1.1 Brief of the Case

1.2 Background of the Case

• The petitioner was an importer who purchased goods on a CIF (Cost, Insurance, Freight) basis.
• Under this model, the foreign exporter arranged and paid for the shipping, including freight.
• The Government of India imposed IGST on ocean freight via reverse charge mechanism (RCM) through Notification No. 10/2017 – IGST (Rate).
• The importer, though not a direct party to the freight service, was made liable to pay tax.
• Mohit Minerals challenged this levy as violative of the GST Act and Constitution.

1.3 Key Legal Provisions Discussed

• Section 2(93) of CGST Act: Defines “recipient of service”.
• Section 5(3) of IGST Act: Allows Government to notify RCM services.
• Section 7(1)(b) of CGST Act: Taxable inter-State supply of goods or services.
• Article 265 of Constitution: No tax shall be levied or collected except by authority of law.
• Delegated legislation principles: Notifications cannot exceed the authority granted by the statute.

1.4 Petitioner’s Arguments

• The importer is not the recipient of service, since the service contract exists between two foreign parties (exporter and foreign shipping line).
• Freight is already included in the value of imported goods, and IGST is already paid on full CIF value.
• Levy of IGST on ocean freight results in double taxation.
• The Government exceeded its power by issuing notifications imposing tax without statutory backing.
• The tax attempts to levy on extra-territorial transactions, which is unconstitutional.

1.5 Respondent’s Arguments

• The Government argued that the importer indirectly benefits from the ocean transport and is thus a recipient of service.
• Under the composite nature of import, services like freight are integral, so taxation is justified.
• The tax on ocean freight was to create a level playing field for Indian shipping companies.
• Notifications are valid delegated legislation, authorized by the IGST Act.

1.6 Court’s Findings and Analysis

• Recipient of Service: The Court held that in CIF contracts, the importer is not the recipient, as the contract is between exporter and foreign shipping line.
• Double Taxation: Since IGST is already paid on CIF value (which includes freight), taxing freight separately would amount to double taxation.
• Extra-territorial Taxation: The services occur outside India between two non-residents. Indian GST law does not extend to such foreign-to-foreign transactions.
• Delegated Legislation Invalid: Notifications cannot go beyond what the statute permits. The Court held that Notification 10/2017 was ultra vires the IGST Act.

1.7 Court Judgments & Order

• The Supreme Court held that levy of IGST on ocean freight under reverse charge mechanism is unconstitutional.
• Notification No. 10/2017-IGST (Rate) and related provisions were struck down.
• The importer cannot be made liable to pay tax on a service he did not receive.
• Tax authorities were directed to not levy IGST on ocean freight under CIF contracts.

1.8 Significance of the Judgment

• This judgment brought major relief to importers, especially in the steel, coal, and other heavy import sectors.
• It reaffirms the limits of delegated legislation — tax laws must come from Parliament, not notifications.
• Ensures no double taxation, upholding the fundamental principles of GST.
• Clarified the scope of RCM and extra-territorial application of GST laws.
• Sets a strong precedent for judicial review of executive overreach in tax matters.

1.9 Conclusion

The Supreme Court, through this well-reasoned decision, clarified that taxation under GST must strictly follow statutory provisions. The attempt to tax a foreign-to-foreign transaction where the importer was not the service recipient was declared unconstitutional. The judgment ensures legal certainty, protection from double taxation, and respect for jurisdictional limits under India’s tax regime.