Case Law Details
Saraogi Udyog Pvt. Ltd. Vs Union Of India (Andhra Pradesh High Court)
The Andhra Pradesh High Court allowed the writ petitions challenging GST demands raised on ocean freight paid under Free on Board (F.O.B.) contracts in the course of coal imports. The petitioners, engaged in the business of importing and selling coal, had imported coal under both Cost, Insurance and Freight (C.I.F.) and F.O.B. contracts. Show-cause notices were issued for different periods alleging that GST was payable under the reverse charge mechanism (RCM) on ocean freight incurred in such imports. Subsequent assessment orders dropped the proposals relating to C.I.F. contracts but confirmed GST liability on freight paid under F.O.B. contracts.
The petitioners challenged these assessment orders on the ground that the levy was based on Notification No.08/2017 and Notification No.10/2017, which had already been quashed by the Gujarat High Court in Mohit Minerals Pvt. Ltd. and later affirmed by the Supreme Court. The petitioners contended that GST on ocean freight could not be levied either in C.I.F. or F.O.B. contracts as it would amount to double taxation of the same transaction.
The respondents argued that the Supreme Court judgment in Mohit Minerals was confined only to C.I.F. contracts and did not decide the taxability of freight under F.O.B. contracts.
The High Court noted that although the Supreme Court observations were made in the context of C.I.F. contracts, this Court had earlier held in W.P.No.1268 of 2021 and batch that the principle against double taxation would equally apply to both C.I.F. and F.O.B. contracts. The Court reiterated that taxing supply of services after the same cost had already suffered tax would amount to impermissible double taxation.
Relying on its earlier judgment, the High Court held that GST on ocean freight paid by the petitioners during import of coal under F.O.B. contracts was not leviable. Consequently, the Court set aside the assessment orders dated 21.02.2023 and 31.01.2023 to the extent they levied GST on freight paid during import transactions. The writ petitions were accordingly allowed without any order as to costs.
Counsel for the Petitioner: .C SANJEEVA RAO
FULL TEXT OF THE ANDHRA PRADESH HIGH COURT JUDGMENT
The Court made the following Common Order:
(per Hon’ble Sri Justice R. Raghunandan Rao)
Since the issues raised in both these Writ Petitions are one and the same, they are being disposed of, by way of this common order.
2. The petitioner in W.P.No.12903 of 2023, is in the business of importing and selling coal to local customers. In the process of such import, the petitioner had purchased coal, on C.I.F. basis as well as on F.O.B. basis. The petitioner was served with a show-cause notice, dated 28.02.2022, for the period, July, 2017 to March, 2021, calling upon the petitioner to show cause why G.S.T., on a reverse charge mechanism basis, should not be collected from the petitioner, in relation to the ocean freight charges, which had been incurred either on C.I.F. basis or on F.O.B. basis. After, hearing the petitioner, the 2nd respondent had passed an order of assessment, dated 21.02.2023, confirming the show-cause notice and raised a demand against the petitioner. In this order of assessment, the 2nd respondent, dropped the proposal, in relation to freight, paid on C.I.F. basis and levied tax, on R.C.M. basis, on freight, in relation to F.O.B. contracts.
3. The petitioner in W.P.No.10536 of 2023 is also involved in the import of coal, which is subsequently sold to local customers. In the process of such import, this petitioner also purchased coal on C.I.F. basis as well as on F.O.B. basis. This petitioner received a show-cause notice, dated 30.08.2021, for the period, 2017-2018 & 2018-2019, calling upon the petitioner to show cause why G.S.T., on a reverse charge mechanism basis, should not be collected from the petitioner, in relation to the ocean freight charges, which had been incurred either on C.I.F. basis or on F.O.B. basis. After, hearing the petitioner, the 2nd respondent had passed an order of assessment, dated 31.01.2023, confirming the show-cause notice and raised a demand against the petitioner. In this order of assessment, the 2nd respondent, dropped the show-cause notice, in relation to freight, paid on C.I.F. basis and levied tax, on R.C.M. basis, on freight, in relation to F.O.B. contracts.
4. These petitioners have approached this Court, by way of these Writ Petitions, being aggrieved by the aforesaid orders of assessment.
5. The contention of the petitioners is that, the orders in both these cases came to be passed, on the basis of two Notifications, bearing Notification No.08/2017 & Notification No.10/2017, under which freight paid, in the course of import, came to be taxed. The petitioners would further submit that, these two Notifications came to be quashed by the Hon’ble High Court of Gujarat in the case of M/s. Mohit Minerals Pvt. Ltd. Vs. Union of India & another’ and the same was confirmed by the Hon’ble Supreme Court in the Appeal filed against the said judgment in the case of Union of India & another Vs. M/s. Mohit Minerals Pvt. Ltd.2. The petitioners would also contend that, in such circumstances and in view of the judgment of the Hon’ble Supreme Court mentioned above, G.S.T. cannot be collected on freight paid, under the C.I.F. basis or F.O.B. basis.
6. The respondents, on the other hand, have filed counter-affidavits, contending that, the judgment of the Hon’ble Supreme Court is restricted to freight, paid on C.I.F. basis and the question of whether freight, paid on F.O.B. basis can be subjected to tax, is left open.
7. Though the contention of the learned Standing Counsel, appearing for the respondents is correct, the fact remains that this Court, in its judgment, dated 05.02.2025, in W.P.No.1268 of 2021 & batch, had held in paragraph — 27, as follows:
“27. The aforesaid observations of the Hon’ble Supreme Court, are a reiteration of the principle that taxation of supply of services, even after the said cost of services had already been taxed, would not arise. We are alive to the fact that the observations of the Hon’ble Supreme Court were made only in the context of a C.I.F. contract. However, the basic principle that there cannot be double taxation of the same transaction, is a universal principle, which would apply to both C.I.F. contracts and F.O.B. contracts.”
8. In that view of the matter these Writ Petitions are allowed, setting aside the orders of assessment, dated 21.02.2023 & 31.01.2023, in relation to the issue of exigibility of G.S.T. on freight paid by the petitioners, in the course of importing coal. There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand closed.
Notes:-
1 2020 (1) TMI 974, 2020 (33) G.S.TL. 321 (Guj.)
2 2022 (5) TMI 968, (2022) 10 SCC 700
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