In the recent case, the Allahabad bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) upheld the Commissioner (Appeal) Order-In Appeal stating no service tax is payable on ocean freight relying upon the decision made in the landmark case stating that the unauthorized collection of tax entitles the person from whom it is collected to claim a refund.
B L Agro Oils Ltd, the respondent assessee, who manufactures edible oil and imports crude oil, filed a refund claim for Rs. 21,20,859/- on 06.09.2021. This claim was for an amount deposited after an audit for the period from April 2017 to June 2017.The Department argued that the respondent owed service tax on ocean freight under the reverse charge mechanism. The assessee contended it would amount to double taxation as the ocean freight was already included in the assessable value.
The refund claim was rejected by the Adjudicating Authority (AA) stating it was filed 20 months late i.e., past the deadline of December 30,2019.According to Section 11B of the Central Excise Act, 1944, which also applies to service tax as per Section 83 of the Finance Act, 1994, refund claims must be filed within one year.
The Commissioner(Appeals) allowed the appeal to the assessee and ordered the AA to grant the refund and referred to a decision made in the case of Sal Steels Ltd., Vs. Union of India , wherein the service tax imposed on the ocean freight has been declared invalid and the appellant is not required to pay the 1.4% service tax on the CIF value for Ocean Freight.
The Commissioner (Appeal) referred to the decision in the case of Mafatlal Industries Ltd., wherein, the Supreme Court held that all claims for refund, except where the levy itself is deemed unconstitutional, must be processed under Section 11B of the Central Excise Act, 1944, or Section 27 of the Customs Act, 1962. The claimant must prove that the burden of duty has not been passed on to a third party.
A member bench of P.K.Choudhary (Judicial Member) contended that no issues were found in the Order-In-Appeal, so it stands and the revenue’s appeal which lacks merits is dismissed.
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