No IGST on Ocean Freight Services under RCM: Madras High Court directs Refund [Read Order]

The Madras High Court directed the Goods and Services Tax ( GST ) Department to provide refund to the petitioner the amount that has been collected in the form of Integrated Goods and Services Tax ( IGST ) on Ocean Freight Services under the Reverse Charge Mechanism ( RCM ).

The order was filed by the petitioner to quash the order in appeal dated 03.12.2021 and rectification order dated 28.06.2022 passed by the respondent 2 i.e The Commissioner of GST and Central Excise (Appeals), Madurai and Respondent 3 i.e, The Joint Commissioner of GST and Central Excise (Appeals), Madurai respectively and to direct the respondents to forthwith sanction and grant the refund of Rs.13,147/- along with appropriate interest for the month of July 2019.

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The Counsel representing the Petitioner as well as the counsel representing the respondents submitted that the issue in the case was already stands covered by the Hon’ble Supreme Court in 2022 (61) GSTL 257 (SC) conforming the judgment of Gujarat High Court, wherein it was held that the levy of GST on Ocean Freight Services vide notification 8/2017-IT(Rate), dated 28.07.2017 and the Entry of the Notification No.10 of 2017-IT(Rate), dated  28.06.2017 was struck down.

The relevant portions of the judgment are, “The issue raised in the writ petition was already allowed in favor of the assessee by the Hon'ble Gujarat High Court in the case of Mohit Minerals V. Union of India, reported in 2020 (33) GSTL 321 (Guj.) whereby the Notification 8/2017 IT(Rate) dated, 28.07.2017 and the Entry of the Notification No.10 of 2017-IT(Rate), dated 28.06.2017 was struck down”.

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Subsequently the Department preferred SLP before the SC, but the appeal was dismissed confirming the order of Gujarat HC holding that the levy of GST on Ocean Freight Services vide the notification stated supra is ultra vires section 8 of the CGST Act as well as section 5(3) of the IGST Act and accordingly no GST is leviable on such service.

So based on this the petitioner, Viterra India Pvt Ltd, Thoothukudi, Tamil Nadu filed rectification application on 30.05.2022 under section 161 of CGST to rectify the order-in-original on 03.12.2012, but the respondents rejected the application stating that the petitioner is having remedy before the Goods and Services Tax Appellate Tribunal. But due to the inexistence of the Tribunal the petitioner opted to file the present writ petition.

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The Single bench of Justice Mohammed Shaffiq observed that it is an admitted fact that the issue of levy of GST on Ocean Freight Service is settled by the Hon’ble SC and notification 8/2017-IT(Rate) dated, 28.07.2017 and the Entry of the NOtification No.10 of 2017-IT (Rate), dated 28.06.2017 is struck down as ultra vires. So in such circumstances, the respondents are not empowered to collect GST for Ocean Freight Services and the respondents are bound to refund the amount collected.

It was directed to refund an amount of Rs.45,93,793/- which is liable to be refunded to the petitioner by the respondent and the court is leaving it open to parties to adjudicate the same. The Writ petition is disposed of on above terms.

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