Karnataka HC Reopens Freight Forwarder’s Tax Case, Says Authority Should Have Sought Proof Of Overseas Place Of Supply

The petitioner, a freight forwarder, challenged an adjudication order dated 13 July 2023 confirming a service-tax demand and a recovery communication dated 27 February 2026.

It contended that it had disputed liability in its reply to the show-cause notice, relying on the place-of-supply provisions and an exemption notification, but that the adjudicating authority had not properly considered those matters.

The petitioner also argued that the proceedings had been initiated on information received from the Central Board of Direct Taxes.

The Court considered Section 66D of the Finance Act, 1994, Rule 10 of the Place of Provision of Services Rules, 2012, and Notification No. 25/2012-ST dated 20 June 2012 as relevant to determining the petitioner’s service-tax liability in light of the place of supply.

It held that the adjudicating authority should examine the place of business and place of supply and, where necessary, call for supporting documents before concluding adjudication on the basis that no documents had been produced.

The Court also referred to M/s Karnataka Chinmaya Seva Trust v. Joint Commissioner of Central Tax, W.P. No. 11154/2023 and connected matters, dated 3 July 2024, as relevant to the question of restoring proceedings with an opportunity to provide an additional response.

The petitioner had raised a specific contention that, as a freight forwarder, it was not liable to pay service tax on transport charges where the place of supply was outside India, and had invoked the statutory provisions and notification relevant to that contention.

The Court found that the first respondent had not examined the place of business or adequately determined whether the petitioner’s reliance on those provisions was justified.

If further material was needed to ascertain the place of supply, the authority ought to have called for it rather than closing the adjudication for want of documents.

These shortcomings, together with the stated origin of the proceedings in information from the CBDT, persuaded the Court to restore the matter for reconsideration.

The adjudication order dated 13 July 2023 was quashed, and the proceedings were restored to the first respondent.

The petitioner was directed to appear before that respondent on 16 November 2026, without further notice, and file an additional response and documents demonstrating that the place of supply was outside India.

The first respondent was directed to consider that material in light of Section 66D, Rule 10, and Notification No. 25/2012-ST.