Seil Energy INDIA Limited vs. The Union Of INDIA

Held

The Court held that the rejection orders concerning CIF contracts must be set aside, following the Supreme Court's judgment in Union of India & another Vs. M/s. Mohit Minerals Pvt. Ltd. The Court found that the principle against double taxation, established in Mohit Minerals, is a universal principle applicable to both CIF and FOB contracts. The reasoning was that the Supreme Court's observations in paragraphs 144 and 148(v) of the Mohit Minerals judgment clearly indicated that taxing the 'service' aspect of a transaction when it has already been taxed as part of a composite supply (in CIF contracts) or when it leads to double taxation (a universal principle) is not permissible. The Court found the impugned rejection orders to be inconsistent with these principles. Consequently, the Court set aside the rejection orders and remanded the matters to the authority for reconsideration, applying the principles laid down in this judgment. The earlier refund applications were deemed to be pending. Writ Petition Nos. 1268 of 2021 & 28209 of 2022 were allowed to the extent of refunds sought on CIF contracts, and all other Writ Petitions were disposed of.

Facts

The petitioner, M/s Sembcorp Energy India Limited, involved in power generation, imports coal and other goods. When imported on a CIF basis, tax under IGST Act is paid on the value of goods. For FOB contracts, the petitioner also paid IGST on freight charges under a reverse charge mechanism. The petitioner sought refunds for the IGST paid on freight charges in FOB contracts, and also for CIF contracts. The Assistant Commissioner of Central Tax rejected these refund applications. The petitioner filed multiple writ petitions challenging these rejection orders, with the refund amounts in dispute totaling approximately INR 1,007,632,240.

Key Issues

1. Whether the rejection orders pertaining to refunds sought on CIF contracts are valid, considering the Supreme Court's judgment in Union of India & another Vs. M/s. Mohit Minerals Pvt. Ltd.? 2. Whether the principle against double taxation, as established in the Mohit Minerals case, extends to FOB contracts, thereby entitling the petitioner to a refund of IGST paid on freight charges under a reverse charge mechanism? Petitioner's Arguments: The petitioner argued that the rejection of refunds for CIF contracts should be set aside in light of the Supreme Court's decision in Mohit Minerals. For FOB contracts, the petitioner contended that freight costs were already included in the value of goods on which IGST was paid. They argued that levying IGST again on freight under a reverse charge mechanism, as per Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate), amounts to double taxation, which is impermissible, citing the Mohit Minerals judgment. Revenue's Arguments: The revenue, through the Assistant Commissioner, refuted the petitioner's claims by holding that the Mohit Minerals judgment was applicable only to CIF contracts and its principles could not be extended to FOB contracts.