Union of India vs Mohit Minerals Pvt. Ltd. Through Director

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(SC) 479

SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, SURYA KANT, VIKRAM NATH, JJ.
Union of India & Anr. - Appellants
Versus
M/s Mohit Minerals Pvt. Ltd. Through Director - Respondent
C.A. No. 1390, 1394, 1417, 1419, 1445, 1414, 1402, 1412, 1411, 1413, 1415, 1418, 1420, 1446, 1447, 1409, 1416, 1395, 1407, 1406, 1398, 1401, 1391, 1403, 1393, 1410, 1405, 1397, 1404, 1400, 1396, 1408, 1399, 1392/2022
Decided on : 19-05-2022

Advocates:
Advocate Appeared:
For the Appellant(s) : Mr. N. Venkataraman, ASG Mr. Akshay Amritanshu, Adv. Ms. Nisha Bagchi, Adv. Mr. Rupesh Kumar, Adv. Mr. Sharath Nambiar, Adv. Mr. Ashutosh Jain, Adv. Mr. Kartikey Singh, Adv. Mr. Mukesh Kumar Maroria, AOR
For the Respondent(s): Mr. Harish N. Salve, Sr. Adv Mr. JK Mittal, Adv. Ms. Neeha Nagpal, Adv. Mr Malak Manish Bhatt, AOR Ms. Vandana Mittal, Adv Ms. Aashna Suri, Adv Mr. Apurva Mehta, Adv. Mr. Shashank Shekhar, Adv. Mr. Tushar Joshi, Adv. Mr. Rajat Mittal, AOR Mr. Vikram Nankani, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Anshuman Srivastava, Adv. Mr. Rohan Talwar, Adv. Mr. Abhinabh Garg, Adv. Mr. E. C. Agrawala, AOR Mr. Arvind P. Datar, sr. Adv. Mr. Harish Bindumadhavan, Adv. Mr. Pawanshree Agrawal, AOR Ms. Shrayshree Thyagarajan, Adv. Mr. Kumar Visalaksh, Adv. Mr. Harsh Shah, Adv. Ms. Ruchita Shah, Adv. Mr. Udit Jain, Adv. Mr. Arihant Tater, Adv. Mr. Archit Gupta, Adv. Mr. Ajitesh Dayal Singh, Adv. Mr. Abhishek Vikas, AOR Mr. Rishabh Sancheti, Adv. Ms. Padma Priya, Adv. Mr. Anchit Bhandari, Adv. Mr. Suyash Jain, Adv. Ms. Saloni Bhandari, Adv. Mr. Zeeshan Ali, Adv. Mr. K. Paari Vendhan, AOR Mr. Ranjan Kumar, AOR Mr. Kapil Dev Yadav, Adv. Mr. Sanjay Kumar, Adv. Mr. Avushka Singh, Adv. Mr. Simranjeet Singh, Adv. Ms. Rhea Dube, Adv. Ms. Rudrakshi Deo, Adv. Mr. Mizan Siddiqui, Adv. Mr. Sudhir Kumar Gupta, AOR Mr. Manish Gupta, Adv. Ms. Hemantika Wahi, AOR Ms. Jesal Wahi, Adv. Mr. Santosh Krishnan, AOR M/S. Ap & J Chambers, AOR Mr. Parijat Sinha, AOR Mr. V. Sridharan, Sr. Adv. Mr. Anand Nainawati, Adv. Mr. Aditya Bhattacharya, Adv. Ms. Apeksha Mehta, Adv. Mr. Sahil Parghi, Adv. Mr. Somesh Jain, Adv. Ms. Mounica Kasturi, Adv. Ms. Charanya Lakshmikumaran, AOR Ms. Deepanwita Priyanka, AOR Mr. Vinay Shraff, Adv. Mr. Ravi Bharuka, AOR Mr. Ankit Agarwal, Adv. Mr. Ankit Kanodia, Adv. Mr. Prateek Gattani, Adv. Mr. Abhishek A. Rastogi, Adv. Mr. Pratyushprava Saha, Adv. Mr. Mahir Chablani, Adv. Mr. Rohit Ghosh, Adv. Ms. Kanika Sharma, Adv. M/S. Khaitan & Co., AOR Mr. Tarun Gulati, Sr. Adv. Mr Sparsh Bhargava, Adv. Mr Ankit Sachdeva, Adv. Mr Vinayak Mathur, Adv. Ms. Anishka Gupta, Adv. Mr. Kamal Kumar Arya, Adv. Mr Rahul Jain, AOR

Headnote:(A) Constitution of India - Articles 246A, 269A - Goods and Services Tax Act, 2017 - Integrated Goods and Services Tax Act, 2017 - Challenge to constitutional validity of notifications imposing tax on ocean freight on imports based on CIF contracts - High Court ruled they are ultra vires as they exceed powers of the IGST Act and CGST Act - The term 'recipient' defined under Section 2(93) of the CGST Act where consideration is paid dictates tax liability; hence appointing an importer as recipient lacks legal basis as he doesn’t pay consideration for freight. (Paras 87, 148)

(B) Legislative Competence - The GST regime marked a transition to cooperative federalism, allowing both Parliament and State legislatures to legislate over GST, with recommendations of the GST Council being advisory, not binding. (Paras 60, 148)

(C) Taxation - The imposition of tax on ocean freight when the cost is included in CIF pricing constitutes double taxation, violating the concept of composite supply prescribed under Section 8 of the CGST Act as the service has already been considered in the price of goods. (Paras 132, 148)

(D)

Result: Appeals dismissed.

Table of Content
1. foundation of case: cif contracts and tax implications (Para 1 , 2 , 3 , 4 , 5 , 6)
2. union government argues tax necessity on cif basis (Para 7 , 10)
3. court considers arguments about legality and double taxation (Para 9 , 24 , 30)
4. respondents argue contravening principles of tax law (Para 12 , 15 , 17)
5. ratio decidendi established on limitations of delegations (Para 20 , 32 , 46)

JUDGMENT :

Dhananjaya Y. Chandrachud, J.

A Introduction ........................................................................................................... 5
B Submissions ....................................................................................................... 12
B.1 Union of India ............................................................................................... 12
B.2 Respondent-assessees ................................................................................ 28
C Constitutional Architecture of GST ..................................................................... 52
	C. 1 Legislative History of the Constitution Amendment Act 2016....................... 56
	C.2 The nature of the recommendations of the GST Council ............................. 75
D Analysis .............................................................................................................. 92
	D.1 Statutory Provisions and Scheme of the IGST Act....................................... 92
	D.2 Do the impugned notifications suffer from excessive delegation? ............. 104
	D.3 Charging Section: taxable person, taxable rate and manner of determining value ............ 108
	D.4 Taxable event: Is an ocean freight transaction for import of goods a valid category of supply of services under Section 5 (3) of IGST Act? ......................... 114
	D.4.(a) Do imported goods procured on a CIF basis constitute an inter-state supply or is it an extra-territorial tax? ................................................................ 115
	D.4.(b) Are importers service recipients under CIF contracts? ..................... 125
	D.5 Applicability of Section 5 (4) of IGST Act .................................................... 135
	D.6 Composite Supply and Issues of Double Taxation..................................... 141
E Conclusion ...............................................................................150

A Introduction

1. The Union of India¹[“Union Government” or “Central Government”] is in appeal against a judgment of a Division Bench of the Gujarat High Court dated 23 January 2020. The High Court allowed a petition instituted by the respondents under Article 226 for challenging the constitutionality of two notifications of the Central Government. The bone of contention is whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax²[“IGST”] on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis.

2. The respondents import non-coking coal from Indonesia, South Africa and the U.S. by ocean transport on a ‘Cost-Insurance-Freight’³[“CIF”] basis which is supplied to domestic industries. The goods are transported from a place outside India, up-to the customs station in India. The respondent pays customs duties on the import of coal, which includes the value of ocean freight. In the case of a CIF contract, the freight invoice is issued by the foreign shipping line to the foreign exporter, without the involvement of the importer. Ocean freight is paid by the importer only when goods are imported under a ‘Free-on-Board’⁴[“FOB”] contract. In the case of a high seas sale transaction, the coal is purchased from the original buyer before it arrives at Indian ports.

3. Prior to t

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2022 Supreme(SC) 479

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