Mohit  Minerals  (p) Ltd  v.  Union of India  [2020] 113 taxmann.com43

Regarding Ocean Freight Reverse Charge

Assessee Plea

The  writ - applicant was  engaged  in importing  non - cooking  coal from  Indonesia  South  Africa and  U.S.A  and  supplying  it to  various  domestic  industries  including  power, steel ,etc .  The writ - applicant  discharged  customs  duty  on the  imported  products at the time of each import including the value of ocean freight. In addition to the customs duty, it also paid IGST on the imported coal which included the value of ocean freight.

The  writ - applicant challenged the  challenged  the  legality  and  validity  of the  Notification  NO.8/2017-Intergated  Tax (Rate) , and Entry  10 of  the  Notification NO.10/2017-Intergated  Tax (Rate) ,both  dated 28.6.2017 being ultra  vires  to the  IGST  Act ,2017.

As  per  the  submission  of the  writ - applicant  IGST  was  levied  again  on   reverse  charges  basis under  said  Notifications  on the Ocean  Freight, for which  IGST  was  already  paid  at the  time  of  import.

The Honourable  High  Court  observed  that the writ - applicant was importing   goods  on the  CIF  basis where  the transportation of goods in a vessel was the obligation of the foreign exporter.  The  foreign exporter  entered in  to contract with  the  shipping  line  for  availing the  services  of  transportation  of goods in a  vessel. The obligation to pay consideration was also of the foreign exporter.  

Hence the writ - applicant  was not the recipient of the  service of  transportation  of goods  in a vessel  under GST. Moreover  in a case of CIF  contract  the contract for transportation  is entered  in to  by the seller i.e.  the  foreign  exporter  and  not the  buyer  i.e.  the  importer  and the  importer  was  not  the  recipient of the  service  of transportation   of the goods .

In the  present  case  the  entire  transaction  takes  place outside the taxable  territory  i.e.  outside  India 

the mere fact  that the  transportation of goods  terminated  in India, will  not  make such  supply of transportation of goods as  taking place  in India  .

The abovementioned  notifications levying  tax  on supply  of service  of transportation of goods  by a  person  in a non -taxable  territory from  a place  outside India  up to the   customs  station  of clearance  in  India and  making  the  importer  liable  to pay  GST are ultra  vires  the  provisions  of the  IGST Act.

The Honourable  High  Court held  that  no IGST would  be levied  on the  ocean  freight for the  services provided  by  a person  located in a non-taxable  territory  by way  of  transportation of goods  by a vessel   from a place outside  India  up to  the  customs  station  of clearance  in India 

Hence  levy  and  collection of  IGST  on ocean  freight  under the said  notifications  is not  permissible  in law .