Court Grants Interim Relief on Tax Payment for Ocean Freight

The court granted interim relief to the petitioner, directing no coercive steps be taken against them in relation to the challenged notifications on tax payment for ocean freight on non-cooking coal imports. The court issued notice prohibiting coercive actions until a specified date, emphasizing the need for a comprehensive review of legislative provisions to ensure fairness and compliance with the law regarding tax implications on imports, particularly concerning ocean freight.

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Issues involved: Challenge to the vires of Notification No. 8/2017-Integrated Tax [Rate] and Entry 10 of Notification No. 10/2017-Integrated Tax [Rate] regarding payment of tax on ocean freight for non-cooking coal imports under the Integrated Goods & Service Tax Act, 2017.

Analysis:

The petitioner, an importer of non-cooking coal, challenged the vires of two notifications related to the payment of tax on ocean freight for imports. The petitioner contended that paying tax on ocean freight again under a different notification, despite already paying tax under the IGST Act on the entire value of imports inclusive of ocean freight, was unjust. Additionally, in cases of CIF contracts where both the service provider and recipient were outside India, the petitioner argued that no tax should be collected, even under the reverse charge mechanism. Furthermore, in high sea sales, the burden of tax was placed on the petitioner as an importer, even though the petitioner was not the recipient of the service, as the services were received by the seller of goods on a high sea basis from the exporter/transporter. The petitioner claimed that the impugned notifications were ultra vires the Act and constituted excessive delegation of powers of subordinate legislation.

The court had previously passed orders in favor of the petitioner, granting interim relief by directing that no coercive steps be taken against the petitioner in relation to the impugned notification. Subsequently, the court issued notice returnable on a specified date, prohibiting any coercive actions against the petitioner until then. Direct service was permitted in this matter to ensure timely communication of the court's decisions and proceedings to the concerned parties. This case highlighted the complexities and legal intricacies surrounding tax implications on imports, especially concerning ocean freight, and the need for a thorough examination of legislative provisions to ensure fairness and compliance with the law.

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