Bombay High Court Quashes SCN Demanding GST On Ocean Freight On Transportation Of Goods From Outside India

The Bombay High Court has quashed the show cause notice (SCN) demanding GST on ocean freight on transportation of goods from outside India.

The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has relied on the decision of the Supreme Court in the case of Mohit Minerals and observed that the verdict applies to both free on board (FOB) and sum of cost, insurance, and freight (CIF) contracts.

The petitioner/assessee has challenged a show cause notice issued by the Assistant Commissioner of Sales Tax primarily on the ground that it 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.

The court found 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.

“The Court, on such facts, declared the revenue's decision ultra vires of the IGST Act. Once the notification itself has been declared as ultra vires and the same has been upheld by the Supreme Court, in our opinion, following the mandate of the settled principle of law as laid down in M/s. Kusum Ingots & Alloys Ltd vs. Union of India and Anr., the notification is not available to the state authorities to be applied as it would amount to applying an illegal notification,” the court said while rendering the show cause notice without jurisdiction.

Counsel For Petitioner: J. K. Mittal

Counsel For Respondent: S. D. Vyas

Case Title: M/s. Agarwal Coal Corporation Pvt. Ltd. Versus Assist. Commissioner of State Tax.

Case No.: Writ Petition No. 15227 Of 2023

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