Calcutta HC Rejects Tax Demand Order As Ocean Freight Out from GST Ambit

A service tax demand for Rs. 28 crores was released by a single bench of the Calcutta High Court after learning that GST can’t be imposed on ocean freight.

The operator of multimodal transportation, M/s. LCL Logistics India Pvt. Ltd., filed the petition. On ocean freight charges collected from exporters, with the interest and penalties under business support service, a claim for service tax totalling more than Rs. 28 crores was made.

A writ petition was submitted. Given the alternative procedure of filing an appeal with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), the single bench court denied the writ petition saying that pre-deposit cannot be a justification for considering a writ case.

Read also: Easy to Learn Ocean Freight Taxability Under GST Law with Impact

The appellant/writ petitioner filed an intra-court appeal in which he or she challenged the order passed by Commissioner, Service Tax (ii) of the Commissioner of Kolkata’s decision to tax the relevant transaction.

In the Supreme Court’s ruling in the matter of Union of India & Ors v. Mohit Minerals Pvt. Ltd., the bench of Justice TS Sivagnanam relied on the decision, where the conclusion was made that “inter-state supply is defined for the purposes of the charging under the aegis of Section 5(1) of the Integrated Goods and Services Tax Act, 2017 and it was held that only the Union Government has the power to specify categories of supply of goods or services or both where the tax shall be paid on a Reverse Charge Mechanism.”

The fundamental provision is appropriate to determine certain things, including whether the tax-liable event is a service provided by a person who is not in the tax-liable region, the transportation of goods by ship or from a location outside India to the customs station of clearance in India, or both. The order confirming the service tax requirement was kept aside by the court. The High Court followed the Supreme Court’s ruling in the Mohit Minerals case, declaring that no Goods and Services Tax (GST) should be levied on ocean freight.