Bombay HC Rejects GST Demand Notice on Ocean Freight for Goods’ Transportation Outside India

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

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

The applicant has contested an SCN that the Assistant Commissioner of Sales Tax issued on the foundation that it has been issued without jurisdiction.

The petitioner’s contention is to the effect that what has been aimed to be invoked by the Designated Officer is Notification No. 8/2017-Integrated Tax (Rate) on June 28, 2017, in issuing the SCN, 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 High Court of Gujarat carried a decision in appeal before the Supreme Court in the matter of “Union of India vs. Mohit Minerals Pvt. Ltd.“, wherein a three-judge bench of the Supreme Court has kept the decision.

In Mohit Minerals, the applicant’s case before the High Court of Gujarat was a case in which the applicant was importing coal from diverse countries based on FOB and CIF. The High Court’s decision of Gujarat has been kept by the Supreme Court.

The department argues that the Mohit Minerals-related decision is required to be applicable concerning the matters that comprise the contracts on a CIF basis rather than FOB contracts.

The court discovered the department’s argument was not perfect in as much as the matter in Mohit Minerals before the High Court of Gujarat was a case that consists of both categories of contract, CIF and FOB, which was reported 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 expressed while generating the show cause notice without jurisdiction.

Case Title	M/s. Agarwal Coal Corporation Pvt. Ltd. Versus Assist. Commissioner of State Tax
Citation	Writ Petition No. 15227 Of 2023
Date	05.03.2024
Petitioner:	Mr J. K. Mittal with Aman Mishra i/b. UBR Legal
Counsel For Respondent	Ms. S. D. Vyas, Addl. Govt. Pleader with Ms P. N. Diwan, AGP for the State
Bombay High Court	Read Order