CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI PRINCIPAL BENCH – COURT NO. III SERVICE TAX APPEAL NO. 50539 OF 2022 [Arising out of Order-in-Appeal No.346(SM)ST/JPR/2021 dated 08.11.2021/09.11.2021 passed by the Commissioner(Appeals) Central Excise and Central GST, Jaipur ]

M/s Mitsui Prime Advanced Composites India Pvt Ltd …Appellant SP2-54-55-56, Complex Industrial Area,Majarkath, Neemrana, Alwar, Rajasthan-301 705 Versus Commissioner(Appeals), Central Excise & CGST, Jaipur …Respondent NCRB, Statue Circle, Jaipur-302 005 APPEARANCE:

Shri Shashank Shekhar, Advocate for the appellant Shri S.K. Meena, Authorised Representative for the respondent CORAM:

HON’BLE MS. BINU TAMTA, MEMBER (JUDICIAL)

HON’BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)

FINAL ORDER NO.50085/2026 Date of Hearing: 16.01.2026 Date of Decision: 20.01.2026 BINU TAMTA:

1. By the impugned order, Order in Appeal No. 346(SM)/ST/JPR/2021 dated, the Commissioner (Appeals) confirmed the liability to pay service tax on ‘Ocean Freight’ under reverse charge along with interest and penalty.

08.11.2021/09.11.2021

2. The appellant is primarily engaged in the manufacture of Polypropylene Compound falling under sub heading 39029000 of the First Schedule to the Central Excise Tariff Act, 1985, CETA. The appellant, in order to carry out its manufacturing processes, imports various goods like Bag Polypropylene, etc. from foreign exporters who are situated in a non-taxable territory. For this purpose, the appellant enters into Cost, Insurance and Freight ('CIF') contracts with the foreign exporters for supply of goods and consequently, the exporter enters into an agreement/contract with the foreign shipper for the transportation of goods. The appellant Company discharges its Basic Custom Duty ('BCD') under the Customs Tariff Act, 1975 read with Customs Act, 1962 for the importation of goods. As a result, the appellant enters into a single contract with the foreign exporter for the import of goods and pays a single consideration to the foreign exporter for the import of goods which is inclusive of the value of insurance and freight. Therefore, no separate consideration/freight amount is charged to the appellant by the foreign exporter/shipping line for shipping of the goods to India.

3. The submission of the learned counsel for the appellant is that the issue of levying service tax on ‘Ocean Freight’ is no longer res integra. Reliance was placed on the decision of the Gujarat High Court in the case of SAL Steel Limited Vs. Union Of India, (2020) 37 GSTL 1, whereby the

taxability of ‘Ocean Freight’ was held ultra vires. The observation of the Gujarat High Court are as follows-

“2.5. the service proposed to be taxed under the impugned provisions is admittedly that of transportation of goods upto the Indian Port i.e., land mass of the country, and this service covering sea transportation of hundreds or thousands of KMs is an event occurring beyond the land mass of the country, and hence in the nature of an extraterritorial event. The provisions of the Finance Act, 1994, which is an Act of the Parliament for levy of service tax, do not permit nor empower the Central Government to collect service tax on such extraterritorial events, and the services which are rendered and consumed beyond the land mass of the country.

28. The charging provision i.e. Section 668 provides for levy of service tax on the value of services provided or agreed to be provided in the taxable territory by one person to another. Section 658(52) defines "taxable territory" to mean the territory to which the provisions of this Chapter apply. As seen above, the provisions of this Chapter ie. Chapter V, apply to the whole of India by virtue of Section 64(1) of the Finance Act, and thus it is the mandate of the Parliament for applying the provisions of Chapter V of the Finance Act for service tax to whole of India, and not to extraterritorial events occurring outside the land mass of India.

29. It is a settled legal p