The Hon'ble Bombay High Court in M/s. Agarwal Coal Corporation Pvt. Ltd. … Petitioner Versus The Assist. Commissioner of State Tax [WRIT PETITION NO. 15227 OF 2023] held that a show cause notice issued invoking the Notification No. 8/2017-Integrated Tax (Rate) dated 28/6/2017 was without jurisdiction as the said notification had been struck down by the Gujarat High Court in the case of Mohit Minerals Pvt. Ltd. v. Union of India, which was upheld by the Supreme Court.
Facts of the Case:
The Petitioner, M/s. Agarwal Coal Corporation Pvt. Ltd., was a company engaged in the business of coal trading and importing coal from various countries. The Petitioner imported coal on both CIF (Cost, Insurance, and Freight) and FOB (Free on Board) basis.
The Assistant Commissioner of State Tax, "C" Division, Mumbai, issued a show cause notice dated September 26, 2023, to the Petitioner. The show cause notice primarily invoked the Notification No. 8/2017-Integrated Tax (Rate) dated June 28, 2017, and the Entry 10 of the Notification No. 10/2017-Integrated Tax (Rate), dated June 28, 2017.
The show cause notice alleged that during the course of a GST audit conducted on the Petitioner's records for the period from April 2018 to March 2019, it was observed that the Petitioner had imported its major input (vegetable oils) from overseas, involving payment of ocean freight. According to the show cause notice, the Petitioner was liable to pay Integrated Goods and Services Tax (IGST) under reverse charge on the ocean freight, as per the aforementioned notifications. However, the Petitioner had not discharged the said IGST liability under reverse charge.
Aggrieved by the show cause notice, the Petitioner filed a writ petition (Writ Petition No. 15227 of 2023) before the Hon'ble Bombay High Court, primarily on the ground that the notification invoked in the show cause notice had been struck down by the Division Bench of the Gujarat High Court in the case of Mohit Minerals Pvt. Ltd. v. Union of India. The decision of the Gujarat High Court was upheld by the Supreme Court in the case of Union of India v. Mohit Minerals Pvt. Ltd.
The Petitioner also relied on the orders passed by the Delhi High Court in the case of Agarwal Coal Corporation Pvt. Ltd. v. Union of India & Anr. and the Madhya Pradesh High Court in the case of M/s. Agarwal Fuel Corporation Pvt. Ltd. v. Union of India & Anr., wherein the respective High Courts had quashed the impugned notifications as being ultra vires the Integrated Goods and Services Tax Act, 2017, in light of the Supreme Court's decision in Mohit Minerals.
Held by the Court:
The Hon'ble Bombay High Court, in Writ Petition No. 15227 of 2023, held as under:-
Observed that in the case of Mohit Minerals Pvt. Ltd. v. Union of India, the petitioner's case before the Gujarat High Court involved importing coal from various countries on both FOB (Free on Board) and CIF (Cost, Insurance, and Freight) basis.
The Division Bench of the Gujarat High Court in Mohit Minerals had struck down the Notification No. 8/2017-Integrated Tax (Rate), dated June 28, 2017, and the Entry 10 of the Notification No. 10/2017-Integrated Tax (Rate), dated June 28, 2017, as ultra vires the Integrated Goods and Services Tax Act, 2017, and declared them unconstitutional.
The Supreme Court, in Union of India v. Mohit Minerals Pvt. Ltd., upheld the decision of the Gujarat High Court and agreed that a tax on the supply of a service, which had already been included by the legislation as a tax on the composite supply of goods, cannot be allowed.
The Bombay High Court noted that since the notification itself had been declared ultra vires and the same had been upheld by the Supreme Court, following the settled principle of law laid down in M/s. Kusum Ingots & Alloys Ltd. v. Union of India And Anr., the notification was no longer available to the State Authorities, and applying it would amount to applying an illegal notification.
Considering the decision in Mohit Minerals and the principle laid down in Kusum Ingots & Alloys Ltd., the Bombay High Court held that the show cause notice issued by invoking the Notification No. 8/2017-Integrated Tax (Rate) dated June 28, 2017, was without jurisdiction and quashed the same.
The Bombay High Court also observed that the argument made by the Respondent that the decision in Mohit Minerals should be applied only in respect of CIF contracts and not FOB contracts was untenable. The court noted that the case in Mohit Minerals before the Gujarat High Court involved both categories of contracts, i.e., CIF and FOB, and the court had declared the revenue's decision as ultra vires the IGST Act.
Since the Petitioner had made payment of tax under protest, the court permitted the Petitioner to seek a refund of the same, along with interest at 7% per annum, within four weeks from the date on which a copy of the order was placed before the proper officer.
Relevant Sections:
"Notification No. 8/2017-Integrated Tax (Rate), dated June 28, 2017"
"Notification No. 10/2017-Integrated Tax (Rate), dated June 28, 2017"
"Section 74(1) of the Central Goods and Services Act, 2017"
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