Roving Judgements!

[Raghav Rathi]

Judgement passed by the Hon’ble Supreme Court of India in the case of UNION OF INDIA & ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [2022 (5) TMI 968 - SUPREME COURT] is one of the landmark judgements on the landscape of Goods and Services Tax era.

With the aforesaid judgement, the dispute as to leviability of tax under reverse charge over freight on a deemed amount in CIF contracts was put to rest. However, no explicit observation was rendered over the fate of liability in case of imports on FOB basis, wherein the freight is to be paid by importer. On a careful reading of judgement, it can be comprehended that in the judgement SC was more inclined over discussing the tax liability in the case of CIF contracts. In para 5 of the judgement, it has restricted its discussion by marking:

“5……. The respondent does not dispute the liability of integrated tax on supply of service of transportation when it imports goods on an FOB basis.”

By holding apropos, the court has limited the scope of its judgement to CIF contracts. Frankly speaking, most of the tax experts and professionals have interpreted the said judgements of providing relief limited to the tax liability on CIF contracts as the same being composite supply. The integrated tax is still required to be paid on transportation charges borne on imports made on FOB basis. The issue seem to be settled.

However,  Hon’ble High Court of Delhi [SWISS SINGAPORE INDIA PRIVATE LIMITED, AGARWAL COAL CORPORATION PRIVATE LIMITED, SARAOGI UDYOG PRIVATE LIMITED, NARENDRA PLASTIC PRIVATE LIMITED VERSUS UNION OF INDIA & ANR. - 2022 (8) TMI 1501 - DELHI HIGH COURT], High Court of Madhya Pradesh [M/S AGARWAL FUEL CORPORATION PRIVATE LIMLITED VERSUS UNION OF INDIA, SECRETARY GOODS AND SERVICES TAX COUNCIL OFFICE OF THE GSTC, DELHI. - 2023 (1) TMI 1364 - MADHYA PRADESH HIGH COURT] and High Court of Bombay [M/S. AGARWAL COAL CORPORATION PVT. LTD. VERSUS THE ASSIST. COMMISSIONER OF STATE TAX - 2024 (3) TMI 1265 - BOMBAY HIGH COURT]  seems to have taken a different way to interpret the said judgement. In the different writ petitions filed involving the similar issue, the aforesaid courts relying upon the judgement of Hon’ble High Court of Gujarat in the case of Mohit Minerals and Hon’ble Supreme Court of India in the case of Mohit Minerals, the aforesaid High Courts had deduced that even the tax on reverse charge basis is not payable for the transportation services in the imports made on FOB basis. A event of mixed emotions for the tax professionals and experts. 

All the aforesaid judgements were passed on a single ground observing that as the Hon’ble High Court of Gujarat in the case of Mohit Minerals has declared the entry no. 10 of notification no. 10/2017 – Integrated Tax (Rate) dt. 28.06.2017 as ultra vires to the provisions of the Act and Hon’ble Supreme Court has dismissed the appeal filed against such order, the said judgement has precedential values and consequent to declaration of such entry ultra vires, no tax can be imposed in regards to such entry. All the appeals were allowed.

Pandora’s box seems to have been opened. Wherein on one hand Supreme Court specifically observes that taxpayers are not disputing the liability in case of imports made on FOB basis and on other hand, High Courts on the basis of same decision are holding that even tax is not payable in the case of imports made on FOB basis! Dubiety!!

Well, here it becomes interesting to see the further course of action of the respondents in the aforesaid judgements. Prior experiences suggests that department is likely to file appeal against such order before Hon’ble Supreme Court.

The aforesaid decisions have already created a lot of kiosk for the importers. In opinion of Author, the matter is highly contingent. In order to shun potential tax liabilities and to secure the rights and interest envisaged under the Act, the most prudent step would be to pay taxes, avail ITC and file refund of the taxes paid. The matter would be prone to litigation, however the rights of the taxpayers would be safeguarded in the case of any adversity. Comments of the netizens are welcomed.