Liberty Oil Mills Limited vs. Union Of INDIA Thr. Thr Joint Secretary And Anr
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The Petitioner, Liberty Oil Mills Limited, engaged in manufacturing vegetable edible oil, received a show cause notice dated March 31, 2019, from Respondent No. 2, the Commissioner of CGST. The notice alleged that the Petitioner had failed to discharge Integrated Goods and Services Tax (IGST) liability amounting to Rs. 4,13,47,167/- under Section 74(1) of the Central Goods and Services Act, 2017, for the period April 2018 to March 2019. The allegation stemmed from an audit observation that the Petitioner imported its major input, vegetable oils, from overseas, incurring ocean freight, and had not paid IGST on this service under reverse charge as required by Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate). The Petitioner challenged this notice, relying on the Gujarat High Court's decision in Mohit Minerals (P) Ltd. Vs. Union of India.
Held
The Court held that there was no purpose in continuing the proceedings, either for the Petitioner or the Commissioner, if the very basis of the show cause notice had been concluded by a higher judicial authority. The Court noted that the Petitioner had relied on the Gujarat High Court's decision in Mohit Minerals (P) Ltd. Vs. Union of India, which was later upheld by the Supreme Court in Union of India Vs. Mohit Minerals Private Limited. The Respondents acknowledged this development. Consequently, the Court found no utility in allowing the matter to proceed further. The ratio decidendi is that a show cause notice based on a legal position that has been definitively settled against the revenue by the Supreme Court should be quashed. The Court allowed the writ petition and quashed the impugned show cause notice.
Key Issues
1. Whether the Petitioner is liable to pay IGST on ocean freight for imported goods under the reverse charge mechanism, as per Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate), when the supplier is located in a non-taxable territory and the service is provided to a person in a taxable territory? (Question of law). Petitioner's contention: The Petitioner argued that the issue was settled in their favour by the Gujarat High Court in Mohit Minerals (P) Ltd. Vs. Union of India, and subsequently, the Supreme Court upheld this decision in Union of India Vs. Mohit Minerals Private Limited. Therefore, the show cause notice was unsustainable. Respondents' contention: The Respondents initially contended that the Gujarat High Court's judgment was under appeal before the Supreme Court, and thus the legal competency for levying tax had not attained finality. They suggested the Petitioner point out the Supreme Court's decision to the Commissioner in response to the show cause notice.
Sections Cited
Section 74(1), Notification No.8/2017-Integrated Tax (Rate), Notification No.10/2017-Integrated Tax (Rate)
AI-generated summary — verify with the full judgment below
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURI ICTION WRIT PETITION NO.5191 OF 2021
Liberty Oil Mills Limited … Petitioner V/s. Union of India and anr. … Respondents --- Mr.Chirag Shetty with Mr.Jitendra Motwani i/by M/s Economic Laws Practice, Advocates for the Petitioner. Mr.Karan Adik with Mr.Satyaprakash Sharma, Advocates for the Respondents. --- CORAM : NITIN JAMDAR AND ABHAY AHUJA, JJ. DATE : 27 JANUARY 2023. P.C.:-
Heard learned counsel for the parties. Taken up for disposal in view of the narrow issue involved.
The Petitioner has challenged the show cause notice issued by the Respondent No.2-Commissioner of CGST (Central Excise Tribunal).
The Petitioner is a company who is engaged in manufacture of vegetable edible oil, is registered under the goods and services tax Priya Soparkar PRIYA RAJESH SOPARKAR PRIYA RAJESH SOPARKAR Date: 2023.02.03 16:34:30 +0530
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holding a duty registration. A show cause notice issued by the Respondent No.2 dated 31 March 2019 to the Petitioner called upon the Petitioner as to why Integrated Goods and Service Tax (IGST) amounting Rs.4,13,47,167/- be not recovered from the Petitioner under Section 74(1) of Central Goods and Services Act, 2017 alongwith interest and penalty as specified. The gist of the allegation against the Petitioner is found in paragraph No.2 of the show cause notice which reads thus :
“2. During the course of GST audit conducted on the records of the assessee for the period from April 2018 to March 2019, it was observed from their financials that during the audit period, they have imported their major input (vegetable oils) from overseas involving payment of ocean freight. In terms of Notf. No.8/2017-Integrated Tax (Rate), dated 28th June, 2017 & Notf. No.10/2017-Integrated Tax (Rate), as amended, where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the Customs station of clearance in India, the person liable to pay the IGST under reverse charge has been specified to be the Imported recipient of the goods, as defined in clause (26) of Section 2 of the Customs Act, 1962, located in the taxable territory. However, it was observed during the audit that the assessee have not discharged the said IGST liability under reverse charge as required.” 4. 3 12 wp 5191-21-c
to which response was given by the Respondents by filing reply affidavit on 27 October 2021 contending as follows:
“6. 2018 filed by M/s Mohit Minerals Pvt Limited is assailed before Hon’ble Supreme Court in Special Leave Petition (Civil) No.13958 of 2020 and other connected SLPs. The same are likely to be listed for hearing and final disposal on 26.10.2021. Thus the legal competency or otherwise, as contended by the Petitioner, for levy of tax on the said subject matter in terms of IGST Notification No 8/2017 dated 28.06.2017 and Notification No.10/2017 as amended has not attained finality. Since the matter is still sub- judiced, the Petitioners contention that the demand is unsustainable is pre-emptive and not legally correct.”
Learned counsel for the Petitioner informs that the Hon’ble Civil Appeal No.1390-22 and ors dated 19 May 2022. Priya Soparkar
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We do not find any purpose in the case, either for the Petitioner or the Commissioner to invest their time and energy on the issue, if the position on which the show cause notice is founded, already stands concluded in the light of the decision of the Hon’ble Supreme Court.
Accordingly, writ petition is allowed and the impugned show cause notice dated 31 March 2019 is quashed and set aside.
(ABHAY AHUJA, J.)
(NITIN JAMDAR, J.) …. Priya Soparkar
Reproduced from the public record of the Bombay High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.