2024 (3) TMI 1265 - HC - GST

Jurisdiction to issue SCN - Ocean Freight - contention of the petitioner is to the effect that, what has been sought to be invoked by the Designated Officer is the Notification No. 8/2017-Integrated Tax (Rate) dated 28/6/2017 in issuing the show cause notice which itself has been struck down by the Division Bench of Gujarat High Court in the case MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA 1 OTHER 2020 (1) TMI 974 - GUJARAT HIGH COURT - HELD THAT - 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 FOB (Free on Board) and CIF (sum of Cost, Insurance and Freight) basis, as clearly set out in paragraph 15 of the said decision. This Court had an occasion to consider a similar case in Liberty Oil Mills Vs. Union of India 2023 (2) TMI 177 - BOMBAY HIGH COURT , where a challenge akin to the challenge in the present proceedings, was made to the show cause notice dated 31 March 2019 calling upon the petitioner to show cause as to why Integrated Goods and Service Tax may not be recovered under Section 74(1) of the Central Goods and Services Act, 2017 (for short CGST Act ) alongwith interest and penalty on the ocean trade service. This Court following the decision of the High Court of Gujarat in Mohit Minerals (supra) as also the decision of the Supreme Court in Union of India Vs. Mohit Minerals Pvt. Ltd. 2020 (1) TMI 974 - GUJARAT HIGH COURT allowed the petitioner s proceedings, setting aside the show cause notice. The present petition also needs to be allowed considering the decision in the case of Mohit Minerals. Also, a submission being made on behalf of the respondent is noted namely that the decision in Mohit Minerals needs to be applied only in respect of the cases which involve the contracts on CIF basis and not FOB contracts. It is submitted that in the present case the show cause notice has been issued referring to Notification No. 8/2017-Integrated Tax (Rate) dated 28-6-2017 as the contract was a FOB contract. It is found that such argument is totally untenable inasmuch as the case in Mohit Minerals before the High Court of Gujarat, was a case which involved both categories of contract namely CIF and FOB, which was noted in paragraph 57 of the judgment of the High Court of Gujarat. Petition allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assistant Commissioner of Sales Tax in issuing the show cause notice.
2. Validity of Notification No. 8/2017-Integrated Tax (Rate) and Entry 10 of Notification No. 10/2017-Integrated Tax (Rate).
3. Applicability of the Supreme Court's decision in Union of India vs. Mohit Minerals Pvt. Ltd. to the present case.
4. Distinction between CIF and FOB contracts concerning the impugned notifications.

Summary:

The petitioner challenged a show cause notice dated 26 September 2023 issued by the Assistant Commissioner of Sales Tax, arguing it was issued without jurisdiction. The petitioner contended that the notification invoked was already struck down by the Gujarat High Court in Mohit Minerals Pvt. Ltd. vs. Union of India, which was upheld by the Supreme Court.

The Gujarat High Court had declared Notification No. 8/2017-Integrated Tax (Rate) and Entry 10 of Notification No. 10/2017-Integrated Tax (Rate) as ultra vires the Integrated Goods and Services Tax Act, 2017, and unconstitutional. The Supreme Court upheld this decision, concluding that a tax on the supply of a service already included as a tax on the composite supply of goods cannot be allowed.

The petitioner's case was similar to the one in Mohit Minerals, involving both CIF and FOB contracts. The Delhi High Court and the Madhya Pradesh High Court had also quashed the same notifications in related cases involving the petitioner's group companies, following the Supreme Court's decision.

This Court, in Liberty Oil Mills vs. Union of India, had previously set aside a similar show cause notice, relying on the Mohit Minerals decision. The Court found no purpose in further proceedings if the issue was already settled by the Supreme Court.

The respondent argued that the Mohit Minerals decision should apply only to CIF contracts, not FOB contracts. However, the Court rejected this argument, noting that the Mohit Minerals case involved both CIF and FOB contracts, and the notifications were declared ultra vires for both.

Therefore, the Court allowed the petition, quashed the show cause notice, and permitted the petitioner to seek a refund of the tax paid under protest, with interest at 7% per annum.