Custom, Excise & Service Tax Tribunal
Dynamic Cables Pvt Ltd vs Principal Commissioner Of Cgst And ... on 24 September, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH,
COURT NO. IV
SERVICE TAX APPEAL NO. 50736 OF 2021
[Arising out of the Order-in-Appeal No. 137 (SM)/ST/JPR/2021 dated
18/03/2021 passed by Commissioner (Appeals), Central Excise & CGST, Jaipur
- 302 005. ]
M/s Dynamic Cables Pvt. Ltd., ......Appellant
Unit - III, H-581A to H-592A, Road No. 6, VKI Area,
Jaipur (Raj.) - 302 013.
Versus
The Commissioner, CGST, ....Respondent
NCR Building, Statue Circle, C scheme, Jaipur - 302 005 (Rajasthan).
APPEARANCE:
Shri R.G. Choudhary, Consultant - for the appellant. Ms. Jaya Kumari, Authorized Representative for the Department CORAM:
HON'BLE DR. MS. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE SHRI P.V. SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER NO. 51354/2025 DATE OF HEARING : 20.08.2025.
DATE OF DECISION: 24.09.2025.
RACHNA GUPTA M/s Dynamic Cables Ltd., the appellant herein are engaged in manufacturing of XLPE/PUC insulated cables and ACR conductors and they are also registered with service tax department for payment of service tax as recipient of services. During the audit of the appellant's record for period from March 2016 to June 2017, department observed that the appellants
2 ST/50736 OF 2021 imported two consignments of aluminium wire rod under two Bills of Entry i.e. 9909971 dated 31.05.2017 and 2249034 dated 27.06.2017. However, they have not paid service tax on ocean freight under reverse charge mechanism amounting to Rs. 8,48,967/-, which was levied w.e.f. 23.04.2017. Relying upon the Circular No. 206/4/2017 dated 13.04.2017, Notification No. 14/2017, 15/2017 and 16/2017 all dated 13.04.2017, a show cause notice No. 73/2017-18 dated 05.02.2019 was served upon the appellant proposing the recovery of aforesaid amount of service tax (Rs. 8,48,967/- along with proportionate interest and the appropriate penalties). The proposal was initially confirmed vide order-in-original No. 161/2019-20 dated 17.09.2019. Appeal against the said order has been allowed by way of remand vide Order-in-Appeal bearing No. 137/2021 dated 18.03.2021 the directions to pass the speaking order, afresh. However, appellant is held liable to pay service tax @ 1.5% of CIF value of the consignment. Being aggrieved, the appellant is before this Tribunal.
2. We have heard Shri R.G. Choudhary, learned Consultant and Ms. Jaya Kumari, learned authorized representative for the Revenue.
3. Learned counsel for the appellant submitted that the issue of service tax liability under reverse charge mechanism in case of CIF imports on ocean charges now stands settled in favour of the assessee in the case Commissioner of Service Tax versus Kiri 3 ST/50736 OF 2021 Dyes & Chemicals Ltd.1 The order under challenge is prayed to be set aside on that ground itself.
4. Learned departmental representative has acknowledged the said decision, however, has reiterated the findings in the order under challenge.
5. We have perused the aforesaid decision. The relevant portion of this order is reproduced below :-
(1) Since service tax on Ocean Freight has been demanded that too in respect of the CIF contracts, it is necessary to consider what is "ocean freight", what is "CIF", and how the CIF is different from the FOB contracts.
In the international trade, the goods are bought and sold by way of two different modes/methods, namely, the CIF contract and FOB contract. Therefore, we must give a fair idea about both these modes/methods. FOB (i.e. Free on Board) is a contract of sale between the foreign supplier and the local importer, where the importer would engage the vessel/ship owner or operator for importing goods into India. In the FOB contract, the service of transportation of goods by ship or vessel is received by the importer in India, whereas such service is rendered by the owner/operator of the foreign going vessel.
1. (2023) 10 Centax 135 (S.C.) 4 ST/50736 OF 2021 In the case of CIF contract, the overseas supplier would engage the vessel owner/operator for the transportation of goods to India. The hiring of the vessel/ship and also payment of the transportation charges i.e. ocean freight of such vessel owner/operator are made by the overseas supplier in the CIF contract. The service of transportation of goods by vessel is thus received by the overseas supplier from the foreign going vessel owner/operator in the CIF contract.
Thus, the basic difference between the FOB and CIF contract is that the service of transportation of goods by vessel/ship is received by the importer in the FOB contract, whereas such service is received by the overseas supplier in case of CIF contract. The transportation charges for transporting goods by vessel or ship are colloquially known or called "ocean freight", and such ocean freight is paid by the local importer in case of FOB contract whereas ocean freight is paid by the overseas supplier in case of CIF contract. We draw our support from the transportation charges for transportation of goods by a vessel or a ship are known as ocean freight (2) from page 3 of this decision of the Supreme Court in the case of Phulchand Exports Ltd. versus O.O.O. Patriot, (2011) 10 SCC 300, wherein the Supreme Court has explained what is 5 ST/50736 OF 2021 CIF and what are the obligations upon a seller under a CIF contract.
(2) The Parliament had put service of transportation of goods by an aircraft or a vessel in Negative List under Section 66D of the Finance Act, 1994 as amended on 1- 7-2012.
However, the Central Government has issued a Notification No. 25/2012-S.T., dated 20-6-2012, popularly known as the Mega Exemption Notification; and at Sl. No. 34 of this mega exemption Notification, services received from a provider of service located in a non-taxable territory by a person located in a non- taxable territory was fully exempt. Since the overseas seller/supplier of the goods when the goods were exported to India was located in a non-taxable territory and the vessel owner/operator who actually transported the goods to India was also located in a non-taxable territory, ocean freight in case of CIF contracts still continued to be exempt from collection of service tax even after 1-6-2016 by virtue of Sl. No. 34 of the above referred Notification.
Under Rule 2(1)(d) of the Service Tax Rules, the expression "person liable for paying service tax" has been defined. By virtue of Notification No. 2/2017-S.T., dated 12-1-2017, the Central Government has inserted Clause (EEC) under Rule 2(1)(d) thereby laying down 6 ST/50736 OF 2021 that the person in India who complied with Section 29, 30 or 38 read with Section 148 of the Customs Act, 1962 with respect to goods transported by a vessel from a place outside India upto the Custom Station of clearance in India was the person liable to pay service tax on such services.
By virtue of which the persons in charge of the vessel was deemed to be the person liable to pay service tax in situation covered under the said clause. Ordinarily, the shipping agent of the vessel owner is the person responsible for filing IGM and therefore, by virtue of the above referred provision of Rule 2(l)(d)(EEC), shipping agent of the vessel owner was the person liable to pay service tax on ocean freight. However this provision is held ultra vire of section 64, 66B, 67 and 94 of the Finance Act, 1994 and has been struck down by Hon'ble Supreme court in the case titled as Commissioner of Service Tax versus Kiri dyes and Chemicals Ltd. reported as (2023) 10 Centax 35 (S.C.). (3) 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 7 ST/50736 OF 2021 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.
"Ocean freight" is the colloquial expression; but the service for which service tax is proposed to be collected under the impugned provisions is described as the "transportation of goods by a vessel from a place outside India upto the Customs station of clearance in India....." in all the impugned provisions under Rule 2(1)(d)(EEC) of Service Tax Rules, Rule 6(7CA) of Service Tax Rules and also in Explanation V of reverse charge Notification No. 30/2012-S.T. The service for which tax is proposed to be collected under the impugned provisions is thus admittedly rendered and consumed outside the country, because the service is that of transportation of goods by a vessel from a place outside India upto the Customs station of clearance in India, which is outside the scope of Notification No. 30.2012-ST. Thus, it is held that no service tax was
8 ST/50736 OF 2021 payable on ocean freight under reverse charge in case of CIF Contracts. We rely upon Kiri Dyes (supra), hence, the order under challenge is hereby set aside. Consequently, the appeal is allowed.
6. In light thereof, no differentiating fact in the present case and the present order under challenge being contrary thereto, we hereby set aside the impugned order-in-appeal dated 18.03.2021. Consequent thereto the present appeal is hereby allowed.
(Order pronounced in open court on 24/09/2025.) (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (P.V. SUBBA RAO) MEMBER (TECHNICAL) PK