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Show-cause notice for IGST on ocean freight quashed after notifications declared unconstitutional The Gujarat HC quashed a show-cause notice demanding IGST on ocean freight under reverse charge mechanism. The notice relied on Notifications No. 8/2017 ...
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Show-cause notice for IGST on ocean freight quashed after notifications declared unconstitutional
The Gujarat HC quashed a show-cause notice demanding IGST on ocean freight under reverse charge mechanism. The notice relied on Notifications No. 8/2017 and 10/2017 dated 28.06.2017, making the importer liable for IGST on ocean freight services. However, the court noted that the SC in Mohit Minerals Pvt. Ltd. case had upheld the Gujarat HC's earlier decision declaring these notifications unconstitutional for exceeding powers under IGST Act and CGST Act. The SC held that imposing separate tax on services already included in composite supply of goods was impermissible. Consequently, the show-cause notice was deemed without jurisdiction and set aside.
Issues involved: The issue involves a petition under Article 226 of the Constitution of India seeking a writ of prohibition against a show-cause notice related to the payment of IGST on ocean freight for imported goods during specific financial years.
Judgment Summary:
Issue 1: Jurisdiction of the show-cause notice The petitioner, engaged in manufacturing and outward supply of goods, received a show-cause notice alleging short payment of IGST on ocean freight for imported goods. The notice relied on Notifications No. 8/2017 and 10/2017. The petitioner argued that the notice was not maintainable due to a previous decision by the Hon'ble Apex Court. The respondent contended that the petition should be dismissed as the Gujarat High Court's judgment had been reversed by the Apex Court.
Issue 2: Validity of Notifications and Constitutional Aspect The Apex Court held that the impugned notifications were unconstitutional as they imposed double taxation through delegated legislation, contrary to the IGST Act and CGST Act. The Court emphasized that a tax on the supply of a service already included in a tax on the composite supply of goods is impermissible. The Court concluded that the show-cause notice lacked jurisdiction and quashed it, allowing the petition.
Separate Judgment: The Hon'ble Apex Court's decision highlighted the non-binding nature of GST Council recommendations on the Union and States, emphasizing the collaborative dialogue and equal legislative power between the Union and States regarding GST. The judgment clarified the import of goods under CIF contracts as an inter-state supply subject to IGST. It also addressed the reverse charge mechanism, specifying the recipient for taxation purposes. The Court concluded that the levy on the service aspect of the transaction violated the principle of composite supply under the CGST Act.
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