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Whether IGST is payable under RCM for services in Free-on-Board Contract?

25 May, 2024
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No, the Honorable Bombay High Court in the case of M/s. Agarwal Coal Corporation Pvt. Ltd. v. Union of India [2024 TAXONATION 606 (BOMBAY)] set aside the Show Cause Notice issued by the Revenue Department based on the Notification No. 08/2017-Integrated Tax (Rate) dated June 28, 2017 which has been held ultra vires as per the judgment of Division Bench of Honorable Gujarat High Court in the case of the Mohit Minerals Pvt. Ltd. v. Union of India [Special Civil Application No. 726 of 2018 dated January 23, 2020] which was further affirmed by the Honorable Supreme Court in the case of Union of India and Anr. v. Mohit Minerals Pvt. Ltd. [Civil Appeal No. 1390 of 2022 dated May 19, 2022]The HonorableHigh Court further held that SCN should not have been issued for payment of IGST on reverse charge basis concerning the Free-on-Board contract-related services as the Notification, which includes payment of IGST on reverse charge basis on services concerning Cost, Insurance, and Freight and FOB Contract, has been held as ultra vires.

 

Author’s Comments

The Honorable Bombay High Court relied upon its judgment in the case of Liberty Oil Mills v. Union of India [Writ Petition No. 5191 of 2021 dated January 27, 2023] wherein the Honorable High Court set aside the Show Cause Notice issued by the Department by placing reliance upon the Notification, for non-payment of IGST on Ocean Trade Services. The Honorable Court noted that in the cases filed by the Petitioner before the Honorable Delhi High Court Agarwal Coal Corporation Pvt. Ltd. v. Union of India and Anr. (Writ Petition (C) No. 8720/2017 dated August 24, 2022) and Honorable Madhya Pradesh High Court in the case of M/s. Agarwal Fuel Corporation Pvt. Ltd. v. Union of India & Anr. [Writ Petition No. 19382 of 2017 dated January 30, 2023] which involved both CIF and FOB Contracts, wherein the Honorable High Courts relying upon the judgment of the Honorable Supreme Court in Mohit Minerals case, quashed the Notification and related entries thereto, thereby holding that the Petitioner is not liable to pay IGST on ocean freight for services supplied by 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 of India. Further the contention made by the department that the decision in the Mohit Minerals case is only applicable in the case of CIF contracts and not FOB contract is not tenable as the whole Notification has been held ultra vires

 

Topic-M/s. Agarwal Coal Corporation Pvt. Ltd. v. Union of India

Citation-2024 TAXONATION 606 (BOMBAY

Author-CA Ritesh Arora

 

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