Union of India and Another v. M/s Mohit Minerals Pvt. Ltd.

Case snapshot

Sections / provisions: GST statutory provision - Section 1; GST statutory provision - Section 2; GST statutory provision - Section 2(10); GST statutory provision - Section 2(107); GST statutory provision - Section 2(109); GST statutory provision - Section 2(11); GST statutory provision - Section 2(14); GST statutory provision - Section 2(15); GST statutory provision - Section 2(21); GST statutory provision - Section 2(22); GST statutory provision - Section 2(26); GST statutory provision - Section 2(30); GST statutory provision - Section 2(31); GST statutory provision - Section 2(5); GST statutory provision - Section 2(6); GST statutory provision - Section 2(84); GST statutory provision - Section 2(87); GST statutory provision - Section 2(93)

Questions before the Court / Tribunal

• Issue and context: PART A A Introduction 1 The Union of India1 is in appeal against a judgment of a Division Bench of the Gujarat High Court dated 23 January 2020. The High Court allowed a petition instituted by the respondents under Article 226 for challenging the constitutionality of two notifications of the Central Government . The bone of contention is whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax 2 on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis. 2 The respondents import non-coking coal from Indonesia, South Africa and the U.S. by ocean transport on a ‘Cost -Insurance-Freight’3 basis which is supplied to domestic industries. The goods are transported from a place outside India, up- to the customs station in India. The respondent pay s customs duties on the import of coal,…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

A Introduction 1 The Union of India1 is in appeal against a judgment of a Division Bench of the Gujarat High Court dated 23 January 2020. The High Court allowed a petition instituted by the respondents under Article 226 for challenging the constitutionality of two notifications of the Central Government . The bone of contention is whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax 2 on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis. 2 The respondents import non-coking coal from Indonesia, South Africa and the U.S. by ocean transport on a ‘Cost -Insurance-Freight’3 basis which is supplied to domestic industries. The goods are transported from a place outside India, up- to the customs station in India. The respondent pay s customs duties on the import of coal, which includes the value of ocean freight. In the case of a CIF contract, the freight invoice is issued by the foreign shipping line to the foreign exporter, without the involvement of the importer. Ocean freight is paid by the importer only when goods are imported under a ‘Free- on-Board’4 contract. In the case of a high seas sale transaction, the coal is purchased from the original buyer before it arrives at Indian ports.

The respondent does not dispute the liability of integrated tax on supply of service of transportation when it imports goods on an FOB basis. 6 The respondent filed a writ petition b efore the Gujarat High Court challenging Notification 8/2017 and Notification 10/2017 13 on the grounds that: (i) the notifications are ultra vires the IGST Act and CGST Act; (ii) customs duty is levied on the component of ocean freight and the levy of IGST on the freight element in the course of transportation would amount to double taxation; (iii) though in the case of high sea sales, the importer is a different entity yet this regime would tax the respondent as the importer and the recipient of service; (iv) in the case of a CIF contract, the su pply of service of transport of goods in a vessel is by a foreign shipping line located in a non -taxable territory to an exporter located in a non11 “Customs Tariff Act” 12 “Customs Act” 13 Collectively referred as “impugned notifications”

Neither of them will apply if both the supplier and recipient of service are based outside India. The mere fact that the service terminates at India does not make the service of supply of transportation to be taking place in India; (viii) The provisions regarding time of supply, as contemplated in Section 20 of the IGST Act and applicable to Section 13 of the IGST Act dealing with supply of services, are applicable only vis -à-vis the actual recipient of the supply of service, which is the foreign exporter in this case; (ix) Section 15(1) of the CGST Act enables the determination of the value of the supply, only between the actual supplier and actual recipient of the service; (x) Since the importer is not the “recipient” of the service under Section 2(93) of the CGST Act, it will not be in a position to avail ITC under Section 16(1) of the CGST Act; and

B Submissions B.1 Union of India 10 Mr N Venkataraman, learned Additional Solicitor General 15 appearing on behalf of the appellant – the Union of India – urged the following submissions: A. Constitutional Architecture of IGST (i) Under Article 286(2), Parliament is empowered to formulate inter alia the principles for determining when a supply of goods or services takes place in any of the ways mentioned in Article 286(1), which includes imports; (ii) Article 269A enables the Union Government to levy GST on inter -state supplies. The explanation to Article 269A(1) creates a deeming fiction that a supply of goods or services in the course of import s is to be considered as a supply of goods or services or both in the course of interstate trade; (iii) Article 269A(5) enables Parliament to formulate the principles fo r determining the place of supply and when a supply of goods and services or both takes place in the course of inter -State trade or commerce. This constitutional mandate finds legislative effect in the IGST Act;

line and the foreign exporter is distinct and independent of the contract between the foreign exporter and the Indian importer. Their concomitance does not make them composite; (xix) What is sought to be taxed on the supply of goods on CIF value basis is traceable to the proviso to Section 5(1) read with Sections 3(7) and 3(8) of the Customs Tariff Act. On the other hand, what is sought to be taxed under IGST on reverse charge basis derives power under Section 5(1) (taxable person) read with Section 24(iii) of the CGST Act and Section 5(3) of the IGST Act and the impugned notifications; (xx) A Constitution Bench of this Court in McDowell and Company Ltd. v. Commercial Tax Officer 18 has held that a single element can constitute the basis of a levy and can also form par t of the value for another transaction. This cannot be termed as double taxation. G. Extra-territoriality (xxi) There is sufficient territorial nexus for the purpose of taxation since the importer is the final beneficiary of a service provided by a foreign shipping line by way of transportation up to the customs station of clearance in India. The transaction between the foreign exporter and the foreign shipping line has a nexus to the taxable territory of India. The importer is the beneficial owner of the goods at t he time of clearance. The appellant relies on the decisions of this Court in M/s Electronic Corporation of India v. Commissioner of

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

collaborative federalism which must be respected by upholding the constitutional validity of the impugned notifications. 11 The learned ASG has urged the following supplementary submissions by way of rejoinder: (i) The purpose of the integrated tax is to introduce a level playing field between foreign shipping lines and Indian shipping lines. It is a settled principle that to tax one subject, the revenue does not have to tax everything; (ii) The respondents have contended that the tax on an Indian importer is on a reverse charge basis, and therefore the importer does not fall under the definition of a ‘taxable person’. However, Section 2(107) of the CGST Act defines a taxable person as any person registered or liable to be registered under Section 22 or Section 24 of the CGST Act. Section 24 classifies persons liable for compulsory registration, and Section 24(iii) includes persons governed by the reverse charge mechanism; (iii) In Laghu Udyog Bharati v. Union of India 24, this Court struck down the imposition of service tax on a reverse charge basis since the legislature had failed to identify the persons on whom service tax could be imposed, enforced and collected. However, Section 2(107) read with Section 24(iii) of the CGST Act specifically identifies the importer as a taxable person who is liable to pay tax on a reverse charge basis. Section 24(iii) of the CGST Act also defines persons liable to pay tax on reverse charge as taxable persons;

(iv) The respondent s have argued that under Section 5(1) of the IGST Act, the taxable value can be determined only through Section 15 of the CGST Act and its corresponding rules. It was contended that Notification 8/2017 prescribes the valuation of 10% of CIF value for the f irst time, which violates Section 5(1) of the IGST Act. The appellant submits that in terms of Section 15(4) and Section 15(5) of the CGST Act, Rules 27 to 31 of the Central Goods and Service Tax Rules 2017 25 have been formulated. The Revenue can also assess the transaction by taking aid of a residual method prescribed under Rule 31 of the CGST Rules.

B.2 Respondent-assessees 12 Mr V Sridharan, learned senior counsel appearing on behalf of the respondents28 has urged the following submissions: (i) Under Section 5(4) of the IGST Act, the Government cannot specify the person liable to pay service tax on a reverse charge basis: (a) Section 5(3) of the IGST Act provides that the Government may specify the categories of supply of goods or services or both on which the tax shall be paid on reverse charge basis by the recipient of the goods or services. Thus, the power under Section 5(3) is only to specify the categories of supply, while the liability to pay tax is fixed on the recipient. The Government cannot specify the person liable to pay tax on reverse charge basis under Section 5(3); (b) Notification 10/2017 has been issued under Section 5(3) of the IGST Act. Since the power flows from Section 5(3), the Government can by a notification only specify the ‘categories of supply’, as the liability for tax has been determined by Parliament; (c) In contrast with Section 5(3), prior to the introduction of GST, Section 68(2) of the Finance Act 1994 provided that the service tax shall be paid by “such person…as may be pres cribed”. In that case, the liability of tax was not determined by the legislation;

Subsequently, the Government rescinded the above exemption notifications and issued separate notifications under the Customs Act and IGST Act; and (k) The Government has also issued various notifications exempting payment of IGST in case of import of goods on lease or temporary import basis. The intention of Government is not to impose IGST in case of import of goods that do not amount to supply. 13 Mr Harish Salve, learned senior counsel, appearing on behalf of the respondent 30 has submitted: (i) A CIF contract is an inclusive price covering cost of goods, insurance and freight payable for carriage of goods to the destination specified in the contract. The essence of the contract is that a seller having shipped the goods in accordance with the cont ract, can fulfil his part of the bargain by tendering to the buyer the proper shipping documents. If he does this, he is not in breach even if the goods are lost before such tender. In the event of a loss, the buyer must pay the price on tender of document s and his remedies lie against the carrier but not the seller; (ii) A CIF contract has two components: (i) price is paid for the freight, and (ii) the buyer is never obligated to pay it. The owner of the vessel who enters into a contract of affreightment has a privity of contract with the supplier of goods

Court / Tribunal analysis and reasoning

requirements in Article 279A(7). Every decision flows from one common source; (xxxi) The GST Council is the only constitutional body which acts as a converging point or a platform for both the f ederal units to work in a harmonious manner in structuring the goods and service tax, in the process of developing a harmonised national market for goods and services; (xxxii) Article 246A states that the power to legislate GST laws is only with the Union of India and the States. Neither can Article 279A override Article 246A nor can Article 246A be made subject to Article 279A . Judicial interpretation must strike a harmony such that Parliament, the state legislatures and the GST Council work in unison and harmony; and (xxxiii) The constitutional scheme therefore envisages a two-step process.

21 The Union Government has contended that the recommendations of the GST Council are binding on the legislature and the executive. It was submitted that since the recommendations are binding, the rule making power of the Government under the provisions of the IGST Act and CGST Act, exercisable on the ‘recommendations’ of the GST Council, are also very wide. The arguments of the Union Government are as follows: (i) A combined reading of Articles 246A and 279A elucidates that the GST Council is the ultimate decision- making body in framing the GST law since it is a constitutional body that acts as a converging platform for both the Union and the States; (ii) The functions and role of the GST Council are unique and incomparable to other constitutional bodies. Therefore, interpretations of other provisions of the Constitution do not have precedential value while interpreting the role of the GST Council;

(iii) The power of the Parliament and the State Legislature under Article 246A and the power of the GST Council under Article 279A must be balanced and harmonised, such that neither overrides the other: (a) Though Article 279A does not begin with a non- obstante clause overriding Article 246A, the latter would not override the former . The core theme of GST law – as it emanates from Article 279(6) – is cooperation and harmony. A system premised on cooperation cannot provide inter se supremacy. Therefore, Article 279A has rightly not been given an overriding effect over Article 246A; and (b) Article 246A vests the Parliament and the State legislatures with the power to enact laws on GST. This function, if delegated would amount to abdication of the P arliament’s constitutional function. Therefore, Article 246A cannot be made subject to Article 279A. (iv) The ordinary legislative process for enacting a statute is that bills are introduced and voted on by the legislature. However, Article 264A departs from this as th e framing of the policy, discussion on the policy, and decision making are vested wit h the GST Council. The Parliament or the State Legislature cannot legislate a law on GST under Article 246A independent of the recommendations of the GST Council. A reading of Sections 5, 6 and 22 of the IGST Act indicates that the legislature and the exec utive are bound by the recommendations of the GST Council on three preliminary provisions, namely charge, exemption and rule- making power. Therefore, P arliament

However, for this GST to be introduced at the State-level, it is essential that the States should be given the power of levy of taxation of all services. This power of levy of service taxes has so long been only with Centre. A Constitutional Amendment will be made for giving this power also to the States. Moreover, with the introduction of GST, burden of Central Sales Tax (CST) will also be removed. The GST at the State-level is, therefore, justified for (a) additional power of levy of taxation of services for the States, (b) system of comprehensive set -off relief, including set -off for cascading burden of CENVAT and services taxes, (c) subsuming of several taxes in the GST and (d) removal of burden for CST. Because of the removal of taxes in the GST, the burden of tax under GST on goods will, in general, fall.” 23 Parliament introduced the Constitution (One Hundred and Fifteenth Amendment) Bill 201142 which sought to amend the provisions of the Constitution to introduce the GST regime. The Speaker of the Lok Sabha referred the 2011 Amendment Bill to the Parliamentary Standing Committee on Finance. The Constitution (One Hundred and Twenty -Second Amendment) Bill 2014 43 was introduced after incorporating the recommendations of the Standing Committee. The 2014 Amendment Bill was introduced to replace almost all the indirect taxes that were levied by the State Governments and the Union Government , with a singular tax system to eliminate the cascading effect of multiple taxes and to provide for a

The concurrent list does not include any entry related to taxation. 46 For example, while the Union primarily has the power to impose income taxes, except from agriculture47, the State has the power to impose tax on agricultural income 48. Therefore, both the Union and the States had a separate and an exclusive domain over specific heads of taxation. The Union and the State could not impose tax under the same head since the concurrent list did not include an entry for taxes. This Court, in its decision in Hoecst Pharmaceuticals Ltd. v. State of Bihar 49, recognised the exclusive powers held by the Union and the State on taxation.

76. It would therefore appear that there is a distinction made between general subjects of legislation and taxation. The general subjects of legislation arc dealt with in one group of entries and power of taxation in a separate group. In M.P.V. Sundararamier & Co. v. State of A.P. [AIR 1958 SC 468 : 1958 SCR 1422 : (1958) 9 STC 298] this court dealt with the scheme of the separation of taxation powers between the Union and the States by mutually exclusive lists. In List I, Entries 1 to 81 deal with general subjects of legislation; Entries 82 to 92- A deal with taxes. In List II, Entries 1 to 44 deal with general subjects of legislation; Entries 45 to 63 deal with taxes.

Operative decision and relief

149 For the reasons stated above, the appeals are accordingly dismissed. 150 Pending application(s) if any, stand disposed of.

Ratio and legal principle

The narrow proposition associated with Union of India and Another v. M/s Mohit Minerals Pvt. Ltd. concerns issue and context: part a a introduction 1 the union of india1 is in appeal against a judgment of a division bench of the gujarat high court dated 23 january 2020. the high court allowed a petition instituted by the respondents under article 226 for challenging the constitutionality of two notifications of the central government . the bone of contention is whether an indian importer can be subject to the levy of integrated goods and services tax 2 on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis. 2 the respondents import non-coking coal from indonesia, south africa and the u.s. by ocean transport on a ‘cost -insurance-freight’3 basis which is supplied to domestic industries. the goods are transported from a place outside india, up- to the customs station in india. the respondent pay s customs duties on the import of coal,… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in Civil Appeal No. 1390 of 2022 and connected appeals.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Disposed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Issue and context: PART A A Introduction 1 The Union of India1 is in appeal against a judgment of a Division Bench of the Gujarat High Court dated 23 January 2020. The High Court allowed a petition instituted by the respondents under Article 226 for challenging the constitutionality of two notifications of the Central Government . The bone of contention is whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax 2 on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis. 2 The respondents import non-coking coal from Indonesia, South Africa and the U.S. by ocean transport on a ‘Cost -Insurance-Freight’3 basis which is supplied to domestic industries. The goods are transported from a place outside India, up- to the customs station in India. The respondent pay s customs duties on the import of coal,… Its practical value lies in the way the Supreme Court of India connected the governing provisions—GST statutory provision - Section 1; GST statutory provision - Section 2; GST statutory provision - Section 2(10); GST statutory provision - Section 2(107); GST statutory provision - Section 2(109); GST statutory provision - Section 2(11); GST statutory provision - Section 2(14); GST statutory provision - Section 2(15); GST statutory provision - Section 2(21); GST statutory provision - Section 2(22); GST statutory provision - Section 2(26); GST statutory provision - Section 2(30); GST statutory provision - Section 2(31); GST statutory provision - Section 2(5); GST statutory provision - Section 2(6); GST statutory provision - Section 2(84); GST statutory provision - Section 2(87); GST statutory provision - Section 2(93)—to the procedural posture and evidence before it.

The authority level is Supreme Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of GST statutory provision - Section 1; GST statutory provision - Section 2; GST statutory provision - Section 2(10); GST statutory provision - Section 2(107); GST statutory provision - Section 2(109); GST statutory provision - Section 2(11); GST statutory provision - Section 2(14); GST statutory provision - Section 2(15); GST statutory provision - Section 2(21); GST statutory provision - Section 2(22); GST statutory provision - Section 2(26); GST statutory provision - Section 2(30); GST statutory provision - Section 2(31); GST statutory provision - Section 2(5); GST statutory provision - Section 2(6); GST statutory provision - Section 2(84); GST statutory provision - Section 2(87); GST statutory provision - Section 2(93) and the decision date 2022-05-19; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Union of India and Another v. M/s Mohit Minerals Pvt. Ltd., the proceeding is Civil Appeal No. 1390 of 2022 and connected appeals, and the decision is dated 2022-05-19. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as Hon'ble the Chief Justice; Hon'ble Mr. Justice Surya Kant; Hon'ble Mr. Justice P.S. Narasimha. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with GST statutory provision - Section 1; GST statutory provision - Section 2; GST statutory provision - Section 2(10); GST statutory provision - Section 2(107); GST statutory provision - Section 2(109); GST statutory provision - Section 2(11); GST statutory provision - Section 2(14); GST statutory provision - Section 2(15); GST statutory provision - Section 2(21); GST statutory provision - Section 2(22); GST statutory provision - Section 2(26); GST statutory provision - Section 2(30); GST statutory provision - Section 2(31); GST statutory provision - Section 2(5); GST statutory provision - Section 2(6); GST statutory provision - Section 2(84); GST statutory provision - Section 2(87); GST statutory provision - Section 2(93). The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Disposed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is SUPREME_COURT_FINAL_REVIEW_CURATIVE_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• GST statutory provision - Section 1 — apply the exact version considered in the judgment.
• GST statutory provision - Section 2 — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(10) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(107) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(109) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(11) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(14) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(15) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(21) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(22) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(26) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(30) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(31) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(5) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(6) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(84) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(87) — apply the exact version considered in the judgment.
• GST statutory provision - Section 2(93) — apply the exact version considered in the judgment.

Case network

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• M/S K.K. CONSTRUCTION CO. v. COMMISSIONER OF SGST, DELHI & ANR. — Delhi High Court · Disposed
• JATIN GROVER v. COMMISSIONER OF DGST & ORS. — Delhi High Court · Disposed
• Union of India and Others v. VKC Footsteps India Pvt. Ltd. — Supreme Court of India · Disposed

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