The Kerala High Court has admitted a petition challenging the Service Tax on Ocean Freight.
The Petitioner is a manufacturer and dealer in edible oil. The Petitioner is importing goods from abroad on Cost Insurance Freight basis, on the agreement to deliver the goods at the Port at Cochin or Mangalore. The price paid is for the goods to be delivered at the Port of destination.
The Petitioner is discharging Customs Duty on the goods and value as reached at the Port under section 14 of Customs Act 1962 read with Rule 10 of the Customs Valuation (Determination of value of imported goods) Rules 2007. As per section 65 B (44) of the Finance Act, 1994, sale or purchase of goods has been excluded from the definition of the term ‘service’. As per section 66 D (e) of the Finance Act 1994, trading of goods is under negative list. As per section 66 B of Finance Act 1994, service tax shall be levied only on the taxable service other than those mentioned in the negative list provided in the taxable territory. As per section 68 (2) of Finance Act 1994, liability to pay tax can be fixed on taxable service on a person other than the service provider.
The Petitioner submitted that, the preconditions to levy service tax, are that it should be an activity other than sale or purchase of goods or trading of goods, that it should be taxable service and service should be provided in the taxable territory.
The Petitioner has not undertaken any activity of service and has not passed any consideration towards the service of transportation of goods. The Petitioner is not a party in the service of transportation of goods, which is between the foreign seller and the foreign shipper. His price is for the goods to be delivered at the Port of destination.
The Petitioner also submitted that, Notification on fixing liability to pay service tax on Ocean Freight against the Petitioner, who is not at all a party to service, is against the provisions of sections 65 B, 66 B, 66 D (e), 68 (2) of Finance Act 1994 is ultra vires.
Justice Shaji P. Chaly has issued notices to Central Government and stayed show-cause notices issued to the petitioner.
Advocates K.P Abdul Azees, Akhil Suresh and T. Archana appeared for the petitioners.
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