Revenue Contests Adani Power’s Refund Claim Over Service Tax on Ocean Freight: Supreme Court lists Matter this Date [Read Judgement]

The Supreme court has entertained the Revenue’s challenge to the CESTAT (Customs, Excise & Service Tax Appellate Tribunal) decision directing it to grant the refund of service tax on ocean freight without considering the Notification No.12/2013-ST. The matter is listed for hearing on 16th September 2025.

The bench of Justice B.V. Nagarathna and Justice Viswanathan, in this matter, is expected to clarify whether SEZ-based procedural notifications can restrict refund rights where the levy itself stands declared unconstitutional.

During the proceedings before the Court, Adani Power was granted four weeks’ time to file its counter affidavit. The Revenue also sought time for submission of the affidavit of valuation.

The issue is whether the Commissioner (Appeals) is right in remanding the matter of refund amounting to Rs.5,03,71,491/-to examine the refund under Notification No.12/2013-ST dated 01.07.2013 applicable to the SEZ units without giving conclusive finding on the issue of non taxability of service of ocean freight which is covered by the Gujarat High Court judgment in the case of SAL Steel Limited on the ground that the matter is pending before the Supreme Court.

Adani Power had paid service tax of ₹5.03 crore on ocean freight and subsequently sought a refund. In November 2024 the CESTAT, Ahmedabad ruled in Adani Power’s favour, holding that since the Gujarat High Court had already declared the levy ultra vires, the refund claim could not be routed through SEZ-specific Notification No. 12/2013-ST. Instead, the Tribunal held that the tax itself was never payable, making Adani Power directly eligible for refund without additional conditions.

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Before the tribunal, Rahul Patel, Chartered Accountant appearing on behalf of the appellant at the outset submitted that the appellant have filed the refund claim on the ground that the ocean freight on which the service tax was paid and refund was sought, therefore the ocean freight itself is not taxable in the light of SAL Steel Limited.

He submitted that the Commissioner (Appeals) without any conclusive filing on the ocean freight being not taxable, remanded the matter to the adjudicating authority to examine the refund claim in terms of Notification No.12/2013-ST dated 01.07.2013. Therefore, the order of the Commissioner (Appeals) to this extent is absolutely illegal and contrary to the judgment given by the Gujarat High Court in the case of SAL Steel Limited. He added that merely because of the matter of SAL Steel Limited against the Gujarat High Court judgment pending before the Supreme Court, the refund on this count cannot be withheld.

He submits that since as per the SAL Steel judgment the service tax paid by the appellant is itself not correct. Hence, the same is refundable without taking recourse to Notification No.12/2013-ST.

The tribunal said that “We agree with the submission of the Ld. Counsel that if the service i.e. ocean freight itself is held non taxable then the question of processing the refund under Notification No.12/2013-ST does not arise.”

The Tribunal observed that the Commissioner (Appeals) avoided giving a conclusive finding on the SAL Steel Limited ruling and instead remanded the refund to be examined under Notification No. 12/2013-ST. However, once the Gujarat High Court had already held the levy of service tax on ocean freight as unconstitutional, the refund should have been granted directly on that basis. Since no tax was legally payable, there was no question of routing the claim through the SEZ notification; Adani Power was entitled to refund without following that process.

Aggrieved by the decision of the tribunal, the Revenue filed an appeal before the apex court, which is now listed on 16th September 2025.

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