A Single Bench of the Calcutta High Court observed that GST cannot be levied on ocean freight, thereby quashing a service tax demand of 28 crores.
The petitioner, M/s. LCL Logistix India Private Limited, is a multi-modal transport operator. A demand of service tax of over Rs.28 crores was raised on ocean freight charges being collected from exporters, along with interest and penalties under “business support service”.
A writ petition came to be filed. The Single judge dismissed the writ petition in light of alternate remedy of appeal to Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on the ground that pre-deposit cannot be a ground to entertain a writ petition.
The intra-Court appeal was filed by the appellant/writ petitioner in the appellant had challenged the order passed by the Commissioner, Service Tax (ii), Commissionerate, Kolkata, imposing tax on the subject transaction.
The Bench of Justice TS Sivagnanam, relied on the judgment of the Apex Court in the case of Union of India & Ors v. Mohit Minerals Pvt Ltd, wherein it was observed that “Inter-State supply is defined for the purposes of the charging under aegis of Section 5(1) of the Integrated Goods and Services Tax Act, 2017 and it was held that only the Union Government has power to specify categories of supply of goods or services or both where the tax shall be paid on a Reverse Charge Mechanism.”
The key provision is relevant to determine whether the taxable event is services supplied by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. The Court allowed the appeal and set aside the order confirming demand of service tax. The High court followed judgment of the Supreme Court in the case of Mohit Minerals holding that no GST can be demanded on ocean freight.
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