IGST Exemption: Free-on-Board & CIF Services Under RCM

Introduction

In a significant legal development, the Hon’ble Bombay High Court recently delivered a groundbreaking judgment in the case of M/s. Agarwal Coal Corporation Pvt. Ltd. v. Union of India. The court addressed the contentious issue of whether Integrated Goods and Services Tax (IGST) is payable under the Reverse Charge Mechanism (RCM) for services provided in Free-on-Board (FOB) Contracts.

Facts of the Case

M/s. Agarwal Coal Corporation Pvt. Ltd. (“the Petitioner”) challenged a Show Cause Notice (SCN) issued by the Revenue Department regarding IGST liability under RCM for services in FOB Contracts. The Petitioner argued that the SCN was issued without jurisdiction, citing the invalidity of the Notification based on the Mohit Minerals case.

Issue

The central issue before the court was whether IGST is payable under RCM for services provided in FOB Contracts, considering the legal precedents established by previous judgments.

Held

The Hon’ble Bombay High Court, drawing on legal principles and precedents, delivered a decisive ruling. The court observed the applicability of the Mohit Minerals case to the present matter, emphasizing that the Notification, including its provisions on IGST liability for FOB Contracts, had been declared ultra vires.

In light of this, the court held that the SCN issued to the Petitioner was without jurisdiction. Consequently, the writ petition was allowed, and the Petitioner was entitled to a refund of the tax amount deposited under protest, along with interest.