Comprehension
In the present case, the levy of IGST on the supply of ocean freight services under the reverse charge mechanism on the importer, when the value of such service is already included in the transaction value of imported goods, amounts to double taxation. The concept of double taxation implies that the same subject matter is taxed twice when it should be taxed only once. The GST law, as framed, does not envisage taxation of a transaction twice, and the fundamental principles of GST do not support such an imposition. Further, the importer, who is not the recipient of the service but is treated as a deemed recipient under the reverse charge mechanism, cannot be made liable to pay tax on a service that they have not directly availed. This stretches the scope of reverse charge mechanism beyond its intended purpose, which is to simplify tax collection by shifting the liability to pay tax from the service provider to the service recipient, particularly in cases where the service provider is located outside India and does not have a presence within the taxable territory. Moreover, the constitutional framework requires that a tax should be levied with legislative competence and should not contravene any fundamental rights guaranteed under the Constitution. The imposition of IGST on ocean freight under the reverse charge mechanism without proper legislative backing undermines the very essence of taxation principles enshrined in the Constitution of India.
(This extract is taken from Mohit Minerals v. Union of India CA No. 1390/2022)
Question: 1

According to the Mohit Minerals Pvt. Ltd. v. Union of India judgment, what constitutes double taxation in the context of GST on ocean freight?

Updated On: Jan 13, 2026
  • Taxing both the importer and the exporter for the same service
  • Tax not payable on ocean freight under the RCM for CIF imports
  • Taxing the service provider and the service recipient for the same service
  • Taxing the importer for both the goods and the services separately
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The Correct Option is B

Solution and Explanation

The Mohit Minerals Pvt. Ltd. v. Union of India case examined double taxation under GST concerning ocean freight. IGST levied on importers under the reverse charge mechanism (RCM) for ocean freight, already included in the imported goods' value, constitutes double taxation. GST aims to prevent duplicate taxation. The ruling determined that: Tax is not due on ocean freight under the RCM for CIF imports. The RCM intended to simplify tax by shifting the tax payment responsibility to the service recipient, particularly when the service provider is foreign. However, the importer, acting as a deemed recipient under RCM, faces unwarranted tax liability without directly receiving the service. This contradicts GST principles and lacks sufficient legal support under Indian constitutional tax provisions.

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Question: 2

Assertion (A): The importer should not be liable to pay GST on ocean freight under the reverse charge mechanism if they are not the direct recipient of the service.
Reason (R): The reverse charge mechanism is intended to shift the tax burden from service providers located outside India to the service recipients within India.

Updated On: Jan 13, 2026
  • Both A and R are true, and R is the correct explanation of A
  • Both A and R are true, but R is not the correct explanation of A
  • A is true, but R is false
  • A is false, but R is true
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The Correct Option is A

Solution and Explanation

Assertion (A): An importer shouldn't pay GST on ocean freight via reverse charge if not the direct service recipient. This is because reason (R): The reverse charge collects tax from Indian service recipients when the provider is outside India. The connection between the assertion and reason is explained below:
  1. Avoiding Double Taxation: Importing includes ocean freight value, already taxed with GST. Applying reverse charge would tax the same service twice.
  2. Indirect Recipient: The importer is considered a deemed recipient, even without directly using the freight service. Applying reverse charge in this case misuses the mechanism.
  3. Reverse Charge Purpose: Reverse charge facilitates tax collection when the service provider is outside India. It shifts the liability to the Indian recipient.
  4. Legal Compliance: Tax principles avoid double taxation. Imposing IGST without proper legal basis contradicts constitutional principles.
Conclusion: The assertion and reason are true and related. The reverse charge aims for tax integrity, not to unfairly tax entities not directly using the service.
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Question: 3

Consider the following statements regarding the Mohit Minerals Pvt. Ltd. v. Union of India judgment:
1. The Supreme Court ruled that imposing GST on ocean freight charges under the reverse charge mechanism leads to double taxation
2. The importer, not being the direct recipient of the service, should not be liable to pay GST on ocean freight
3. The judgment emphasized that tax laws must have proper legislative backing to prevent contravention of fundamental rights
Which of the statements given above are correct?

Updated On: Jan 13, 2026
  • 1 and 2 only
  • 1 and 3 only
  • 2 and 3 only
  • 1, 2 and 3
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The Correct Option is D

Solution and Explanation

In the Mohit Minerals Pvt. Ltd. v. Union of India case, the Supreme Court addressed whether GST on ocean freight under the reverse charge mechanism resulted in double taxation. The Court's findings were:
  1. GST on ocean freight constitutes double taxation because the freight cost is already included in the import value. Taxing the same item twice violates the core GST principle of single taxation per transaction.
  2. The importer is not the direct service recipient under the reverse charge mechanism, suggesting they shouldn't be liable for GST on ocean freight. This mechanism is designed for situations where the service provider is outside India, not for making the importer liable when they aren't the direct recipient.
  3. The judgment highlighted the importance of proper legislative basis for tax laws. Imposing taxes without such backing, especially if affecting fundamental rights, can violate constitutional principles. Any tax must be legislatively authorized and compliant with the Indian Constitution.
Based on these findings, all three statements accurately reflect the Mohit Minerals Pvt. Ltd. v. Union of India judgment.
The correct answer is: 1, 2 and 3
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Question: 4

Consider the following statements:
The reverse charge mechanism:
1. shifts the tax liability from the service provider to the service recipient
2. The principle of single taxation was violated by imposing GST on ocean freight charges already included in the cost of imported goods
3. The judgment clarified that importers can be liable for GST on services directly availed by them
Which of the statements given above are correct?

Updated On: Jan 13, 2026
  • 1 and 2 only
  • 1 and 3 only
  • 2 and 3 only
  • 1, 2 and 3
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The Correct Option is A

Solution and Explanation

To evaluate the accuracy of the provided statements, we must consider the reverse charge mechanism and GST taxation principles, referencing the Mohit Minerals v. Union of India case.
  1. The reverse charge mechanism transfers the tax obligation from the service provider to the service receiver. This is accurate; the mechanism makes the recipient responsible for tax, especially when the service provider is located outside India and lacks a taxable presence.
  2. Taxing ocean freight charges, already part of imported goods' cost, violated the single taxation principle. This statement is correct. The judgment stated that imposing IGST on ocean freight under the reverse charge, when it's already included in the transaction value, results in double taxation, conflicting with GST principles.
  3. The judgment clarified that importers could be subject to GST on services they directly used. This statement is incorrect. The judgment clarified that importers are not considered service recipients under the reverse charge mechanism if they did not directly avail the service, absent proper legislative backing, rendering it outside its intended scope.
Consequently, the correct answer is: 1 and 2 only.
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Question: 5

According to the judgment, what is the constitutional requirement for levying a tax?

Updated On: Jan 13, 2026
  • The tax should be easy to administer
  • The tax should have legislative competence and not contravene fundamental rights
  • The tax should be progressive in nature
  • The tax should only apply to domestic transactions
Show Solution

The Correct Option is B

Solution and Explanation

Taxation must adhere to legal and constitutional standards. Specifically, a tax requires legislative authorization and must not violate fundamental rights guaranteed by the constitution. This ensures that the taxing authority has the legal power to impose the tax and that individual rights are protected during tax collection and management.

This principle was illustrated in *Mohit Minerals v. Union of India*, which concerned the Integrated Goods and Services Tax (IGST) on ocean freight under the reverse charge mechanism. The court ruled this as double taxation, as the freight's value was already included in the imported goods' transaction value. GST principles generally avoid double taxation, and the Indian Constitution mandates taxes comply with legal authority and respect constitutional rights. The tax was deemed unconstitutional due to a lack of proper legislative support and exceeding the reverse charge mechanism's scope.

The correct constitutional requirement for taxation, as shown in this case, is that a tax must possess legislative competence and not infringe upon fundamental rights.

OptionsExplanation
The tax should be easy to administerAdministrative ease is a practical consideration, not a constitutional requirement.
The tax should have legislative competence and not contravene fundamental rightsThis is the constitutional requirement, guaranteeing legal basis and protection of rights.
The tax should be progressive in natureProgressivity concerns fairness and equity, but is not a constitutional requirement.
The tax should only apply to domestic transactionsJurisdictional scope, not a constitutional mandate.
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Top Questions on Tax Law

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An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
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Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
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The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
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