Firmenich Aromatics Production India Pvt. Ltd. Vs Union of India & Ors. (Bombay High Court)
No IGST/ Service Tax on Ocean Freight under CIF Contracts – Importer Not ‘Recipient’ and Levy Violates Composite Supply Principle: Bomaby High Court
Importers purchasing goods under CIF contracts are not liable to pay IGST or service tax on ocean freight under the reverse charge mechanism, the Bombay High Court held in a significant ruling. The Court observed that under CIF contracts, the transportation service is arranged between the foreign exporter and the foreign shipping line, and therefore the Indian importer is neither the service provider nor the recipient of the ocean freight service. It held that taxing importers for such services amounts to imposing tax liability on a third party beyond the charging provisions of the Finance Act, 1994. The Court further ruled that levy of IGST on ocean freight violates the composite supply principle under Sections 2(30) and 8 of the CGST Act because importers already pay IGST on the composite value of imported goods including freight and insurance. Relying on earlier decisions in Sal Steel India Ltd., Mohit Minerals Pvt. Ltd., and Sanathan Textiles Pvt. Ltd., the Court quashed the show cause notice and related communications and permitted refund claims subject to unjust enrichment principles.
