IGST on ocean freight under reverse charge was treated as impermissible where the service formed part of a composite supply.

Separate IGST levy on ocean freight under reverse charge for CIF imports was treated as impermissible where the service element formed part of a composite supply of goods. Applying the principle later affirmed in Mohit Minerals, the commentary states that Notifications Nos. 8/2017 and 10/2017 could not survive to that extent, and consequential proceedings based on those notifications could not continue. The legal point is that a distinct tax on a service already embedded in the composite supply is not maintainable.

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Issues: Whether the impugned notifications and the consequential show cause notice relating to levy of IGST on ocean freight under the reverse charge mechanism were liable to be set aside in view of the law declared in Mohit Minerals.

Analysis: The dispute concerned levy of tax on the service element in a CIF import transaction through Notifications Nos. 8/2017 and 10/2017. The governing principle applied was that where the supply of service is already included within a composite supply of goods, a separate levy on that service component is impermissible. The Court also noted that the later pronouncement in Mohit Minerals had upheld this position and that, to that extent, the earlier levy could not survive. Consequently, the consequential proceedings based on the impugned notifications could not continue.

Conclusion: The challenge succeeded and the show cause notice was set aside.

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