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Analysis on Supreme Court Judgment in Mohit Minerals – Striking Down the Levy on Ocean Freight
Introduction:
The entire country is swayed by the Honourable Supreme Court’s verdict in the matter of Mohit Minerals Private Limited[1]. This is completely unexpected decision after what we have seen in VKC Footsteps India Private Limited. The Supreme Court has struck down the obligation to pay tax under reverse charge mechanism by the importer. Earlier, the Gujarat High Court qua writ petition filed by Mohit Minerals Private Limited[2], has held the notifications bringing the tax under reverse charge mechanism are ultra-vires the law. The said judgment was appealed before the Supreme Court by Revenue, which led to the current judgment. In this write -up, we shall analyse the decision delivered by Supreme Court.
The entire issue is, whether the importer is liable to pay tax on ocean freight services provided by foreign shipping line qua the foreign supplier under the reverse charge mechanism for the CIF contracts? The position under service tax law[3] and the analysis of the decision of Gujarat High Court[4] can be accessed here.
The Supreme Court after listening to the appellant (the Union of India) and the respondent (Mohit Minerals Private Limited) has opined on various issues, which are summarised hereunder: