23.04.2024: SCN Demanding GST On Ocean Freight On Transportation Of Goods From Outside India set aside : Bombay High Court

The Bombay High Court in the case of M/S. AGARWAL COAL CORPORATION PVT. LTD. VERSUS THE ASSIST. COMMISSIONER OF STATE TAX. vide WRIT PETITION NO. 15227 OF 2023 dated 05.03.2024has held that has quashed the show cause notice (SCN) demanding GST on ocean freight on transportation of goods from outside India.

Facts of the case: – In this case, the petitioner filed the petition against SCN concerning FOB Contract by the Revenue Department on the ground that, the Impugned SCN has been issued without jurisdiction. The contention of the petitioner is to the effect that what has been sought to be invoked by the Designated Officer is Notification No. 8/2017-Integrated Tax (Rate) dated June 28, 2017, in issuing the show cause notice, which itself has been struck down by the Division Bench of the Gujarat High Court in the case Mohit Minerals Pvt. Ltd. vs. . Union of India. The decision of the High Court of Gujarat was carried in appeal before the Supreme Court in the case “Union of India vs. . Mohit Minerals Pvt. Ltd.”, wherein a three-judge bench of the Supreme Court has upheld the decision.

In Mohit Minerals, the petitioner's case before the High Court of Gujarat was a case where the petitioner was importing coal from various countries on a FOB and CIF basis. The decision of the High Court of Gujarat has been upheld by the Supreme Court.

The department contended that the decision in Mohit Minerals needs to be applied only in respect of cases that involve contracts on a CIF basis and not FOB contracts.

Held That – The Court found that the argument of the department totally untenable in as much as the case in Mohit Minerals before the High Court of Gujarat was a case that involved both categories of contract, namely CIF and FOB, which was noted in the judgment of the High Court of Gujarat.

Also, reliance placed upon Bombay High Court judgment in the case of Liberty Oil Mills v. Union of India, wherein SCN was set aside by placing reliance upon the Notification, for non-payment of IGST on Ocean Trade Services. It was held that SCN should not have been issued for payment of IGST on reverse charge basis concerning the FOB contract-related services as the Notification, which includes payment of IGST on reverse charge basis on services concerning CIF and FOB Contract, has been held as ultra vires.

Relying upon the judgement of the Hon’ble Supreme Court in the case of M/s. Kusum Ignots & Alloys Ltd. v. Union of India and Anr. the Notification, being ultra vires, is not available with the State authorities and the application of Notification for issuance of Impugned SCN would be illegal in nature.

Directed the respondent that the Petitioner is entitled to refund of the tax amount deposited under protest along with interest after the filing of refund application by the Petitioner.

To read the complete judgment 2024 Taxo.online 561

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