The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), in the case M/s Universal Industries Versus Commissioner, CGST- Dehradun observed and has held that the service tax demand is not sustainable as the appellant has purchased fertilisers and which are their inputs, at cost, insurance, and freight (CIF) value, including the ocean freight element.
The Single bench of Judicial Member, Anil Choudhary stated that the custom duty has been paid by the appellant on CIF value, including ocean freight. No demand can be there for service tax on the purchase price of goods and even under that of the reverse charge mechanism.
In the present case, the appellant/assessee is a manufacturer of zinc sulphate and is also a trader of calcium nitrate and the assessee imported fertilisers via a Bill of Entry. IGST has been paid by the appellant at the time of import, on ocean freight along with customs duty.
The appellant has been issued a show cause notice by the Assistant Commissioner, CGST Audit, Circle Kashipur, wherein demanding the service tax of Rs. 91,110 alleging to be short-paid on the services viz. ocean freight services as paid by the appellant.
Further, it was alleged that the Exemption Notification No. 25/2012-ST vide order dated June 20, 2012 was amended vide Notification No. 1/2017-ST dated 12.01.2017 and a proviso that is inserted in entry no. 34. Thus, the exemption of same is being provided to the services of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India (Ocean Freight) was being withdrawn. The importer was designated as the person who is responsible for paying service tax on a reverse charge basis with effect from April 23, 2017.
Vide Notification No. 14/2017-ST vide order dated 13.04.2017, a new Rule 8B has been inserted into the Point of Taxation Rules, 2011 and the point of taxation in respect of the services was being made to be the date of the Bill of Lading of such goods which is loaded into the vessel at the port of export.
IGST has been paid by the appellant on ocean freight and is demanding service tax on the ocean freight under the Reverse Charge Mechanism, alleging that the Bills of Entry had been filed on May 5, 2017 and June, 14, 2016 (during the service tax regime). However, the demand was confirmed to be Rs. 91,110 along with penalty and interest under Section 78. An appeal has been preferred by the appellant before the Commissioner (appeals), whose vide order in the appeal had been pleased for dismissing the appeal.
It has been argued by the appellant that the appellant has paid custom duty on CIF value which includes ocean freight element. Thus, no demand can be there for service tax on the purchase price of goods and even under that of the reverse charge mechanism.
It was also found by the tribunal that the show cause notice issued is also based on wrong facts as the date of filing of two Bills of Entry on July 6, 2017 and July 14, 2017, wrongly alleging that these had been filed on May and June 2017.
The CESTAT bench observed that the show cause is also erroneous on this score and in view of the court finding and observations, the appeal is allowed by the court and has set aside the impugned order. Further, the court stated that the appellant shall be entitled to consequential benefits in accordance with the provision of law.
Accordingly, the bench allowed the appeal.
