IGST refund allowed on shipping services in CIF contracts following Section 8 violation ruling

The HC disposed of a writ petition challenging the constitutional validity of various GST provisions following the SC judgment in Mohit Minerals. The SC had ruled that separate IGST levy on importers for shipping services in CIF contracts violates Section 8 of the CGST Act, as IGST is already paid on the composite supply including goods and services. Following this precedent, the HC held that the petitioner was entitled to refund of IGST paid on such transactions. The petition was disposed of favorably with the refund claim allowed.

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Issues involved:
The issues involved in the judgment include challenging the constitution of the Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) under the RGST Act and CGST Act, the notification regarding the levy of IGST on reverse charge mechanism, and the proviso to section 5(1) of the IGST Act resulting in double taxation.

Constitution of AAR and AAAR:
The petitioner sought to declare the provisions of section 96(2) of the RGST Act and section 96 of the CGST Act, along with related rules, as arbitrary and unconstitutional. Similarly, the provisions of section 99 of the CGST Act and RGST Act regarding the constitution of the AAAR were challenged. The petitioner's plea was based on the judgment in Union of India Vs. Mohit Minerals (Pvt.) Limited, where it was indicated that the reliefs claimed by the petitioner would be available. The submissions made were not disputed by the respondents, leading to the disposal of the writ petition in line with the Mohit Minerals case.

Levy of IGST on Reverse Charge Mechanism:
The petitioner challenged Entry 10 of the Impugned Notification, which notified the 'importer' as the 'recipient' of service for the levy of IGST on reverse charge mechanism. The petitioner argued that this was ultravires to section 5(3) of the IGST Act, 2017. The judgment in the Mohit Minerals case highlighted that a tax on the supply of a service, already included as a tax on the composite supply of goods, cannot be allowed. Consequently, the petitioner was entitled to a refund of the IGST paid, and the respondents were directed to do the needful within six weeks.

Proviso to Section 5(1) of the IGST Act:
The petitioner also challenged the proviso to section 5(1) of the IGST Act, which provided for the levy and collection of IGST on goods imported into India without excluding the value of Transportation Services, leading to double taxation. The judgment in the Mohit Minerals case emphasized that the impugned levy on the 'service' aspect of the transaction was in violation of the principle of 'composite supply' enshrined under the CGST Act. As a result, the petitioner was granted relief and entitled to a refund of the IGST paid.

This summary outlines the key issues raised in the judgment before the Rajasthan High Court, the arguments presented by the petitioner, and the court's decision based on the principles highlighted in the Mohit Minerals case.

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