Top Stories Bombay HC Invalidates GST Demand on Ocean Freight from outside India Citing Ultra Vires Notification, Upholds SC and Gujarat HC Verdicts in Mohit Minerals [Read Order] By Devanand T R – On April 16, 2024 1:06 pm – 2 mins read The High Court of Bombay has struck down a Goods and Services Tax (GST) demand on ocean freight for services originating from outside India. The ruling cited Notification No. 8/2017-Integrated Tax (Rate) dated 28th June 2017 as ultra vires, aligning with previous decisions by the Supreme Court and the Gujarat High Court in the case of Mohit Minerals.
The petitioner, M/s. Agarwal Coal Corporation Pvt. Ltd., was represented by Mr. J. K. Mittal with Aman Mishra, appearing on behalf of UBR Legal while the respondent revenue, the Assistant Commissioner of State Tax, was represented by Ms. S. D. Vyas and Ms. P. N. Diwan. The petitioner challenged a show cause notice issued by the Assistant Commissioner of Sales Tax dated 26th September 2023. The petitioner argued that the notice lacked jurisdiction as it relied on a notification that had been struck down by the Gujarat High Court. The respondent revenue argued that the legality of the GST demand on ocean freight was not conclusively settled, citing ongoing legal challenges.
They contended that the show cause notice was justified pending resolution of the legal dispute, rejecting the petitioner’s claim of lack of jurisdiction. The High Court referenced the Gujarat High Court decision in Mohit Minerals Pvt. Ltd. vs. Union of India, where it was ruled that no tax is leviable under the Integrated Goods and Services Tax Act, 2017, on ocean freight for services provided by entities located in non-taxable territories.
This decision was subsequently upheld by the Supreme Court, emphasising the principle that a tax on the supply of a service already included in a tax on composite goods is impermissible. The Bombay High Court emphasised that the ruling in Mohit Minerals applies to both Cost, Insurance, and Freight (CIF) and Free on Board (FOB) contracts, dismissing the argument that it only pertained to CIF contracts. It reiterated that once a notification has been declared ultra vires and upheld by the apex court, it cannot be applied by state authorities, as doing so would be tantamount to applying an illegal notification.
The ruling provides clarity on the applicability of GST on ocean freight and reinforces the boundaries of legislative competency. It sets a precedent for challenging tax demands based on notifications that have been deemed unconstitutional by higher courts. In result, the division bench of the Bombay High Court comprising Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla invalidated the GST demand on ocean freight from outside India, citing an ultra vires notification. Upholding decisions by the Supreme Court and Gujarat High Court in the case of Mohit Minerals, it ruled in favor of the petitioner, allowing their petition and permitting the refund of taxes paid under protest.