Supreme Court upheld Gujarat High Court judgment of Mohit Minerals

Case Details: Union of India v. Mohit Minerals (P.) Ltd. - [2022] 138 taxmann.com 331 (SC)

Judiciary and Counsel Details

• • Dr Dhananjaya Y Chandrachud, Surya Kant & Vikram Nath, JJ.

Facts of the Case

The assessee had challenged the IGST levy on reverse charge basis on the Ocean Freight in respect of import of goods under CIF contracts for which it was already paying the IGST at the time of import with the value of imported coal under the Customs laws. The Hon’ble Gujarat High Court held that IGST levy on ocean freight is ultra-vires the levy provisions of the IGST Act. Against the said order, the Government filed the appeal before the Apex Court.

Supreme Court Held

The Apex Court has observed that the ocean freight from foreign location to customs station in India in CIF import contracts has sufficient territorial nexus for levying IGST under reverse charge. On an interpretation of Sections 5(3) and 5(4) of the IGST Act, read with Section 2(93) of the CGST Act, it is clear that the importer can be classified as the ‘recipient’ of the services. On this interpretation, the validity of the notifications levying GST under RCM on ocean freight has to be upheld.

The Apex Court held that there is no legal fiction or power to bifurcate the composite supply into supply of goods and supply of services and to levy reverse charge GST on supply of services component under section 5(4) of the IGST Act. Given this, the GST on reverse charge basis can’t be levied on ocean freight in CIF contracts as it is part of ‘composite supply’ attracting section 2(30) and section 8 of CGST Act.

In view of the above, it was held that the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, but it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation as no such power can be noticed with respect to interpreting a composite supply of goods and services as two segregable supply of goods and supply of services.

List of Cases Reviewed

• • Mohit Minerals v. Union of India [2020] 113 taxmann.com 436 (Guj.) affirmed.