The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) quashed the demand of service tax on ocean freight as no stay order was in operation.
The audit of the appliance unit for the period April, 2017 to June, 2017 was conducted on 19.02.2018, 02.02.2018 and 27.03.2018, during which the audit team pointed that service tax exemption on ocean freight has been withdrawn and accordingly the Appellant is liable to pay service tax on ocean freight under reverse charge mechanism.
Accordingly, the Appellant submitted application for refund of Rs.8,31,322/- of service tax wrongly paid on ocean freight under reverse charge mechanism on 04.12.2018. Upon submission of the refund claim, show cause notice dated 17.07.2019 was issued proposing to reject the refund on the ground that since bill of entry was filed in the name of the Appellant, hence the Appellant is the service recipient and accordingly the Appellant is liable to pay service tax in terms of Circular No.206/4/2017–ST dated 13.04.2017.
The counsel for the Appellant submitted that the agreement with the foreign supplier was on C.I.F basis and it was the foreign supplier who entered into an agreement with the foreign shipping line for transportation of goods and the Appellant was not privy to such an agreement. It was the foreign shipping line who was the service recipient, hence the Appellant was not required to pay service tax on ocean freight.
The DR relied and reiterated the findings recorded in the impugned order. As regards the decision of the Gujarat High Court and that the revenue has challenged the said decision before the Supreme Court but as on date there is no stay of the order of the High Court.
A Single Member Bench of PK Choudhary, Judicial Member observed that “The Appellant has specifically pleaded in its reply to show cause notice and appeal memo submitted before the Appellate authority that the goods were imported under C.I.F contracts. This categorical pleading of the Appellant has not been disputed by the revenue in the adjudication order as well as the impugned order. This being the case, the present case is squarely covered by the dicta laid down in SAL Steel Ltd. and accordingly it is held that the Appellant is not liable to pay service tax on ocean freight.”
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