2023 (9) TMI 275 - HC - GST

Levy of IGST on Ocean Freight - reverse charge mechanism - transportation of goods by a vessel from outside India upto an Indian port where both the service provider and the service recipient are outside India - whether the person who files the import manifest, are liable in the present circumstance? HELD THAT - Perusal of the show- cause notice would indicate that reliance has been placed on the Notifications No. 8/2017 and 10/2017 dated 28.06.2017 indicating that a person liable to pay IGST on ocean freight appears to be the person who has been the importer of the impugned goods in terms of entry made at Sr. No. 10 appended to the notification no. 10/2017. Essentially therefore the show-cause notice draws power from the Notifications No. 8/2017 and 10/2017. Perusal of the judgement of the Apex Court in the case of Mohit Minerals Pvt. Ltd. 2022 (5) TMI 968 - SUPREME COURT would indicate that the Division Bench of this court held that the impugned notifications are unconstitutional for exceeding the powers conferred by the IGST Act and the CGST Act - The Hon ble Apex Court in agreement with the decision of this Court held that to the extent that a tax on the supply of a service which has already been included by the legislation as a tax on the composite supply of goods cannot be allowed. The show-cause notice impugned in the petition dated 16.02.2023 is without jurisdiction and the same is therefore quashed and set aside - Petition allowed.

Summary

Issues involved:
The issue involves a petition under Article 226 of the Constitution of India seeking a writ of prohibition against a show-cause notice related to the payment of IGST on ocean freight for imported goods during specific financial years.

Judgment Summary:

Issue 1: Jurisdiction of the show-cause notice
The petitioner, engaged in manufacturing and outward supply of goods, received a show-cause notice alleging short payment of IGST on ocean freight for imported goods. The notice relied on Notifications No. 8/2017 and 10/2017. The petitioner argued that the notice was not maintainable due to a previous decision by the Hon'ble Apex Court. The respondent contended that the petition should be dismissed as the Gujarat High Court's judgment had been reversed by the Apex Court.

Issue 2: Validity of Notifications and Constitutional Aspect
The Apex Court held that the impugned notifications were unconstitutional as they imposed double taxation through delegated legislation, contrary to the IGST Act and CGST Act. The Court emphasized that a tax on the supply of a service already included in a tax on the composite supply of goods is impermissible. The Court concluded that the show-cause notice lacked jurisdiction and quashed it, allowing the petition.

Separate Judgment:
The Hon'ble Apex Court's decision highlighted the non-binding nature of GST Council recommendations on the Union and States, emphasizing the collaborative dialogue and equal legislative power between the Union and States regarding GST. The judgment clarified the import of goods under CIF contracts as an inter-state supply subject to IGST. It also addressed the reverse charge mechanism, specifying the recipient for taxation purposes. The Court concluded that the levy on the service aspect of the transaction violated the principle of composite supply under the CGST Act.