2022 (8) TMI 688 - HC - GST

Supreme Court Strikes Down IGST Notifications on Ocean Freight, Mandates Refund and Interest for Affected Importers

SC upheld the petitioner's challenge to Notifications No. 8 and 10 of 2017 regarding IGST on ocean freight charges. Following precedents in previous cases ... Validity of Notification No.10 of 2017 and Notification No.8 of 2017 read with corrigendum - Ultra vires - Refund of IGST collected on ocean freight with statutory interest - Reverse charge on import of services by way of transportation of goods by vesselValidity of Notification No.10 of 2017 and Notification No.8 of 2017 read with corrigendum - Ultra vires - Notifications impugned (Notification No.10 of 2017 and Notification No.8 of 2017 read with corrigendum) have been held ultra vires and their vires cannot be sustained. - HELD THAT: - The Court accepted and followed the earlier decision in Mohit Minerals Pvt. Ltd. (Special Civil Application No. 726 of 2018 decided 23.1.2020) which declared the said notifications unconstitutional and ultra vires the statute. The Court observed that the position of law as laid down in Mohit Minerals has been followed in subsequent decisions of this Court and that the legal position was not disputed by the parties. On that basis the notifications impugned were treated as invalid for the purposes of the present petition. [Paras 4, 6]The impugned notifications are ultra vires and cannot be sustained.Refund of IGST collected on ocean freight with statutory interest - Reverse charge on import of services by way of transportation of goods by vessel - Petitioner entitled to refund of IGST collected pursuant to the impugned notifications, together with statutory rate of interest. - HELD THAT: - Relying on the prior decisions (including the coordinate-bench order in ADI Enterprises which directed refunds in similar cases) and taking cognisance that appellate remedies against those decisions had failed, the Court directed that any IGST collected pursuant to the impugned entries of the notifications be refunded. The Court specified a timeline for refund and ordered payment of statutory interest on such refunds. The direction was given as the natural consequence of holding the notifications ultra vires and in accordance with the reliefs granted in the earlier analogous orders. [Paras 5, 7]Respondents directed to refund IGST collected pursuant to the impugned notifications along with statutory rate of interest within the time fixed by the Court.Final Conclusion: The petition is allowed: the Notifications impugned have been treated as ultra vires and the respondents are directed to refund any IGST collected thereunder, with statutory interest, within the period specified by the Court. Issues:1. Refund of Integrated Goods and Services Tax (IGST) on ocean freight charges.2. Validity of Notification No. 8 of 2017 and Notification No. 10 of 2017.3. Previous judgments on the constitutionality of the notifications.4. Direction for refund of IGST paid pursuant to the notifications.Analysis:Issue 1: The petitioner, a private limited company engaged in processing edible oils and coffee, sought a refund of IGST calculated on ocean freight charges and requested to prohibit the collection of IGST as per specific notifications.Issue 2: Notifications No. 8 of 2017 and No. 10 of 2017, along with a corrigendum, imposed IGST on inter-state supply of services and transportation of goods by vessel. The validity of these notifications was challenged in light of their constitutionality.Issue 3: Previous judgments, including Mohit Minerals Pvt. Ltd. vs. Union of India, declared the notifications unconstitutional and ultra vires the statute. Other cases like Gokul Agro Resources Ltd. vs. UOI and Bharat Oman Refineries Ltd. vs. Union of India also supported this decision.Issue 4: In a similar case, ADI Enterprises vs. Union of India, the court directed the refund of IGST paid under Notification No. 10 of 2017. The court emphasized the unconstitutionality of Entry No.10 of the notification and ordered the refund with statutory interest.Conclusion: Considering the precedents and the unconstitutionality of the notifications established in previous cases, the present petition was allowed. The court directed the refund of any collected IGST amount within six weeks, along with statutory interest, in line with the decisions in similar cases.