BLA Coke Pvt. Ltd. Vs Union Of India & Ors. (Gujarat High Court)
Conclusion: Integrated Goods and Services Tax ( IGST ) on ocean freight could not be levied on Free on Board ( FOB ) transactions also as once the IGST was paid on value of goods including the freight, cost and insurance, it would not make any difference between the transactions was on CIF basis or FOB basis
Held: Assessee – company was engaged in the manufacturing and sale of hard coke, which imported coking coal both on CIF ( Cost, Insurance, and Freight ) and FOB bases. Assessee argued that while CIF transactions included freight costs in the consolidated invoice raised by the foreign exporter, in FOB transactions, the freight was paid directly by assessee to the shipping line. Importantly, IGST was paid on the total value of imports, inclusive of freight, at the time of customs clearance. Assessee claimed that despite fulfilling the tax obligations on both CIF and FOB transactions, the GST department issued a show cause notice rejecting their refund claim for IGST already paid on ocean freight. Assessee contended that the ruling in Mohit Minerals, which struck down a similar notification regarding the levy of IGST on ocean freight, applied equally to FOB contracts. It was held that IGST as per proviso to section 5(1) was leviable on the on the value as determined in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) at the point when duties of customs were levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962)and value of goods include the cost, freight and insurance at the place of importation and therefore, once the IGST was paid on value of goods including the freight, cost and insurance, it would not make any difference between the transactions was on CIF basis or FOB basis, as in both the cases IGST would be payable as per provision of section 5(1) of the IGST Act, 2017 on the value of goods as per the provisions of the Customs Act. As held by the Hon’ble Apex Court in case of Union of India and another v. Mohit Minerals Private Limited through Director as well as by Bombay High Court in case of M/s. Agarwal Coal Corporation Pvt. Ltd., when the notification itself was struck down, the respondent authorities could not insist for levy of IGST on the amount of ocean freight in case of transaction FOB basis also.
