The Union of India filed appeals challenging the judgment of the Gujarat High Court dated 23 January 2020, which had struck down Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate), both dated 28 June 2017, as unconstitutional. These notifications levied Integrated Goods and Services Tax (IGST) on ocean freight paid by a foreign seller to a foreign shipping line in cases where goods were imported into India on a Cost-Insurance-Freight (CIF) basis, making the Indian importer liable to pay tax on a reverse charge basis.

The respondent, M/s Mohit Minerals Pvt. Ltd., imported coal under CIF contracts, where the freight was paid abroad by the exporter. It contended that it was not the “recipient” of the shipping service, that IGST on ocean freight amounted to double taxation since the value of freight was already included in the assessable value of imported goods for customs duty, and that the notifications exceeded the powers conferred by the IGST Act.

The Supreme Court upheld the Gujarat High Court’s decision, declaring the levy of IGST on ocean freight as unconstitutional. It held that under a CIF contract, the importer is not the recipient of transportation service—the contractual relationship exists between the foreign exporter and the foreign shipping line. The impugned notifications were ultra vires Section 5(3) of the IGST Act, 2017 since they imposed tax liability on a third party who was not the recipient of service.

The Court further held that the levy resulted in double taxation because the value of ocean freight was already included in the assessable value of imported goods under Section 3(7) of the Customs Tariff Act, 1975 and subjected to IGST at the time of import. The Court ruled that the GST Council’s recommendations are not binding on the Union and States but have persuasive value under Article 279A of the Constitution. Accordingly, all appeals filed by the Union of India were dismissed.