liable to pay tax at the rate and value from 22.01.2017. There are no merits in the challenge to it. 121. In CIF contracts, the service of transportation of goods by vessel is received by the foreign exporters/overseas supplier from the foreign/overseas vessel owner/operator/Shipping Liners in the CIF contract. The value of all incidental services consumed in the course of import of goods is built into the import value of the import goods. Customs duty is already paid by the importers on these values. To that extent, there is no justification to burden the importers who will be forced to bear the incidence of the levy on again. 122. The transaction value for the purpose of custom duty and additional duty of custom equivalent to the excise duty (ADC), includes the value of ocean freight. Therefore, importers cannot be mulcted with the double tax on the ocean freight either directly or indirectly particularly in a CIF contracts. 123. The value of incidence of such intermediate services availed by the Shippi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be demanded from these petitioners as neither the steamer agents nor the importers in India are the recipient of service. They are not liable to pay tax. 131. The other impugned notifications which were issued as a consequence of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 also cannot be challenged as challenge to the latter notification has to fail. 132. The, Central Government had devised a mechanism, whereby, apart from those activities which were specifically excluded from the definition of service in Section 65B(44) of the Finance Act, 1994, few services were placed in the negative list in Section 66D of the Finance Act, 1994 while few services were specifically exempted with effect from 01.07.2012 under Mega Exemption Notification No.25/2012-ST dated 20.06.2012 with effect from 01.07.2012. 133. Along with these notifications, the Service Tax Rules, 1994 issued vide Notification No.2/1994 dated 28.6.1994 was amended first vide Notification No.2/2017-ST dated 12.01.2017 with effect fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017, it is the steamer agent or the importers who are liable to pay service tax during the respective period as detailed below:- Table No.16 Notification No.03/2017-ST dated 12.01.2017 Notification No.15/2017-ST dated 13.4.2017 The person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods. The importer as defined under clause (26) of Section 2 of the Customs Act, 1962 (52 of 1962) of such goods. 139. There is a flaw in the above Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017. It is the foreign liner who engages the service of various other persons in the course of transport of service. It is the foreign shipping liner who receives service who can be taxed and not the importers or the steamer agents although by virtue of the above two notifications, the person liable to pay tax has been also declared as the person who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods between 22.01.2017 and 22.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability on them. 144. Thus, neither of the Category of writ petitioners are liable to pay tax in view of defect in Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017. 145. While amending Notification No.30/2012-ST dated 20.06.2012 vide Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017 and the burden was shifted on these writ petitioners by virtue of the amendment to the provisions of Service Tax Rules, 1994 vide Notification No.02/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and later by Notification No.16/2017 dated 13.04.2017 w.e.f. 23.04.2017, the demand of service tax on these petitioners cannot be countenanced for the foregoing reasons. 146. The impugned notifications had a very short life with effect from 22.01.2017 upto 30.06.2017. With effect from 01.07.2017, the respective Goods and Service Tax Act, 2017 (GST Act, 2017) came into force and subsumed several indirect taxes including Chapter V of the Finance Act, 1994. 147. In Sal Steel Ltd. Vs. Union of India , 2019 SCC OnLine Guj 3706 : (2020) 37 GST1, the Division Bench of the Gujarat High Court held as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 6A of the Service Tax Rules and held at paras 44, 47, 48 and 53 that a Rule made by the Central Government has to necessarily be only in relation to taxable services, namely, services provided in the taxable territory of India, and an essential legislative function of taxing an activity in non-taxable territory could not have been delegated to the Central Government. Rule 6A has been struck down as ultra-vires the Rule making power of Section 94 by the Delhi High Court. 33. The impugned provisions are also ultra vires the Rule making power of Section 94 of the Finance Act. 34. As observed above, the person receiving service of sea transportation in CIF contracts is the seller-supplier of the goods located in a foreign territory. The Indian importers like the writ applicants are not the persons receiving sea transportation service, because they receive the goods contracted by them, and they have no privity of contract with the shipping line nor does the Indian importer make any payment of ocean freight to the service provider. But the impugned provisions make such importer liable to pay service tax; and therefore such provisions allowing the Central Government to recover servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents propose to charge service tax from the third parties i.e. the Indian importers by implication, and not by clear words of the charging section. The impugned provisions creating a charge of service tax on third parties though the Act of the Parliament provides for levy and collection of tax either from the person providing service or from the person receiving service are beyond the charging provision, and also beyond the Rule making power of Section 94 of the Finance Act. No machinery provision: 44. Even if it is assumed that service tax can be recovered from a third party like the Indian importers in CIF contracts, there is no machinery provision for valuation of the service, and therefore also the impugned Rules and Notifications are unenforceable. It is an admitted position of fact that the Petitioners do not have any information about the actual amount of ocean freight paid by the overseas sellers/suppliers to shipping lines. The invoices and purchase orders (Annexure- D to SCA No. 20785/2018) clearly show that the price of the goods was fixed on basis of quantity (i.e. DMT-Dry Metric Tton) for CIF Mundra Port basis. When service tax is to be computed and assessed on the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenged by the category II writ petitioner in Table 5 are also liable to be quashed. However, we would not go that far to hold all the notifications challenged as ultra-vires. 150. To implement the consequences of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, the burden to pay service tax was attempted to be shifted for a part of the period between 22.01.2017 and 22.04.2017 on the Steamer Agents (Category I W.Ps) and for the period between 23.04.2017 and 30.06.2017 on the Importer (Category II W.Ps) vide other impugned Notifications which have been challenged in these batch of the writ petitions. 151. Category I Writ Petitioners have also challenged the vires of para 4 and 4.1 of Circular No.206/4/2017-ST dated 12.4.2017 in W.P.No.14643 of 2017 as null and void and ultravires the various provisions of the Constitution and ultra vires Section 83 of the Finance Act, 1994, Section 37B of the Central Excise Act, 1994 as made applicable to Finance Act, 1994 as well as Notification No.26/2012-ST dated 20.06.2012. 152. Impugned Circular No. 206/4/2017-ST dated 12.4.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), and in supersession of notification number 13/2012- Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 211(E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely:- Sl. No. Description of taxable service Percentage Conditions (1) (2) (3) (4) 10 Transport of goods in a vessel 50 Same as above*. * CENVAT credit on in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as refunds are concerned in Table No.6, the petitioners will have to file appropriate refund applications for refund of the amounts which are said to have been paid by them in accordance with the law laid down by the Hon ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India , 1997 (89) E.L.T.(S.C.). 161. In the light of the above discussion, the challenge to Section 66(2) of the Finance Act, 1994 and Circular dated 13.04.2017 bearing Circular No.206/4/2017-ST in Writ Petitions in Table No.2 and Table.No.3 respectively fails. 162. Challenge to Notification No.01/2017-ST dated 12.01.2017 has to fail in the light of the decision of the Hon ble Supreme Court in Kasinka Trading vs. Union of India , 1995 (1) SCC 274, 1994 (74) E.L.T.782 (S.C.). The challenges to other notifications are unnecessary. 131. In the light of the above discussion, challenge to the impugned Show Cause Notices in Table No.5 issued to the respective petitioners succeeds and therefore they stand quashed. 163. As far as refunds are concerned in Table No.6, the petitioners shall file refund applications within a period of 30 days from the date of receipt of a copy of this order, if such refu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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