Facts of the Case:

In this case, the petitioner was subjected to adjudication proceedings under Section 74 alleging non-payment of IGST on ocean freight under the reverse charge mechanism in respect of goods imported on CIF (Cost, Insurance and Freight) basis for the period July 2017 to March 2018. A show cause notice was issued to the petitioner, alleging failure to discharge IGST on ocean freight. The petitioner contended that no IGST was payable on ocean freight in view of the judgment of the Gujarat High Court in Mohit Minerals (P.) Ltd. v. Union of India. Subsequently, a second notice dated 13 July 2022 was issued, which was also replied to by the petitioner on 8 August 2022, reiterating the same legal position. During the pendency of adjudication, the Supreme Court in Union of India v. Mohit Minerals (P.) Ltd. (2022) conclusively held that IGST on ocean freight under RCM in CIF contracts was not leviable, being violative of the concept of composite supply under the GST regime.

The petitioner was granted a personal hearing on 26 September 2024, after which written submissions dated 7 October 2024 were filed, specifically relying on the Supreme Court judgment. Despite the same, the Proper Officer passed an order on the reasoning that the Supreme Court judgment did not clarify whether it applied retrospectively and that Notification No. 10/2017-IGST was amended only with effect from 1 October 2023.

Issue:

Whether IGST on ocean freight for imported goods under CIF contracts can be demanded for the period prior to 1 October 2023, despite the Supreme Court’s judgment in Mohit Minerals (P.) Ltd., on the ground that the amendment deleting Entry 10 of Notification No. 10/2017-IGST was prospective in nature.

Held that:

The Court observed that the issue relating to levy of IGST on ocean freight under reverse charge mechanism in respect of CIF imports stood conclusively settled by the judgment of the Supreme Court in Union of India v. Mohit Minerals (P) Ltd., wherein it was categorically held that such levy was contrary to the concept of composite supply under Sections 2(30) and 8 of the CGST Act and therefore invalid. The Court rejected the reasoning of the Proper Officer that the Supreme Court judgment could be applied only prospectively on the ground that it did not expressly state its retrospective effect. Reiterating settled principles of law, the Court held that a declaration of law by a constitutional court operates retrospectively unless specifically made prospective, whereas statutory amendments ordinarily operate prospectively unless otherwise provided.

Consequently, the Proper Officer was in error in holding that IGST on ocean freight was payable for the period July 2017 to March 2018 merely because Notification No. 10/2017 was amended by deleting Entry 10 with effect from 1 October 2023.

The Court further held that reliance on the amendment to Notification No. 10/2017 was wholly misplaced, as a notification issued under delegated legislative power cannot override or dilute the statutory provisions as interpreted by the Supreme Court. The Supreme Court had already clarified that the said notification was only clarificatory in nature and did not create or validate any levy contrary to the IGST Act. In view of the binding effect of the judgment in Mohit Minerals (P) Ltd., the levy imposed on the petitioner was without jurisdiction.

Accordingly, the order-in-original dated 30 January 2025 and the consequential rectification order dated 25 March 2025 were set aside.

Case Name: Sunrise Timply Company Pvt. Ltd. Versus Union of India & Ors. dated 19.01.2026

To read the complete judgement 2026 Taxo.online 128