GST on Ocean Freight for Imported Crude Oil Struck Down as Ultra Vires Following Mohit Minerals Precedent

The HC quashed a notice dated 29.08.2019 issued to the petitioner regarding non-payment of tax on reverse charge basis for ocean freight on imported crude oil. Following precedent established in Mohit Minerals Pvt Ltd vs. Union of India and upheld by the SC, the court ruled that Entry No. 10 of the notification dated 28.06.2017 under the Integrated Goods and Services Tax Act, 2017 was ultra vires. The court set aside the proceedings initiated against the petitioner and made the rule absolute.

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Issues:
Challenge to Entry No. 10 of a notification dated 28.06.2017 under the Integrated Goods and Services Tax Act, 2017.

Analysis:
The petitioner, engaged in importing crude oil, challenged Entry No. 10 of a notification dated 28.06.2017 under the Integrated Goods and Services Tax Act, 2017. The petitioner contended that although they paid customs duties, the respondent alleged non-payment of tax on reverse charge basis on ocean freight. Entry No. 10 pertained to services supplied by a person in a non-taxable territory for transportation of goods by vessel to India's customs station. A notice was issued by the Court on 18.12.2019 regarding this matter.

The Coordinate Bench of the Court had previously ruled on a similar issue in the case of Mohit Minerals Pvt Ltd vs. Union of India, declaring Entry No. 10 as ultra vires the Integrated Goods and Service Tax Act, 2017. Consequently, the proceedings based on this entry were quashed and set aside. The petitioner cited a recent judgment by the Honorable Apex Court in Union of India vs. Mohit Minerals Pvt. Ltd., upholding the decision of the Division Bench. This supported the petitioner's argument to quash the proceedings initiated by the authority.

After hearing arguments from both sides and reviewing relevant documents, including the impugned notice and previous judgments, the Court found in favor of the petitioner. The Court held that Entry No. 10 was ultra vires the Integrated Goods and Services Tax Act, 2017, as previously determined by the Coordinate Bench and upheld by the Honorable Supreme Court. Consequently, the Court quashed and set aside the impugned notice/communication dated 29.08.2019, ruling in favor of the petitioner and making the rule absolute in this regard.

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