Rawmet Resources (P) Limited vs. Union Of INDIA

Held

The High Court held that the issue raised in these writ petitions is squarely covered by the judgment of the Hon'ble Supreme Court in "Union of India and another Vs. Mohit Minerals Private Limited" reported in (2022) 10 SCC 700. The Supreme Court's conclusions, as extracted in the judgment, addressed the binding nature of GST Council recommendations, the interpretation of "inter-state" supply in CIF contracts, the applicability of the reverse charge mechanism, and the principle of composite supply. Specifically, the Supreme Court held that recommendations of the GST Council have persuasive value but are not binding on legislatures for primary legislation. It also found that the import of goods under a CIF contract constitutes an "inter-state" supply, and the importer is the recipient of shipping services. Crucially, the Supreme Court ruled that a separate levy on the Indian importer for the "supply of services" by the shipping line in a CIF contract would be in violation of Section 8 of the CGST Act, as it contravenes the principle of "composite supply." Consequently, the High Court allowed all the writ petitions in terms of the Supreme Court's order.

Facts

This batch of writ petitions before the High Court of Andhra Pradesh concerns the legality of imposing Integrated Goods and Services Tax (IGST) on ocean freight in CIF contracts, particularly when IGST has already been paid on the full value of imports. The petitioners are challenging Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017. The Court notes that a similar issue was decided by the Gujarat High Court in "Mohit Minerals (P.) Ltd. Vs. Union of India," and the Union of India's Special Leave Petition against that judgment was dismissed by the Supreme Court, upholding the Gujarat High Court's decision. The Supreme Court's judgment in "Union of India and another Vs. Mohit Minerals Private Limited" (2022) 10 SCC 700 is central to the present petitions.

Key Issues

1. Whether the recommendations of the GST Council are binding on the Union and States, particularly concerning the imposition of IGST on ocean freight in CIF contracts, under Article 279-A of the Constitution and the CGST/IGST Acts. 2. Whether the import of goods under a CIF contract constitutes an "inter-state" supply subject to IGST on ocean freight, considering Sections 2(11) and 13(9) of the IGST Act and Section 2(93) of the CGST Act. 3. Whether the importer of goods in a CIF contract is the recipient of shipping services for the purpose of reverse charge mechanism under the IGST Act and CGST Act. 4. Whether the levy on the "service" aspect of the transaction violates the principle of "composite supply" under Section 2(30) read with Section 8 of the CGST Act, when IGST is already paid on the full value of imports. Petitioner's arguments (implied by the reliance on the Supreme Court judgment): The levy is illegal as it amounts to double taxation and violates the principles of composite supply. The recommendations of the GST Council are not binding, and the legislation imposing the levy is ultra vires. The importer should not be taxed separately on ocean freight when IGST is already paid on the total CIF value. Revenue's arguments (implied by the Supreme Court's dismissal of their appeal): The levy is validly imposed under the relevant provisions of the IGST Act and notifications issued thereunder. The ocean freight is a separate taxable supply on which IGST is leviable.