Facts of the Case

L S Mills Limited, represented by its Chief Financial Officer, challenged the validity of Sl. No. 10 of Notification No. 10/2017-Integrated Tax (Rate) and Sl. No. 9(ii) of Notification No. 8/2017-Integrated Tax (Rate), both dated 28.06.2017, along with a consequential show cause notice bearing SCN No. 04/2021-GST dated 15.12.2021 issued by the Assistant Commissioner of Central GST & Central Excise, Dindigul. The notifications purported to levy IGST on ocean freight (transportation services) paid by a foreign shipping line to a foreign exporter under a CIF import contract, treating the Indian importer as the deemed recipient of that service, in addition to IGST already levied on the value of the imported goods (which included the freight component). The petitioner contended this amounted to a second, impermissible levy on a component already taxed as part of a composite supply.

Issues Involved

  1. Whether IGST could be separately levied on the ocean-freight/transportation service component of a CIF import contract when IGST had already been paid on the value of the imported goods, of which freight formed part.
  2. Whether such a separate levy is consistent with the concept of 'composite supply' under Section 8 read with Section 2(30) of the CGST Act, and with Sections 5(3)/5(4) of the IGST Act.

Petitioner's Arguments

  • The petitioner relied squarely on the Supreme Court's decision in Union of India vs Mohit Minerals Private Limited (2022), which held that a separate IGST levy on the service leg of a CIF transaction — already subsumed in the composite supply of goods — would violate Section 8 of the CGST Act and the overall scheme of GST.
  • It was contended the show cause notice, premised on the impugned notifications, was consequently unsustainable and liable to be quashed.

Respondent's Arguments

  • Standing Counsel for the Union of India and the GST authorities appeared but did not seriously contest the applicability of Mohit Minerals to the facts of the case.

Court Order / Findings

  • The Court extracted the Supreme Court's reasoning at length: while the notifications validly identified the importer as recipient under Sections 5(3)/5(4) of the IGST Act, a separate levy on the service component of a composite CIF supply contradicted Section 8 of the CGST Act and the composite-supply scheme under Section 2(30).
  • Since the Indian importer had already paid IGST on the value of goods inclusive of freight, insurance and allied services under the composite supply, a further levy on the freight as a standalone service was impermissible.
  • Applying this binding precedent, the Court held the show cause notice dated 15.12.2021 is quashed and allowed the writ petition.

Important Clarification

  • Once GST has been discharged on a composite supply of goods (which naturally bundles ancillary services such as transportation and insurance under a CIF contract), the tax authorities cannot vivisect the transaction to levy a separate tax on the service component — doing so violates Section 8 of the CGST Act, per the Supreme Court's ruling in Mohit Minerals.

Sections Involved

  • Section 5, Integrated Goods and Services Tax Act, 2017 – levy and reverse-charge mechanics, including sub-sections (3) and (4) on notified recipients.
  • Section 7, Integrated Goods and Services Tax Act, 2017 – inter-state supply, including deeming of import transactions.
  • Section 8 and Section 2(30), Central Goods and Services Tax Act, 2017 – composite supply and its tax treatment as a single bundled supply.

Decision – In Favour of

Allowed; entirely in favour of the Assessee, with the underlying show cause notice quashed.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: W.P.(MD)No.3129 of 2022 and W.M.P(MD)No.2727 of 2022
  • Coram: Justice Dr. Anita Sumanth and Justice C. Kumarappan
  • Date of Order: 13.10.2025

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