Facts of the Case

The petitioner, M/s K.V.N. Impex P Ltd, Calicut, represented by its Director M.K. Rajesh, filed this writ petition under Article 226 of the Constitution of India before the Kerala High Court challenging Notification No.10/2017-Integrated Tax (Rate) dated 28.06.2017 (Ext.P2) as ultra vires the provisions of the Integrated Goods and Services Tax Act, and the consequent show cause notice bearing No.20/2018-19(GST)/SCN No.27/2020-21(GST) dated 04.02.2021 (Ext.P3) issued by the Joint Director, Directorate General of GST Intelligence, Kochi Zonal Unit, based on a Bill of Entry dated 25.02.2020 (Ext.P1). The matter was heard and decided by Justice Dinesh Kumar Singh on 17.10.2023.

Issues Involved

  1. Whether Notification No.10/2017-Integrated Tax (Rate), which fixed the importer as the person liable to pay IGST under reverse charge on ocean freight for CIF import contracts, was ultra vires the IGST Act.
  2. Whether the show cause notice (Ext.P3) issued on the strength of that notification survived after the Supreme Court's decision in Union of India v. Mohit Minerals.

Petitioner's Arguments

  • Notification No.10/2017-Integrated Tax (Rate) dated 28.06.2017 is ultra vires the provisions of the Integrated Goods and Service Tax Act and should be quashed.
  • The consequential show cause notice (Ext.P3) issued on the basis of that notification is equally unsustainable and should be struck down.

Respondent's Arguments

  • Counsel for the respondents fairly and candidly conceded that Notification No.10/2017-Integrated Tax (Rate), the basis for the impugned show cause notice, had already been held unsustainable by the Supreme Court in Union of India v. Mohit Minerals [2022 (10) SCC 700].
  • Under that ruling, since an Indian importer under a CIF contract already pays IGST on the composite supply comprising goods and ancillary services such as transportation and insurance, a separate reverse-charge levy on the shipping line's freight component violates the "composite supply" principle under Section 2(30) read with Section 8 of the CGST Act.

Court Order/Findings

  • The Court extracted and relied on the relevant findings in Union of India v. Mohit Minerals, holding that the specification of the importer as the person liable for IGST under Notification No.10/2017 was only clarificatory and that a separate levy on the "service" aspect of a CIF transaction, over and above the IGST already payable on the composite supply, was impermissible.
  • Since the matter was squarely covered in the petitioner's favour by the binding Supreme Court ruling in Mohit Minerals, the writ petition was allowed and the impugned show cause notice was set aside.

Important Clarification

  • Following Union of India v. Mohit Minerals (2022) 10 SCC 700, a GST show cause notice raising a reverse-charge IGST demand on ocean freight under Notification No.10/2017-Integrated Tax (Rate), in a case where the importer has already paid IGST on a CIF composite supply, is liable to be quashed as covered by binding precedent, without requiring further adjudication on facts.

Sections Involved

  • Notification No.10/2017-Integrated Tax (Rate) - fixed the importer as the recipient liable to pay IGST under reverse charge on ocean freight services in relation to CIF imports.
  • Section 5(3) and 5(4), IGST Act, 2017 - provide the reverse charge mechanism and the power to notify the class of recipients liable thereunder.
  • Section 2(30) and Section 8, CGST Act, 2017 - define "composite supply" and its tax treatment, central to the Supreme Court's reasoning in Mohit Minerals.

Decision - In Favour of

The decision is in favour of the Assessee/Petitioner. The writ petition was allowed and the impugned show cause notice was set aside, following the Supreme Court's ruling in Mohit Minerals.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Kerala High Court
  • Case No.: WP(C) No. 5861 of 2021
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 17 October 2023
  • Disposal Nature: Allowed; show cause notice issued under IGST Act quashed following Union of India v. Mohit Minerals

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