The Chennai and Ennore v. Union of India

Order.

¶72Exemption to services received from a provider of service located in a non-taxable territory by a person located in a non-taxable territory, by way of transportation of goods in a vessel from a place outside India up to the customs station of clearance in India ceased to be exempted in view of the impugned Notification No.1/2017-ST dated

12.01.2017 with effect from 22.01.2017. Thus, there is a challenge to the impugned Notification No.1/2017-ST dated 12.01.2017 in W.P.No.2149 of 2017.

¶73Therefore, services by way of transportation of goods by a vessel from a place outside India up to the Customs Station of clearance in India which was exempted from 1.7.2012 became liable to pay service tax under Section 66B of the Finance Act, 1994, in view of the above amendment. Page No. 45 of 103

¶74Thus, intermediate services provided and consumed in the course of import of goods through a vessel or a Shipping liner in connection with transportation of goods from outside the territory of India into India was made liable to service tax in view of the changes. Thus, the collateral notifications impugned in these writ petitions were issued.

¶75At best, the petitioners can be said to be aggrieved by the withdrawal exemption in Sl.No.34(c) of Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. However, the law on the subject is well settled against the petitioner.

¶76The Hon'ble Supreme Court in the case of Kasinka Trading Vs. Union of India, 1995 (1) SCC 274 : 1994 (74) E.L.T.782 (S.C.) has clarified the position. The power to grant exemption implies power to withdraw the exemption. A reference is made to some of the paras from the said judgment which is extracted under:- Page No. 46 of 103

¶20The power to grant exemption from payment of duty, additional duty etc. under the Act, as already noticed, flows from the provisions of Section 25(1) of the Act. The power to exempt includes the power to modify or withdraw the same. The liability to pay customs duty or additional duty under the Act arises when the taxable event occurs. They are then subject to the payment of duty as prevalent on the date of the entry of the goods. An exemption notification issued under Section 25 of the Act had the effect of suspending the collection of Customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty etc., wholly or partially and subject to such conditions as may be laid down in the Notification by the Government in "public interest". Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revokation of an exemption notification, in the "public interest", is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act. Under the General Clauses Act an authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. From the very nature of power of exemption granted to the Government under Section 25 of the Act, it follows that the same is with a view to enabling the Government to regulate, control and promote the industries and industrial production in the country. Notification No. 66 of 1979 in our opinion, was not designed or issued to induce the appellants to import PVC resin. Admittedly, the said Notification was not even intended as an incentive for import. The Notification on the plain language of it was conceived and issued on the Central Government Page No. 47 of 103 "being satisfied that it is necessary in the public interest so to do." Strictly speaking, therefore, the Notification cannot be said to have extended any "representation" much less a "promise" to a party getting the benefit of it to enable it to invoke the doctrine of promissory estoppel against the State. It would bear repetition that in order to invoke the doctrine of promissory estoppel, it is necessary that the promise which is sought to be enforced must be shown to be an unequivocal promise to the other party intended to create a legal relationship and that it was acted upon as such by the party to whom the same was made. A Notification issued under Section 25 of the Act cannot be said to be holding out of any such unequivocal promise by the Government which was intended to create any legal relationship between the Government and the party drawing benefit flowing from the said Notification. It is, therefore, futile to contend that even if the public interest so demanded and the Central Government was satisfied that the exemption did not require to be extended any further, it could still not withdraw the exemption. …..

23.It needs no emphasis that the power of exemption under Section 25(1) of the Act has been granted to the Government by the Legislature with a view to enabling it to egulate,control and promote the industries and industrial productions in the country. Where the Government on the basis of the material available before it, bona fide, is satisfied that the "public interest" would be served by either granting exemption or by withdrawing, modifying or rescinding an exemption already granted, it should be allowed a free hand to do so. We are unable to agree with the learned counsel for the appellants Page No. 48 of 103 that Notification 66/79 could not be withdrawn before 31-3-1981. First, because the exemption Notification having been issued under Section 25(1) of the Act, it was implicit in it that it could be rescinded or modified at any time if the public interest so demands and secondly it is not permissible to postpone the compulsions of "public interest" till after 31st March 1981 if the Government is satisfied as to the change in the circumstances before that date. Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn it was free to act in the manner it did. It would bear a notice that though Notification 66/79 was initially valid only upto 31-3-1979 but that date was extended in "public interest", we see no reason why it could not be curtailed in public interest. Individual interest must yield in favour of societal interest.

¶24In our considered opinion therefore the High Court was perfectly right in holding that the doctrine of promissory estoppal had no application to the impugned notification issued by the Central Government in exercise of its powers under Section 25(1) of the Act in view of the facts and circumstances, as established on the record. ……

26.In our opinion, no justifiable prejudice was caused to the appellants in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the "public interest" so demanded. Thus, in the facts and circumstances of these cases, the Page No. 49 of 103 appellants cannot invoke the doctrine of promissory estoppel to question the withdrawal notification issued under Section 25 of the Act.

¶77This view has been followed by the Hon'ble Supreme Court in the following cases also:- i. Darshan Oils Private Limited vs. Union of India, 1995 (75) E.L.T.32 (S.C.); ii. S.B.International Limited vs. Assistant Director General of F.T., 1996 (82) E.L.T. 164 (S.C.); iii. Union of India vs. Victory Plastic Private Limited, 1996 (E.L.T.) 481 (S.C.); iv. Shrijee Sales Corporation vs. Union of India, 1997 (89) E.L.T. 452 (S.C.); v. D.P.F.Textiles Limited vs. Union of India, 1997

(92) E.L.T.28 (S.C.); vi. Sales Tax Officer vs. Shree Durga Oil Mills, 1998 (97) E.L.T. 202 (S.C.); vii.Union of India vs. Bharat Commerce & Industries Limited, 1999 (107) E.L.T.582 (S.C.). viii.Union of India vs. Indian Charge Chrome, 1999

(112) E.L.T.753 (S.C.); ix. Union of India vs. Unicorn Industries, 2019

(368) E.L.T.202 (S.C.); x. Hero Motocorp Limited vs. Union of India, 2022

(66) G.S.T.L.129 (S.C.).

¶78Therefore, challenge to notification No.1/2017-ST dated

12.01.2017 w.e.f 22.01.2017 in W.P.No.2149 of 2017 also has to fail.

¶79Service tax would have been payable right from inception i.e. Page No. 50 of 103 from 1.7.2012 either on the Steamer Agents or on the importer as the case may be but for the concession given by the parliament under the negative list in Section 66D and by the Central Government vide Sl.No.34(c) to Mega Exemption Notification 25/2012 ST dated

20.06.2012.

¶80It cannot be said that the Place of Provision of Services Rules, 2012 issued vide Notification No.28/2012-ST dated 20.12.2012 was invalid, merely because exemption that was earlier granted vide Sl.No.34(c) to Mega Exemption Notification 25/2012 ST dated

20.06.2012 was withdrawn vide Notification No.1/2017-S.T., dated

12.01.2017.

¶81The petitioners in W.P.No.2147 of 2017 (Category I) had no occasion earlier to challenge the vires of Section 66C of the Finance Act, 1994 as services provided in connection with the transportation of goods by a service provider located outside the territory of India to a person located in a "non taxable territory" was exempted with effect from

01.07.2012 vide Sl.34(c) to Mega Exemption Notification No.25/2012-Page No. 51 of 103 ST dated 20.06.2012.

¶82Challenge to 66C(2) of the Finance Act, 1994 is perhaps on account of the fact that the challenge to Rule 10 of the Place of Provision Rules, 2012 is barred under Section 66C(2) of the Finance Act, 1994.

¶83This challenge to Section 66C of the Finance Act, 1994 is long after it was incorporated into the Finance Act, 1994 after the withdrawal of exemption by amendment to Mega Exemption Notification No.25/2012-ST

dated

20.6.2012 vide the impugned Notification No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017.

¶84Therefore, challenge to Section 66C(2) of the Finance Act, 1994 has to be answered against the petitioners. Challenge to Section 66C(2) of Finance Act, 1994 has to fail in view of the law settled by the Hon'ble Supreme Court in Electronics Corporation of India Vs. Commissioner of Income Tax and Another, AIR 1989 SC 1707, GVK Industries Vs. Income Tax Officers, 2011 (4) SCC 36 and in Union of Page No. 52 of 103 India Vs. Mohit Minerals Private Limited, 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.). It cannot be said that the Parliament exceeded its power under the Article 245 of the Constitution.

¶85As long as there is a territorial nexus between the service being taxed and its consumption in India whether directly or indirectly, the challenge to Section 66C(2) of the Finance Act, 1994 cannot be countenanced. Consequently, challenge to provisions of the Place of Provision of Services Rules, 2012 has to fail.

¶86If at all, at best, the petitioners could be aggrieved by Rule 10 of the Place of Provision of Services Rules, 2012. However, as mentioned above, Rule 10 of the Place of Provision of Services Rules, 2012 is a generic Rule. It applies to all specie of service of transportation of goods other than by way of "mail" or "courier service".

¶87In this connection, it will be useful to refer to the decision of the Hon'ble Supreme Court in Electronics Corporation Of India vs Commissioner Of Income Tax & Anr, AIR1989 SC 1707, wherein, it Page No. 53 of 103 was held as follows:- "8. Now it is perfectly clear that it is envisaged under our constitutional scheme that Parliament in India may make laws which operate extra-territorially. Art. 245(1) of the Constitution prescribes the extent of laws made by Parliament. They may be made for the whole or any part of the territory of India. Art. 245(2) declares that no law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Therefore, a Parliamentary statute having extra-territorial operation cannot be ruled out from contemplation. The operation of the law can extend to persons, things and acts outside the territory of India. The general principle, flowing from the sovereignty of States, is that laws made by one State can have no operation in another State. The apparent opposition between the two positions is reconciled by the statement found in British Columbia Electric Railway Company Limited v. The King, [1946] A.C. 527: "A legislature which passes a law having extra-territorial operation may find that what it has enacted cannot be directly enforced, but the Act is not invalid on that account, and the courts of its country must enforce the law with the machinery available to them." In other words, while the enforcement of the law cannot be contemplated in a foreign State, it can, nonetheless, be enforced by the courts of the enacting State to the degree that is permissible with the machinery available to them. They will not be regarded by such courts as invalid on the ground of such extra-territoriality." Page No. 54 of 103

¶88The Hon'ble Supreme Court in GVK Industries Vs. Income Tax Officers, 2011 (4) SCC 36 has clearly held that the Parliament has power to legislate over events which occur outside the territory of India provided that such an event has a real nexus/connection with event in India.

¶89In fact, dealing with an identical situation under the GST Regime under Section 13(9) of the Integrated Goods and Service Tax Act, 2017, the Hon'ble Supreme Court in Union of India Vs. Mohit Minerals Private Limited, 2022 SCC OnLine SC 657, 2022 (61) G.S.T.L. 257 (S.C.) held as follows:-

109.As an alternative, the respondents submitted that though the levy may have a nexus with the Indian territory, the levy of tax extra-territorial must be provided by Parliament through statute and not by the Union Government through delegated legislation. We do not find any applicability of this submission to the facts at hand. As stated above, the IGST Act under Section 13(9) recognizes the place of supply of services as the destination of goods is India, the statute itself is broad enough to Page No. 55 of 103 cover a taxable event that has extra-territorial aspects, which bears a nexus to India"

¶90We therefore hold that the challenge to the vires to Section 66C(2) of the Finance Act, 1994 has to fail. Therefore, W.P No.2147 of 2017 is liable to be dismissed. For the same reason, challenge to Notification No.28/2012-ST dated 20.6.2012 vide W.P No.2147 of 2018 has also to fail. Consequently, the challenge to Notification No. 28/2012-ST dated 20.6.2012 has also to fail.

¶91Thus, with effect from 01.07.2012, services provided in connection with the transportation of goods by a service provider located outside the territory of India to a person located in a "non taxable territory" were exempted under Sl.No.34(c) of Mega Exemption Notification No.25/2012-ST, dated 20.06.2012.

¶92For comparison, Entry No.34 as it stood prior to the amendment vide impugned Notification No.1/2017-ST, dated 12.01.2017 and after the amendment with effect from 22.01.2017 are extracted as under:- Page No. 56 of 103 Table No.10 Entry 34 Mega Exemption Notification No.25/2012-ST, dated 20.06.2012, w.e.f. 01.07.2012

¶34Services received from a provider of service located in a non-taxable territory by – a. Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; b. an entity registered under section 12AA of the Income Tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or c. a person located in a non-taxable territory; Provided that the exemption shall not apply to online information and database access or retrieval services received by persons specified in clause (a). Provided that the exemption shall not apply to – i. online

information

and database access or retrieval services received by persons specified in clause (a); or ii. services

by

way

of

transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. Note: The above Proviso as it read when

Mega

Exemption Notification

No.25/2012-ST, dated 20.06.2012 was introduced w.e.f. 01.07.2012 Note: The above Proviso as amended by Notification

No.1/2017,

dated

12.01.2017 effect from 22.01.2017. Page No. 57 of 103

¶93As mentioned in the earlier part of this order, the other notifications which have been issued are only consequential notifications issued to shift the burden of tax on the "Steamer Agents" [Category I Writ Petitioners] for a period between 22.01.2017 and 22.04.2017 and thereafter on the "Importers [Category II Writ Petitioners] between

23.04.2017 and 30.06.2017.

¶94The activity of transportation of goods qualified as a "service" within the meaning of Section 65B(44) of the Finance Act, 1994 and provision of service in India in view of Rule 10 of the Place of Provision of Services Rules, 2012. Such an activity was merely exempted in terms of Sl.No.34(c) of Exemption Notification No.25/2012-ST dated

20.06.2012.

¶95We will therefore, examine whether on account of the withdrawal of the exemption, the Central Government was justified in shifting the burden to pay service tax on the "Steamer Agents" viz., Category I Writ Petitioners and later on the importer viz., Category II Writ Petitioners and results in impossibility, arbitrary and impractical Page No. 58 of 103 levy in view of impugned Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 withdrawing the exemption under Clause 34

(C) to Mega Exemption Notification No. 25/2012-ST dated

20.06.2012.

¶96The other notifications which have been challenged are detailed in the Table below. Column B gives the details of the Parent Notification. Column C lists out the Notification impugned by the Steamer Agents (Category I Writ Petitioners) and Column D lists out the Notification impugned by the Importer (Category II Writ Petitioners):- Table No.11 Sl. No. Parent Notification(s) Impugned Notifications A B C D Category I Writ Petitioners Category II Writ Petitioners. Steamer Agents Importers 2/1994-ST dt

28.6.1994. [STR, 1994] 2/2017-ST dt

12.1.2017 with effect from 22.1.2017 16/2017-ST dt 13.4.2017 with effect from 23.4.217 W.P.No.2150 of 2017 W.P. in Sl.Nos.7 to 12 of Table 4 Page No. 59 of 103

¶1Both the impugned Notifications insert clauses and substitute clauses in STR, 1994* and impact Rule 2(1)(d) of the STR, 1994* which defines the expression "person liable to pay tax".

¶2Both the impugned Notifications shift the burden to discharge service tax liability on:

¶3Introduces and later substitutes Rule 2(1)(d)(EEB) to STR, 1994. Person Liable to pay Tax. The person who complies with the provision of Section 29,30 or 38 of the Customs Act, 1962. ie. Steamer Agents. The person who imports i.e. importer. 30/2012-ST dated

20.6.2012-with effect form

1.7.2012. 3/20170ST dt dt12.1.2017 with effect from

22.1.2017. 15/2017-ST dt 13.4.2017 with effect from 23.4.217 W.P.No.2151 of 2017 W.P. at Sl.Nos.7 to 14 of Table 4 The parent notification 30/2012-ST dated 20.6.2012-with effect form 1.7.2012 was issued under Section 68(2) of the Finance Act, 1994 to shift the burden. Impugned Notifications 3/20170ST dt dt12.1.2017 with effect from 22.1.2017 15/2017-ST dt 13.4.2017 with effect from

23.4.217 give effect to the above amendments in the Notification in Column C &D as above to parent Notification No.30/2012-ST dated

20.6.2012-with effect form 1.7.2012 issue under notification issued under Section 68(2) of the Finance Act, 1994 by shifting the burden to Page No. 60 of 103 pay service tax. Person Liable to pay Tax The person who complies with the provision of Section 29, 30 or 38 of the Customs Act,1962 ie. Steamer Agents.) The importer. 28/2012-ST dated

20.6.2012-with effect form

01.07.2012. [POPR, 2012] No amendment. Rule 10 makes it clear that the place of provision of service in case of transportation

of goods shall be the place of destination. challenged by Steamer Agents – Category I in W.P.No.2148 of 2017 18/2011-ST dated

1.3.2011 with effect from

01.04.2011. [POTR, 2011] 14/2017-ST

dated

13.4.2017

with retrospective effect from

22.1.2017. W.P at S.No.14 of Table STR, 1994 : Service Tax Rules,1994 POTR, 2011 : Point of Taxation Rules, 2011

¶97The changes brought to the Rules and other Notifications under the rest of the impugned Notification are only consequential. They by themselves do not make the activity taxable. They merely shift the burden to pay service tax on these petitioners during the period in Page No. 61 of 103 dispute.

¶98But, for the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017, the petitioners would have no cause for complaint. The amendments to the parent notifications in the above table are only the consequential changes to the Rules and the enabling Notifications issued under Section 68(2) and Section 67A of the Finance Act, 1994. The impugned notifications were only meant to implement the withdrawal of the exemption vide impugned Notification No.1/2017-ST dated, 12.01.2017. They by themselves do not create any liability on these petitioners.

¶99To give effect to the above amendment, the definition of "person liable to pay tax" in Sub Clause (EEC) to Rule 2(1)(d)(i) of the Service Tax Rules, 1994 was inserted vide impugned Notification No.02 of 2017-ST dated 12.01.2017 with effect from 22.01.2017. It shifted the burden on the "Steamer Agents" to pay tax. Later, the Service Tax Rules, 1994 was further amended vide impugned Notification No.16/2017-ST, dated 13.04.2017 w.e.f. 23.04.2017 and thereby shifted Page No. 62 of 103 the burden on the importer of the goods.

¶100Relevant portion of Rule 2(1)(d)(i) EEC of Sales Tax Rules, 1994 with effect from 22.01.2017 in terms of Notification No.2/2017-ST, dated 12.01.2017 and in terms of Notification No.16/2017-ST, dated

13.04.2017 with effect from 23.04.2017 read as under:- Table No.12 Not.No.2/2017-ST, dated

12.01.2017, w.e.f. 22.01.2017 Not.No.16/2017-ST, dated

13.04.2017, w.e.f. 23.04.2017 2(1) In these rules, In these rules, unless, the context otherwise requires:-

(d) " person liable for paying service tax" :-

(i) in respect of the taxable services notified under sub-section (2) of Section 68 of the Act, means;-

(EEC) in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods;

(EEC) in relation to services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, the importer as defined under clause (26) of Section 2 of the Customs Act, 1962 (52 of 1962) of such goods; Page No. 63 of 103

¶101A further amendment was also made to the Service Tax Rules, 1994 vide impugned Notification No.16/2017-ST, dated

13.04.2017 by inserting sub-rule (7CA) to Rule 6 read as follows with effect from 22.01.2017. Rule 6:-Payment of Service Tax: 1….. 2……. ……. 7A……………. 7B .................. 7(C)................

(7CA) The person liable for paying service tax for the taxable services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall have the option to pay an amount calculated at the rate of 1.4% of the sum of cost, insurance and freight (CIF) value of such imported goods."

¶102Rule 6(7CA) of the Service Tax Rules, 1994 as inserted vide Notification No.16/2017-ST, dated 13.04.2017 gave an option to the person liable for paying service tax to pay an amount calculated at the rate of 1.4% of cost, insurance and freight (CIF) value of such imported Page No. 64 of 103 goods."

¶103Thus, from 23.04.2017, a person liable to pay Sales Tax for the taxable services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall have the option to pay an amount calculated at the rate of 1.4% of the sum of cost, insurance and freight (CIF) value of such imported goods.

¶104As a sequitur to the impugned Notification No.02/2017-ST dated 12.01.2017 with effect from 22.01.2017, impugned Notification No.3/2017-ST dated 12.01.2017 was issued with effect from 22.01.2017. It amended Notification No.30/2012-ST dated 20.6.2012 issued under Section 68(2) of the Act. Thus, attempt was made to shift the burden on the Steamer Agents.

¶105Later, by the impugned Notification No.15/2017-ST, dated

13.04.2017, there was further amendment to Notification No.30/2012-Page No. 65 of 103 ST, dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 to shift the burden of paying service tax on the recipient of services on reverse charge basis.

¶106Notification No.30/2012-ST, dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 prescribed the extent of service tax payable by person liable to pay tax for the purpose of Section 68(2) of the Act.

¶107Relevant portion of Notification No.30/2012-ST, dated

20.06.2012 as it stood after the impugned Notification No.3/2017-ST dated 12.01.2017 during the period in dispute reads as follows:-Notification No.30/2012-ST, dated 20.06.2012 I.The taxable services,— In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994) and in supersession of (i) notification of the Government of India in the Ministry of Finance (Department of Revenue), Page No. 66 of 103 No.15/2012-Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part Ii, Section 3, Sub-Section (i) vide number G.S.R 213(E) dated the 17th March, 2012 and (ii) notification of the Government of India in the Minsitry of Finance (Department of Revenue) No.36/204, Service Tax, dated the 31st December, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R.849(E) dated the 31st December, 2004, except as respects things done or omitted to be done before such supersession, the Central Government hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section namely:-

(A) (i)…

(ii) …

(a)…

(b)…

(c)…

(d)…

(e)…

(f)…

(iii)…

(iv)…

(A)…

(B)…

(C)…

(1)…

(2)…

(v) …

(vi)…… Page No. 67 of 103

(vii) provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up t o the customs station of clearance in India,

(B) provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory;

(II) The extent of service tax payable thereon by the person who provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely:- Table Sl. No. Description of a service Percentage of service tax payable by the person providing service Percentage of service tax payable by the person receiving the service

¶12in respect of services provided or agreed

to

be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100% [Sl.No.12 inserted vide impugned Notification Page No. 68 of 103 No.03/2017-ST, dated 12.01.2017 with effect from

22.1.2017]

¶108By the impugned Notification No.03/2017-ST, dated

12.01.2017, Explanation No.IV was inserted. Realizing difficulties in collecting service tax from Steamer Agent in terms of Notification Nos.1 to 3/2017-ST dated 12.01.2017, the Government decided to shift the burden of tax in relation to goods imported into India, on the importer vide impugned Notifications in Category II with effect from 23.04.2017.

¶109The amendments to the Explanation to Notification No.30/2012 as amended by Notification No.03/2017-ST, dated

12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017 are reproduced below:- Table No.13 Notification No.03/2017-ST, dated 12.01.2017 Notification No.15/2017-ST, dated

13.04.2017 "Explanation III.- The business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services Page No. 69 of 103 Explanation IV.- For the purposes of this notification, in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying service tax other than the service provider shall be the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods.". for the purpose of this notification. Explanation IV.- For the purposes of this notification, "non-assesse online recipient" has the same meaning as assigned to it in clause (ccba) of sub-rule 1 of rule 2 of Service Tax Rules, 1994. Explanation V.- For the purposes of this notification, in respect of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, person liable for paying service tax other than the service provider shall be the importer as defined under clause

(26) of section 2 of the Customs Act, 1962 (52 of 1962) of such goods.".

¶110Section 29 of the Customs Act, 1962 refers to the obligations of the person-in charge of a vessel or an aircraft entering India from any place outside India. Section 30 of the Customs Act, 1962 also refers to the obligations of such person for submitting Import General Manifest and the like documents. Section 38 of the Customs Act, 1962 refers to Page No. 70 of 103 the powers of the proper Customs Officer requiring person-in-charge of any conveyance carrying imported goods for production of any document or answer any questions.

¶111Thus, burden for paying the service tax liability was attempted to be shifted on the person in India who complied with Section 29, 30 or 38 of the Customs Act, 1962 read with section 148 of the Customs Act, 1962 with respect to such goods by virtue of Notification No.2 of 2017-ST dated 12.01.2017 with effect from 22.01.2017 upto

22.42017 and thereafter on the importer of goods.

¶112Thus, service tax initially became payable by "steamer agents" on ocean freight with effect from 22.01.2017 in view of the amendment by Notification No.1/2017-ST dated 12.01.2017. Later, by the impugned Notification No.15/2017-ST dated 13.04.2017, the burden was shifted on the importer.

¶113Thus, the intention of the Government was to shift burden of tax on the "steamer agents" and later on the importers vide impugned Page No. 71 of 103 Notification No.15/2017-ST dated 13.04.2017 with effect from

23.04.2017, wherein, an Explanation V to Notification No.30/2012-ST dated 20.06.2012 was inserted. It impacted the second Category II of Writ Petitioners namely the "importers". There were further amendments to the Explanations to vide Notification No.03/2017-ST, dated

12.01.2017 and Notification No.15/2017-ST, dated 13.04.2017.

¶114Explanation IV as inserted vide Notification No.03/2017-ST, dated 12.01.2017 impacted the Category I of the Writ Petitioners namely the "Steamer Agents".

¶115The Point of Taxation Rules, 2011 which was introduced was issued by the Central Government in the powers vested with it under Section 67A of the Finance Act, 1994 vide Notification No.18/2011-ST dated 01.03.2011 was also amended.

¶116Section 67A of the Finance Act, 1994 and Rule 8B of Point of Taxation Rules, 2011 as inserted vide impugned Notification No.14/2017-ST dated 13.04.2017 read as under:- Page No. 72 of 103 Table No.14 Section 67A of the Finance Act, 1994 Rule 8B of the Point of Taxation Rules, 2011 Date of determination of rate of tax, value of taxable service and rate of exchange. —

(1) The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. For the purposes of this section, "rate of exchange" means the rate of exchange determined in accordance with such rules as may be prescribed.

(2) The time or the point in time with respect to the rate of service tax shall be such as may be prescribed. Determination of point of taxation in case of services provided by a person located in non-taxable territory to a person in non-taxable territory. – Notwithstanding

anything contained in these rules, the point of taxation in respect of services provided by a person located in non-taxable territory to a person in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, shall be the date of bill of lading of such goods in the vessel at the port of export.".

¶117Prior to amendment to the Point of Taxation Rules, 2011 vide impugned Notification No.14/2017-ST dated 13.04.2017 with effect from

23.04.2017, the point of taxation was:- ● the time when the invoice for the service provided or agreed to be provided was issued; ● if no invoice was not issued within prescribed time period (30 days except for specified financial sector where it is 45 days) of completion of provision of service then the date of completion of service; Page No. 73 of 103 ● the date of receipt of payment where payment is received before issuance of invoice or completion of service.

¶118Rule 8B was inserted to the Point of Taxation Rules, 2011, after Rule 8A vide impugned Notification No.14/2017-ST dated

13.04.2017. It came into force on 23.04.2017 with retrospective effect from 22.01.2017.

¶119The purpose of the insertion of Rule 8B of the Point of Taxation Rules, 2011 with retrospective effect from 22.1.2017 was to fix the rate of tax, value of taxable service and rate of exchange as the date of bill of lading of goods in the vessel at the port of export.

¶120The impugned Notification No.14/2017-ST dated 13.04.2017 was intended to enable the Department to levy and collect service tax on the steamer agents and also the importers at the prevailing rate for the respective period. The amendment was in compliance with the requirement of Section 67(A) of the Act. Thus, not only the importer but also the "steamer agents" were liable to pay tax at the rate and value from Page No. 74 of 103

22.01.2017. There are no merits in the challenge to it.

¶121In CIF contracts, the service of transportation of goods by vessel is received by the foreign exporters/overseas supplier from the foreign/overseas vessel owner/operator/Shipping Liners in the CIF contract. The value of all incidental services consumed in the course of import of goods is built into the import value of the import goods. Customs duty is already paid by the importers on these values. To that extent, there is no justification to burden the importers who will be forced to bear the incidence of the levy on again.

¶122The transaction value for the purpose of custom duty and additional duty of custom equivalent to the excise duty (ADC), includes the value of ocean freight. Therefore, importers cannot be mulcted with the double tax on the ocean freight either directly or indirectly particularly in a CIF contracts.

¶123The value of incidence of such intermediate services availed by the Shipping Liners will be passed on by the Shipping Liners to the Page No. 75 of 103 Foreign Shippers and eventually to the importers. This value gets taxed in the case of CIF Contract. In the case of FOB contracts, the importers have to in any event include the value under Section 14 of the Customs Act, 1962. Thus, to tax, the overseas freight twice is also uncalled.

¶124Such cost of such transportation is factored into the price of the shipment and such cost of such shipment gets built into the transaction value of the import goods at the time and place of importation. Computation of service tax in CIF contract is impossible. That apart, in view of the Division Bench of the Gujarat High in Sal Steel Ltd Vs. Union of India, (2020) 37 GSTL 3, no tax can be demanded on an ocean freight or importers.

¶125Neither the importer in India who imports the goods at the place of destination in India will have an idea as to the cost of such services which are in built and borne by the foreign shipping liners nor the steamer agents who book cargo for and behalf of a shipping liner. Page No. 76 of 103

¶126Further, in the case of contracts on a CIF (Cost, Freight and Insurance), the foreign supplier-exporter engages the services of the Overseas Shipping Liner and is responsible for arranging transportation and insurance of the goods. The consideration for shipping the goods is payable by the foreign supplier in the case of CIF contracts to the foreign/Overseas Shipping Liner.

¶127In case of CIF transaction, the value of ocean freight is not available with the importer as the ocean freight is paid by the overseas supplier. The value of a CIF contract is indivisible. The impugned notifications also have the propensity of spiraling the import value of the goods.

¶128In CIF contracts, the "value" of sea transportation service is not made available either to the importers or the steamer agents. There is also no privity of contract between the importers and the Overseas Shipping Liner in CIF contracts nor does an Indian importer make any payment for such ocean freight to the Overseas Shipping Liners and its ancillary service provider who services are engaged enroute. Page No. 77 of 103

¶129The steamer agents (Category I Writ Petitioners) are already service providers and are already taxed under the provisions of the Finance Act, 1994 for the service provided by them to the shipping liners.

¶130We therefore hold that service tax cannot be demanded from these petitioners as neither the "steamer agents" nor the "importers" in India are the recipient of service. They are not liable to pay tax.

¶131The other impugned notifications which were issued as a consequence of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated 20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017 also cannot be challenged as challenge to the latter notification has to fail. Page No. 78 of 103

¶132The, Central Government had devised a mechanism, whereby, apart from those activities which were specifically excluded from the definition of "service" in Section 65B(44) of the Finance Act, 1994, few services were placed in the "negative list" in Section 66D of the Finance Act, 1994 while few services were specifically exempted with effect from 01.07.2012 under Mega Exemption Notification No.25/2012-ST dated 20.06.2012 with effect from 01.07.2012.

¶133Along with these notifications, the Service Tax Rules, 1994 issued vide Notification No.2/1994 dated 28.6.1994 was amended first vide Notification No.2/2017-ST dated 12.01.2017 with effect from

22.01.2017 and by the impugned Notification No.16/2017-ST dated

13.04.2017 with effect from 23.4.2017 for the respective period. Those amendments vide the impugned notifications were intended to declare these petitioners as "persons liable to pay tax".

¶134Thus, a statutory framework for shifting the burden to pay tax was made. However, the Notification No.3 of 2017-ST, dated 12.01.2017 had defects right from the time of its inception. Page No. 79 of 103

¶135The other collateral notifications which have been challenged in these writ petitions are merely incidental and only consequential to withdrawal of exemption in Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017. They have been issued with a view to implement the changes on account of withdrawal of exemption under impugned No.1/2017-ST dated 12.01.2017 with effect from 22.01.2017.

¶136Although, Notification No.30/2012-ST dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 has been amended by Notification No.3/2017-ST, dated 12.01.2017 with effect from

22.01.2017 and later by Notification No.15/2017-ST dated 13.04.2017, it is evident that as per Sl.No.12 to the above notification, it is only the "recipient of service" who can be made liable to pay tax. It is the "recipient of service" who is liable to 100% tax on such service. Sl.No.12 as inserted vide Notification No.3/2017-dated 12.01.2017 with effect from 22.1.2017 reads as follows:- Page No. 80 of 103 Table No.15 Sl. No. Description of a service Percentage of service tax payable by the person providing service Percentage of service tax payable by the person receiving the service

¶12in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India Nil 100%

¶137Sl.No.12 to Notification No.30/2012-ST dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 as amended by the impugned Notification No.3/2017-dated 12.01.2017 with effect from

22.1.2017 and Notification No.15/2017-ST dated 13.4.2017 with effect

23.4.2017 merely shifts the burden to pay service tax. Page No. 81 of 103

¶138As per Sl.No.12 to the above notification, it is the person receiving service who has to pay 100% of the service tax although in the amendment to parent notification No.30/2012-ST dated 20.6.212 vide impugned Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017, it is the steamer agent or the importers who are liable to pay service tax during the respective period as detailed below:- Table No.16 Notification No.03/2017-ST dated

12.01.2017 Notification No.15/2017-ST dated

13.4.2017 The person in India who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods. The importer as defined under clause (26) of Section 2 of the Customs Act, 1962 (52 of 1962) of such goods.

¶139There is a flaw in the above Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017. It is the foreign liner who engages the service of various other persons in the course of transport of service. It is the foreign shipping liner who receives service who can be taxed and not the importers or the steamer Page No. 82 of 103 agents although by virtue of the above two notifications, the person liable to pay tax has been also declared as the person who complies with Sections 29, 30 or 38 read with Section 148 of the Customs Act, 1962 (52 of 1962) with respect to such goods between 22.01.2017 and

22.04.2017 and thereafter the importer as defined under Clause (26) of Section 2 of the Customs Act, 1962 of such goods between 23.04.2017 and 30.06.2017.

¶140The demand are incapable of being enforced in view of the above defects pointed out in the amendment to Notification No.30/2012-ST dated 20.06.2012 issued under Section 68(2) of the Finance Act, 1994 vide the impugned Notification No.3/2017, dated 12.01.2017 under the scheme of the Act, the Rules made thereunder and the Notifications issued.

¶141We are therefore of the view that there is no scope for shifting the burden on these two categories of writ petitioners to pay service tax as things stand. Therefore, these collateral notifications which have been challenged need not be declared ultra vires as such. Page No. 83 of 103

¶142Further, there is no privity of contract between the petitioners and the ancillary service providers of the shipping liner who provide services to the Overseas Shipping Liners. Although the goods are exported by the foreign supplier-exporter who engages the service of the Overseas Shipping Liners, it is the overseas shipping liners who engages the service of ancillary service providers. The enroute petitioners cannot be construed as the recipients of service to make them liable to pay tax under the Scheme of the Act and under the Notification issued under Section 68(2) of the Finance Act,1994. As such, no service is provided to these two categories of the writ petitioners to fasten liability on them.

¶143Although under Notification No. 16/2017-S.T., dated

13.04.2017, an option to pay service tax on an amount calculated at the rate of 1.4% of the sum total of the cost, insurance and freight (CIF) value of the imported goods, again it is only the recipient of service who is liable to pay tax on this compounded rate if Notification No.03/2017-ST dated 12.01.2017 and Notification No.15/2017-ST dated 13.04.2017 Page No. 84 of 103 are applied to the petitioners during the relevant period. In our view, it is the Overseas Shipping Liner who is the recipient of service from various service providers whose services are engaged enroute. Therefore, it cannot be said that these two categories of writ petitioners are the persons receiving service within the meaning of Notification No.3/2017-dated 12.01.2017 with effect from 22.1.2017 and later under Notification No.15/2017-ST dated 13.4.2017 with effect 23.4.2017 to fasten liability on them.

¶144Thus, neither of the Category of writ petitioners are liable to pay tax in view of defect in Notification No.3/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and Notification No.15/2017, dated 13.04.2017.

¶145While amending Notification No.30/2012-ST dated

20.06.2012 vide Notification No.3/2017-ST dated 12.01.2017 w.e.f.

22.01.2017 and Notification No.15/2017, dated 13.04.2017 and the burden was shifted on these writ petitioners by virtue of the amendment to the provisions of Service Tax Rules, 1994 vide Notification No.02/2017-ST dated 12.01.2017 w.e.f. 22.01.2017 and later by Page No. 85 of 103 Notification No.16/2017 dated 13.04.2017 w.e.f. 23.04.2017, the demand of service tax on these petitioners cannot be countenanced for the foregoing reasons.

¶146The impugned notifications had a very short life with effect from 22.01.2017 upto 30.06.2017. With effect from 01.07.2017, the respective Goods and Service Tax Act, 2017 (GST Act, 2017) came into force and subsumed several indirect taxes including Chapter V of the Finance Act, 1994.

¶147In Sal Steel Ltd. Vs. Union of India, 2019 SCC OnLine Guj 3706 : (2020) 37 GST1, the Division Bench of the Gujarat High Court held as follows:-

¶22In the case on hand, indisputably, the overseas sellers/suppliers of the goods have made contracts with the shipping line/shipper for sea transportation of the goods, and such overseas sellers/suppliers have made payment of transportation charges to the shipping line; and admittedly there is no contract nor any arrangement between the Petitioners (who are Indian importers/buyers of the goods) and the shipping line for sea transportation. Thus, Ocean freight is admittedly paid by the overseas suppliers/sellers to Page No. 86 of 103 the shipping line, and therefore the overseas suppliers i.e. the sellers of the goods located in foreign country are the persons who have received service of sea transportation from the shipping line, and the value of such service i.e. ocean freight is also paid by such overseas suppliers/sellers for receiving such service. …...

¶30All the three impugned provisions are made by the Central Government by way of amending Service Tax Rules, but there is no power conferred upon the Central Government under Secion 94 of the Finance Act for charging and collecting tax on extraterritorial events. The impugned provisions allowing the Central Government to recover service tax on sea transportation occurring upto the land mass of the country are therefore ultra vires the Rule making power of Section 94 of the Finance Act.

¶31A perusal of Section 94 shows that there is no power conferred upon the Central Government to make any Rules or Notifications for extraterritorial events; or in other words, for services rendered and consumed beyond the "taxable territory" i.e. beyond India. Obviously, the Act itself is not applicable to the territories other than India and therefore the Executives cannot have any power to make Rules for territories beyond India.

¶32In Paras 16 to 24 of the Union of India v. S. Srinivasan, 2012 (281) ELT 3 (SC), and in para 14 of the General Officer Commanding in Chief v. Subhash Chandra Yadav, (1988) 2 SCC 351 : AIR 1988 SC 876, the Supreme Court has held that a Rule going beyond the Rule making power conferred by the Statute was ultra vires; a Rule supplanting Page No. 87 of 103 any provision for which power has not been conferred was ultra vires; and a Rule which was not relatable to the source of power to make such rule was ultravires. In Indian Association of Tour Operators 2017 (5) G.S.T.L. 4 (Del.), the Delhi High Court has considered validity of Rule 6A of the Service Tax Rules and held at paras 44, 47, 48 and 53 that a Rule made by the Central Government has to necessarily be only in relation to taxable services, namely, services provided in the taxable territory of India, and an essential legislative function of taxing an activity in non-taxable territory could not have been delegated to the Central Government. Rule 6A has been struck down as ultra-vires the Rule making power of Section 94 by the Delhi High Court.

¶33The impugned provisions are also ultra vires the Rule making power of Section 94 of the Finance Act.

¶34As observed above, the person receiving service of sea transportation in CIF contracts is the seller-supplier of the goods located in a foreign territory. The Indian importers like the writ applicants are not the persons receiving sea transportation service, because they receive the "goods" contracted by them, and they have no privity of contract with the shipping line nor does the Indian importer make any payment of ocean freight to the service provider. But the impugned provisions make such "importer" liable to pay service tax; and therefore such provisions allowing the Central Government to recover service tax from a third party are ultra vires the statutory provisions of the Finance Act, as discussed below. …..

¶38But the importers in CIF contracts i.e. the Page No. 88 of 103 writ applicants herein are neither service providers nor service receivers in respect of transportation of goods by a vessel from a place outside India upto the Customs station of clearance in India. Section 68 (1) and also the reverse charge Notification under Section 68(2) permit the Central Government to collect and recover service tax only from the person providing the service or from the person receiving the service, and not from a third party. The rule making power of section 94 also does not permit the Central Government to make rules for recovering service tax from a third party who is neither the service provider nor the service receiver.

¶39Therefore, the impugned provisions i.e. Rule 2(1)(d)(EEC) and Explanation V to Notification No. 30/2012-ST are ultra vires Section 65B(44) defining "service" and Section 68, and also Section 94 of the Finance Act. Strict Interpretation of the charging Section: It is not the case of the Respondents that importers like the Petitioners have received services of sea transportation from the shipping lines. The Respondents have however pleaded that in case of the Indian importers receiving goods on the land mass of the country by virtue of CIF arrangements, they "indirectly" receive sea transportation service also; and therefore obligation to pay service tax can be shifted to them.

¶40First, the Indian importers like the Petitioners have contracted for purchase and delivery of goods, and under CIF contract where the lump sum amount is paid for delivery of the goods on the land mass of the country; and what the Page No. 89 of 103 importers receive in India is the goods, and not any service. Secondly, liability to pay tax cannot be fastened on a person if the charging provision does not charge or levy the tax; because a charging section has to be strictly interpreted, and not by way of inferences or presumptions about any indirect benefit to a person.

¶41..

¶43When the Respondents have admitted that the importers in India are not persons receiving service of sea transportation, and that it is the Respondent's case that the Indian importers were "indirectly" receiving such service and hence were persons liable to pay service tax on such service; it is clearly a case where the Respondents propose to charge service tax from the third parties i.e. the Indian importers by implication, and not by clear words of the charging section. The impugned provisions creating a charge of service tax on third parties though the Act of the Parliament provides for levy and collection of tax either from the person providing service or from the person receiving service are beyond the charging provision, and also beyond the Rule making power of Section 94 of the Finance Act. No machinery provision:

¶44Even if it is assumed that service tax can be recovered from a third party like the Indian importers in CIF contracts, there is no machinery provision for valuation of the service, and therefore also the impugned Rules and Notifications are unenforceable. It is an admitted position of fact that the Petitioners do not have any information about the actual amount of ocean freight paid by the overseas sellers/suppliers to shipping lines. The invoices and purchase orders (Annexure-"D" to Page No. 90 of 103 SCA No. 20785/2018) clearly show that the price of the goods was fixed on basis of quantity (i.e. DMT-Dry Metric Tton) for CIF Mundra Port basis. When service tax is to be computed and assessed on the "value" of the service as laid down under the machinery provision of Section 67 of the Finance Act, no service tax can be assessed and charged from third parties like the Indian importers in CIF contracts, because "value" of sea transportation service is not available with them in CIF contracts.

¶46In the present cases, since the value of ocean freight is not available, Sub Rule (7CA) is inserted in Rule 6 of the Service Tax Rules thereby giving an option to the importer to pay service tax on 1.4% of CIF value of imported goods. But this insertion of Sub Rule (7CA) in Rule 6 is also ultra vires the machinery provision of Section 67, and also rule making power of Section 94.

¶47There is no power conferred upon the Central Government under Section 94 to fix value of any service, the way such power is conferred upon the Board under Section 14(2) of the Customs Act, 1962. In absence of any power vested in the Central Government to fix value of any service by way of making a rule or a notification, Rule 6 (7CA) of the Service Tax Rules is ultra vires the Rule making power. Secondly, it is an option under Rule 6(7CA) to pay service tax on the amount calculated @1.5% of CIF value of the imported goods; but if the importer does not exercise this option, then there is void because actual value of this service i.e. ocean freight is not known even to the Revenue officers. Therefore, the scheme of taxation would fail and fall in absence of a machinery provision for valuation of the service when tax is proposed to be recovered from a third party not having any information about Page No. 91 of 103 the value of such service.

¶48Therefore, Rule 6(7CA) amended by the Central Government is also ultra vires Section 67 and Section 94 of the Finance Act.

¶148For the period, under the GST regime with effect form

01.07.2017, the Hon'ble Supreme Court has answered the issue against the revenue in Uol Vs Mohit Minerals, 2022 SCC OnLine SC 657.

¶149In Kusum Ingots and Alloys Ltd. Vs. Union of India, 2004

(168) E.L.T. 3 (S.C.), it was held that an order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act. If that be so, the notices which have been challenged by the category II writ petitioner in Table 5 are also liable to be quashed. However, we would not go that far to hold all the notifications challenged as ultra-vires.

¶150To implement the consequences of withdrawal of the exemption under Mega Exemption Notification No.25/2012-ST dated Page No. 92 of 103

20.6.2012 vide Notification No.1/2017-ST dated 12.1.2017 with effect from 22.1.2017, the burden to pay service tax was attempted to be shifted for a part of the period between 22.01.2017 and 22.04.2017 on the "Steamer Agents" (Category I W.Ps) and for the period between

23.04.2017 and 30.06.2017 on the "Importer" (Category II W.Ps) vide other impugned Notifications which have been challenged in these batch of the writ petitions.

¶151Category I Writ Petitioners have also challenged the vires of para 4 and 4.1 of Circular No.206/4/2017-ST dated 12.4.2017 in W.P.No.14643 of 2017 as null and void and ultravires the various provisions of the Constitution and ultra vires Section 83 of the Finance Act, 1994, Section 37B of the Central Excise Act, 1994 as made applicable to Finance Act, 1994 as well as Notification No.26/2012-ST dated 20.06.2012.

¶152Impugned Circular No. 206/4/2017-ST dated 12.4.2017 was issued in the background of withdrawal of exemption for services provided by a person located in a non-taxable territory to a person Page No. 93 of 103 located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India vide impugned Notification No. 1/2017-S.T., dated 12.1.2017 with effect from 22.1.2017.

¶153Para 4 and 4.1 of Circular No. 206/4/2017-ST dated

12.4.2017 read as under:- Table No.17

¶4It is pertinent to point out here that under notification No. 26/2012-S.T., dated 20-6-2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfillment of the condition that Cenvat credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. This conditional exemption has been extended for the reason that out of the full value of such services, the exempted value of service has already suffered taxes (Central Excise) which would have been available as Cenvat credit to set off service tax on full value of service. In effect, service tax is levied on the value added only. However, in case of foreign shipping lines, their services being exports from their home country, are zero-rated in their home country and thus have suffered no taxes. Further the foreign shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules.

4.1 Thus, the condition for availing exemption under notification No. 26/2012-S.T., dated 20-6-2012 (Sl. No. 10) is not fulfilled by the foreign shipping lines. Hence, benefit of conditional exemption will not be available to them and service tax will be paid on full value of services. Further, the amount of service tax payable under the option available under Service Tax Rules, 1994 has been prescribed Page No. 94 of 103 accordingly.

¶154Notification No.26/2012-S.T., dated 20.06.2012 gave abatement. Relevant portion of Notification No.26/2012-S.T., dated

20.06.2012 reads as under:- Table No.18 Exemption from Service tax in relation to transport of goods and passengers tour operators, financial leasing, hire purchase, renting of hotels, inns, guest houses, clubs campsites or other places, chit funds, renting of cabs, construction of complex/building for sale — Notification No. 13/2012-S.T. Superseded In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), and in supersession of notification number 13/2012-Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 211(E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the said Table, namely:- Sl. No. Description of taxable service Percent-age Conditions

(1)

(2)

(3)

(4) Page No. 95 of 103 Transport of goods in a vessel Same as above*. * CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

¶155Though, Notification No.26/2012-ST dated 20.06.2012, was in force from 01.07.2012, it did not impact these petitioners earlier as service provided outside the territory of India in relation to import of the goods through vessel till the customs port, was exempted vide Sl.No.34

(c) Mega Exemption Notification No.25/2012-ST dated 20.12.2012.

¶123If it is the case of the petitioners that the clarification in Para 4 and

4.1 of Circular No. 206/4/2017-ST dated 12.4.2017 is incorrect, these petitioners are only questioning the denial of abatement in the above notification.

¶156Further, in view of Notification No.16/2017-ST dated

13.04.2017, a compounded scheme for payment of service tax has been provided at 1.4% of the (CIF) value of the imported goods. Thus, these petitioners have thus tacitly admitted that the levy of service tax was valid save that they have not been given abatement under Notification Page No. 96 of 103 No.26/2012-ST dated 20.06.2012 since the overseas service providers could not have paid service tax in their country as such services are zero rated service in their home country.

¶157The petitioners in W.P.No.2147 of 2017 on the other hand have chosen to challenge Sub-Section (2) to Section 66 C of the Finance Act, 1994 as Rule 10 of the Place of Provision of Service Rules, 2012 gets automatically attracted in view of the withdrawal of exemption.

¶158Therefore, there is no necessity to declare the impugned notifications as ultra vires as there is no proper machinery provided under the impugned notifications issued under Section 68(2) of the Finance Act, 1994 to shift the burden to pay service tax on the petitioners as the petitioners are not either the recipients of the taxable service by way of transportation goods by a vessel from a space outside India up to the customs stations of clearance in India. They are not liable to tax as things stand. Page No. 97 of 103

¶159There are defects in the notifications as mentioned above. They are curable defects. However, it is unwarranted, as the drift under the GST regime is also to not to burden the import with IGST under similar circumstances. Therefore challenges to Notifications in Table No.1 and Table No.4 fail and demand of sales tax on these petitioners also fail.

¶160As far as refunds are concerned in Table No.6, the petitioners will have to file appropriate refund applications for refund of the amounts which are said to have been paid by them in accordance with the law laid down by the Hon'ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India, 1997 (89) E.L.T.(S.C.).

¶161In the light of the above discussion, the challenge to Section 66(2) of the Finance Act, 1994 and Circular dated 13.04.2017 bearing Circular No.206/4/2017-ST in Writ Petitions in Table No.2 and Table.No.3 respectively fails. Page No. 98 of 103

¶162Challenge to Notification No.01/2017-ST dated 12.01.2017 has to fail in the light of the decision of the Hon'ble Supreme Court in Kasinka Trading vs. Union of India, 1995 (1) SCC 274, 1994 (74) E.L.T.782 (S.C.). The challenges to other notifications are unnecessary.

¶131In the light of the above discussion, challenge to the impugned Show Cause Notices in Table No.5 issued to the respective petitioners succeeds and therefore they stand quashed.

¶163As far as refunds are concerned in Table No.6, the petitioners shall file refund applications within a period of 30 days from the date of receipt of a copy of this order, if such refund applications have not been already filed. Such refund applications shall be disposed of in accordance with the decision of the Hon'ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India, 1997 (89) E.L.T.(S.C.). within a period of 60 days thereafter. Wherever refund applications have already been filed, they shall be disposed of in terms of the above decision of the Hon'ble Supreme Court, within a period of 60 days from the date of receipt of a copy of this order. Page No. 99 of 103

¶164In the result, it is held as follow:- i. The challenges to Section 66(2) of the Finance Act, 1994, impugned Circular No.206/4/2017 – Service Tax, dated

13.04.2017 and impugned Notifications issued by the Central Government under the provisions of the Finance Act, 1994 fail. Therefore, Writ Petitions in Table, 1,2,3 4 are liable to be dismissed and are accordingly dismissed. ii. These petitioners are however not the recipient of service for the purpose of the impugned Notification No.3/2017-ST dated 12.01.2017 amending Notification No.30/2012-ST dated 20.06.2012 issued under Section 68(2) of the Finance Act,1994. iii. Therefore, there is no scope for demanding service tax from these petitioners in view of the defects pointed out in the impugned Notification No.3/2017-ST dated

12.01.2017 amending Notification No.30/2012-ST dated

20.06.2012 issued under Section 68(2) of the Finance Act,1994. Therefore, there is no justification in the impugned Show Cause Notices in Table-5. These show cause notices are therefore quashed. iv. The respondents shall also not issue any show cause Page No. 100 of 103 notices to the importers and steamer agents for the period covered by this order ie. for the period between

22.01.2017 and 30.06.2017 for similar activity. v. As far as refunds in Table 6 are concerned, the petitioners are directed to file refund claims within 30 days from the date of receipt of a copy of this order, if no claim has already been made. vi. All the refund claims shall be disposed of within a period of 60 days or 90 days, as the case may be, in accordance with the law laid down by the Hon'ble Supreme Court in Mafatlal Industries Private Limited vs. Union of India, 1997 (89) E.L.T.(S.C.).

¶165These Writ Petitions stand disposed of with the above observations. No costs. Consequently, connected Miscellaneous Petitions are closed. S.V.N., J. C.S.N., J.

28.03.2023 Index : Yes/No Internet : Yes/No Speaking : Non-speaking Order kkd / rgm / jen Page No. 101 of 103 To

1.The Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Shastri Bhavan Annexe, 1st Floor, 26, Haddows Road, Chennai 600 006.

2.The Commissioner of Central Excise, Office of the Commissionerate of Central Excise, Chennai III Commissionerate, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034.

Page No. 102 of 103

S.VAIDYANATHAN, J. AND

C. SARAVANAN, J. kkd/rgm/jen Pre-delivery Common Order in

28.03.2023 Page No. 103 of 103

IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 04.11.2022 PRONOUNCED ON : 28.03.2023 CORAM THE HON'BLE MR. JUSTICE S.VAIDYANATHAN AND THE HON'BLE MR. JUSTICE C. SARAVANAN W.P.Nos.2147 to 2151 of 2017, 14643 of 2017, 9118 of 2019, 9120 of 2019, 19009 of 2019, 19011 of 2019, 35435 of 2019, 35445 of 2019, 8809 of 2020, 14929 of 2020, 141 of 2021, 400 of 2021, 12467 of 2021, 12976 of 2021, 13476 of 2021, 15394 of 2021, 15395 of 2021, 15398 of 2021 and W.M.P.Nos.9629 of 2019, 9662 of 2019, 18346 of 2019, 28303 of 2019, 36269 of 2019, 36276 of 2019, 18549 of 2020, 197 of 2021, 470 of 2021, 13780 of 2021, 13780 of 2021, 14343 of 2021 W.P.No.2147 of 2017 The Chennai and Ennore Ports Steamer Agents Association New No.63, Old No.32, Pophams Broadway, George Town, Chennai 600 018 Represented by its Chairman Y.Leeladharan ... Petitioner Page No. 1 of 103 Vs. 1.Union of India, Ministry of Finance, (Department of Revenue) No.137, North Block, New Delhi, 110 001 Represented by its Under Secretary 2. The Chairman, Central Board of Excise and Customs, North Block, New Delhi 110 001. Represented by its Chairman. 3. The Chief Commissioner of Service Tax (Chennai Zone) Newry Towers, 2054/1, II Avenue, Anna Nagar, Chennai 600 040. ... Respondents Writ Petition under Article 226 of the Constitution of India praying for issue of a Writ of declaration to declare Section 66C(2) of Chapter V of the Finance Act, 1994 ( as amended) as null, void and ultra vires Article 14,19,246, 248, 265, 268A and 302 read with Entry 41 and 83 of List 1 of VII Schedule of the Constitution of India and also being beyond the legislative competence of Parliament under Articles 246 and 248 of the Constitution of India. For Petitioner in W.P.Nos,141 of 2021, 9118 of 2019, 9120 of 2019 and 400 of 2021 : Mrs.Radhika Chandra Sekhar : Mr.Joseph Prabakar Page No. 2 of 103 For Petitioner in W.P.No.8809 of 2020 For Petitioner in W.P.Nos.12976 of 2021, 12467 of 2021, 13476 of 2021, 19009 of 2019 and 19011 of 2019 : Mr.M.A.Mudimannan For Petitioner in W.P.Nos.15394, 15395 & 15398 of 2021 : Mr.Hari Radhakrishnan For Petitioner in W.P.No.14929 of 2020 : Mr.T.Ramesh For Petitioner in W.P.Nos.2147 to 2151 of 2017 : Mr.P.Giridharan For Petitioner in W.P.Nos.35435 & 35445 of 2019 : Mr.M.N.Bharathi ......... For R1 in W.P.Nos.141 of 2021 and 15394 of 2021 : Mr.S.Diwakar Senior Panel Counsel For R2 to R4 in W.P.No.141 of 202, For R1 and R2 in W.P.No.9120 of 2019, For R1 and R4 in W.P.Nos.12976 of 2021, Page No. 3 of 103 15395 of 2021, 15398 of 2021, For R2 to R4 in W.P.No.15394 of 2021, For Respondents in W.P.Nos.19009 of 2019 & 19011 of 2019, & For R1 to R4 in W.P.No.12467 of 2021 : Mr.V.Sundareswaran Senior Panel Counsel For R1 & R2 in W.P.No.9118 of 2019, For Respondents in W.P.No.13476 of 2021, For R2 to R4 in W.P.No.400 of 2021, & For Respondents in W.P.Nos.2147 to 2151/2017 : Mr.Hema Muralikrishnan Senior Standing Counsel For R1 and R2 in W.P.No.8809 of 2020, For Respondent in W.P.No.14929 of 2020, & For R2 in W.P.Nos.35435 and 35445 of 2019 : Mr.A.P.Srinivas Senior Standing Counsel and Mr.K.S.Ramasamy For R1 in W.P.No.400 of 2021 : Mr.K.Subbu Ranga Bharathi For R1 in W.P.Nos.35435 & 35445 of 2019 : Mr.Venkataswamy Babu Senior Panel Counsel Page No. 4 of 103 C O M M O N O R D E R By this common order, all these 22 cases are being disposed. Broadly, there are 2 categories of Writ Petition. Details of the Writ Petitions are given below:- Category No.1 : S teamer Agents 2. These Writ Petitions have been filed by and on behalf of Steamer Agents. These petitioners have challenged the vires of Notification No.28/12-ST dated 20.6.2012, Notification Nos.1/2017-ST, 02/2017-ST& 03/2017-ST, all dated 12.01.2017 and Section 66C(2) of Chapter V of the Finance Act, 1994 (as amended) as ultra vires provision of the Constitution. They have also challenged the clarification of the Board in Para 4 & 4.1 of the Circular No.206/4/2017 – Service Tax, dated 13.04.2017. 3. Table Nos.1, 2 and 3 below