TMI Blog2020 (12) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... us statutes and the Constitution of India. Therefore, the question proposed before the Advance Ruling Authority is not whether the liability exists or not, but whether such a liability is constitutionally valid or not. This Authority is of the view that based on the detailed reading and understanding of Section 97 of the CGST Act. an application for Advance Ruling can only be made to determine the liability to pay tax on any goods or services or both. Therefore, no application can be made to determine whether the liability is constitutionally valid or not. Such power rests only with the courts. - Order No. 18/2020, Case No. 09/2020 - - - Dated:- 8-12-2020 - SHRI MANOJ KUMAR CHOUBEY AND SHRI VIRENDRA KUMAR JAIN, MEMBER Present on behalf of applicant : Shri Kapil Binakiya, CA PROCEEDINGS (Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods Service Tax Act, 2017) 1. M/s. KHAITAN CHEMICALS AND FERTILISER (hereinafter referred to as the Applicant) is an autonomous not for profit, registered society under Department of Micro. Small and Medium Enterprises. Government of Madhya Pradesh. The Applicant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Phosphate which is imported from various countries like Egypt. Jordan Morocco and also procured locally within country. The company is registered under the GST laws for payments of GST/IGST besides being paying the customs duty on import of Rock Phosphate. 5.3. Rock phosphate and other materials is imported only on CIF (sum of Cost, Insurance Freight) basis. In CIF basis purchases. the freight invoice is issued by the foreign shipping line to the foreign exporter. The importer (i.e. Khaitan Chemicals Fertilizers Ltd.) is concerned only with the purchase of goods and the suppliers of rock phosphate are responsible for transportation of goods upto the custom frontier of India. The company neither have any invoice of ocean freight nor has any idea of payments and the amount of occan freight by the foreign exporter. 5.4. Reference to various acts for levying IGST on imported goods and determining the value for calculation of IGST: Section 5(1) of the IGST Act, 2017 provides for circumstances when IGST would he applicable. It states IGST is charged on all interstate supplies (goods or services or both) except the supply of alcoholic liquor for home consumption. Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate). where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax. the same shall be deemed to be 10% of the CIF value (sum of cost. insurance and freight) of imported goods. As per Notification No. 10/2017-Integrated Tax (Rate), in case of services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. the whole of integrated tax leviable under section 5 of the said Integrated Goods and Services Tax Act. shall be paid on reverse charge basis by the recipient or the such services. Importer. as defined in clause (26) of section 2 of the Customs Act. 1962 (52 or 1962). located in the taxable territory shall be considered as the recipient of services. With reference to the above notifications, IGST is levied on freight components (Ocean Freight) and payable by the importer (KCFL) under reverse charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the transportation of the goods by the foreign seller as sought to be levied and collected from the writ-applicants as the importer of the goods. Gujarat High Court in this matter pronounced the judgement that as per section 14 of Customs Act, assessable value of goods includes freight amount which represent the expenditure on transportation of goods. IGST is already paid on freight element by including it in assessable value. Therefore. payment of IGST separately on the ocean freight will amount to double taxation. Thus. IGST cannot he imposed on the same freight amount by treating it as a supply of service since freight also suffers IGST as a part of the assessable value of imported goods. This is necessary to avoid the vice of double taxation. 5.10. The company imports on CIF basis, and therefore is not concerned about the freight and is not knowing even about the charges for the same, which is the sole responsibility of the supplier of the rock phosphate outside India. Thus, the company deems the freight amount to he 10% of the CIF value. 5.11. Therefore. the company firstly pays IGST on the total of CIF Value and Customs Duty. The CIF value referred here includes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company paying the IGST on Reverse Charge Mechanism on the amount of deemed ocean freight equal to 10% of the CIF value of goods imported. 2. The company also paid IGST on CIF value of goods imported, which includes value of goods imported + Freight + Custom Duty + Social Welfare Cess. 3. Since the company has already paid IGST On freight component and also paying IGST under RCM for deemed ocean freight equal to 10% of CIF value. which leads to double taxation on the ocean freight. 4. Therefore the company filed application for advance ruling under section 97(2)(e) of CGST Act Determination of the liability to pay tax on any goods or service of both for whether the company is required to pay IGST on Reverse Charge Mechanism on the amount of deemed ocean freight equal to 10% of the value of goods imported even after IGST has already been paid on CIF value at the time of import of goods. 5. The Applicant also submitted the requisite fees for Advance Ruling i.e. ₹ 5000 in CGST and ₹ 5000 in SGST on 29.10.2020. Hence the time limit for passing Advance Ruling begins from 29.10.2020. 6. DISCUSSIONS AND FINDINGS - 6.1. The Authority carefully conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to first judge if the question proposed before the Advance Ruling Authority is in fact falling under the said category in terms of common parlance. 6.6. From the principal assertions put forth by the applicant in their application. it appears that the levy of IGST on reverse charge on imports made on CIF basis on ocean freight is being challenged on the grounds that doing so would tantamount to double taxation. However, in order to opine whether double taxation exists or not. the Advance Ruling Authority would inevitably have to opine not only on the applicability of a notification issued under law, but also on the rules issued under the Customs Act. This is clearly outside the purview of aspects that the Advance Ruling Authority is competent to look into. 6.7. Furthermore, while the question proposed before the Authority is whether the liability to pay tax exists or not. the applicant himself is not denying the existence of such a liability. The only assertion is whether the existence of such a liability creates irregularities in respect of tax laws outside the limited applicability of the IGST Act. In other words, the existence of such a liability is not being chall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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