Sunrise Timply Company Pvt. Ltd. vs Union of India & Others
- Calcutta High Court
(IGST on Ocean Freight Not Leviable Even for Pre-2023 Period –
Mohit Minerals Applied Retrospectively)
Court, Bench and Case
Details
The present writ petition
was decided by the Hon’ble Calcutta High Court exercising its Constitutional
Writ Jurisdiction (Appellate Side). The matter was heard and decided by Hon’ble
Justice Om Narayan Rai in WPA 10415 of 2025. The judgment was pronounced on 19
January 2026 after hearing the parties on the same day. The case assumes
significance as it deals with the levy of IGST on ocean freight under reverse
charge mechanism despite the authoritative judgment of the Hon’ble Supreme
Court in Mohit Minerals (P.) Ltd.
Parties to the Dispute
The petitioner in the
present case was Sunrise Timply Company Pvt. Ltd., a company engaged in import
of goods. The respondents were the Union of India and the concerned State and
GST authorities, including the Central Goods and Services Tax authorities who
had initiated proceedings against the petitioner.
Factual Background of the
Case
The dispute arose from
audit observations made by the GST department for the period July 2017 to March
2018. The department alleged that the petitioner had failed to discharge
Integrated Goods and Services Tax on ocean freight in respect of goods imported
under CIF contracts, invoking the reverse charge mechanism.
Pursuant to audit
observations, a show cause notice dated 8 September 2021 was issued under
Section 74 of the Central Goods and Services Tax Act, 2017 and the West Bengal
Goods and Services Tax Act, 2017. The petitioner submitted its reply on 23
October 2021, contending that no IGST was payable on ocean freight in view of
the judgment of the Gujarat High Court in Mohit Minerals (P.) Ltd. v. Union of
India.
Subsequently, another
notice dated 13 July 2022 was issued, to which the petitioner again responded
on 8 August 2022, reiterating its stand that the levy itself was
unconstitutional and unsustainable.
Reliance on Mohit
Minerals Judgment
Throughout the
proceedings, the petitioner consistently relied upon judicial precedents, first
the Gujarat High Court judgment and later the judgment of the Hon’ble Supreme
Court in Union of India v. Mohit Minerals (P.) Ltd., wherein the Supreme Court
categorically held that IGST on ocean freight under reverse charge mechanism in
CIF contracts was not leviable.
After personal hearing
granted on 26 September 2024, the petitioner filed written submissions on 7
October 2024, again drawing attention to the Supreme Court judgment and
subsequent High Court decisions following the same legal position.
Order-in-Original Passed
by Proper Officer
Despite the binding
nature of the Supreme Court judgment, the Proper Officer passed an
order-in-original dated 30 January 2025, confirming demand of IGST amounting to
₹18,61,047/- on account of ocean freight for the period in question. The
officer took the view that the amendment to Notification No. 10/2017, whereby
Entry 10 was deleted with effect from 1 October 2023, was prospective and
therefore did not apply to earlier periods.
Rectification Application
and Its Rejection
Aggrieved by the
order-in-original, the petitioner filed an application for rectification,
pointing out that the levy was contrary to law declared by the Supreme Court
and therefore constituted an error apparent on the face of record. However, the
rectification application was rejected by an order dated 25 March 2025, leading
the petitioner to approach the High Court under Article 226 of the
Constitution.
Submissions on Behalf of
the Petitioner
The petitioner argued
that the impugned order was wholly without jurisdiction as it sought to impose
a tax liability which had already been declared unconstitutional by the Hon’ble
Supreme Court. It was contended that once the Supreme Court held that IGST on
ocean freight was not leviable, the authorities were bound to follow the law
declared under Article 141 of the Constitution.
It was further argued
that the amendment to Notification No. 10/2017 was merely to remove redundant
provisions in light of the Supreme Court judgment and could not be used as a
basis to revive a levy which had already been struck down. Reliance was also placed
on a Division Bench judgment of the Calcutta High Court in MCPI Private
Limited, which had followed Mohit Minerals and rejected the revenue’s appeal.
Submissions on Behalf of
the Revenue
The revenue authorities
contended that the Supreme Court judgment in Mohit Minerals had been given
effect only prospectively by amending Notification No. 10/2017 with effect from
1 October 2023. According to the department, transactions undertaken prior to
that date continued to attract IGST on ocean freight.
It was argued that since
the amendment was not expressly retrospective, the petitioner could not claim
exemption from tax for the period July 2017 to March 2018. The Proper Officer,
therefore, justified the levy by interpreting the notification amendment as the
operative point of relief.
Issues for Determination
The primary issue before
the High Court was whether IGST on ocean freight could be levied for periods
prior to 1 October 2023 despite the Supreme Court judgment in Mohit Minerals. A
connected issue was whether a delegated legislation in the form of a notification
could override the interpretation of statutory provisions by the Supreme Court.
Court’s Analysis and
Findings
The High Court undertook
a detailed examination of the sequence of events and the reasoning adopted by
the Proper Officer. The Court noted that during the pendency of adjudication
proceedings, the Supreme Court had already delivered its judgment in Mohit
Minerals, clearly holding that the levy of IGST on ocean freight under reverse
charge was unsustainable.
The Court rejected the
reasoning of the Proper Officer that the Supreme Court judgment was prospective
merely because it did not explicitly state its retrospective application. The
Court reiterated the settled principle that a judgment of a Constitutional
Court declaring the law applies retrospectively unless expressly stated
otherwise.
Retrospective Operation
of Judicial Decisions
Relying upon settled
jurisprudence, including the Supreme Court decision in Kanishk Sinha v. State
of West Bengal, the High Court observed that while statutes are presumed to be
prospective, judicial pronouncements declaring the law operate retrospectively.
Therefore, the absence of an express declaration of prospectivity in Mohit
Minerals could not be used to limit its application.
Role of Notification No.
10/2017
The Court categorically
held that Notification No. 10/2017 was only clarificatory in nature and could
not override the statutory framework of the IGST Act. The amendment deleting
Entry 10 with effect from 1 October 2023 was merely to align the notification
with the law already declared by the Supreme Court and could not be construed
as granting relief only from that date.
The Court emphasized that
delegated legislation must operate within the four corners of the statute and
cannot trump statutory provisions or constitutional interpretation.
Error Apparent on the
Face of Record
The High Court held that
the order-in-original suffered from a patent error, as it ignored binding
precedent of the Supreme Court. Consequently, rejection of the rectification
application was also held to be unsustainable, since the levy itself was illegal.
Final Decision of the
High Court
In view of the above
findings, the High Court set aside the order-in-original dated 30 January 2025
as well as the rectification rejection order dated 25 March 2025. The writ
petition was allowed, and the proceedings initiated under Section 74 were quashed.
No order as to costs was passed.
Legal Significance of the
Judgment
This judgment reinforces
the binding nature of Supreme Court decisions on tax authorities and reiterates
that administrative convenience or delayed amendments cannot be used to defeat
settled legal positions. It also provides strong protection to taxpayers
against continued demands on ocean freight despite the clear law laid down in
Mohit Minerals.
Conclusion
The decision in Sunrise
Timply Company Pvt. Ltd. v. Union of India is a significant reaffirmation of
constitutional principles in GST administration. It clarifies that once a levy
is declared invalid by the Supreme Court, authorities cannot continue to enforce
it by relying on technical or prospective interpretations of notifications. The
judgment will serve as an important precedent for similarly placed importers
facing demands on ocean freight under GST.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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