[Cites 36, Cited by 0]
Karnataka High Court
Mangalore Steamer Agents Association vs Union Of India on 28 November, 2025
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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WP No. 32835 of 2017
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 32835 OF 2017 (T-RES)
BETWEEN:
MANGALORE STEAMER AGENTS ASSOCIATION
HAVING ITS OFFICE AT 2ND FLOOR
WEST GATE TERMINUS , HIGHLAND
MANGALORE - 575 002
THROUGH ITS AUTHORIZED SIGNATORY
MR PRAVEEN KUMAR BANGERA
...PETITIONER
(BY SRI. BHARAT B. RAICHANDAI, ADVOCATE
FOR SRI. ASIM MALIK, ADVOCATE)
AND:
1. UNION OF INDIA
THROUGH THE SECRETARY
Digitally signed MINISTRY OF FINANCE
by DEPARTMENT OF REVENUE
SHARADAVANI
B NORTH BLOCK,
Location: HIGH NEW DELHI - 110 001
COURT OF
KARNATAKA 2. THE CENTRAL BOARD OF EXCISE AND CUSTOMS
(CBEC)
DEPARTMENT OF REVENUE
MINISTRY OF FINANCE
NORTH BLOCK,
NEW DELHI - 110 001
3. THE COMMISSIONER OF CENTRAL EXCISE
& SERVICE TAX, MANGALORE
HEADQUARTERS, TRADE CENTRE
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BUNTS HOSTEL ROAD
MANGALURU - 575 003
...RESPONDENTS
(BY SRI. JEEVAN J. NEERALAGI, ADVOCATE)
***
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING 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 AS ALSO BEING BEYOND THE
LEGISLATIVE COMPETENCE OF PARLIAMENT UNDER ARTICLES
246 AND 248 OF THE CONSTITUTION OF INDIA, ETC.
THIS WRIT PETITION, COMING ON FOR ORDERS, THIS
DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioner seeks the following reliefs:
" a. Issue any writ, order or direction more particularly in the
nature 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 I of VII Schedule of
the Constitution of India and as also being beyond the
legislative competence of Parliament under Articles 246 and
248 of the Constitution of India and pass such further or
other orders as this Hon'ble Court may deem fit and
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necessary in the facts and circumstance of the case and
thus render justice;
b. Issue any writ, order or direction more particularly in the
nature of a Writ of Declaration to declare Rule 10 of
Notification No. 28 of 2012-ST dated 20.06.2012, (The
Place of Provisions of Service Rules, 2012), 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 as also being beyond the
legislative competence of Parliament under Articles 246 and
248 of the Constitution of India and pass such further or
other orders as this Hon'ble Court may deem fit and
necessary in the facts and circumstance of the case and
thus render justice.
c. Issue any writ, order or direction more particularly in the
nature of a Writ of Declaration to declare Notification No. 1
of 2017 dated 12.01.2017 vide F. No. 354/42/2016-TRU
issued by the 1" Respondent, published in the Gazette of
India, Extraordinary, Part II, Section 3, Sub-Section (1), as
per Annexure - A, as ultra vires Article 14, 19, 265, 268A
and 302 read with Entry 41 and 83 of List 1 of VII Schedule
of the Constitution of India and pass such further or other
orders as this Hon'ble Court may deem fit and necessary in
the facts and circumstance of the case and thus render
justice;
d. Issue any writ, order or direction more particularly in the
nature of a Writ of Declaration to declare Notification No. 2
of 2017 dated 12.01.2017 vide F No. 354/42/2016-TRU
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issued by the 1 Respondent, published in the Gazette of
India, Extraordinary, Part II, Section 3. Sub-Section (i), as
per Annexure - A as ultra vires Article 14, 19, 265, 268A
and 302 read with Entry 41 and 83 of List 1 of VII Schedule
of the Constitution of India and contrary to Section 14 of the
Customs Act, 1962 read with the provisions of Rule 10(2) of
the Customs Valuation (Determination of Price of Imported
Goods) Rules, 2007 and pass such further or other orders
as this Hon'ble Court may deem fit and necessary in the
facts and circumstance of the case and thus render justice;
e Issue any writ, order or direction more particularly in the
nature of a Writ of Declaration to declare Notification No. 3
of 2017 dated 12.01.2017 vide F. No. 354/42/2016-TRU
issued by the 1st Respondent, published in the Gazette of
India, Extraordinary, Part II, Section 3. Sub-Section (i), as
per Annexure A2 as ultra Vires Article 14, 19, 265, 2684
and 302 read with Entry 41 and 83 of List I of VII Schedule
of the Constitution of India and contrary to Section 14 of the
Customs Act. 1962 read with the provisions of Rule 10(2) of
the Customs Valuation (Determination of Price of Imported
Goods) Rules, 2007 and pass such further or other orders
as this Hon'ble Court may deem fit and necessary in the
facts and circumstance of the case and thus render justice;
f. Issue any writ, order or direction more particularly in the
nature of a Writ of Declaration to declare Notification No.
15/2017-Service Tax dated 13.04.2017 issued by the 1st
Respondent, published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-Section (i), as per
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Annexure A3, as applicable on and from 22nd January,
2017 and pass such further or other orders as this Hon'ble
Court may deem fit and necessary in the facts and
circumstance of the case and thus render justice;
g. Issue a Writ of Certiorari or a writ in the nature of
Certiorari or any other writ, order or direction under Article
226 of the Constitution of India quashing the impugned
circular No 206/4/2017 Service tax dated 13.04.2017, as
per Annexure A4 issued from File No. 354/42/2016-TRU
issued by 2nd Respondent, more particularly Para 4 and
Para 4.1 thereof.
h. Pass such other order or orders as this Ho 'ble Court
deems fit in the facts and circumstances of the case, in the
interest of justice and equity."
2. The issue in controversy involved in the present petition is
directly and squarely covered by the judgment of the Madras High
Court in the case of The Chennai and Ennore Ports Steamer
Agents Association Vs. Union of India and others, dated
28.03.2023, rendered in Writ Petition Nos.2147-2151/2017 and
connected matters. The relevant portion of the said judgment
reads as hereunder:
"130. We therefore hold that service tax cannot be
demanded from these petitioners as neither the "steamer
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agents" nor the "importers" in India are the recipient of
service. They are not liable to pay tax.
131. The 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.
132. The, 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.
133. Along 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".
134. Thus, 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.
135. The 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
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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.
136. Although, 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:-
Table No.15
Percentage of Percentage of
service tax service tax
Sl.No. payable by the payable by the
Description of a service
person person receiving
receiving the the service
service
in respect of services
provided or agreed to be
provided by way of
12 transportation of goods by a Nil 100%
vessel from a place outside
India up to the customs
station of clearance in India
137. Sl.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.
138. As 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
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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 Notification No.15/2017 ST
dated 12.01.2017 dated 13.4.2017
The person in India who The importer as defined
complies with Sections 29, under clause (26) of
30 or 38 read with Section Section 2 of the Customs
148 of the Customs Act, Act, 1962 (52 of 1962) of
1962 (52 of 1962) with such goods.
respect to such goods.
139. There 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
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.
140. The 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.
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141. We 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.
142. Further, 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.
143. Although 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 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.
144. Thus, 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.
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145. While 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
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.
146. The 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.
147. In 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:-
"22. In 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 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.
......
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30. All 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.
31. A 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.
32. In 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 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
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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.
33. The impugned provisions are also
ultra vires the Rule making power of Section 94
of the Finance Act.
34. As 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.
.....
38. But the importers in CIF contracts i.e.
the 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.
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39. Therefore, 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.
40. First, 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 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. ..
43. When 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
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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:
44. Even 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 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.
46. In 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.
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47. There 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 the
value of such service.
48. Therefore, Rule 6(7CA) amended by
the Central Government is also ultra vires
Section 67 and Section 94 of the Finance Act."
148. For 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.
149. In 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.
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150. To implement the consequences 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,
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.
151. Category 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.
152. Impugned 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 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.
153. Para 4 and 4.1 of Circular No. 206/4/2017-ST
dated 12.4.2017 read as under:-
Table No.17
4. It is pertinent to point out here that under notification No.
26/2012-1 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
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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 accordingly.
154. Notification 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
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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 Percentage Conditions
service
(1) (2) (3) (4)
Transport of Same as
10 goods in a vessel
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.
155. Though, 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. 123. If 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.
156. Further, 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
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that they have not been given abatement under Notification
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.
157. The 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.
158. Therefore, 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.
159. There 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.
160. As 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.).
161. In 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-
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ST in Writ Petitions in Table No.2 and Table.No.3
respectively fails.
162. Challenge to Notification No.01/2017-ST dated
12.01.2017 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. 131. In 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.
163. As 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.
164. In 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
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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 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.).
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165. These Writ Petitions stand disposed of with the
above observations. No costs. Consequently, connected
Miscellaneous Petitions are closed."
3. Accordingly, I pass the following:
ORDER
(i) Writ Petition is allowed and disposed of
in terms of the judgment of the Madras High Court
in the case of The Chennai and Ennore Ports
Steamer Agents Association Vs. Union of India
and others, dated 28.03.2023 in Writ Petition
Nos.2147-2151/2017 and connected matters.
Sd/-
(S.R.KRISHNA KUMAR)
JUDGE
BMV*
CT-SG
