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TMI Blog2024 (12) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... well as payment of transportation charges are borne by the overseas supplier. It is these transportation charges incurred in transporting goods by a vessel or ship which is commonly known as ocean freight. In the case of a Free On Board [FOB] contract, the solitary distinction is that the ocean freight liability is to be borne by the local importer. 2. By virtue of the provisions contained in the Finance Act, 1994 [1994 Act] and the amendments made therein which came into effect from 01 July 2012, a list of negative services came to be collated and which was ordained to be not taxable. The effect of that list of negative services was that except for those services, others were made taxable. The service of transportation of goods by an aircraft or vessel came to be placed in the negative list in terms of the provisions contained in Section 66D (p) (ii) of the 1994 Act. The said clause, however, came to be omitted with effect from 01 June 2016. Accordingly, services by way of transportation of goods by an aircraft or vessel from a place outside India up to customs stations of clearance became chargeable to service tax with effect from 01 June 2016. 3. The petitioners assert that oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the decision of the Supreme Court in Mohit Minerals: "14.5. Imposition of IGST on ocean freight will lead to double taxation: (a) Section 3 (7) of the Customs Tariff Act states that goods imported into India will be subject to IGST under Section 5 of the IGST Act, on the value as determined by Section 3 (8) and Section 3 (8)(a). Under Section 3 (8), the value includes value of freight; and (b) Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 includes cost of transportation and insurance in the value of goods, which forms the basis of the levy of IGST under the proviso to Section 5 of the IGST Act. The impugned levy of IGST on ocean freight would thus amount to double taxation on the same transaction. xxxx xxxx xxxx 96. In determining the vires of the impugned notifications, a few preliminary contentions raised by the respondents would have to be addressed. The respondents have argued that no charge has been created for the ocean freight transaction to be taxed in the hands of the importer. It has been alleged that only Section 5(1) is a charging provision and Sections 5(3) and 5(4) cannot independently create a charge. 97. In ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section." (emphasis supplied) xxxx xxxx xxxx D.4. Taxable event : Is an ocean freight transaction for import of goods a valid category of supply of services under Section 5(3) of the IGST Act? 106. The other limb for contesting the validity of the impugned notification is with respect to its identification of a "taxable event". The question that falls for the determination is whether the impugned notifications issued in 2017, under Section 5(3) of the IGST Act, validly prescribe a taxable event that constitutes an inter-State supply of goods and services with the importer being a recipient of shipping services in CIF transactions. 107. The analysis of whether import of goods under CIF contracts constitutes a valid import of service has to be answered on two prongs : (i) whether classification of imports as a specific category of supply of shipping service is valid under Section 5 (3) read with Section 5(1) of the IGST Act; and (ii) whether the recipient of the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s levying tax again as a supply of service, without any express sanction by the statute, are illegal and liable to be struck down." (emphasis supplied) 170. We are in agreement with the High Court to the extent that a tax on the supply of a service, which has already been included by the legislation as a tax on the composite supply of goods, cannot be allowed." 7. Our attention has also been drawn to a judgment rendered by the Ahmedabad Bench of the Customs Excise and Service Tax Appellate Tribunal [Tribunal] in Commissioner of Service Tax vs. Kiri Dyes and Chemicals Limited Final Order No. A/10507/2023 dated 23 March 2023 and which came to be dismissed in the following terms: "The issue involved in the present case is whether the appellant is liable to pay service tax on the service on Ocean Freight or otherwise. 2. Shri Sanjay Kumar, learned Superintendent (AR) appearing on behalf of Revenue/ Appellant submits that though this issue is decided by Hon'ble Gujarat High Court in the case of SAL Steel Limited but the Revenue has preferred SLP before the Hon'ble Supreme Court therefore, this matter may be kept pending till outcome of Hon'ble Supreme Court judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Section 11B of the Central Excise Act but even otherwise in light of the provisions of the Limitation Act, 1963 [Limitation Act], which would apply. 10. Mr. Ramachandran submitted that insofar as the decision in Sal Steel is concerned, the same is yet to attain finality and consequently, the claim for refund is not liable to be countenanced. It was further asserted that the claim is barred by limitation not only when tested on the anvil of Section 11B of the Central Excise Act, but also in light of the provisions contained in the Limitation Act and more particularly Section 17 (1) (c) thereof. Mr. Ramachandran sought to draw sustenance for the aforesaid submissions by relying upon the following passages as they appear in the judgment of the Constitution Bench in Mafatlal Industries Ltd. vs. Union of India (1997) 5 SCC 536. Our attention was specifically drawn to paragraph 108 and which is extracted hereinbelow: "108. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court. (ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: Where a person approaches the High Court or the Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on the basis of a decision on another person's case; this is the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched. (iv) It is not open to any person to make a refund claim on the basis of a decision of a court or tribunal rendered in the case of another person. He cannot also claim that the decision of the court/tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an authority, Tribunal or Court or otherwise. (ix) The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and the Customs Act are constitutionally valid and are unexceptionable. (x) By virtue of sub-section (3) to Section 11-B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactments. No suit for refund of duty is maintainable in that behalf. So far as the jurisdiction of the High Courts under Article 226 of the Constitution - or of this Court under Article 32 - is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintainable both by virtue of the declaration contained in Article 265 of the Constitution as also in terms of Section 72 of the Contract Act, 1872 [Contract Act]. It was in that context that the Supreme Court further observed that in all such cases, the period of limitation would have to be calculated taking into account the principles enshrined in Section 17 (1) (c) of the Limitation Act. 12. It is, however, pertinent to note that Mafatlal Industries in unequivocal terms holds that where the refund is claimed consequent to a declaration of invalidity having been rendered, it would clearly fall outside the purview of the principal enactment and could be claimed either by way of suit or by way of a writ petition. Once it is held that the statutory provisions envisaging a levy of service tax on ocean freight had come to be declared unconstitutional, the levy itself would be liable to be viewed as invalid and thus not maintained under the principal enactment. The reliance on Section 11B of the Central Excise Act is thus clearly misconceived. 13. This position stands lucidly explained by the Gujarat High Court in Comsol Energy (P) Ltd. vs. State of Gujarat 2020 SCC OnLine Guj 3601, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fraud of the defendant or respondent or his agent; or (b) *** (c) the suit or application is for relief from the consequences of a mistake; or (d) ***" 8. This Court, in the case of Binani Cement Ltd. v. Union of India, (2013) 288 ELT 193 (Guj), held that where the duty is collected without any authority of law, such collection of duty is considered as collected without authority of law and, therefore, is opposed to Article 265 of the Constitution of India and, thus, unconstitutional. It is held that the assessee is not bound by the limitation prescribed under the special law for claiming the refund of the excess duty or duty collected illegally. The period of limitation prescribed under the Limitation Act would apply. The relevant abstract of the decision at paragraphs nos. 23 and 25 are as under: "23) Despite this prima-facie conclusion we have reached, there is a reason why we are inclined to hold that what is collected by the respondents from the petitioners can never be described as a customs duty. We say so because the very levy has been declared to be unauthorized by the Supreme Court in the case of Commissioner of Central Excise & Customs, Bhubaneswari v. Tata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Tea Co. Ltd. v. Superintendent of Taxes, Nowgong (supra), in case where money is paid by mistake, the period of limitation prescribed is three years from the date when the mistake was known. Besides, section 17 of the Limitation Act inter alia provides that when a suit or application is for relief from the consequences of a mistake, the period of limitation would not begin to run until the plaintiff or applicant has discovered the mistake, or could, with reasonable diligence, have discovered it. Therefore, in case where money is paid under a mistake, the limitation would begin to run only when the applicant comes to know of such mistake or with reasonable diligence could have discovered such mistake. Adverting to the case at hand, the mistake is in the nature of a mistake of law. It appears that the legal position was not clear and hence, pursuant to representations made by the trade and field formations, the CBEC was required to issue the circular dated 07.01.2014 clarifying the issue. As noticed earlier, the petitioner had all along, right from July 2004 been paying Education Cess and subsequently, from the year 2007 was paying Secondary and Higher Secondary Education Cess, til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince Oil Cess is not a duty of excise, the amount paid by the petitioner by way of Education Cess and Secondary and Higher Secondary Education Cess, cannot in any manner be said to be a duty of excise inasmuch as what was paid by the petitioner was not a duty of excise calculated on the aggregate of all the duties of excise as envisaged under the provisions of section 93 of the Finance Act, 2004 and section 138 of the Finance Act, 2007. Thus, the amount paid by the petitioner would not take the character of Education Cess and Secondary and Higher Secondary Education Cess but is simply an amount paid under a mistake of law. The provisions of section 11B of the Central Excise Act, 1944 would, therefore, not be applicable to an application seeking refund thereof. The petitioner was therefore, wholly justified in making the application for refund under a mistake of law and not under section 11B of the Central Excise Act, 1944. - Since the provisions of section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and the general provisions under the Limitation Act, 1963 would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax is paid by mistake a claim for refund cannot be barred by limitation, merely because the period of limitation under Section 11B had expired. Such a position would be contrary to the law laid down by the Hon'ble Apex Court, and therefore we have no hesitation in holding that the claim of the Assessee for a sum of Rs. 4,39,683/- cannot be barred by limitation, and ought to be refunded. 14. There is no doubt in our minds, that if the Revenue is allowed to keep the excess service tax paid, it would not be proper, and against the tenets of Article 265 of the Constitution of India. On the facts and circumstances of this case, we deem it appropriate to pass the following directions:- a) The Application under Section 11B cannot be rejected on the ground that is bared by limitation, provided for under Section. b) The claim for return of money must be considered by the authorities."" 14. That only leaves us to examine the submission of Mr. Ramachandran and which proceeded on the basis of Section 17 (1) (c) of the Limitation Act. Suffice it to note that the Gujarat High Court on 06 September 2019 in Sal Steel had declared that the relevant provisions of the 1994 Act insofar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. 5.4. It is further clarified that the period from 15-3-2020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29-A of the Arbitration and Conciliation Act, 1996, Section 12-A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings." 16. Viewed in that light, and bearing in mind the mandate of the Supreme Court and which clearly and in unequivocal terms excludes the period between 15 March 2020 and 28 February 2022, it would be wholly incorrect for the respondents to urge that the claim of the petitioners is barred by limitation when computed in light of Section 17 (1) (c) of the Limitation Act. 17. We, accordingly, allow the instant writ petitions and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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