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TMI Blog2024 (12) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ade liable for paying service tax in cases of services of transportation of goods by sea provided by a foreign shipping line to a foreign charterer with respect to the goods destined for India. This change has come into effect from 23rd April, 2017. The Shipping/steamer agents are no longer liable to pay the service tax for the services provided on or after 23rd April, 2017. Thus in view of the Notification No. 16/2017 ST dtd. 13.04.2017 read with Notification No. 15/2017 ST dtd. 13.04.2017, the importer was liable for payment of Service tax @1.4% on the CIF Value of the imported goods. As regard the disputed condition of Sr. No. 10 of Notification No. 26/2012-ST dtd. 20.6.2012 it is found that the said condition provide that CENVAT Credit on inputs, Capital Goods and input services, used for providing the taxable services, has not been taken under the provisions of the Cenvat Credit Rules, 2004. Ld. Commissioner (Appeals) in this context has considered the Judgment of Hon ble Apex Court in the case of SRF Ltd [ 2015 (4) TMI 561 - SUPREME COURT] vis-a-vis disputed condition and dealt with the applicability of the said condition in the present matter. There are no reasons to interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices without availing of exemption under Sr. No. 10 of Notification No. 26/2012-ST dtd. 20.06.2012. The lower adjudicating authority vide order dtd. 08.06.2018 rejected the refund claim filed by the respondent on ground of CBEC Circular No. 206/4/2017 dtd. 13.04.2017 stating the benefit of the exemption would not be available in case where the services are rendered by a foreign shipping line as much as the said shipping lines are not registered in India and do not follow the provisions of Cenvat Credit Rules, 2004. The respondent filed appeal before the Commissioner (Appeals). By the impugned order, Commissioner (Appeals) set aside the adjudication order and allow the appeal filed by respondent. Hence, Revenue filed this appeal. 2. Shri Tara Prakash Ld. Deputy Commissioner (AR) appearing on behalf of Revenue reiterates the grounds of appeal. He submits that appellate authority has not considered the Circular No. 206/4/2017-Service tax dtd. 13.04.2017 issued by the Board which specifically states that the condition for availing exemption under notification No. 26/2012-ST dtd. 20.06.2012 (Sl. No. 10) is fulfilled by the foreign shipping lines. Hence, benefit of conditional exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the said Table, namely :- TABLE Sl. No. Description of taxable service Percentage Conditions (1) (2) (3) (4) - - - - - - - - 10 Transport of goods in a vessel 30 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 4.1 We find that the CBEC vide Circular No. 206/4/2017 dtd. 13.04.2017 also issued clarification and clarified under para 4 and 4.1 of the Circular which is read as under:- 4. It is pertinent to point out here that under notification No. 26/2012-S.T., dated 20-6-2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfilment of the condition that Cenvat credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. This conditional exemption has been extended for the reason that out of the full value of such services, the exempted value of service has already suffered taxes (Central Excise) which would have been available as Cenvat credit to set off service tax on full value of service. In ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s neither been withdrawn nor amended to the effect that exemption is not available in a case of service of transportation of goods in vessel provided by the foreign shipping lines. We find Notification provide the payment of service tax @1.4% on the CIF value whereas notification No. 26/2012-ST provided service tax on transport of goods in a vessel. Therefore, the Ld. Commissioner (Appeals), in the present matter rightly set aside the order passed by the lower adjudicating authority. 4.4 As regard the disputed condition of Sr. No. 10 of Notification No. 26/2012-ST dtd. 20.6.2012 we find that the said condition provide that CENVAT Credit on inputs, Capital Goods and input services, used for providing the taxable services, has not been taken under the provisions of the Cenvat Credit Rules, 2004. We find the Ld. Commissioner (Appeals) in this context has considered the Judgment of Hon ble Apex Court in the case of SRF Ltd (Supra) vis-a-vis disputed condition and dealt with the applicability of the said condition in the present matter. We do not find any reasons to interfere with the impugned order. 4.5 We also find that on the identical dispute allowing the refund claim on service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (EEC) of Rule 2(1)(d) of the Service Tax Rules has been substituted, and there also the importer as defined under Section 2(26) of the Customs Act is made liable to pay service tax on ocean freight in cases like CIF transactions. A new sub-rule i.e. sub-rule (7CA) has also been inserted in Rule 6 of the Service Tax Rules by this Notification, thereby providing that the value of the ocean freight may be calculated at the rate of 1.4% of the sum total of CIF for paying service tax thereon. Thus, the effect of the amendments vide the other Notification No. 16/2017-S.T. is also the same i.e. an importer like the Petitioner is made the person liable to pay service tax on ocean freight in case of CIF transactions, though the service of transportation of goods in CIF transactions is rendered by the ship owner/operator to the overseas seller/supplier, and not to the local importer. 5.4 Since the challenge is to the provisions empowering the Central Government to collect and recover service tax on Ocean Freight and the Petitioners have challenged such provisions only in respect of the CIF contracts, it is necessary to consider what is ocean freight , what is CIF , and how the CIF is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of affreightment under which the goods will be delivered at the destination contemplated by the contract. Fourth, to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. Fifthly, with all reasonable dispatch to send forward and tender to the buyer these shipping documents, namely, the invoice, bill of lading and policy of assurance, delivery of which to the buyer is symbolical of delivery of the goods purchased, placing the same at the buyer s risk and entitling the seller to payment of their price . 6 . In light of this distinction Section 26 of the Sale of Goods, 1930 Act draws relevance which reads as follows : S. 26. Risk prima facie passes with property. - Unless otherwise agreed, the goods remain at the seller s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer s risk whether delivery has been made or not : Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault : Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purchase and delivery of goods, and under CIF contract where the lump sum amount is paid for delivery of the goods on the land mass of the country; and what the importers receive in India is the goods, and not any service. Secondly, liability to pay tax cannot be fastened on a person if the charging provision does not charge or levy the tax; because a charging section has to be strictly interpreted, and not by way of inferences or presumptions about any indirect benefit to a person. 9 . In Commissioner, Surat-I v. Patel Vishnubhai Kantilal Co., 2012 (28) S.T.R. 113 (Guj.), the Hon ble High Court has considered relevant case law on this proposition in paras 19 to 22 of this judgment and held at para 22 that the rule of construction of a charging section is that before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. 10 . When the Respondents have admitted that the importers in India are not persons receiving service of sea transportation, and that it is the Respondent s case that the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation-V to reverse charge Notification No. 30/2012-S.T. 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 with all consequential reliefs and benefits. 13.1 Since the Notification under which the payment was made have as such been struck down, any payment made pursuant thereto no more remains under the scope of the charging section, i.e. it cannot be called as duty. Still retaining the said amount will therefore unjustly enrich the Department. The consequence, accordingly, is that the appellant is entitled for the refund of the said amount. 13.2 Though the stand of Department is that the refund is qua amount paid by the appellant on October, 2018 i.e. after 1-7-2017, and paid as CGST amount, and the refund therefore is governed by GST law. 13.3 Be that as it may, there is some controversy regarding the transitional ITC to be claimed under Section 140(1) of the CGST Act, 2017 which is claimed to have some vague ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) as on date. In any case, the entire discussion is utmost, academic, inasmuch as when Tax itself was not payable in the first place, as per the legal position as it exists, there is no reason why refund of such tax paid should not be allowed to the appellant. 13.8 At the same time, Be that as it may, after introduction of GST regime, Section 142(6)(a) of the CGST Act, 2017 is specifically enacted to provide for cash refund in case where any credit becomes due and available to an assessee after introduction of GST regime. The appellant referred to the following case law :- (a) Oswal Castings (P.) Ltd. Reported in 2019 (24) G.S.T.L. 649 (Tri. - Chan.) (b) MCPI Private Ltd. Another v. Union of India Others 14 . But I am of the opinion that the issue is covered by the decision in the case of Mohit Minerals Pvt. Ltd. v. Union of India 1 Other [2020 (1) TMI 974-Gujarat High Court = 2020 (33) G.S.T.L. 321 (Guj.)] where it was held that No tax is leviable under the Integrated Goods and Services Tax Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit, duty, tax, interest or any other amount paid under the existing law, should be disposed of in accordance with the provisions of existing law and any amount eventually accruing to such person should be paid in cash. I am of the considered opinion that in view of this clear provision, the Respondent No. 2 ought to have directed the sanctioning Authority to refund the amount of the duty refundable to the petitioner in cash instead of credit in Cenvat Account. 17 . In case of M/s. Lanxess India Pvt. Ltd. (supra), the Commissioner (Appeals) has directed the sanctioning Authority to refund in cash. As per the GST transition provisions, the balance of credit lying un-utilized in account as on 30-6-2017 only gets carried forward. Hence, in the present case also, what was lying in Cenvat account of the petitioner before 10-7-2017 was to be carried forward in fresh account of Cenvat account after appointed day i.e. 1-7-2017. 18 . I shall now look into few decisions on the subject. In Prabhat Cotton Silk Mills Ltd. v. Union of India, reported in 1982 (10) E.L.T. 203 (Guj.), a Division Bench of this High Court while interpreting the expression India under Section 12 of the Customs Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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