Holding

The Court held that the GST Council’s recommendations are not binding, that a CIF import creates an inter‑state supply making the importer the deemed recipient of shipping services, but that the notifications levy IGST on the service component in violation of the composite‑supply rule, rendering the levy invalid.

Summary

The Supreme Court examined whether the GST Council’s recommendations are binding on Parliament and the States, and whether the import of goods on a CIF basis creates an inter‑state supply that makes the Indian importer the deemed recipient of shipping services. It held that the Council’s recommendations are merely persuasive, that a CIF import does constitute an inter‑state supply, and that the importer can be treated as the recipient for reverse‑charge purposes. However, the Court found that the notifications levying IGST on the service component of the transaction violate the composite‑supply rule, resulting in double taxation, and therefore the levy is invalid.

Issues considered

The GST Council’s recommendations are binding on the Union and the States
Whether a CIF import of goods constitutes an inter‑state supply under the IGST Act
Whether the importer is the recipient of shipping services for reverse‑charge liability
Whether Notification 8/2017 and Notification 10/2017 exceed the powers conferred by the IGST and CGST Acts (excessive delegation)
Whether the levy on the service component violates the composite‑supply principle and results in double taxation
Whether Section 5(4) of the IGST Act can validate the notifications
Whether extra‑territorial taxation of shipping services is permissible

Legislation cited

Central Goods and Services Tax Act, 2017s. 15, s. 20, s. 2(107), s. 2(30), s. 24(iii), s. 2(93), s. 2(98), s. 5(3), s. 5(4)
CGST Rules, 2017s. Rule 31
Constitution of Indias. Art. 246, s. Art. 246A, s. Art. 254, s. Art. 269A, s. Art. 279, s. Art. 279A, s. Art. 279B, s. Art. 286
Customs Act, 1962s. 2(26)
Customs Tariff Act, 1975s. 3
Integrated Goods and Services Tax Act, 2017s. 13, s. 13(9), s. 2(11), s. 5(1), s. 5(3), s. 5(4), s. 7, s. 8

Subjects

GST Councilrecommendationsbinding vs persuasiveIGST Actreverse chargecomposite supplyCIF contractexcessive delegationextra‑territorial taxationfederalismconstitutional law

Judgment

300 [2022]REPORTS
SUPREME COURT 9 S.C.R. 300 [2022] 9 S.C.R.

A UNION OF INDIA & ANR.
v.
M/s MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR
(Civil Appeal No. 1390 of 2022)
B MAY 19, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SURYA KANT
AND VIKRAM NATH, JJ.]
Constitution of India – Articles 246A and 279A – Constitution
(One Hundred and First Amendment Act) 2016 – Central Goods
C
and Services Tax Act, 2017 – Integrated Goods and Services Tax
Act, 2017 – Recommendations of Goods and Services Tax Council
– Nature of – Held: Recommendations of the GST Council are not
binding on the Union and States – Deletion of Art. 279B and the
inclusion of Art. 279(1) by the Constitution Amendment Act 2016
D indicates that the Parliament intended for the recommendations of
the GST Council to only have a persuasive value, particularly when
interpreted along with the objective of the GST regime to foster
cooperative federalism and harmony between the constituent units
– Neither does Art. 279A begin with a non-obstante clause nor does
Article 246A state that it is subject to the provisions of Article 279A
E
– Parliament and the State legislatures possess simultaneous power
to legislate on GST – Art. 246A does not envisage a repugnancy
provision to resolve the inconsistencies between the Central and
the State laws on GST – The ‘recommendations’ of the GST Council
are the product of a collaborative dialogue involving the Union
F and States – They are recommendatory in nature – To regard them
as binding edicts would disrupt fiscal federalism, where both the
Union and the States are conferred equal power to legislate on
GST – Government while exercising its rule-making power under
the provisions of the CGST Act and IGST Act is bound by the
recommendations of the GST Council – However, that does not mean
G
that all the recommendations of the GST Council made by virtue of
the power Art. 279A (4) are binding on the legislature’s power to
enact primary legislations.
Constitution of India – Constitution (One Hundred and First
Amendment Act) 2016 – Articles 246 A and 279A – Central Goods
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and Services Tax Act, 2017 – ss.2(30), 2(93), 8 – Integrated Goods A
and Services Tax Act, 2017 – ss.2(11), 5(3), 13(9) – Impugned
notifications (Notification 8/2017 and 10/2017) issued by Central
Government on the advice of the GST Council levied an integrated
tax at the rate of 5 per cent on the supply of specified services,
including transportation of goods, in a vessel from a place outside
B
India up to the customs station of clearance in India and categorized
the recipient of services of supply of goods by a person in a non-
taxable territory by a vessel to include an importer u/s. 2(26) of the
Customs Act, 1962 – Respondents-importers of non coking coal on
a Cost-Insurance-Freight (CIF) basis, filed writ petition challenging
the notifications – High Court held that the impugned notifications C
are unconstitutional for exceeding the powers conferred by the IGST
Act and the CGST Act – On appeal, held: Government in exercise
of its power u/s.5(3) of the IGST Act issued the impugned Notification
10/2017 specifying the ‘categories of the supply’ which shall be
subject to reverse charge – The notification, besides specifying the
D
criteria also mentioned the corresponding recipient in those
categories – The IGST Act and the CGST Act define reverse charge
and prescribe the entity that is to be taxed for these purposes – The
specification of the recipient- in this case the importer- by Notification
10/2017 is only clarificatory – The Government by notification did
not specify a taxable entity different from that which is prescribed E
in s.5(3) of the IGST Act for the purposes of reverse charge – The
impugned notification 10/2017 clearly specifies a taxable person
who is liable to pay a reverse charge that is envisaged in the statute
– Thus, the impugned notifications cannot be invalidated for an
alleged failure to identify a taxable person – Further, the impugned
F
notification 8/2017 cannot be struck down for excessive delegation
when it prescribes 10 per cent of the CIF value as the mechanism
for imposing tax on a reverse charge basis – Also, Constitution
Bench decision in GVK Industries recognises the power of Parliament
to legislate over events occurring extra-territorially – The only
requirement imposed is that such an event must have a real G
connection to India – In the present case, the impugned levy on the
supply of transportation service by the shipping line to the foreign
exporter to import goods into India has a two-fold connection: first,
the destination of the goods is India and thus, a clear territorial
nexus is established with the event occurring outside the territory;
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302 SUPREME COURT REPORTS [2022] 9 S.C.R.

A and second, the services are rendered for the benefit of the Indian
importer – Thus, the transaction does have a nexus with the territory
of India – On a conjoint reading of ss.2(11) and 13(9) of the IGST
Act, r/w ss.2(93) of the CGST Act, the import of goods by a CIF
contract constitutes an “inter-state” supply which can be subject
to IGST where the importer of such goods would be the recipient of
B
shipping service – s.5(4) of the IGST Act enables the Central
Government to specify a class of registered persons as the recipients,
thereby conferring the power of creating a deeming fiction on the
delegated legislation – Validity of the impugned notifications upheld
u/ss.5(3) and 5(4) of the IGST Act – However, the impugned levy
C imposed on the ‘service’ aspect of the transaction is in violation of
the principle of ‘composite supply’ enshrined u/s.2(30) r/w s.8, CGST
Act and the overall scheme of the GST legislation – Double taxation
– Customs Act 1962 – s.2(26).
Integrated Goods and Services Tax Act, 2017 – Statutory
D provisions and Scheme of the Act – Discussed.
Constitution of India – Constitution (One Hundred and First
Amendment Act) 2016 – Legislative History – Discussed.
Integrated Goods and Services Tax, Act 2017 – ss.2(11), 13(9)
– Central Goods and Services Tax, Act 2017 – s.2(93) – Whether
E the import of goods by a CIF contract constitutes an “inter-state”
supply which can be subject to IGST where the importer of such
goods would be the recipient of shipping service – Held: Yes.
Constitution of India – Power of Parliament to levy tax over
events occurring extra-territorially – Discussed – Central Goods
F and Services Tax, Act 2017 – Integrated Goods and Services Tax,
Act 2017.
Central Goods and Services Tax, Act 2017 – s.2(93) –
Integrated Goods and Services Tax, Act 2017 – ss.5(3), 5(4) – Plea
of respondents that the amended and unamended s.5(4) do not save
G the impugned notifications since they still make the reference to the
term “recipient” – Held: s.5(4) employs the language “as the
recipient”, in contradistinction to s.5(3) of the IGST Act which uses
“by the recipient” – Recipient includes the importer – Further, s.5(4)
clarifies that it may designate a class of registered persons as the
recipient, thereby broadening the scope of s.2(93) of the CGST Act,
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which is anyway an inclusive definition since s.2 is prefaced with A
“unless the context otherwise requires” – It is settled law that non-
reference of the source of power may not vitiate its exercise and
application in given facts and circumstances of a case.
Integrated Goods and Services Tax Act, 2017 – s.5(3), 13(9)
– Central Goods and Services Tax, Act 2017– s.2(93)(c) – Whether B
the imports of goods on a CIF basis would also constitute import of
shipping services, by way of deeming fiction – Held: s.5(3) of the
IGST Act does not confer the powers on the Central Government to
create a deeming fiction vis-à-vis who constitutes the recipient – It
merely enables the Central Government to identify certain categories
of goods and services, where the recipient of such services is subject C
to a reverse charge, as opposed to the usual mode of taxation where
the supplier of the service is charged on a forward charge basis –
However, s.13(9) of the IGST Act r/w s.2(93)(c) of the CGST Act
inherently create a deeming fiction of the importer of goods to be
the recipient of shipping service. D
Constitution of India – “Recommendations”– Articles 3, 109,
111, 113, 117, 203, 207, 255 and 274; Article 233; Articles 243I,
243Y, 280, 281, 338, 338B and 340; Article 263; Articles 270, 275,
344, 349 and 371A – Nature and contextual meaning of – Discussed.
Constitution of India – Constitutional role and functions of E
the GST Council, in the context of the simultaneous legislative power
conferred on Parliament and the State legislatures – Discussed.
Constitution of India – Constitution (One Hundred and First
Amendment Act) 2016 – Articles 246A, 279A – Held: GST Council
is not only an avenue for the exercise of cooperative federalism but F
also for political contestation across party lines – Thus, the
discussions in the GST Council impact both federalism and
democracy – The constitutional design of the Constitution
Amendment Act 2016 is sui generis since it introduces unique features
of federalism – Article 246A treats the Centre and States as equal G
units by conferring a simultaneous power of enacting law on GST
– Article 279A in constituting the GST Council envisions that neither
the Centre nor the States can act independent of the other.
Constitution of India – GST Law – Essential legislative
functions – Excessive delegation of, if any – Constitution (One
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304 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Hundred and First Amendment Act) 2016 – Central Goods and
Services Tax, Act 2017 – Integrated Goods and Services Tax, Act
2017 – Whether the impugned notifications are ultra vires the IGST
Act on the grounds of excessive delegation – Held: Legislature is
required to perform its essential legislative functions – Once the
skeletal structure of the policy is framed by the legislature, the details
B
can emerge through delegated legislations – Legislature cannot
delegate its ‘essential legislative functions – Essential legislative
functions with respect to the GST law are the levy of tax, subject
matter of tax, taxable person, rate of taxation and value for the
purpose of taxation – Principles governing these essential aspects
C of taxation find place in the IGST Act – Both the IGST and CGST
Act clearly define reverse charge, recipient and taxable persons –
Thus, the essential legislative functions vis-à-vis reverse charge have
not been delegated.
Integrated Goods and Services Tax, Act 2017 – Central Goods
D and Services Tax, Act 2017 – ss. 2(30) and 8 – Impugned levy
seeking to impose IGST on the ‘service’ aspect of the transaction, if
in violation of the principle of ‘composite supply’ incorporated u/
s.2(30) r/w s.8 of the CGST Act – Held: Yes – Since the Indian
importer is liable to pay IGST on the ‘composite supply’, comprising
of supply of goods and supply of services of transportation,
E insurance, etc. in a CIF contract, a separate levy on the Indian
importer for the ‘supply of services’ by the shipping line would be
in violation of s.8 of the CGST Act – Double taxation.
Central Goods and Services Tax, Act 2017 – s.2(93)(c) –
Integrated Goods and Services Tax, Act 2017 – s.13(9) – Held: The
F only argument that supports the case of the appellant is that of
s.13(9) of the IGST Act r/w s.2(93)(c) of the CGST Act which defines
a “recipient” – s.13(9) of the IGST Act creates the deeming fiction
of place of supply of service to be the destination of goods when
they are transported by means other than mail or courier – No specific
G exemptions for importers have been carved out – This reasoning is
accepted and read into the definition of recipient in s.2(93) of the
CGST Act.
Central Goods and Services Tax, Act 2017 – s.24(iii) –
Integrated Goods and Services Tax Act, 2017 – ss.5(3), (4) – Held:
H Power of the Central Government to designate persons and
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categories of supply for reverse charge derives from ss.5(3) and A
5(4) of the IGST Act and not s.24(iii) of the CGST Act which mandates
the compulsorily registration as a logical corollary to ensure tax
collection.
Central Goods and Services Tax Act, 2017 – s.2(93) –
Integrated Goods and Services Tax Act, 2017 – s.5(3) – Held: B
Interpreting the term “by the recipient” vis-à-vis the categories of
goods and services identified in s.5(3) of the IGST Act should
necessarily be governed by the principles governing the definition
of “recipient” u/s.2(93) of the CGST Act.
Interpretation of Statutes – Legislative history, Parliamentary C
debates, Committee Reports – Held: Though the traditional view of
interpretation of statutes is that legislative history is not readily used
in interpreting a law, the modern trend of thinking on the subject
has enabled courts to look into the history of a legislation to
understand the full purport of the words used and the mischief
D
sought to be remedied by the law – Constitution of India – Articles
246A, 279A – Constitution (One Hundred and First Amendment Act)
2016 – Central Goods and Services Tax Act, 2017 – Integrated
Goods and Services Tax Act, 2017.
Words and Phrases:
E
“Recommendations”– Constitution of India – Interpretation
of, vis-à-vis the provisions of IGST Act and CGST Act – Integrated
Goods and Services Tax Act, 2017 – Central Goods and Services
Tax Act, 2017.
‘Cooperative federalism’; ‘Dual federalism’; ‘Fiscal F
federalism’ – Discussed.
Dismissing the appeals, the Court
HELD: 1. Though the traditional view of interpretation of
statutes is that legislative history is not readily used in interpreting G
a law, the modern trend of thinking on the subject has enabled
courts to look into the history of a legislation to understand the
full purport of the words used and the mischief sought to be
remedied by the law. [Para 42][386-H; 387-A]

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306 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 2.1 The nature of the recommendations of the GST Council
Article 246A vests Parliament and the State Legislatures
with a unique, simultaneous law-making power on GST. It is in
this context that the role of the GST Council gains significance.
The recommendations of the GST Council are not based on a
B unanimous decision but on a three-fourth majority of the members
present and voting, where the Union’s vote counts as one-third,
while the States’ votes have a weightage of two-thirds of the total
votes cast. There are two significant attributions of the voting
system in the GST Council. First, the GST Council has an unequal
voting structure, where the States collectively have a two-third
C voting share and the Union has a one-third voting share; and
second, since India has a multi-party system, it is possible that
the party in power at the Centre may or may not be in power in
various States. Therefore, the GST Council is not only an avenue
for the exercise of cooperative federalism but also for political
D contestation across party lines. Thus, the discussions in the GST
Council impact both federalism and democracy. The constitutional
design of the Constitution Amendment Act 2016 is sui generis
since it introduces unique features of federalism. Article 246A
treats the Centre and States as equal units by conferring a
simultaneous power of enacting law on GST. Article 279A in
E constituting the GST Council envisions that neither the Centre
nor the States can act independent of the other. [Para 46][390-D-
H; 391-A]
K.P Varghese v. ITO (1981) 4 SCC 173 : [1982] 1 SCR
629; Kalpana Mehta v. Union of India (2017) 7 SCC
F 295 – relied on.
2.2 The Indian Constitution has sometimes been described
as quasi-federal or a Constitution with a ‘centralising drift’. This
is because when the Constitution is read as a whole, the Union is
granted a larger share of the power. Instances of this centralising
G drift can be traced to Articles 254, 248, and 353. However, there
are instances such as Article 246A, where the Centre and the
States are conferred equal power. Merely because a few provisions
of the Constitution provide the Union with a greater share of
power, the provisions in which the federal units are envisaged to
H possess equal power cannot be construed in favour of the Union.
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 307
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The Union and the States have a simultaneous power to legislate A
on GST. The GST Council has the power to make
recommendations on a wide range of subjects relating to GST.
Since the Constitution does not envisage a repugnancy provision
to resolve inconsistencies between the Central and State laws
on GST, the GST Council must ideally function, as provided by
B
Article 279A(6), in a harmonised manner to reach a workable
fiscal model through cooperation and collaboration. [Para 48][392-
B-E]
2.3 One of the important features of Indian federalism is
‘fiscal federalism’. A reading of the Statement of Objects and
Reasons of the 2014 Amendment Bill, the Parliamentary reports C
and speeches indicate that Articles 246A and 279A were
introduced with the objective of enhancing cooperative federalism
and harmony between the States and the Centre. However, the
Centre has a one-third vote share in the GST Council. This
coupled with the absence of the repugnancy provision in Article D
246A indicates that recommendations of the GST Council cannot
be binding. Such an interpretation would be contrary to the
objective of introducing the GST regime and would also dislodge
the fine balance on which Indian federalism rests. Therefore, the
argument that if the recommendations of the GST Council are
not binding, then the entire structure of GST would crumble does E
not hold water. Such a reading of the provisions of the Constitution
diminishes the role of the GST Council as a constitutional body
formed to arrive at decisions by collaboration and contestation of
ideas. [Para 51][393-G-H; 394-A-C]
2.4 The contextual meaning of ‘recommendations’ F

The GST Council which is a constitutional body is entrusted
with the duty to make recommendations on a wide range of areas
concerning GST. The GST Council has plenary powers under
Article 279A (4)(h) where it could make recommendations on
‘any other matter’ related to GST as the Council may decide. G
The GST Council has to arrive at its recommendations through
harmonised deliberation between the federal units as provided
in clause 6 of Article 279A. Unlike the other provisions of the
Constitution which provide that recommendations shall be made
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A to the President or the Governor, Article 279A states that the
recommendations shall be made to the ‘Union and the States’.
The recommendation of the GST Council made under Article 279A
is non-qualified. That is, there is no explanation on the value of
such a recommendation. Yet the notion that the recommendations
of the GST Council transform into legislation in and of themselves
B
under Article 246A would be farfetched. If the GST Council was
intended to be a decision-making authority whose recommendations
transform to legislation, such a qualification would have been
included in Articles 246A or 279A. Neither does Article 279A begin
with a non-obstante clause nor does Article 246A provide that
C the legislative power is ‘subject to’ Article 279A. If the GST
Council were intended to be a constitutional body whose
recommendations transform into legislation without any
intervening act, there would have been an express provision in
Article 246A. Article 279A does not mandate tabling the
recommendations in the legislature like the provisions in category
D
3, where the recommendations have to be mandatorily tabled in
the legislature along with an explanatory note. Only the secondary
legislation which is framed based on the recommendations of the
Council under the provisions of the CGST Act79 and IGST Act80
is mandated to be tabled before the Houses of the Parliament.
E The use of the phrase ‘recommendations to the Union or States’
indicates that the GST Council is a recommendatory body aiding
the Government in enacting legislation on GST. [Paras 54 and
56][396-H; 397-A-D, G-H; 398-A-B]
Naraindas Indurkhya v. State of Madhya Pradesh
F (1974) 4 SCC 788 : [1974] 3 SCR 624 – followed.
Manohar v. State of Maharashtra (2012) 13 SCC 14 :
[2012] 12 SCR 850 – relied on.
2.5 Interpretation of ‘recommendation’ vis-à-vis the
provisions of IGST Act and CGST Act
G
The provisions of the IGST Act and CGST Act which provide
that the Union Government is to act on the recommendations of
the GST Council must be interpreted with reference to the
purpose of the enactment, which is to create a uniform taxation
system. The GST was introduced since different States could
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earlier provide different tax slabs and different exemptions. The A
recommendations of the GST Council are made binding on the
Government when it exercises its power to notify secondary
legislation to give effect to the uniform taxation system. The
Council under Article 279A has wide recommendatory powers
on matters related to GST where it has the power to make
B
recommendations on subject matters that fall outside the purview
of the rule-making power under the provisions of the IGST and
CGST Act. Merely because a few of the recommendations of the
GST Council are binding on the Government under the provisions
of the CGST Act and IGST Act, it cannot be argued that all of the
GST Council’s recommendations are binding. [Para 59][400-D- C
H; 401-A]
3.1 Statutory Provisions and Scheme of the IGST Act
The IGST Act enables the Central Government to impose
IGST on inter-state supply of goods and services. In aiding the D
levy and collection of IGST, the IGST Act provides for a
comprehensive scheme for determining the nature of supply, time
of supply and place of supply. Statutory interpretation will
determine whether the IGST Act confers the powers on the
Central Government, in consultation with the GST Council, to
designate imports as a supply of services under Section 5(3) of E
the IGST and whether the importer can be considered as the
recipient of such supply, liable to pay tax on a reverse charge
basis. Further, it will determine if the Central Government, in
consultation with the GST Council, has the powers to designate
the importer as a recipient of a service under 5(4) of the IGST F
Act, when goods are imported on a CIF basis. The critical fact in
this case is that the service of shipping in these CIF contracts is
availed by the non-taxable exporter who engages and pays a
foreign shipping line of their choice, without the involvement of
the importer. In contrast, in FOB contracts, the Indian importer
G
pays for the services of shipping and directly deals with the
shipping line. The respondents herein are importers of non-coking
coal on a CIF basis. [Paras 61 and 62][401-C-G]

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A 3.2 Do the impugned notifications suffer from excessive
delegation?
Article 286(1) stipulates that the State shall not levy tax
when the supply of goods or services takes place outside the
State or in the course of import or export of goods or services
B from the territory of India. Clause (2) of Article 286 states that
Parliament may by law formulate principles for determining when
there is a supply of goods or services as prescribed by clause
(1). Article 269A provides that GST on supplies in the course of
inter-state trade or commerce shall be levied and collected by
the Union Government. The manner of apportionment between
C the Union and the States has to be provided by Parliament on the
recommendations of the GST Council. The explanation to Article
269A(1) states that supply of goods or services in the course of
import shall be deemed to be supply in the course of inter-State
trade or commerce. Clause (5) provides that Parliament may by
D law formulate principles for determining the place of supply and
when the supply of goods or services takes place in the course of
inter-state trade or commerce. Articles 269A stipulates that
Parliament may by law formulate principles for determining: (a)
the place of supply and; (b) when the supply of goods or services
or both takes place in the course of inter-State trade or commerce.
E Article 286(1) empowers Parliament to formulate the principles
by law for determining when a supply of goods or services, or
both, takes place (a) outside the state; and (b) in the course of
import into or export outside the territory of India. Parliament
enacted the IGST Act prescribing the principles as required
F under Articles 269A and 286(1). The provisions of the IGST Act
deal with the levy and collection of tax (Section 5(1)), export of
goods and services (Section 2(5) and 2(6)), import of goods and
services (Section 2(10) and 2(11)), identification of the location
of the supplier and recipient of services (Sections 2(14) and
2(15)), determination of the nature of inter-State supply (Section
G 7), supplies in territorial waters (Section 9), place of supply with
respect to import to India and export from India (Section 11),
and place of supply of services where the location of the supplier
and recipient is in India and outside India (Sections 12 and 13).
[Paras 80-82][412-F-G; 413-B-D, H; 414-A-C]
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3.3 The legislature is required to perform its essential A
legislative functions. Once the skeletal structure of the policy is
framed by the legislature, the details can emerge through
delegated legislations. It is a settled position that the legislature
cannot delegate its ‘essential legislative functions’.87 The
essential legislative functions with respect to the GST law are
B
the levy of tax, subject matter of tax, taxable person, rate of
taxation and value for the purpose of taxation. The principles
governing these essential aspects of taxation find place in the
IGST Act: Section 5(1) identifies the subject matter of taxation
as inter-State supplies of goods, services or both; Section 2(107)
of the CGST Act identifies a taxable person; Section 5(1) provides C
a maximum cap of 40% as the rate of taxation; and Section 5(1)
stipulates that the value of taxation be determined under Section
15 of the CGST Act. Section 2(98) of the CGST Act defines
“reverse charge” as the liability of the recipient of the supply of
goods or services or both to pay tax instead of the supplier.
D
Section 2(93) of the CGST Act defines “recipient” with reference
to three situations (i) when consideration is payable for the supply
of goods or services or both; (ii) when no consideration is payable
for the supply of goods; and (iii) when no consideration is payable
for the supply of services. In the first situation, the recipient is
the person by whom consideration is payable. In the second E
situation, the recipient is the person to whom (a) the goods are
delivered or made available; or (b) possession or the use of the
goods is given or made available. The CGST Act also stipulates
a two-fold requirement for a recipient to be taxed on reverse
charge basis- the recipient must be a ‘person’ as defined under
F
Section 2(84) of the CGST; and the person is a “taxable person”
only if registered or is liable to be registered under Section 22 or
Section 24. Section 24(iii) of the CGST Act states that persons
who are required to pay tax under reverse charge must be
registered. Therefore, both the IGST and CGST Act clearly define
reverse charge, recipient and taxable persons. Thus, the G
essential legislative functions vis-à-vis reverse charge have not
been delegated. Section 5(3) of the IGST Act provides the
Government the power to specify categories of supply of goods
or services or both on which tax shall be paid on a reverse charge
basis by the recipient. The Government is to exercise this power
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312 SUPREME COURT REPORTS [2022] 9 S.C.R.

A on the recommendation of the GST Council. The Government in
exercise of its power under Section 5(3) of the IGST Act issued
the impugned Notification 10/2017 specifying the ‘categories of
the supply’ which shall be subject to reverse charge. The
notification, besides specifying the criteria, has also mentioned
the corresponding recipient in those categories. The IGST Act
B
and the CGST Act define reverse charge and prescribe the entity
that is to be taxed for these purposes. Therefore, the stipulation
of the recipient in each of the categories is only clarificatory. The
Government by notification did not specify a taxable entity
different from that which is prescribed in Section 5(3) of the IGST
C Act for the purposes of reverse charge. [Paras 84-86][414-E-G;
415-A-G]
3.4 Charging Section: taxable person, taxable rate and
manner of determining value
Taxable person
D
The respondents have alleged that the importer cannot be
validly termed as a taxable person. However, this argument has
to fail on a close reading of the impugned notifications alongside
Sections 2(107) and 24 of the CGST Act. Section 24(iii) of the
CGST Act mandates persons required to pay tax under reverse
E charge to be compulsorily registered under the CGST Act.
Section 2(107) of the CGST Act defines a “taxable person” to
mean a person who is registered or liable to be registered under
Section 24 of the CGST Act. Neither Section 2(107) nor Section
24 of the CGST Act qualify the imposition of reverse charge on a
F “recipient of service” and broadly impose it on “the persons who
are required to pay tax under reverse charge”. Since the
impugned notification 10/2017 identifies the importer as the
recipient liable to pay tax on a reverse charge basis under Section
5(3) of the IGST Act, the argument of the failure to identify a
specific person who is liable to pay tax does not stand. The
G impugned notification 10/2017 clearly specifies a taxable person
who is liable to pay a reverse charge that is envisaged in the
statute. Thus, the impugned notifications cannot be invalidated
for an alleged failure to identify a taxable person. [Paras 91 and
92][417-C-F; 419-C-D]
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Laghu Udyog Bharati v. Union of India 1999 (6) SCC A
418 : [1999] 3 SCR 1199 – held inapplicable.
Mathuram Agrawal v. State of Madhya Pradesh 1999
(8) SCC 667 : [1999] 4 Suppl. SCR 195 – followed.
Gobind Saran Ganga Saran v. Commissioner of Sales
Tax AIR 1985 SC 1041 : [1985] 3 SCR 985; CIT v. B
B.C. Srinivas Setty AIR 1981 SC 972 : [1981] 2 SCR
938 – relied on.
Taxable value
By a corrigendum dated 8 June 2016, Notification 8/2017 C
was amended to include the measure of taxable value to be ten
per cent of the CIF value. Section 5(1) of the IGST Act enables
the taxable value to be determined under Section 15 of the CGST
Act. The respondents have argued that the value has to be strictly
determined by Section 15(1) of the CGST Act and not by way of
delegated legislation. However, Sections 15(4) and 15(5) enable D
delegated legislation to prescribe methods for determination of
value, on the recommendations of the GST Council. Rules 27 to
31 of Chapter IV of the CGST Rules 2017, prescribe the manner
of determining value of supply. Rule 31 also provides for residual
powers to the GST Council for prescribing modes of valuation. E
The respondents have urged that the determination of the value
of supply has to be specified only through rules, and not by
notification. However, this would be an unduly restrictive
interpretation. Parliament has provided the basic framework and
delegated legislation provides necessary supplements to create
a workable mechanism. Rule 31 of the CGST Rules 2017 F
specifically provides for a residual power to determine valuation
in specific cases, using reasonable means that are consistent with
the principles of Section 15 of the CGST Act. This is where the
value of the supply of goods cannot be determined in accordance
with Rules 27 to 30 of the CGST Rules 2017. Thus, the impugned G
notification 8/2017 cannot be struck down for excessive
delegation when it prescribes 10 per cent of the CIF value as the
mechanism for imposing tax on a reverse charge basis. [Paras 93
and 94][419-D-F; 420-D-F]

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314 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 4.1 Taxable event: Is an ocean freight transaction for import
of goods a valid category of supply of services under Section 5(3)
of IGST Act?
The analysis of whether import of goods under CIF contracts
constitutes a valid import of service has to be answered on two
B prongs: (i) whether classification of imports as a specific category
of supply of shipping service is valid under Section 5(3) read with
Section 5(1) of the IGST Act; and (ii) whether the recipient of the
imported goods is also a recipient of shipping services in CIF
transactions under Section 5(3). [Para 96][421-A-B]
C
4.2 Do imported goods procured on a CIF basis constitute
an inter-state supply or is it an extra-territorial tax?
Section 7 of the CGST Act defines the term “supply” with
a broad brush and provides for an inclusive definition. Section
D 7(1)(b) of the CGST Act considers import of services for a
consideration to constitute “supply”. Section 7(1)(c) of the CGST
Act captures any and all activities in Schedule 1 of the CGST Act,
irrespective of whether they are made for a consideration.
Additionally, Section 7(3) confers the power on the Central
Government to specify which transactions are to be treated as a
E supply of goods and not a supply of services, and vice-versa.
Section 7(4) of the IGST Act states that supply of services
imported into India would be considered as a supply of services
in the course of “inter-State trade or commerce”. Thus, an Indian
importer could also be considered as an importer of the service
F of shipping which is liable to IGST on inter-state supply, if the
activity falls within the definition of “import of service” for the
IGST Act and CGST Act. The term ‘importer’ is not defined in
the IGST Act or the CGST Act. The term ‘import of goods’ is
defined in Section 2(10) of the CGST Act. “Import of services”
is defined in Section 2(11) of the CGST Act. The conditions for
G an “import of service” would entail three aspects: (i) the supplier
of service must be located outside India; (ii) the recipient of the
service must be located in India; and (iii) the place of supply of
service ought to be in India. [Paras 101 and 102][423-G-H; 424-
A-B, F-G]
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4.3 Chapter V of the IGST Act provides for methodologies A
to determine the place of supply of goods or services or both.
Section 13 of the IGST Act provides the place of supply of services
where the location of the supplier or location of recipient is outside
India. Section 13(9) of the IGST Act appears to create a deeming
fiction, where in case of supply of services of transportation of
B
goods by a supplier located outside India, the place of supply
would be the place of destination of such goods. The supplier,
the foreign shipping line, in this case would be a non-taxable
person. However, its services in a CIF contract for transport of
goods would enter Indian taxable territory as the destination of
such goods. The place of supply of shipping service by a foreign C
shipping line, would thus be India. [Para 103][425-A-B, F-G]
4.4 The respondents argued that since Section 7(1)(b) of
the CGST Act does not define “supply” of import of service
without consideration, other than the ones specified in Schedule
1, this would be inapplicable to importers with CIF contracts as D
the consideration is paid by the exporter. Thus, the importer of
goods cannot be said to be an importer of shipping service since
the latter is not an import of service for a consideration under
Section 7(1)(b) of the CGST Act. However, this argument misses
out on some crucial definitions. The term ‘supply’ has been
defined in the IGST Act with reference to the CGST Act. Thus, E
the three conditions for “import of services” under Section
2(11)(iii) must be understood with reference to the provisions of
the CGST and IGST Acts, including the provisions for
determination of place of supply under Section 13(9) of the IGST
Act. As mentioned previously, Section 13(9) of the IGST Act F
creates a deeming fiction of place of supply of transportation
services to be in India when the destination of goods is in India.
In this case, it is clear the supplier of service- the foreign shipping
line - is located outside India; and the place of supply is India.
Accordingly, Section 13 of the CGST Act would be applicable to
determine the time of such supply. [Para 104][425-G-H; 426-A- G
C]
4.5 The respondents have argued that the ocean freight
transaction cannot be considered as “supply” since Section 7(1)(b)
of the IGST act requires the import of service to be for a
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316 SUPREME COURT REPORTS [2022] 9 S.C.R.

A “consideration”. The definition of “consideration” in Section 2(31)
of the CGST Act is instructive. Section 2(31) of the CGST Act
defines ‘consideration’ to include payment made or to be made,
in money or any other form, for the inducement of supply of goods
or services to be made by the recipient or by any other person.
Thus, in the case of goods imported on a CIF basis, the fact that
B
consideration is paid by the foreign exporter to the foreign
shipping line would not stand in the way of it being considered as
a “supply of service” under Section 7(4) of the IGST Act which is
made for a consideration, thereby constituting “supply of service”
in the course of inter-state trade or commerce that can be subject
C to IGST under Section 5(1) of the IGST Act. [Para 105][426-D;
427-A-C]
4.6 The decision in GVK Industries clearly recognises the
power of Parliament to legislate over events occurring extra-
territorially. The only requirement imposed by the Court is that
D such an event must have a real connection to India. The impugned
levy on the supply of transportation service by the shipping line
to the foreign exporter to import goods into India has a two-fold
connection: first, the destination of the goods is India and thus, a
clear territorial nexus is established with the event occurring
outside the territory; and second, the services are rendered for
E the benefit of the Indian importer. Thus, the transaction does
have a nexus with the territory of India. The IGST Act under
Section 13(9) recognises the place of supply of services as the
destination of goods when the supplier is located outside India.
Since the destination of goods is India, the statute itself is broad
F enough to cover a taxable event that has extra-territorial aspects,
which bears a nexus to India. [Paras 108 and 109][107, 108 and
109]
GVK Industries v. Income Tax Officers [2011] 4 SCC
36 : [ 2011] 3 SCR 366 – followed.
G 4.7 Are importers service recipients under CIF contracts?
Section 5(3) of the IGST Act enables taxation of the
recipients of certain specified categories of supply of services on
a reverse charge basis. It is pertinent to note that the tax is
payable “by the recipient” of such services, in contradistinction
H to broad language such as “any person as may be prescribed”
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which was otherwise used in Section 98(2) of the Finance Act A
1994 which taxed services. The term “recipient” of a supply of
service has been exhaustively defined by Section 2(93) of the
CGST Act. Thus, the language employed in Section 2(93)(a) of
the CGST Act clearly stipulates that when a consideration is
payable for the supply of services, the recipient would mean the
B
person who is liable to pay that consideration. However, when no
consideration is payable for the supply of a service, Section
2(93)(c) states that the recipient shall be the person to whom the
service is rendered. Further, Section 2(93) provides that “any
reference to a person to whom supply is made shall be construed
as a reference to the recipient”. Hence, where the statute refers C
to a person to whom a supply is made, it has to be construed as a
reference to the recipient of service. The power of the Central
Government to designate persons and categories of supply for
reverse charge derives from Sections 5(3) and 5(4) of the IGST
Act and not Section 24(iii) of the CGST Act which mandates the
D
compulsorily registration as a logical corollary to ensure tax
collection. Section 2(98) of the CGST Act, which defines “reverse
charge” reiterates that it means the “liability to pay tax by the
recipient of supply of goods or services or both instead of the
supplier…”. It cannot be construed to imply that any taxable
person identified for payment of reverse charge would E
automatically become the recipient of such goods or service. The
deeming fiction of treating the importer as a recipient must be
found in the IGST Act. As it currently stands, Section 5(3) of the
IGST Act enables the delegated legislation to create a deeming
fiction on categories of supply of goods/services alone.
F
Interpreting the term “by the recipient” vis-à-vis the categories
of goods and services identified in Section 5(3) of the IGST Act
should necessarily be governed by the principles governing the
definition of “recipient” under Section 2(93) of the CGST Act.
Contrary to the arguments of the Union Government, such an
interpretation would not annihilate the mandate of compulsory G
registration under Section 24(iii) of the CGST Act. It would be
applicable to suitably worded provisions in the CGST or IGST
Act which permit the Central Government to identify a taxable
person for a reverse charge. In any event, it would be applicable
to all the recipients liable for reverse charge under Sections 5(3)
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318 SUPREME COURT REPORTS [2022] 9 S.C.R.

A and 5(4) of the IGST Act. The ineffectiveness of a tax collection
mechanism under Section 24(iii) of the CGST Act cannot be argued
to obfuscate the concept of a “recipient” of a good or service
that is uniformly understood across the IGST Act, CGST Act and
tax jurisprudence. The Union Government has argued that the
expression “by the recipient” in Section 5(3) of the IGST Act
B
does not impede the authority of the GST Council in making
recommendations for issuance of notifications for identifying such
persons who shall be governed by reverse charge and once the
identification is complete, such taxable person would
automatically be interpreted as “the recipient”. This argument
C requires the Court to completely discard the principles of
determining the recipient of a service and replace it with whichever
taxable person is identified. The appellant may argue for such an
interpretation to achieve a favourable outcome in this case.
However, in matters of inter-state supply when the supplier and
recipient are within the territory of India, this Court would have
D
to follow this artificially bifurcated interpretation which identifies
recipients vis-à-vis the nature of service and supply in some cases,
and by a simple equation of the identified taxable person in others
without considering the literal and contextual definition of
recipient. This is against settled rules of interpretation and would
E be an act of judicial legislation. If Parliament’s intention were to
designate certain persons for reverse charge, irrespective of
them being the recipient of such goods and services, it must make
a suitable amendment to confer such power for exercise of
delegated legislation. [Paras 112, 115-117][429-H; 430-A-B, G-
H; 431-A-H; 432-A-H; 433-A-B]
F
4.8 The only argument that supports the case of the
appellant is that of Section 13(9) of the IGST Act read together
with Section 2(93)(c) of the CGST Act which defines a “recipient”.
Section 13(9) of the IGST Act creates the deeming fiction of place
of supply of service to be the destination of goods when they are
G transported by means other than mail or courier. No specific
exemptions for importers have been carved out. This Court is
inclined to accept this reasoning and read it into the definition of
recipient in Section 2(93) of the CGST Act. Since a reference to
a person to whom a supply is made, is a reference to the recipient,
H the place of supply is critical. By virtue of Section 13(9) of the
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IGST Act, the place of supply is the destination of goods. The A
time of supply is then determined through the provisions of
Section 13 of the CGST Act. Sections 2(14) and 2(15) of the IGST
Act also define the location of the recipient and supplier of services
with respect to the physical location where the supply of services
is made or received. In such a scenario, when the place of supply
B
of services is deemed to be the destination of goods under Section
13(9) of the IGST Act, the supply of services would necessarily
be “made” to the Indian importer, who would then be considered
as a “recipient” under the definition of Section 2(93)(c) of the
CGST Act. The supply can thus be construed as being “made” to
the Indian importer who becomes the recipient under Section C
2(93)(c) of the CGST Act. This conclusion comports with the
philosophy of the GST to be a consumption and destinated based
tax. The services of shipping are imported into India for the
purpose of consumption that is routed through the import of
goods. Although the consideration for shipping is payable by the
D
foreign supplier to the foreign shipping line in CIF contracts, the
price is consequently factored into the price of the shipment.
The ultimate benefactor of the shipping service is also the
importer in India who will finally receive the goods at a destination
which is within the taxable territory of India. Thus, the meaning
of the term “recipient” in the IGST Act will have to be understood E
within the context laid down in the taxing statute (IGST and CGST
Act) and not by a strict application of commercial principles. [Paras
118 and 119][433-B-D, G-H; 434-A, G-H; 435-A-D]
4.9 Some of the respondents have argued that the possibility
of two different recipients of services would create absurdities F
since whether a supply of service is an inter-state supply under
Section 7(3) or intra-state supply under Section 8(2) of IGST Act
depends on the location of the supplier and the place of supply,
which in most cases is the location of the recipient of service.
Since there can effectively be two recipients on a reading of
Section 2(93)(a) and (c) of the CGST Act, the respondents argue G
that the transaction may simultaneously become an inter-state or
intra-state supply. This could also mean that two recipients can
claim ITC. However, this argument is inapplicable to the case at
hand since Sections 7(3) and 8(2) of the IGST Act do not conflate
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320 SUPREME COURT REPORTS [2022] 9 S.C.R.

A the concept of imports. Section 8(2) deals with a scenario where
the location of the supplier and place of supply are within the
same State/Union Territory in India. This is inapplicable to
determining imports where the supplier is located outside India.
Similarly, Section 7(3) deals with inter-state supply within the
territory of India. Further, both these sections are subject to the
B
provisions of Section 12 of the IGST Act where both- the supplier
and recipient are located in India. Section 12 of the IGST Act
does not create the deeming fiction under Section 13(9) of the
IGST Act which is applicable only when the supplier is located
outside India. The applicable section in this case would be Section
C 7(4) of the IGST Act which clearly stipulates that “Supply of
services imported into the territory of India shall be treated to
be a supply of services in the course of inter-State trade or
commerce”. Thus, no absurdity is created by the deeming fiction
argued by the Union Government. In no scenario would the
foreign exporter be claiming ITC in India. The respondents’
D arguments of identification of two recipients do not have any
bearing on the determination of the present dispute as the foreign
exporter is not sought to be taxed in this case. In the digital age,
the concepts of supplier and recipient of service have also been
altered and are not necessarily understood as two parties with a
E direct chain of supply. The IGST Act tends to create several such
deeming fictions to adequately capture such complexities. For
instance, Section 5(5) of the IGST Act taxes the electronic
commerce operator as the supplier of service in spite of it only
being a conduit, in the commercial sense. These deeming fictions
need to be respected for the purpose of the statute, as long as
F they have constitutional and parliamentary sanction. Section 13
of the IGST Act is critical to effectively meet the aim of the GST
statute to tax the destination of supplies, as opposed to their
origins. The deeming fiction therein is critical to interpret the
charging provision under the IGST Act (Section 5). The
G respondents’ argument for the irrelevance of determining the
beneficiary of the supply or who has received the supply in view
of the definition of ‘recipient’ of Section 2(93) of the CGST Act
mis-reads Section 2(93) which identifies the recipient, inter alia,
on the basis of the person to whom “supply is made” i.e. the
place of supply. [Paras 120-122][435-D-H; 436-A-D, G-H; 437-
H A]
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4.10 GST laws mark a departure from the previous policy A
of taxing sale/consignments and focuses on the taxing of supplies.
The concept of a supplycentric and destination-based tax runs
through the scheme of the statutory provisions and the proposals
issued by the GST Council. Thus, an amendment to the
Constitution was introduced in the form of Article 366(12-A) to
B
create a tax on the supply of goods, or services, or both. In the
commercial reality of the times, the conceptual lines between
goods and services wear thin. Hence, the focus is on the taxation
of supply, as opposed to the creation of neat compartments
between goods and services. Section 7(1)(c) of the CGST Act
specifically characterizes import of services for a consideration C
to constitute “supply”. The only question that falls for
determination is whether the imports of goods on a CIF basis
would also constitute import of shipping services, by way of
deeming fiction. Section 5(3) of the IGST does not confer the
powers on the Central Government to create a deeming fiction
D
vis-à-vis who constitutes the recipient. Section 5(3) merely enables
the Central Government to identify certain categories of goods
and services, where the recipient of such services is subject to a
reverse charge, as opposed to the usual mode of taxation where
the supplier of the service is charged on a forward charge basis.
However, Section 13(9) of the IGST Act read with Section 2(93)(c) E
of the CGST Act inherently create a deeming fiction of the
importer of goods to be the recipient of shipping service. [Para
123][437-B-E]
5. Applicability of Section 5(4) of IGST Act
Amended Section 5(4) came into effect on 1 February 2019. F
Amending Act 32 of 2018 enables the Central Government to
create a deeming fiction of declaring a class of registered persons
“as the recipient” of the supply of taxable goods or service. In
deploying the language “as the”, and not “by the” recipient, the
applicability of the definition of recipient vis-à-vis Section 2(93) G
of the CGST Act is no longer necessary for determining the validity
of such a notification. The effect of the Amending Act 32 of 2018
has been as follows:- (i) the powers of the Central Government
to specify through a notification has been clarified; and (ii) the
power to specify a class of registered persons as the recipient
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322 SUPREME COURT REPORTS [2022] 9 S.C.R.

A has been recognised. The respondents have argued that the
amended and unamended Section 5(4) do not save the impugned
notifications since they still make the reference to the term
“recipient”. However, the respondents crucially miss out that
Section 5(4) employs the language “as the recipient”, in
contradistinction to Section 5(3) of the IGST Act which uses “by
B
the recipient”. Recipient includes the importer in Part D of this
judgment. Further, Section 5(4) clarifies that it may designate a
class of registered persons as the recipient, thereby broadening
the scope of Section 2(93) of the CGST Act, which is anyway an
inclusive definition since Section 2 is prefaced with “unless the
C context otherwise requires”. It is settled law that non-reference
of the source of power may not vitiate its exercise and application
in given facts and circumstances of a case. Thus, as long as a
source of power to legislate or issue a notification is available,
the lack of a mention, an incorrect reference or mistake does not
vitiate the exercise of such power. The impugned notifications
D
were issued with the intention of creating a level playing field
between the Indian and foreign shipping lines. [Paras 124, 126,
127, 128 and 129][438-C-E, G; 439-A-C]
Union of India v. Tulsi Ram Patel (1985) 3 SCC 398 :
[1985] 2 Suppl. SCR 131 – followed.
E
Titagarh Paper Mills v. Orissa State Electricity Board
(1975) 2 SCC 436 – relied on.
6.1 Composite Supply and Issues of Double Taxation
The transaction at hand involves three parties- the foreign
F exporter, the Indian importer and the shipping line. The first leg
of the transaction involves a CIF contract, wherein the foreign
exporter sells the goods to the Indian importer and the cost of
insurance and freight are the responsibility of the foreign exporter.
In other words, the foreign exporter is liable to ensure that the
G goods reach their place of destination and the Indian importer
pays the transaction value to the exporter. The second leg of the
transaction involves an agreement between the foreign exporter
and the shipping line (whether foreign or Indian) for providing
services for transport of goods to the destination, i.e., in the
territory of India. Section 2(30) of the CGST Act clearly provides
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that a transaction may have two or more taxable supplies, where A
one of them is a principal supply. The illustration to Section 2(30)
further clarifies that a transaction such as the CIF contract for
supply of goods reflects a composite supply under the CGST Act,
where the principal supply is the supply of goods. Section 8 of
the CGST Act provides that the tax liability on a composite supply
B
which comprises of two or more supplies, will only be levied on
the ‘principal supply’. In a CIF transaction, the principal supply,
according to Section 2(30), is supply of goods. Thus, the tax would
be levied as if the transaction was one of supply of goods. Section
20 of the IGST Act provides that the provisions relating to
‘composite supply’ under the CGST Act would apply mutatis C
mutandis under the IGST Act. By extension, the IGST in a
transaction of composite supply would be levied on the principal
supply of goods. [Paras 133, 136 - 138][442-G-H; 443-A-B, F-H;
444-C-E]
6.2 The provisions of composite supply in the CGST Act D
(and the IGST Act) play a specific role in the levy of GST. The
idea of introducing ‘composite supply’ was to ensure that various
elements of a transaction are not dissected and the levy is imposed
on the bundle of supplies altogether. This finds specific mention
in the illustration provided under Section 2(30) of CGST Act,
where the principal supply is that of goods. Thus, the intent of E
the Parliament was that a transaction which includes different
aspects of supply of goods or services and which are naturally
bundled together, must be taxed as a composite supply. It is true
that in this case, the first leg of the transaction between the foreign
exporter and the Indian importer is a composite supply, while F
the second leg, between the foreign exporter and the shipping
line may, from a perspective, be regarded as a standalone
transaction. Both of them are independent transactions and
ordinarily, the IGST could be levied on both sets of transactions-
one as supply of goods (under the ambit of composite supply)
and the other as supply of services. However, the impugned G
notifications seek to tax the importer as the deemed recipient of
the supply of service. The ASG has advanced an interpretation of
Sections 5(3) and 5(4) of the IGST Act, read with Section 2(93) of
the CGST Act to contend that the importer can be classified as
the ‘recipient’ of the services. On this interpretation, the validity H
324 SUPREME COURT REPORTS [2022] 9 S.C.R.

A of the impugned notifications has been upheld under Sections
5(3) and 5(4) of the IGST Act in Section D.2-D.5 of this judgment.
This Court is bound by the confines of the IGST and CGST Act
to determine if this is a composite supply. It would not be
permissible to ignore the text of Section 8 of the CGST Act and
treat the two transactions as standalone agreements. In a CIF
B
contract, the supply of goods is accompanied by the supply of
services of transportation and insurance, the responsibility for
which lies on the seller (the foreign exporter in this case). The
supply of service of transportation by the foreign shipper forms a
part of the bundle of supplies between the foreign exporter and
C the Indian importer, on which the IGST is payable under Section
5(1) of the IGST Act read with Section 20 of the IGST Act, Section
8 and Section 2(30) of the CGST Act. To levy the IGST on the
supply of the service component of the transaction would
contradict the principle enshrined in Section 8 and be in violation
of the scheme of the GST legislation. Thus, while the impugned
D
notifications are validly issued under Sections 5(3) and 5(4) of
the IGST Act, it would be in violation of Section 8 of the CGST
Act and the overall scheme of the GST legislation. This Court is
in agreement with the High Court to the extent that a tax on the
supply of a service, which has already been included by the
E legislation as a tax on the composite supply of goods, cannot be
allowed. [Paras 143-147][446-E-H; 447-A, G-H; 448-A-B; 449-
F-G]
Federation of Hotels & Restaurant Association of India
v. Union of India (1989) 3 SCC 634 : [1989] 2 SCR
F 918, BSNL v. Union of India 2006 (3) SCC 1 : [2006]
2 SCR 823 – referred to.
7. Conclusion
(i) The recommendations of the GST Council are not binding
on the Union and States for the following reasons:
G
(a) The deletion of Article 279B and the inclusion of Article
279(1) by the Constitution Amendment Act 2016 indicates that
the Parliament intended for the recommendations of the GST
Council to only have a persuasive value, particularly when
interpreted along with the objective of the GST regime to foster
H cooperative federalism and harmony between the constituent units;
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 325
DIRECTOR

(b) Neither does Article 279A begin with a non-obstante A
clause nor does Article 246A state that it is subject to the
provisions of Article 279A. The Parliament and the State
legislatures possess simultaneous power to legislate on GST.
Article 246A does not envisage a repugnancy provision to resolve
the inconsistencies between the Central and the State laws on
B
GST. The ‘recommendations’ of the GST Council are the product
of a collaborative dialogue involving the Union and States. They
are recommendatory in nature. To regard them as binding edicts
would disrupt fiscal federalism, where both the Union and the
States are conferred equal power to legislate on GST. It is not
imperative that one of the federal units must always possess a C
higher share in the power for the federal units to make decisions.
Indian federalism is a dialogue between cooperative and
uncooperative federalism where the federal units are at liberty
to use different means of persuasion ranging from collaboration
to contestation; and
D
(c) The Government while exercising its rule-making power
under the provisions of the CGST Act and IGST Act is bound by
the recommendations of the GST Council. However, that does
not mean that all the recommendations of the GST Council made
by virtue of the power Article 279A (4) are binding on the
legislature’s power to enact primary legislations; E

(ii) On a conjoint reading of Sections 2(11) and 13(9) of the
IGST Act, read with Section 2(93) of the CGST Act, the import of
goods by a CIF contract constitutes an “inter-state” supply which
can be subject to IGST where the importer of such goods would
be the recipient of shipping service; F

(iii) The IGST Act and the CGST Act define reverse charge
and prescribe the entity that is to be taxed for these purposes.
The specification of the recipient – in this case the importer – by
Notification 10/2017 is only clarificatory. The Government by
notification did not specify a taxable person different from the G
recipient prescribed in Section 5(3) of the IGST Act for the
purposes of reverse charge;
(iv) Section 5(4) of the IGST Act enables the Central
Government to specify a class of registered persons as the
H
326 SUPREME COURT REPORTS [2022] 9 S.C.R.

A recipients, thereby conferring the power of creating a deeming
fiction on the delegated legislation;
(v) The impugned levy imposed on the ‘service’ aspect of
the transaction is in violation of the principle of ‘composite supply’
enshrined under Section 2(30) read with Section 8 of the CGST
B Act. Since the Indian importer is liable to pay IGST on the
‘composite supply’, comprising of supply of goods and supply of
services of transportation, insurance, etc. in a CIF contract, a
separate levy on the Indian importer for the ‘supply of services’
by the shipping line would be in violation of Section 8 of the CGST
Act. [Para 148][449-G-H; 450-A-H, 451-A-E]
C
McDowell and Company Ltd. v. Commercial Tax Officer
1985 (3) SCC 230: [1985] 3 SCR 791; M/s Electronic
Corporation of India v. Commissioner of Income Tax
1989 Supp 2 SCC 642 : [1989] 2 SCR 994; Municipal
Corporation of Delhi v. Birla Cotton Spinning and
D Weaving Mills [1968] 3 SCR 251; Avinder Singh v. State
of Punjab (1979) 1 SCC 441; Union of India v. VKC
Footsteps India Private Limited (2022) 2 SCC 603;
Union of India v. Jalyan Udyog 1994 (1) SCC 318
: [1993] 2 Suppl. SCR 293; Ispat Industries Ltd. v.
E Commissioner of Customs (2006) 12 SCC 583 : [2006]
6 Suppl. SCR 733; Abhiram Singh v. CD Commachen,
(2017) 2 SCC 629; Hoecst Pharmaceuticals Ltd. v. State
of Bihar (1983) 4 SCC 45 : [1983] 3 SCR 130; Union
of India v. Mohit Mineral Pvt. Ltd. (2019) 2 SCC
599 [2018] 13 SCR 139; Baiku v. State Tax Officer, GST
F 2019 SCC OnLine Ker 5362; SR Bommai v. Union of
India (1994) 3 SCC 1 : [1994] 2 SCR 644; State (NCT
of Delhi) v. Union of India (2018) 8 SCC 501 : [2018]
7 SCR 1; Union of India v. Pradip Kumar Dey, (2000)
8 SCC 580 : [2000] 4 Suppl. SCR 465; Kesoram
G Industries and Cotton Mills Ltd. v. CWT, [1966] 2 SCR
688; Som Mittal v. Government of Karnataka, (2008) 3
SCC 753 : [2008] 2 SCR 323; State of AP v. T.
Gopalakrishnan Murthi, (1976) 2 SCC 883 : [1976]
1 SCR 1008; In re Delhi Laws Act 1912 AIR 1951 SC
332 : [1951] SCR 747; Edward Mills Co. Ltd. v. State
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 327
DIRECTOR

of Ajmer, AIR 1955 SC 25 : [1955] 1 SCR 735; A.N A
Parasaran v. State of Tamil Nadu, (1989) 4 SCC 683 :
[1989] 1 Suppl. SCR 371 – referred to.
Tarun Jain, Goods and Services Tax: Constitutional
Law and Policy (EBC 2018) 16, 117; H.M. Seervai,
Constitutional Law of India (NM Tripati Private B
Limited, 4 th Edition, Vol.1) 28; Empowered
Committee, First Discussion Paper on Goods and
Services Tax, (2009) Pars 1.13-1.14; Thirteenth
Finance Commission, Report of the Task Force on
GST (2009) Para 10.5; Standing Committee on
Finance, The Constitution (One Hundred and C
Fifteenth Amendment) 2011 (73rd report, 2013) ;
Select Committee, Report on the Constitution (One
Hundred and Twenty Second Amendment) Bill , 2014,
(Submitted to the Rajya Sabha, 2015); Alok Prasanna,
‘For a mess of Potage: The GST’s promise of D
increased revenue to states comes at the cost of the
federal structure of the Constitution’ National Law
School of India Review. Vol. 28, No. 2(2016), pp-97-
113; Ajitesh Kir, ‘India’s Goods and Services Tax: A
Unique Experiment in Cooperative Federalism and a
Constitutional Crisis in Waiting’ Canadian Tax Journal E
(2021) 69:2, 391-445 – referred to.
Robert A. Schapiro, ‘Justice Steven’s theory of
Interactive Federalism’ 74 Fordham L. Rev. 2133
(2006); Jessica Bulman-Pozen and Heather K.
Gerken, ‘Uncooperative Federalism’ Yale Law F
Journal, Vol. 118. No. 7 (May, 2009), pp. 1256-1310;
Bulman-Pozen and K. Gerken (n 74) – referred to.
Case Law Reference
[1999] 4 Suppl. SCR 195 followed Para 10(vi) G
[1985] 3 SCR 985 relied on Para 10(vi)
[1985] 3 SCR 791 referred to Para 10(xx)
[1989] 2 SCR 994 referred to Para 10(xxi)
[2011] 3 SCR 366 followed Para 10(xxi) H
328 SUPREME COURT REPORTS [2022] 9 S.C.R.

A [1968] 3 SCR 251 referred to Para 10(xxv)
[1979] 1 SCC 441 referred to Para 10(xxv)
(2022) 2 SCC 603 referred to Para 10(xxix)
[1999] 3 SCR 1199 held inapplicable Para 11(iii)
B [1993] 2 Suppl. SCR 293 referred to Para 11(viii)
[2006] 2 SCR 823 referred to Para 11(x)
[2006] 6 Suppl. SCR 733 referred to Para 16(iii)
[1993] 2 Suppl. SCR 293 referred to Para 16(iv)
C
(2017) 2 SCC 629 referred to Para 24
[1983] 3 SCR 130 referred to Para 24
[2018] 13 SCR 139 referred to Para 28
[1982] 1 SCR 629 relied on Para 42
D
(2017) 7 SCC 295 relied on Para 42
[1994] 2 SCR 644 referred to Para 45
[2018] 7 SCR 1 referred to Para 47
[2012] 12 SCR 850 relied on Para 57
E
[1974] 3 SCR 624 followed Para 57
[2000] 4 Suppl. SCR 465 referred to Para 57
[1966] 2 SCR 688 referred to Para 57

F [2008] 2 SCR 323 referred to Para 57
[1976] 1 SCR 1008 referred to Para 57
[1951] SCR 747 referred to Para 84
[1955] 1 SCR 735 referred to Para 84
G [1989] 1 Suppl. SCR 371 referred to Para 84
[1981] 2 SCR 938 relied on Para 90
[1985] 2 Suppl. SCR 131 followed Para 127x
[1975] 2 SCC 436 relied on Para 128
H [1989] 2 SCR 918 referred to Para 14
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 329
DIRECTOR

CIVIL APPELLATE JURISDICTION: Civil Appeal No.1390 of A
2022.
From the Judgment and Order dated 23.01.2020 of the High Court
of Gujarat at Ahmedabad in R/SCA No. 726 of 2018.
With
B
Civil Appeal Nos. 1390, 1394, 1417, 1419, 1445, 1414, 1402, 1412,
1411, 1413, 1415, 1418, 1420, 1446, 1447, 1409, 1416, 1395, 1407, 1406,
1398, 1401, 1391, 1403, 1393, 1410, 1405, 1397, 1404, 1400. 1396, 1408,
1399 and 1392 of 2022.
N. Venkataraman, ASG, Mukesh Kumar Maroria, Ms. Nisha C
Bagchi, Rupesh Kumar, Akshay Amritanshu, Sharath Narayan Nambiar,
Ms. Meena Devi, B. Krishna Prasad, Advs. for the Appellants.
J. K. Mittal, Ms. Neeha Nagpal, Malak Manish Bhatt, Ms.
Vandana Mittal, Ms. Aashna Suri, Joseph Pookkatt, Prashant Kumar,
Nilesh Sharma, Dhawesh Pahuja, M/s AP & J Chambers, Uchit Sheth, D
Santosh Krishnan, Dr. C. Manickam, Ranjan Kumar, Sanjay Kumar,
Kapil Dev Yadav, Rishabh Sancheti, Sharad Kothari, Ms. Padma Priya,
Anchit Bhandari, Sushant Rao, K. Paarivendhan, Devendra Singh, Ankit
Sachdeva, Vinayak Mathur, Kamal Kumar Arya, Ms. Anishka Gupta,
Rahul Jain, G. Natarajan, Rajesh Kumar Gautam, Kartik Jindal, Ms.
Pallavi Ganesh, Parmeet Singh, Ms. Deepanwita Priyanka, S. E
Suriyanarayanan Iyer, Ms. Garima Bajaj, Advs. for the Respondent.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
A Introduction.................................................................5 F
B Submissions...............................................................12
B.1 Union of India..................................................12
B.2 Respondent-assessees........................................28
C Constitutional Architecture of GST................................52 G
C. 1 Legislative History of the Constitution Amendment
Act 2016..........................................................56
C.2 The nature of the recommendations of the GST
Council.............................................................75
H
330 SUPREME COURT REPORTS [2022] 9 S.C.R.

A D Analysis....................................................................92
D.1 Statutory Provisions and Scheme of the IGST Act...92
D.2 Do the impugned notifications suffer from excessive
delegation?.....................................................104
B D.3 Charging Section: taxable person, taxable rate and
manner of determining value.............................108
D.4 Taxable event: Is an ocean freight transaction for
import of goods a valid category of supply of services
under Section 5(3) of IGST Act?........................114
C D.4.(a) Do imported goods procured on a CIF basis
constitute an inter-state supply or is it an
extra-territorial tax?.............................115
D.4.(b) Are importers service recipients under CIF
contracts?............................................126
D
D.5 Applicability of Section 5(4) of IGST Act.............136
D.6 Composite Supply and Issues of Double Taxation...142
E Conclusion...............................................................151

E
A Introduction
1. The Union of India1 is in appeal against a judgment of a Division
Bench of the Gujarat High Court dated 23 January 2020. The High
Court allowed a petition instituted by the respondents under Article 226
F for challenging the constitutionality of two notifications of the Central
Government. The bone of contention is whether an Indian importer can
be subject to the levy of Integrated Goods and Services Tax2 on the
component of ocean freight paid by the foreign seller to a foreign shipping
line, on a reverse charge basis.
2. The respondents import non-coking coal from Indonesia, South
G
Africa and the U.S. by ocean transport on a ‘Cost-Insurance-Freight’ 3
basis which is supplied to domestic industries. The goods are transported

1
“Union Government” or “Central Government”
2
“IGST”
3
H “CIF”
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 331
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

from a place outside India, up-to the customs station in India. The A
respondent pays customs duties on the import of coal, which includes
the value of ocean freight. In the case of a CIF contract, the freight
invoice is issued by the foreign shipping line to the foreign exporter,
without the involvement of the importer. Ocean freight is paid by the
importer only when goods are imported under a ‘Free-on-Board’4 contract.
B
In the case of a high seas sale transaction, the coal is purchased from
the original buyer before it arrives at Indian ports.
3. Prior to the enforcement of the Goods and Services Tax5 regime,
service tax on ocean freight was exempted by Notification No. 25/2012-
ST (Serial No. 34) dated 20 June 2012. This exemption was withdrawn
by Notification No. 01/2017-ST dated 12 January 2017 which levied C
service tax on the importer, by a reverse charge mechanism. With the
advent of the GST regime, Notification No.8/2017- Integrated Tax (Rate)
dated 28 June 20176 was issued by the Central Government on the advice
of the Goods and Services Tax Council7, in exercise of powers under
Section 5(1), Section 6(1) and Section 20(iii)-(iv) of the Integrated Goods D
and Services Tax Act 20178, read with Section 15(5) and Section 16(1)
of the Central Goods and Services Act9. Entry 9 of Notification 8/2017,
effective from 1 July 2017, levied an integrated tax at the rate of 5 per
cent on the supply of specified services, including transportation of goods,
in a vessel from a place outside India up to the customs station of
clearance in India. E

4. On 28 June 2017, the Central Government issued Notification
10/201710. Serial 10 of Notification 10/2017 categorized the recipient of
services of supply of goods by a person in a non-taxable territory by a
vessel to include an importer under Section 2(26) of the Customs Act
1962. F

5. Section 5(1) of the IGST Act authorises the levy of an integrated
tax on all inter-state supplies of goods and services or both. The integrated
tax can also be levied on goods imported into India on the value determined

4
G
“FOB”
5
“GST”
6
“Notification 8/2017”
7
“GST Council”
8
“IGST Act”
9
“CGST Act”
10
“Notification 10/2017” H
332 SUPREME COURT REPORTS [2022] 9 S.C.R.

A under Section 3 of the Customs Tariff Act 197511 at the point when
customs duties are levied on the goods under Section 12 of the Customs
Act 196212. Section 11 of the IGST Act stipulates that the place of supply
of goods in the case of goods imported into India shall be the place of the
importer. Section 13(9) of the IGST Act contemplates that the place of
supply of services, in the case of transportation of goods shall be the
B
destination of the goods. The respondent alleges that the impugned
notifications create an element of double taxation, as ocean freight is
included in the value of goods for the purpose of customs duty which the
importer is liable to pay. The respondent does not dispute the liability of
integrated tax on supply of service of transportation when it imports
C goods on an FOB basis.
6. The respondent filed a writ petition before the Gujarat High
Court challenging Notification 8/2017 and Notification 10/201713 on the
grounds that: (i) the notifications are ultra vires the IGST Act and CGST
Act; (ii) customs duty is levied on the component of ocean freight and
D the levy of IGST on the freight element in the course of transportation
would amount to double taxation; (iii) though in the case of high sea
sales, the importer is a different entity yet this regime would tax the
respondent as the importer and the recipient of service; (iv) in the case
of a CIF contract, the supply of service of transport of goods in a vessel
is by a foreign shipping line located in a non-taxable territory to an
E exporter located in a non-taxable territory by a vessel outside the territory
of India which cannot be subject to tax under the IGST Act; (v)
Notification 10/2017 transgresses the provisions of Section 5(3) of the
IGST Act as instead of the “recipient” mentioned therein, the “importer”
as defined in section 2(26) of the Customs Act, is made liable to pay tax;
F and (vi) Entry 9(ii) and para 2 of Notification 8/2017, read with Notification
10/2017, creates a deeming fiction and a separate taxable event which
is not permissible in law.
7. The Union of India urged before the High Court that although
tax is being paid twice on the value of ocean freight, it is not
G unconstitutional as the tax is on two different aspects of the transaction,
namely, the supply of service and import of goods. The rationale for the
impugned notifications, according to the Union Government, is to remove
11
“Customs Tariff Act”
12
“Customs Act”
13
H Collectively referred as “impugned notifications”
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 333
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

the disparity between Indian and foreign shipping lines, as the former A
are unable to claim input tax credit 14 that forms a part of their
transportation costs, since supply of goods was hitherto exempt from
service tax. The levy of the integrated tax does not, according to the
Union of India, impose an additional cost on importers as the cost paid
on inward transportation of goods and import freight services is available
B
to them as ITC.
8. Under the existing GST regime (presently under challenge),
taxability of ocean freight under different situations is tabulated below :

C

D

E

F

9. The Division Bench of the Gujarat High Court held that the
impugned notifications are unconstitutional for exceeding the powers
conferred by the IGST Act and the CGST Act. The High Court held:
(i) The importer of goods on a CIF basis is not the recipient of G
the transport services as Section 2(93) of the CGST Act
defines a recipient of services to mean someone who pays
consideration for the service, which is the foreign exporter
in this case;
14
Interchangeably referred as “ITC” H
334 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (ii) Section 5(3) of the IGST Act enables the Government to
stipulate categories of supply, not specify a third-party as a
recipient of such supply;
(iii) There is no territorial nexus for taxation since the supply of
service of transportation of goods is by a person in a non-
B taxable territory to another person in a non-taxable territory
from a place outside India up to the Indian customs
clearance station and this is neither an inter-state nor an
intra-state supply;
(iv) Section 2(11) of the IGST Act defines “import of service”
C to mean the supply of service where the supplier of service
is located outside India, the recipient of service is located in
India and the place of supply of service is in India;
(v) In this case, since the goods are transported on a CIF basis,
the recipient of service is the foreign exporter who is outside
India;
D
(vi) Section 7(5)(c) of the IGST Act dealing with intra-state
supply cannot be read so extensively that it conflates the
“supply of goods or services or both in the taxable territory”
to “place of supply”;
(vii) Sections 12 and 13 of the IGST Act deal with determining
E
the place of supply. Neither of them will apply if both the
supplier and recipient of service are based outside India.
The mere fact that the service terminates at India does not
make the service of supply of transportation to be taking
place in India;
F (viii) The provisions regarding time of supply, as contemplated in
Section 20 of the IGST Act and applicable to Section 13 of
the IGST Act dealing with supply of services, are applicable
only vis-à-vis the actual recipient of the supply of service,
which is the foreign exporter in this case;
G (ix) Section 15(1) of the CGST Act enables the determination
of the value of the supply, only between the actual supplier
and actual recipient of the service;
(x) Since the importer is not the “recipient” of the service under
Section 2(93) of the CGST Act, it will not be in a position to
H avail ITC under Section 16(1) of the CGST Act; and
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 335
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(xi) Since the importer pays customs duties on the goods which A
include the value of ocean freight, the impugned notifications
impose double taxation through a delegated legislation,
which is impermissible.
B Submissions
B.1 Union of India B

10. Mr N Venkataraman, learned Additional Solicitor General 15
appearing on behalf of the appellant – the Union of India – urged the
following submissions:
A. Constitutional Architecture of IGST C
(i) Under Article 286(2), Parliament is empowered to
formulate inter alia the principles for determining when
a supply of goods or services takes place in any of the
ways mentioned in Article 286(1), which includes imports;
(ii) Article 269A enables the Union Government to levy GST D
on inter-state supplies. The explanation to Article
269A(1) creates a deeming fiction that a supply of goods
or services in the course of imports is to be considered
as a supply of goods or services or both in the course of
interstate trade;
E
(iii) Article 269A(5) enables Parliament to formulate the
principles for determining the place of supply and when
a supply of goods and services or both takes place in
the course of inter-State trade or commerce. This
constitutional mandate finds legislative effect in the IGST
F
Act;
(iv) As contemplated in Article 286(2) read with Article
269A(1), the IGST Act enacts provisions relating to the
levy and collection of integrated tax (Section 5(1)), export
of goods [Section 2(5)], export of services [Section 2(6)],
import of goods [Section 2(10)], import of services G
[Section 2(11)], location of recipient of services [Section
2(14)] and location of supplier of services [Section
2(15)];

15
“ASG” H
336 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (v) In terms of Article 269A(5), the IGST Act contemplates
provisions for determining the nature of inter-State
supply (Section 7), supplies in territorial waters (Section
9), place of supply of goods imported into or exported
out of India (Section 11), place of supply of services
where the location of supplier and recipient is in India
B
(Section 12) and place of supply of services where the
location of supplier and recipient is outside India (Section
13).
B. Charging Section
C (vi) The charge created by Section 5(1) of the IGST Act
can extend to an ocean freight transaction to be taxed
in the hands of the importer. This creation of a charge is
in compliance with the essential components of taxation
identified by a Constitution Bench in Mathuram
Agrawal v. State of Madhya Pradesh16 and further
D elaborated on by this Court in Gobind Saran Ganga
Saran v. Commissioner of Sales Tax17.
(vii) The four fundamental principles of a taxing enactment
are: the taxable event, the person on whom the levy is
imposed, the rate at which the levy is imposed and the
E measure or the value to which the rate will be applied;
(viii) Section 5(1) fulfils the above components of taxation:
• Taxable event à “There shall be levied a tax called
integrated goods and services tax on all inter-
F State supplies of goods or services or both except
on the supply of alcoholic liquor for human
consumption.”
• Taxable value à “On the value determined under
Section 15 of the CGST Act”
G • Taxable rate à “At such rates not exceeding 40%
as may be notified by the Government on the
recommendations of the Council and collected in
such manner as may be prescribed”
16
1999 (8) SCC 667 (“Mathuram Agrawal”)
H 17
AIR 1985 SC 1041 (“Gobind Saran Ganga Saran”)
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 337
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

• Taxable person à “Shall be paid by the taxable A
person”
C. Concept of Reverse Charge
(ix) Section 2(98) of the CGST Act defines “reverse charge”
to mean the liability to pay tax by the recipient of supply
of goods or services or both instead of the supplier of B
such goods or services or both under sub-Section (3) or
sub-Section (4) of Section 9 of the CGST Act or under
sub-Section (3) or sub-Section (4) of Section 5 of the
IGST Act. The impugned notifications are issued in
exercise of the powers of the Union Government vested C
by the aforesaid sections of the IGST Act or the CGST
Act;
(x) A person covered by reverse charge becomes a taxable
person in terms of Section 2(107) of the CGST Act read
with Section 24(iii) of the CGST Act. Pertinently, Section D
24(iii) of the CGST Act employs the language of “persons
who are required to pay tax under reverse charge” and
not “persons who are recipient of services under
Section 2(93) of the CGST Act 2017”;
(xi) Section 5(3) of the IGST Act and Section 9(3) of the E
CGST Act permit the Government, on the
recommendation of the GST Council, to specify the
categories of goods or services or both, the tax for which
shall be paid on reverse charge basis by the recipient of
such goods or services or both;
F
(xii) Presently, neither the provisions nor the rules have
identified the taxable persons for reverse charge. Hence,
the impugned notifications are a legitimate exercise of
delegated legislation. Notification 10/2017 identifies an
importer as a recipient for the purposes of reverse charge.
The power to issue such a notification can be traced G
back to Sections 5(3) and 5(4) of the IGST Act;
D. Inter-state supply and Place of Supply
(xiii) The import of service in this case is an inter-state supply
in terms of Section 7(4) read with Section 13(1) and H
338 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 13(9) of the IGST Act. Although the contracting parties
are foreign, the critical limb of the transaction happens
in the taxable territory, namely, India. Hence, the
transaction can also fall under Section 7(5)(c) read with
Section 13(1) and Section 13(9) of the IGST Act;
B (xiv) Section 13(9) of the IGST Act stipulates that the place
of supply of services of transportation of goods other
than by way of mail or courier shall be the place of
destination of such goods. Even though the contracting
parties – the foreign shipping line and the foreign exporter
C – are outside the territory of India, the provision of
service is for the Indian importer and consequently the
consumption and exhaustion of service which is a critical
limb, both commercially and legally, happens only in the
hands of the Indian importer;

D E. Time of Supply
(xv) Section 13(5) of the CGST Act contains a residual
provision for determining time of supply to be the date
on which the tax is paid. Since the other sub-sections in
Section 13 are not applicable for construing the time of
E supply, Section 13(5) of the CGST Act would be
applicable;
F. Composite Supply
(xvi) The CIF transaction and IGST on ocean freight are two
independent transactions, entitled to suffer independent
F
levies and do not qualify as a composite supply under
Section 2(30) of the CGST;
(xvii) GST and customs duties are not exclusive means of
taxation. GST is a destination-based tax. The integrated
G tax is being sought to be imposed on the supply of service
and not on the goods. Separate aspects are being taxed,
hence it cannot be termed as overlapping. Moreover,
the tax is on the value of goods, and not the freight. Tax
paid at an anterior stage is not double taxation if it is
included in the overall value;
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 339
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(xviii) The discharge of reverse charge taxation does not make A
two independent contracts as a composite contract. The
contract between the foreign shipping line and the foreign
exporter is distinct and independent of the contract
between the foreign exporter and the Indian importer.
Their concomitance does not make them composite;
B
(xix) What is sought to be taxed on the supply of goods on
CIF value basis is traceable to the proviso to Section
5(1) read with Sections 3(7) and 3(8) of the Customs
Tariff Act. On the other hand, what is sought to be taxed
under IGST on reverse charge basis derives power under C
Section 5(1) (taxable person) read with Section 24(iii)
of the CGST Act and Section 5(3) of the IGST Act and
the impugned notifications;
(xx) A Constitution Bench of this Court in McDowell and
Company Ltd. v. Commercial Tax Officer18 has held D
that a single element can constitute the basis of a levy
and can also form part of the value for another
transaction. This cannot be termed as double taxation.
G. Extra-territoriality
E
(xxi) There is sufficient territorial nexus for the purpose of
taxation since the importer is the final beneficiary of a
service provided by a foreign shipping line by way of
transportation up to the customs station of clearance in
India. The transaction between the foreign exporter and
the foreign shipping line has a nexus to the taxable F
territory of India. The importer is the beneficial owner
of the goods at the time of clearance. The appellant
relies on the decisions of this Court in M/s Electronic
Corporation of India v. Commissioner of Income
Tax19 and GVK Industries v. Income Tax Officers20
G
where this Court has upheld taxing statutes having a
territorial nexus to India;

18
1985 (3) SCC 230 [“McDowell”]
19
1989 Supp 2 SCC 642
20
2011 (4) SCC 36 [“GVK Industries”]
H
340 SUPREME COURT REPORTS [2022] 9 S.C.R.

A H. Service recipient
(xxii) There are six reasons to term an Indian importer as the
recipient of service:
(a) Section 2(93)(c) of the CGST Act envisages a recipient
of an intangible service as one who does not pay
B consideration. In CIF transactions, the Indian importer
does not pay for ocean freight and yet receives the
benefit of transportation;
(b) Section 2 of the CGST Act is prefaced with “In this Act,
unless the context otherwise requires” which warrants
C a broad interpretation of statutory definitions therein;
(c) Section 24(iii) read with Section 2(98) of the CGST Act,
read with Section 5(3) of the IGST Act and the impugned
notifications issued thereunder, allow any person to
become a taxable person and such a taxable person
D becomes the recipient of supply of goods or services or
both. Once ‘any person’ is identified as a taxable person
for reverse charge under a notification issued under 5(3)
of IGST Act, by sheer default of the definition of reverse
charge under Section 2(98) of the CGST Act, such a
E taxable person on reverse charge becomes a service
recipient;
(d) Section 5(3) of the IGST Act clearly enables the
identification of service recipients, and not just categories
of goods or services or both. Any contrary interpretation
F would be against the legislative intention. On a conjoint
reading of Section 5(3) of the IGST Act read with Section
2(93) of the CGST Act, a service recipient can be
identified through a notification;
(e) The definition of “supply” without consideration under
Section 7(c) of the CGST Act is not an exhaustive
G
definition. Further, Section 2(31) of the CGST Act defines
consideration and does not restrict its payment to only
the owner of such goods and services; and
(f) Section 2(93)(c) of the CGST Act reads “..and any
reference to a person to whom a supply is made, shall
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 341
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

be construed as a reference to the recipient of the A
supply…”. A supply can be made to ‘a person’, ‘a
registered person’ and ‘a taxable person’ and such a
supply shall be construed to be a supply to a recipient.
Since the Indian importer would qualify under all the
aforementioned categories, it can be termed as recipient
B
of the service.
I. Applicability of Section 5(4) of the IGST Act
(xxiii) In the alternative, the impugned notifications would be
saved by Section 5(4) of the IGST Act which permits
the Union Government, on the recommendations of the C
GST Council, to specify a class of registered persons
who shall in respect of specified categories of goods or
services or both received from an unregistered supplier,
pay the tax on reverse charge basis as the recipient and
all the provisions of the Act would apply to such a recipient;
D
(xxiv) It is admitted that the impugned notifications do not refer
to Section 5(4) of the IGST Act. However, it is settled
law that once a power is available to grant or identify
the taxable person, taxable event, rate and measure, non-
reference of the source of power will not vitiate its
exercise and application in given facts and circumstances E
of the case;
J. Parliamentary legislation v. Excessive delegation
(xxv) This Court in Municipal Corporation of Delhi v. Birla
Cotton Spinning and Weaving Mills21 and Avinder
Singh v. State of Punjab22 has held that only essential F
legislative functions, such as policy guidelines and
framework, need to be performed by Parliament and
the state legislatures. Once these are made available
through the exercise of plenary power, the rest of the
details can always emerge through the exercise of
G
delegated powers;
(xxvi) The constitutional mandate of Articles 269A and 286
finds effect under the IGST Act. The IGST Act, and
21
1968 (3) SCR 251
22
1979 (1) SCC 441 H
342 SUPREME COURT REPORTS [2022] 9 S.C.R.

A specifically Section 5(1) therein, has defined the subject
matter of taxation (inter-state supply of goods and
services), the taxable person under Section 2(107) read
with Section 24(iii) of the CGST Act, a maximum cap of
40 per cent and determination of taxable value in terms
of Section 15 of the CGST Act. Only the identification
B
of the taxable person is delegated to the Union
Government which makes its decisions on the basis of
the recommendations of the GST Council;
K. GST Council recommendations- Cooperative federalism and
collaborative federalism
C
(xxvii) GST is a consumption tax and the tax jurisdiction extends
to the place the supply is consumed. Since the foreign
shipping line or foreign exporter are located in a non-
taxable territory, the Indian importer has to be taxed on
a reverse charge basis since the service is consumed in
D India. The purpose is to make the Indian shipping lines
as competitive as foreign shipping lines. ITC is available
to the importer and the tax paid on such a reverse charge
can be offset in the importer’s output tax liability.
Therefore, there is no additional burden on the importer-
E it is a mere alteration of the mechanism;
(xxviii) The integrated tax was essential to level the playing field
between foreign shipping lines and Indian shipping lines
since the former were not required to charge any tax on
the recipient of supply of service;
F (xxix) The spirit of the cooperative federalism must guide the
functioning of the GST Council as envisaged in Article
279A(6). This was espoused by this Court in Union of
India v. VKC Footsteps India Private Limited 23
where it was held that there is a need for a harmonised
G structure of goods and service tax. The GST Council is
empowered to decide on every aspect of the GST law.
The recommendations of the GST Council are binding
on the executive and the legislature-while it frames laws
relating to GST by the power under Article 246A;
23
H (2022) 2 SCC 603 (“VKC Footsteps”)
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 343
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(xxx) The GST Council recommends the law, rules and A
notifications through a voting architecture that is
prescribed in Article 279A(6) and quorum requirements
in Article 279A(7). Every decision flows from one
common source;
(xxxi) The GST Council is the only constitutional body which B
acts as a converging point or a platform for both the
federal units to work in a harmonious manner in
structuring the goods and service tax, in the process of
developing a harmonised national market for goods and
services;
C
(xxxii) Article 246A states that the power to legislate GST laws
is only with the Union of India and the States. Neither
can Article 279A override Article 246A nor can Article
246A be made subject to Article 279A. Judicial
interpretation must strike a harmony such that Parliament,
the state legislatures and the GST Council work in unison D
and harmony; and
(xxxiii) The constitutional scheme therefore envisages a two-
step process. At the first level of the GST Council, Article
279A(6) envisages cooperative federalism and in the
absence of either a non obstante clause in Article 279A E
or a ‘subject to’ clause in Article 246A, the need or
requirement is that both the Union and the States should
be supportive of this cooperative federalism through the
process of collaborative federalism; and
(xxxiv) Section 5(1) of the IGST Act, by design, chooses to F
delegate certain functions to the GST Council in order
to achieve the legislative object. Even though Article
246A does not subject Article 246A to Article 279A, the
Union and States after exercising their legislative power
and discretion under Article 246A(1) have agreed to go G
by the recommendations of the GST Council in every
aspect of the GST law wherever required. This is the
spirit of collaborative federalism which must be respected
by upholding the constitutional validity of the impugned
notifications.
H
344 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 11. The learned ASG has urged the following supplementary
submissions by way of rejoinder:
(i) The purpose of the integrated tax is to introduce a level
playing field between foreign shipping lines and Indian
shipping lines. It is a settled principle that to tax one subject,
B the revenue does not have to tax everything;
(ii) The respondents have contended that the tax on an Indian
importer is on a reverse charge basis, and therefore the
importer does not fall under the definition of a ‘taxable
person’. However, Section 2(107) of the CGST Act defines
C a taxable person as any person registered or liable to be
registered under Section 22 or Section 24 of the CGST Act.
Section 24 classifies persons liable for compulsory
registration, and Section 24(iii) includes persons governed
by the reverse charge mechanism;

D (iii) In Laghu Udyog Bharati v. Union of India24, this Court
struck down the imposition of service tax on a reverse
charge basis since the legislature had failed to identify the
persons on whom service tax could be imposed, enforced
and collected. However, Section 2(107) read with Section
24(iii) of the CGST Act specifically identifies the importer
E as a taxable person who is liable to pay tax on a reverse
charge basis. Section 24(iii) of the CGST Act also defines
persons liable to pay tax on reverse charge as taxable
persons;
(iv) The respondents have argued that under Section 5(1) of
F the IGST Act, the taxable value can be determined only
through Section 15 of the CGST Act and its corresponding
rules. It was contended that Notification 8/2017 prescribes
the valuation of 10% of CIF value for the first time, which
violates Section 5(1) of the IGST Act. The appellant submits
G that in terms of Section 15(4) and Section 15(5) of the CGST
Act, Rules 27 to 31 of the Central Goods and Service Tax
Rules 201725 have been formulated. The Revenue can also
assess the transaction by taking aid of a residual method

24
1999 (6) SCC 418 (“Laghu Udyog”)
25
H “CGST Rules”
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 345
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

prescribed under Rule 31 of the CGST Rules. Any discretion A
vested in quasi-judicial authorities must be regulated. The
corrigendum dated 30 June 2016 amending Notification 8/
2017 and prescribing the methodology for determining
valuation can be read as a guideline for dealing with
infirmities in assessment practices. It is only a reference or
B
a guideline for making assessments. Even if it were to be
held inapplicable, the revenue can assess the transaction
under Rule 31 of the CGST Rules. Thus, Notification 8/
2017 does not impinge on Rule 31 of the CGST Rules but
only aids uniformity;
(v) The respondents rely on Section 2(87) of the CGST Act C
and Section 5 of the IGST Act to argue that prescription
can only be through rules, and not notifications. However,
Section 15(1), (2) and (3) of the IGST Act prescribes values.
Section 15(4) and 15(5) of the IGST Act deals with cases
where the valuation cannot be determined under Section D
15(1). Rule 31 of the CGST Rules also enables the valuation
to be conducted through “reasonable means”. Thus,
delegation is envisaged in the statutory mechanism;
(vi) If the expression “by the recipient” is to be given a static
meaning as those falling under Section 2(93) of the CGST E
Act, then one would be denuding the power to notify persons
for reverse charge under Sections 5(1) and 5(3) of the IGST
Act read with Section 24(iii) of the CGST Act.
(vii) Alternatively, the concept of reverse charge and notifying
persons liable for reverse charge is envisaged in the statutory F
mechanism. Section 2(98) of the CGST Act defines reverse
charge as imposed “only on the recipient”. Section 2(93) of
the CGST Act defines a recipient. An Indian importer can
be a recipient in six ways that have been elaborated in the
submissions. The Indian importer does not pay any
consideration of service in CIF imports since consideration G
is paid by the foreign exporter. Section 2 is illustrative and
not rigid. A “person”, as defined under Section 2(84), is
deemed to be the recipient of a service if such person
satisfies the conditions under 2(93) of the CGST Act. Section
5(3) of the IGST Act contemplates the applicability of all H
346 SUPREME COURT REPORTS [2022] 9 S.C.R.

A provisions of the Act to the recipient. The fact that
consideration is paid by the foreign exporter to the foreign
shipping line does not vitiate the IGST Act’s scheme which
enables payment of tax on a reverse charge basis;
(viii) Section 13(9) of the IGST Act states that the destination of
B the goods shall be the place of supply, which is on Indian
territory. This Court in Union of India v. Jalyan Udyog26
has held that deeming fictions can be created even by the
executive, i.e. through delegated legislation.
(ix) In case of a foreign exporter and a foreign shipping line,
C there is a nexus with India since the importer would be
Indian. Forward charge taxation is envisaged in direct tax.
Section 9(1)(6) of the Income Tax Act 1961 taxes a non-
resident outside India since the income is generated in
India;
D (x) The decision of this Court in BSNL v. Union of India27 on
double taxation has no applicability to this case since that
was on the question of the overlap of VAT and service tax
in the pre-GST regime and was decided on the ground of
the impingement on the exclusive domain of the Union to
impose service tax under Entry 97, List I;
E
(xi) In the alternative, the integrated tax derives authority from
Section 5(4) of the IGST Act which permits the government
to specify a class of registered persons who receive goods
or supplies from an unregistered supplier, who shall pay the
tax on a reverse charge basis as the recipient. If this section
F is deemed applicable, then the importers would be liable for
tax with effect from 1 February 2019, though exempted for
the period from 13 October 2017 till 31 January 2019;
(xii) The creation of the GST Council under Article 279A
embodies the spirit of collaborative federalism. The GST
G Council is constitutionally mandated, particularly under
Article 279A(6), to promote harmony and alignment
amongst the federal partners;

26
1994 (1) SCC 318
27
H 2006 (3) SCC 1 (“BSNL”)
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 347
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(xiii) Under Article 279A(4), decisions of the GST Council A
transform into recommendations to the Unions and the
States. The GST Council is the only constitutional body that
acts as a converging space or platform for the federal units
to work in a harmonious matter. The principal function of
the GST Council is to take decisions, which are conveyed
B
as recommendations. These recommendations have a
unique constitutional status and they are overridden in
exceptional circumstances;
(xiv) It was contended by the respondents that instead of course
correcting the input tax mechanism, the revenue has chosen
to tax the Indian importer on reverse charge. This is more C
a policy than a perceptional issue. As long as the tax is
legal and valid, the manner and mode of taxation need not
be questioned. A better manner and mode would not result
in the exercise of legislative discretion being declared to be
invalid or illegal; and D
(xv) The integrated tax was introduced to ensure a level playing
field between foreign and Indian shipping lines. This objective
must be appreciated while determining constitutionality.
B.2 Respondent-assessees
E
12. Mr V Sridharan, learned senior counsel appearing on behalf
of the respondents28 has urged the following submissions:
(i) Under Section 5(4) of the IGST Act, the Government cannot
specify the person liable to pay service tax on a reverse
charge basis: F
(a) Section 5(3) of the IGST Act provides that the
Government may specify the categories of supply of
goods or services or both on which the tax shall be
paid on reverse charge basis by the recipient of the
goods or services. Thus, the power under Section
G
5(3) is only to specify the categories of supply, while
the liability to pay tax is fixed on the recipient. The
Government cannot specify the person liable to pay
tax on reverse charge basis under Section 5(3);

28
In SLP(C) No. 3081 of 2021, SLP(C) No. 1625 of 2021 and SLP(C) No. 3760 of 2021 H
348 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (b) Notification 10/2017 has been issued under Section
5(3) of the IGST Act. Since the power flows from
Section 5(3), the Government can by a notification
only specify the ‘categories of supply’, as the liability
for tax has been determined by Parliament;
B (c) In contrast with Section 5(3), prior to the introduction
of GST, Section 68(2) of the Finance Act 1994
provided that the service tax shall be paid by “such
person…as may be prescribed”. In that case, the
liability of tax was not determined by the legislation;
C (d) Under the CGST Act and the IGST Act, the only
place where a person other than a supplier or recipient
is made liable to pay tax is under Section 5(5) of the
IGST Act, where an electronic commerce operator
through whom supply is made is taxed; and
(e) In case the Parliament desired the tax to be collected
D
from a person other than a supplier or recipient, it
would have expressly provided so in the legislation.
Since Parliament has specified the person liable for
tax, it is not a matter to be governed by delegated
legislation;
E
(ii) Section 2(98) of the CGST Act defines ‘reverse charge’ as
the liability to pay tax by the recipient of supply of goods or
services or both instead of the supplier of such goods or
services or both. In other words, only the recipient can be
made liable to pay tax under reverse charge basis and the
F reverse charge cannot be disintegrated from the recipient
of supply;
(iii) Section 5(3) clearly stipulates that (i) the tax shall be paid
on a reverse charge basis and (ii) the tax is payable by the
recipient;
G (iv) GST laws contemplate only one recipient for one supply:
(a) The interpretation of the ASG that the foreign exporter
is the recipient under clause (a) of Section 2(93) of
the CGST Act and the Indian importer is the recipient
under clause (c) of Section 2(93) of the CGST Act
H leads to absurdity;
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 349
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(b) Under Section 2(93) of the CGST Act, a ‘recipient’ A
is defined with reference to three situations- (a)
where consideration is payable for the supply of goods
or services or both, (b) where no consideration is
payable for the supply of goods and (c) where no
consideration is payable for the supply of a service.
B
Clauses (a), (b) and (c) of Section 2(93) are mutually
exclusive and cannot apply simultaneously. In case
the supply of goods or services is for consideration,
clause (a) applies and the recipient is the person who
is liable to pay the consideration;
(c) The question of who is the beneficiary of the supply C
or who has received the supply are irrelevant in
determining the ‘recipient’ under Section 2(93) of the
CGST Act;
(d) Whether a supply of service is an ‘inter-state supply’
under Section 7(3) or ‘intra-state supply’ under D
Section 8(2) of the IGST Act depends on the location
of the supplier and the place of supply. In case there
are two recipients of a single supply, as argued by
the ASG, then the transaction may become inter-state
as well as intra-state supply. Such a situation has not E
been envisaged by Parliament;
(e) Only the recipient of the supply is entitled to avail
input tax credit. In case there are two recipients of a
single supply, two persons will be allowed to avail
credit of tax by the supplier;
F
(f) The rate of tax is often dependent on the recipient of
the supply. For instance, services supplied to
Government, local authorities or charitable
institutions, are exempted or liable to a lower rate of
tax. If there are two recipients, this would result in
an anomaly; and G
(g) Even in case of a three-party transaction involving
supply of goods, Section 10(1)(b) of the IGST Act
provides that the place of supply of goods is the
principal place of business of the recipient, and not
the person to whom the goods are delivered; H
350 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (v) The last leg of Section 2(93) of the CGST Act does not
create a separate category of recipient:
(a) Section 2(93) provides three categories of recipients,
namely, where consideration is payable for supply of
goods or services; where no consideration is payable
B for supply of goods; and where no consideration is
payable for supply of services;
(b) Section 2(93) also provides that any reference to a
person to whom supply is made shall be construed
as a reference to the recipient of supply and shall
C include an agent acting on behalf of the recipient;
and
(c) The above provision implies that if the Act does not
use the term ‘recipient’ but makes a reference to the
person to whom supply is made, then they shall be
construed as a ‘recipient’. It does not however, create
D
a new category of recipient.
(vi) The taxable event for levy of GST is ‘supply’ of goods or
service. In the absence of supply, no tax can be levied under
IGST, CGST or State Goods and Services Tax Act29:
(a) Article 366(12A) of the Constitution defines the
E
‘goods and services tax’ as the tax on ‘supply’ of
goods or services or both;
(b) Section 5 of the IGST Act, which is the charging
section for levy of tax, also states that the IGST will
be levied on all inter-State ‘supplies’ of goods or
F services or both; and
(c) Each transaction has to be evaluated independently
to determine its taxability. The transaction of supply
takes place between the contracting parties, that is,
at whose instance the supply is made;
G
(vii) The CGST Act does not envisage a taxable supply without
consideration, other than those specified in Schedule I:
(a) Clause (a) of Section 7(1) of the CGST Act defines
the term ‘supply’ as all forms of supply of goods or
29
H “SGST”
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 351
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

services made for a consideration in the course of or A
in furtherance of business. Clause (b) of Section 7(1)
of the CGST Act provides that import of service for
a consideration will be included in the term ‘supply’
even if it is not made in the course or furtherance of
business. Clause (c) provides that activities specified
B
in Schedule I will be included in the term ‘supply’
even if they are made without consideration;
(b) Clause (a) requires two conditions to be satisfied: (i)
that the activity has been made in the furtherance of
business and (ii) made for a consideration. In clause
(b), the condition of the supply being made in the C
course of business is absent. In clause (c), the
condition of supply being made for a consideration
has not been incorporated but this only for activities
provided in Schedule I; and
(c) The argument that supplies can be made without D
consideration for activities other than those specified
in Schedule I would make clause (c) of Section 7(1)
redundant.
(viii) Notification 10/2017 cannot be sustained under Section 5(4)
of the IGST Act: E

(a) The unamended Section 5(4) of the IGST Act provides
that integrated tax in respect of supplies made by an
unregistered supplier to a registered person shall be
paid by such person on reverse charge basis as a
recipient of supply; F
(b) The section was a standalone section, operating on
its own, and did not require anything to be specified
by way of a notification. Thus, Notification 10/2017
cannot be sustained under Section 5(4);
G
(c) Pursuant to the Goods and Services Tax (Amendment)
Act 2018, Section 5(4) was amended w.e.f. 1 February
2019 to provide that the Government may, based on
the recommendations of the GST Council, by
notification, specify a class of registered persons who
shall, in respect of supply of specified categories of H
352 SUPREME COURT REPORTS [2022] 9 S.C.R.

A goods or services or both received from an
unregistered supplier, pay the tax on reverse charge
basis as the recipient;
(d) The reliance placed by the Government on the
amended Section 5(4) of the IGST Act to justify
B Notification 10/2017 is erroneous as:
• There was no power to issue a notification
specifying the class of registered person liable to
pay tax under reverse charge basis under Section
5(4) at the time when the impugned notification
C was issued on 28 June 2017. The power has been
granted by amendment w.e.f. 1 February 2019;
• Section 2(93) of the CGST Act provides that any
reference to a person to whom supply is made
shall be construed as reference to the recipient
D of supply. Thus, the person under Section 5(4)
who has received the supply is the recipient of
the supply. Even after the amendment of Section
5(4), only the recipient can be specified as a
person liable to pay tax; and

E • Section 2(98) of the CGST Act defines ‘reverse
charge’ as the liability to pay tax by the recipient
of the supply instead of the supplier. Thus, only
the recipient can be made liable to pay tax on a
reverse charge basis;

F (ix) Section 13(9) of the IGST Act is only relevant to determine
the place of supply and not the recipient of supply. Whether
the supply of service is an export of services under Section
2(6)(a) of the IGST Act or an import of services under
Section 2(11), read with Section 7(4) of the IGST Act; or
an inter-State supply of service, is not determined by Section
G 13(9);
(x) Notification 10/2017 has been issued on the recommendation
of the GST Council under Section 5(3) of the IGST Act
and not under Article 279A of the Constitution. If the GST
Council intended to make a recommendation deeming the
H importer as recipient of supply, then the proper course of
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 353
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

implementation would be to make an amendment in the IGST A
Act and seek Parliamentary approval;
(xi) The objective of the tax or levy cannot validate an ultra
vires levy:
(a) The Government has contended that the levy of tax
on services of transportation of goods into India B
provided by a person in a non-taxable territory to a
person in a non-taxable territory, has been introduced
to create parity for Indian shipping lines with foreign
shippers;
(b) The notification for the levy and reverse charge has C
been lifted from the erstwhile service tax regime into
the GST regime without considering the changes in
language in Section 5(3) of the IGST Act as opposed
to Section 68(2) of the Finance Act 1994. Thus, the
notification is ultra vires the Act;
D
(xii) The scheme of IGST Act does not envisage a person other
than the supplier or the recipient as a person liable to pay
tax:
(a) The time of supply of services is determined according
to Section 20 of the IGST Act along with Section 12 E
and 13 of the CGST Act. Section 12 deals with the
time of supply of goods and Section 13 deals with
the time of supply of services;
(b) Section 13(1) states that the liability to pay tax on
services arises at the time of supply. Sub-section (2) F
determines the time of supply on forward charge
basis. Sub-section (3) deals with time of supply when
tax is payable on reverse charge basis. Under this
sub-section, time of supply of services is the earliest
date of payment entered in the books of accounts of
the recipient or the date of debit in the bank account G
or sixty days from the date of last issue of invoice by
the supplier. Thus, a person other than a recipient
cannot determine the time of supply;
(c) Section 13(5) of the CGST Act is only relevant for
determining the time of supply in case of clandestine H
354 SUPREME COURT REPORTS [2022] 9 S.C.R.

A supply or evasion of tax and cannot be used to
determine time of supply for ocean freight services;
(d) The provisions relating to filing of returns apply
whether a person is a supplier or a recipient of supply,
or apply only to an outward supply and an inward
B supply. The supply of ocean freight service is neither
an inward supply nor an outward supply;
(xiii) In case of CIF contracts, the customer contracts for a supply
of delivered goods at the port of destination. The contract
for transportation of goods is entered into by the foreign
C exporter with the foreign shipper. Thus, the person liable to
pay consideration to the foreign shipper is the foreign
exporter. The importer of goods in India is not the person
liable to pay the consideration, and is thus, not the ‘recipient’
of the service;

D (xiv) The contract of the Indian importer with the foreign exporter
is for supply of delivered goods. The service of transportation
is a component of the supply of goods similar to raw
material, manufacturing cost or employee cost of the
supplier. To contend that the purchaser has received the
supply of raw material or the services of an employee is
E illogical. Similarly, the argument that the Indian importer
has received transportation services is irrational; and
(xv) Serial No. 9(ii) of Notification 8/2017 read with Para 4 and
Serial No. 10 of Notification No. 9 of 2017-Integrated Tax
(Rate) dated 28 June 2019 describe the services as provided
F by a person located in a non-taxable territory to a person
located in a non-taxable territory. These notifications
recognise the exporter as the recipient of the service of
ocean freight;
(xvi) The argument of the ASG that the IGST paid on goods at
G the time of import is a customs duty and not a tax, and thus,
there is no dual levy of tax recovered on ocean freight from
the exporter is erroneous:
(a) The present case involves outright purchase of goods
and thus, it is a supply of goods under GST and an
H import of goods according to customs law. The issue
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 355
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

is whether the transaction is an import of goods under A
customs law, but a supply of service under GST law;
(b) Section 5(1) of the IGST Act is the charging section.
The proviso to Section 5(1) states that integrated tax
on goods imported into India shall be levied and
collected in accordance with Section 3 of the Customs B
Tariff Act on the value as determined under the
Customs Tariff Act and at the point when duties of
customs are levied under Section 12 of the Customs
Act;
(c) Section 3(7) of the Customs Tariff Act provides that C
any article imported into India shall, in addition, be
liable to integrated tax;
(d) Both the proviso to Section 5(1) of the IGST Act and
Section 3(7) of the Customs Tariff Act provide that
goods imported into India shall be liable to integrated D
tax;
(e) The contention that the proviso to Section 5(1) of the
IGST Act does not contain the word ‘supply’ and
thus, the tax is imposed on import of goods
irrespective of whether the transaction is supply or E
not, is erroneous;
(f) The absence of the word ‘supply’ in the proviso will
not lead to an extreme result that the transaction of
import of goods becomes leviable to IGST even if it
is not supply; F
(g) The CGST Act has at various instances, such as
Section 11(1), Section 12(1), Section 13(1) and
Section 49(9), omitted the word ‘supply’ and merely
mentioned the liability to pay tax on goods or services;
(h) The proviso under Section 5(1) of the IGST Act read G
with Section 3(7) of the Customs Tariff Act implies
that the tax is leviable only on supply of goods
imported into India;
(i) The amount collected as IGST on import of goods is
apportioned between the Union and States as per H
356 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Article 269A of the Constitution which provides for
apportionment of GST on inter-state supply of goods
or service. If import IGST was a customs duty, then
the revenue proceeds would be distributed in
accordance with Article 270 of the Constitution;
B (j) At the introduction of GST, the understanding of the
Government was in consonance with the above legal
position and accordingly, the Government issued a
notification exempting goods and services imported
from an SEZ unit or developer under the IGST Act.
Subsequently, the Government rescinded the above
C exemption notifications and issued separate
notifications under the Customs Act and IGST Act;
and
(k) The Government has also issued various notifications
exempting payment of IGST in case of import of
D goods on lease or temporary import basis. The
intention of Government is not to impose IGST in
case of import of goods that do not amount to supply.
13. Mr Harish Salve, learned senior counsel, appearing on behalf
of the respondent30 has submitted:
E
(i) A CIF contract is an inclusive price covering cost of goods,
insurance and freight payable for carriage of goods to the
destination specified in the contract. The essence of the
contract is that a seller having shipped the goods in
accordance with the contract, can fulfil his part of the
F bargain by tendering to the buyer the proper shipping
documents. If he does this, he is not in breach even if the
goods are lost before such tender. In the event of a loss,
the buyer must pay the price on tender of documents and
his remedies lie against the carrier but not the seller;
G (ii) A CIF contract has two components: (i) price is paid for
the freight, and (ii) the buyer is never obligated to pay it.
The owner of the vessel who enters into a contract of
affreightment has a privity of contract with the supplier of

30
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UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 357
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

goods and is rendering a service to the supplier. If the A
service is not received, then the question of reverse charge
does not arise;
(iii) Sections 5(3) and 5(4) of the IGST Act are merely
machinery provisions for collection of tax, and not the
charging provision: B
(a) Section 5(1) is the charging section which levies
IGST. Since there is no separate levy under Section
5(1) on ocean freight, as it is an import of goods which
already suffers IGST on CIF value, the question of
reverse charge does not arise; C
(b) The proviso to Section 5(1) clarifies that the ‘value
as determined’ is only the measure of tax and not the
subject of tax; and
(c) Section 5(3) cannot be treated as the charging section
as it would make it possible for the Government to D
impose separate taxes under Sections 5(1) and 5(3)
and charge for the services at both ends;
(iv) There must be a taxable event in the CIF contract of the
kind contemplated under the IGST Act. In case there is no
such event, it cannot be created through delegated legislation E
by the GST Council. There is an absence of a statutory
fiction by which a CIF contract can be split into a contract
for supply of goods and services, and creating a second
layer of fiction by which the shipper is rendering a service
to the supplier of goods. Thus, the question of levy of tax
by the GST Council does not arise; F
(v) In the transaction of import of coal on CIF basis in the
present case, the recipient will fall under clause (a) of
Section 2(93) of the CGST Act as consideration is payable
for the service of shipping. The mere fact that an Indian is
the recipient will not lead to the Indian recipient making the G
payment separately under the contract of affreightment.
The Indian recipient is only a recipient of goods, not of
service;
(vi) The law recognises and maintains the integrity of a CIF
contract under Section 2(30) read with Section 2(93), and H
358 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Section 8. These sections maintain the integrity of a
composite contract by providing that where the goods come
with insurance and freight, the tax is imposed only on supply
of goods;
(vii) The High Court has held that that the notifications under
B challenge were ultra vires. The Government has not urged
that any of these findings are incorrect and has only
contended that Section 5(1) of the IGST Act satisfies all
ingredients of a valid tax law;
(viii) Notification 8/2017 is ultra vires the IGST Act. Section 5(1)
C of the IGST Act only empowers the issuance of notifications
for rates and requires other provisions to be prescribed.
Section 5(1) does not empower the Government to define
‘description of service’ which is an essential legislative
function;
(ix) Entry 9(ii) of Notification 8/2017 imposes a tax on ocean
D
freight in import of goods. Such a power however, has not
been provided in the statute;
(x) Para 4 of Notification 8/2017 determines the ‘value of
service’ as 10% of the CIF value, which is contrary to
Section 15(1) of the CGST Act which says ‘transaction
E
value’;
(xi) Article 366(12A) defines goods and services tax as involving
only supply of goods or services or both. Section 7 of the
IGST Act has made a clear distinction between standalone
supply of goods, standalone supply of services and
F standalone supply of ‘goods or services or both’. Section
7(4) treats standalone services imported into India as inter-
State supply and does not artificially bifurcate by assuming
ocean freight in the transaction of import of goods;
(xii) Section 13 of the IGST Act has no application in the case
G which relates to import of goods and not services standalone.
Section 13 applies to place of supply of services, referring
to standalone services, and does not use the term ‘both’ to
apply to supply of goods or services; and
(xiii) IGST Act has no extra-territorial application as the Act
H extends to the whole of India. Under Section 2(109) of the
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 359
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

CGST Act, taxable territory means the territory to which A
the Act applies. Further, GVK Industries (supra) states
that Parliament may exercise its powers with respect to an
extra-territorial aspect when it has a nexus with India. It
does not however empower delegated legislation to exercise
such power. Thus, the activity brought within the tax net by
B
the impugned notifications is contrary to the IGST Act.
14. Mr Arvind Datar, learned senior counsel, appearing on behalf
of the respondent31 has submitted:
(i) The levy of IGST on ocean freight by way of Notification
No. 10/2017-Integrated Tax (Rate) is extra-territorial and C
ultra vires Section 1 read with Section 2(22) of the IGST
Act:
(a) The levy imposed is on the service of transportation
of goods rendered by the shipping line to the foreign
vendor/exporter, occurring outside the territory of D
India, that is outside the taxable territory;
(b) The only nexus of the service with India is that the
service results in the import of goods into India.
However, this activity is already subject to IGST under
the IGST Act and customs duty under the Customs E
Act;
(c) For a levy to be imposed under the IGST Act, the
service must be a ‘supply’ under the provisions of
IGST Act read with Section 7 of the CGST Act.
However, Section 1 of the CGST Act and IGST Act F
are limited to the territory of India. Thus, any service
received outside the territory of India cannot be
considered to be ‘supply’ under the IGST Act or the
CGST Act;
(d) To impose a levy on a service that is extra-territorial,
G
there has to be a deeming fiction in the form of a
statutory provision which deems the supply of
transportation by a vessel to a non-resident exporter.
In this case, such a deeming fiction does not exist.

31
SLP (C) No. 3462 of 2021 H
360 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Thus, the transportation service cannot be deemed
as a ‘supply’ under the IGST Act;
(e) Only once the service provided outside the territory
of India is deemed as a ‘supply’ by way of statute,
can there be a determination of the supplier and the
B recipient;
(f) By way of the impugned notification, the freight
charges incurred abroad are sought to be taxed in
India on the ground that the service recipient is in
India. If this argument is accepted, then any service
C (such as insurance or incidental services) rendered
abroad can be taxed in India on the ground that the
recipient is in India. This practice is in contrast with
international taxation laws and will lead to hardship
for Indian importers;
D (g) Article 245(2) of the Constitution states that a law
made by the Parliament will not be invalid on the
ground that it has extra-territorial operation. However,
the expression ‘law made by the Parliament’ does
not include executive notifications, even if made on
E the recommendations of the GST Council; and
(h) Tax can be levied outside the territory of India by
way of primary legislation. For instance, under
Sections 6 and 7 of the Territorial Waters, Continental
Shelf, Exclusive Economic Zone and Other Maritime
F Zones Act 1976, a legal fiction is created by which
India has the power to levy tax in the Exclusive
Economic Zone and Continental Shelf. Pursuant to
this fiction, notifications levying customs duty on
supplies made to oil drilling rigs in the Continental
Shelf have been issued. In the absence of a primary
G legislation or statutory provision to this effect,
notifications cannot impose duties on activities
occurring outside India;
(ii) The value of a CIF contract is indivisible, making the
computation of tax on such a contract impossible:
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 361
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(a) The only way to artificially dissect the value of a A
CIF contract is by way of statute, which is absent in
this case;
(b) If such a division is allowed, then the Government
will be able to tax not just ocean freight, but also
insurance services; and B
(c) Levy on contracts on a CIF basis will lead to
hardships for the Indian recipients. The advantage
of entering into CIF contracts is to ensure that the
foreign supplier is responsible for arranging
transportation and insurance. However, if a CIF C
contract is made subject to GST, then the Indian
importers will have to make their own arrangements
to transport the goods, book an insurance policy and
arrange for shipping;
(iii) The ASG’s reliance on the nexus theory to justify the levy D
of GST on ocean freight, by equating it to the imposition of
income tax on income accruing in India or customs duty
imposed on goods imported into India- is erroneous:
(a) In case of imposition of income tax, the nexus is
provided by way of a deeming fiction under Section E
5(2) of the Income Tax Act 1961, where a non-
resident is liable to tax only if the income is deemed
to accrue or arises in India;
(b) In case of customs duty, the taxing event is the goods
entering the territory of India; and F
(c) In the absence of such a provision, the freight
services rendered outside India cannot be deemed
to be received in India merely because the recipient
is in India.
G
(iv) The importer is not the ‘recipient’ of services under Section
2(93) of the CGST Act:
(a) Under clause (c) of Section 2(93), when there is no
consideration payable for the supply of services, then
the person to whom the services are rendered is the H
362 SUPREME COURT REPORTS [2022] 9 S.C.R.

A service recipient. However, in this case, the importer
is not the service recipient as the importer does not
pay the consideration or receive the services;
(b) The argument of the ASG that the importer is a
‘recipient’ as they are the ultimate beneficiary
B enlarges the scope of Section 2(93) by adding words
that are absent in the statute;
(c) Even if the ultimate beneficiary is considered to be
the recipient, the importer is not the beneficiary of
the service of transportation of goods. Under the
C terms of a CIF contract, the foreign vendor is obligated
to arrange for transportation of goods for which he
engages the services of a shipping line. Thus, the
foreign vendor is the ultimate beneficiary;
(d) The importer is only the beneficiary of the imported
D goods, whose value is taxable as customs duty under
the Customs Tariff Act as well as under the IGST
Act; and
(e) Additionally, reliance cannot be placed on clause(c)
of Section 2(93) as it only refers to those supplies for
E which consideration is not paid as mentioned in
Schedule I of the CGST Act. This schedule
enumerates the activities deemed as supplies without
consideration.
(v) Imposition of IGST on ocean freight will lead to double
F taxation:
(a) Section 3(7) of the Customs Tariff Act states that
goods imported into India will be subject to IGST
under Section 5 of the IGST Act, on the value as
determined by Section 3(8) and Section 3(8)(a).
G Under Section 3(8), the value includes value of freight;
and
(b) Rule 10 of the Customs Valuation (Determination of
Value of Imported Goods) Rules 2007 includes cost
of transportation and insurance in the value of goods,
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 363
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

which forms the basis of the levy of IGST under the A
proviso to Section 5 of the IGST Act. The impugned
levy of IGST on ocean freight would thus amount to
double taxation on the same transaction;
(vi) The ASG’s reliance on ‘aspect theory’ to justify the
impugned levy is erroneous: B
(a) The ASG relied on the ‘aspect theory’ and submitted
that the impugned notification taxes the ‘service’
element of ocean freight, while the ‘goods’ element
is taxed under the proviso to Section 5 of the IGST
Act. However, such an approach is impermissible C
according to the decision of this Court in BSNL
(supra);
(b) The aspect theory is inapplicable as the freight
element is included by levying IGST; and
D
(c) The aspect theory in India permits taxation of two
different aspects or features of a transaction. For
instance, in a catering contract, supply of food was
subject to value added tax and the service aspect
was subject to service tax. However, the aspect
theory does not permit double taxation of the same E
amount or value
(vii) The GST Council which has been created by Article 279A
of the Constitution is a recommendatory body, whose
recommendations can be implemented by either amending
the CGST Act or the IGST Act or by issuing a notification. F
However, notifications issued cannot be ultra vires the parent
legislation;
(viii) The principles of cooperative federalism are not relevant in
this case as they were not adjudicated before the High
Court. The appeal must test the correctness of the impugned G
judgment without expanding its scope; and
(ix) Interpretation of Article 279A of the Constitution was not
an issue before the High Court and the present appeal should
be restricted to the validity of the impugned notification.
H
364 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 15. In addition to the above, Mr Vikram Nankani, learned senior
counsel, appearing on behalf of the respondent32 urged the following
submissions:
(i) Section 7(4) of the IGST Act provides that supply of
services imported into the territory of India shall be treated
B as a supply of services in the course of inter-state trade or
commerce. Section 2(11) of the IGST Act defines “import
of services” when the supplier of service is located outside
India, the recipient of service is located in India and the
place of supply of service is in India. When these provisions
are read together, it implies that in case of import of services
C into the territory of India, the location of the supplier of
services is outside India and the location of the recipient is
in India. Thus the IGST Act covers either import of goods
or import of services and not services subsumed into the
value of goods imported into India;
D (ii) The IGST Act was never intended to apply to the importer
of goods on a CIF basis as the services are provided and
consumed before the goods reach India and have no nexus
with the Indian importer;
(iii) The transaction between two persons located outside India
E is not chargeable under Section 5(1) read with the proviso
and Section 7(4) read with Section 2(11) of the IGST Act.
Thus, Notification 8/2017 is ultra vires and Notification 10/
2017, providing for reverse charge is also ultra vires the
IGST Act;
(iv) Section 13(9) of the IGST Act, which states that the place
F of supply of services of transportation of goods is the
destination of the goods, cannot be read in isolation. Read
with Section 7(4) of the IGST Act, it implies that in case of
import of services, the supplier must be outside India while
recipient must be in India; and
G (v) The test of ‘ultimate beneficiary’ relied upon by the ASG
does not have statutory backing since the charging section,
that is Section 5, makes the recipient of the services liable
to pay tax. The Indian importer is not a party to the CIF
contract between the foreign exporter and the shipping line.
H 32
SLP(C) No. 843/2021
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 365
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

16. Mr Uchit Sheth, counsel appearing on behalf of the A
respondents33 submitted:
(i) The importers in a CIF contract do not have any privity of
contract with the supplier of the transportation service since
they neither make payment of consideration to the service
provider, nor avail any service. The importers only purchase B
and import goods;
(ii) The impugned levy is contrary to the object and purpose of
the IGST Act. Section 5 of the IGST Act clarifies that so
far as imported goods are concerned, IGST is levied at the
point of clearance of goods for home consumption and on C
the total value (including value additions till that point). This
was also clarified by Circular no. 3/1/2018-IGST dated 25
May 2018 issued by the Central Board of Indirect Taxes
and Customs. The impugned levy of IGST on the freight
element of CIF contracts and high seas purchase contracts
is ultra vires as IGST is paid on the total value of goods; D

(iii) In Ispat Industries Ltd. v. Commissioner of Customs34,
in the context of imposition of customs duty, it was held
that in a CIF contract, the freight is part of the price paid to
the seller and further addition of transportation charges is
contrary to the statutory provisions; and E

(iv) The judgment of this Court in Union of India v. Jalyan
Udyog35 which states that a legal fiction can be created
even by delegated legislation, is inapplicable as in that case,
the fiction created was within the parameters of the parent
provision. In this case, the fiction violates Section 5(3) of F
the IGST Act.
17. Mr Rajesh Kumar Gautam, learned counsel appearing on behalf
of the intervenor36 in SLP(C) No. 13958/2020, has submitted that the
argument of the ASG that the levy has been introduced to create a level
playing field is fallacious as: G

33
In SLP(C) No. 3540/2021, SLP(C) No. 1281/2021, SLP(C) No. 1277/2021, SLP(C)
No. 2242/2021, SLP(C) No. 2198/2021, SLP(C) No. 2736/2021
34
(2006) 12 SCC 583
35
(1994) 1 SCC 318
36
IA No. 118754/2021 in SLP(C) No. H
366 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (i) Prior to 2016, all import transportation, whether undertaken
by Indian or foreign shipping lines was outside the scope of
levy. Service tax was imposed on import transactions
undertaken by Indian shipping lines only to allow them to
avail CENVAT credit. This credit was protected even
though no service tax was payable on export transportation.
B
Further, Indian importers availing services of foreign shipping
lines were liable to pay service tax under reverse charge.
This position continued under the GST regime and the only
transaction outside the ambit was when the foreign exporter
availed the services of a foreign shipping line to transport
C goods to India; and
(ii) The introduction of levy of service tax or GST on import
transactions was by way of an incentive to Indian shipping
lines. Thus, it cannot now be contended that the level playing
field has been affected because of this levy.
D 18. Similar submissions have been addressed by Dr C Manickam37,
Mr Shashank Shekhar38 and Mr Abhishek A Rastogi39, which we have
not recorded separately for the sake of brevity.
19. The rival submissions will now be analysed.

E C Constitutional Architecture of GST
20. Before we proceed to analyse the vires of the impugned
notifications, it is pertinent to contextualize the constitutional architecture
of the GST. The Constitution (One Hundred and First Amendment Act)
201640 was enacted on 8 September 2016 introducing Article 246A and
F 279A. Article 246A stipulates that both the Parliament and the State
legislatures have the power to legislate on GST:
“246A. Special provisions with respect to goods and services tax
(1) Notwithstanding anything contained in articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every
State, have power to make laws with respect to goods and services
G
tax imposed by the Union or by such State.
37
Appearing for the respondent in SLP(C) No. 3680/2021
38
Appearing for the respondent in SLP(C) No. 1798/2021
39
Appearing on behalf of the intervenor in IA No. 74108/2021 in SLP(C) No. 13958/
2020
H 40
“Constitution Amendment Act 2016”
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 367
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(2) Parliament has exclusive power to make laws with respect to A
goods and services tax where the supply of goods, or of services,
or both takes place in the course of inter-State trade or commerce.
Explanation: The provisions of this article, shall, in respect of
goods and services tax referred to in clause (5) of Article 279A,
take effect from the date recommended by the Goods and Services B
Tax Council.”
Article 279A constitutes the GST Council which shall make
recommendations to the Union and the States on a wide range of subjects
relating to GST:
C
‘‘279A. (1) The President shall, within sixty days from the date of
commencement of the Constitution (One Hundred and First
Amendment) Act, 2016, by order, constitute a Council to be called
the Goods and Services Tax Council.
(2) The Goods and Services Tax Council shall consist of the
D
following members, namely:—
(a) the Union Finance Minister...................... Chairperson;
(b) the Union Minister of State in charge of Revenue or
Finance................................................................ Member;
(c) the Minister in charge of Finance or Taxation or any other E
Minister nominated by each State Government............Members.
(3) The Members of the Goods and Services Tax Council referred
to in sub-clause (c) of clause (2) shall, as soon as may be, choose
one amongst themselves to be the Vice-Chairperson of the Council
for such period as they may decide. F

(4) The Goods and Services Tax Council shall make
recommendations to the Union and the States on— (a) the taxes,
cesses and surcharges levied by the Union, the States and the
local bodies which may be subsumed in the goods and services
tax; G

(b) the goods and services that may be subjected to, or exempted
from the goods and services tax;
(c) model Goods and Services Tax Laws, principles of levy,
apportionment of Goods and Services Tax levied on supplies in H
368 SUPREME COURT REPORTS [2022] 9 S.C.R.

A the course of inter-State trade or commerce under article 269A
and the principles that govern the place of supply;
(d) the threshold limit of turnover below which goods and services
may be exempted from goods and services tax;
(e) the rates including floor rates with bands of goods and services
B
tax;
(f) any special rate or rates for a specified period, to raise additional
resources during any natural calamity or disaster;
(g) special provision with respect to the States of Arunachal
C Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand; and (h) any other matter relating to the goods and
services tax, as the Council may decide.
(5) The Goods and Services Tax Council shall recommend the
D date on which the goods and services tax be levied on petroleum
crude, high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel.
(6) While discharging the functions conferred by this article, the
Goods and Services Tax Council shall be guided by the need for a
E harmonised structure of goods and services tax and for the
development of a harmonised national market for goods and
services.
(7) One-half of the total number of Members of the Goods and
Services Tax Council shall constitute the quorum at its meetings.
F (8) The Goods and Services Tax Council shall determine the
procedure in the performance of its functions.
(9) Every decision of the Goods and Services Tax Council shall
be taken at a meeting, by a majority of not less than three-fourths
of the weighted votes of the members present and voting, in
G accordance with the following principles, namely:—
(a) the vote of the Central Government shall have a weightage of
one third of the total votes cast, and (b) the votes of all the State
Governments taken together shall have a weightage of two-thirds
of the total votes cast, in that meeting.
H
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(10) No act or proceedings of the Goods and Services Tax Council A
shall be invalid merely by reason of—
(a) any vacancy in, or any defect in, the constitution of the Council;
or
(b) any defect in the appointment of a person as a Member of the
Council; or B
(c) any procedural irregularity of the Council not affecting the
merits of the case.
(11)The Goods and Services Tax Council shall establish a
mechanism to adjudicate any dispute —
C
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on
one side and one or more other States on the other side; or
(c) between two or more States, arising out of the recommendations
of the Council or implementation thereof.’’ D
21. The Union Government has contended that the
recommendations of the GST Council are binding on the legislature and
the executive. It was submitted that since the recommendations are
binding, the rule making power of the Government under the provisions
of the IGST Act and CGST Act, exercisable on the ‘recommendations’
E
of the GST Council, are also very wide. The arguments of the Union
Government are as follows:
(i) A combined reading of Articles 246A and 279A elucidates
that the GST Council is the ultimate decision-making body
in framing the GST law since it is a constitutional body that
acts as a converging platform for both the Union and the F
States;
(ii) The functions and role of the GST Council are unique and
incomparable to other constitutional bodies. Therefore,
interpretations of other provisions of the Constitution do
not have precedential value while interpreting the role of G
the GST Council;
(iii) The power of the Parliament and the State Legislature under
Article 246A and the power of the GST Council under
Article 279A must be balanced and harmonised, such that
neither overrides the other: H
370 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (a) Though Article 279A does not begin with a non-
obstante clause overriding Article 246A, the latter
would not override the former. The core theme of
GST law – as it emanates from Article 279(6) – is
cooperation and harmony. A system premised on
cooperation cannot provide inter se supremacy.
B
Therefore, Article 279A has rightly not been given
an overriding effect over Article 246A; and
(b) Article 246A vests the Parliament and the State
legislatures with the power to enact laws on GST.
This function, if delegated would amount to abdication
C of the Parliament’s constitutional function. Therefore,
Article 246A cannot be made subject to Article 279A.
(iv) The ordinary legislative process for enacting a statute is
that bills are introduced and voted on by the legislature.
However, Article 264A departs from this as the framing of
D the policy, discussion on the policy, and decision making are
vested with the GST Council. The Parliament or the State
Legislature cannot legislate a law on GST under Article
246A independent of the recommendations of the GST
Council. A reading of Sections 5, 6 and 22 of the IGST Act
E indicates that the legislature and the executive are bound
by the recommendations of the GST Council on three
preliminary provisions, namely charge, exemption and rule-
making power. Therefore, Parliament bound itself to the
recommendations of the GST Council by enacting the IGST
Act and CGST Act; and
F
(v) The recommendations by the GST Council are transformed
into legislation on a combined reading of Article 279A and
Sections 5,6, and 22 of the IGST Act 2017 and Sections
9,11, and 164 of the CGST Act.

G C. 1 Legislative History of the Constitution Amendment
Act 2016
Statement of Objects and Reasons
22. As early as in 2004, the Task Force on implementation of the
Fiscal Responsibility and Budget Management Act 2003 had
H recommended a shift to consumption taxes to increase efficiency in
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 371
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

production and enhance international competitiveness of Indian goods A
and services. The need for such an enormous change in the tax regime
arose out of the distortions in the then existing indirect tax regime which
suffered from the drawback of multiplicity of taxes, taxable events,
compliances, and authorities. For instance, the rate of the sales tax and
value added tax on the same goods would differ across India. Several
B
states would impose entry taxes on goods before the goods entered their
boundaries. The First Discussion Paper on Goods and Services Tax in
India released by the Empowered Committee in November 2009 explained
the rationale for introducing the GST regime in the following terms:41
“The introduction of GST at the Central level will not only include
comprehensively more indirect Central Taxes and integrate goods C
and service taxes for the purpose of set-off relief, but may also
lead to revenue gain for the Centre through widening of the dealer
base by capturing value added addition in the distributive trade
and increased compliance.
In the existing State-level VAT structure there are also certain D
short comings as follows. There are, for instance, even now, several
taxes which are in the nature of indirect tax on goods and services,
such as luxury tax, entertainment tax, etc., and yet not subsumed
n the VAT. Moreover, in the present State-level VAT scheme,
CENVAT load on the goods remains included in the value to be E
taxed under State VAT, and contributing to that extent a cascading
effect on account of CENVAT element. This CENVAT load needs
to be removed.
[…]
However, for this GST to be introduced at the State-level, it is F
essential that the States should be given the power of levy of
taxation of all services. This power of levy of service taxes has
so long been only with Centre. A Constitutional Amendment will
be made for giving this power also to the States. Moreover, with
the introduction of GST, burden of Central Sales Tax (CST) will G
also be removed. The GST at the State-level is, therefore, justified
for (a) additional power of levy of taxation of services for the
States, (b) system of comprehensive set-off relief, including set-

41
Empowered Committee, First Discussion Paper on Goods and Services Tax, (2009)
Pars 1.13-1.14 H
372 SUPREME COURT REPORTS [2022] 9 S.C.R.

A off for cascading burden of CENVAT and services taxes, (c)
subsuming of several taxes in the GST and (d) removal of burden
for CST. Because of the removal of taxes in the GST, the burden
of tax under GST on goods will, in general, fall.”
23. Parliament introduced the Constitution (One Hundred and
B Fifteenth Amendment) Bill 201142 which sought to amend the provisions
of the Constitution to introduce the GST regime. The Speaker of the
Lok Sabha referred the 2011 Amendment Bill to the Parliamentary
Standing Committee on Finance. The Constitution (One Hundred and
Twenty-Second Amendment) Bill 2014 43 was introduced after
incorporating the recommendations of the Standing Committee. The 2014
C Amendment Bill was introduced to replace almost all the indirect taxes
that were levied by the State Governments and the Union Government,
with a singular tax system to eliminate the cascading effect of multiple
taxes and to provide for a common national market. The Statement of
Objects and Reasons of the 2014 Amendment Bill reads as follows:
D “The Constitution is proposed to be amended to introduce the
goods and services tax for conferring concurrent taxing powers
on the Union as well as the States including Union territory with
Legislature to make laws for levying goods and services tax on
every transaction of supply of goods or services or both. The
E goods and services tax shall replace a number of indirect
taxes being levied by the Union and the State Governments
and is intended to remove cascading effect of taxes and
provide for a common national market for goods and
services. The proposed Central and State goods and services
tax will be levied on all transactions involving supply of goods and
F services, except those which are kept out of the purview of the
goods and services tax.”
(emphasis supplied)
24. The Finance Minister while introducing the 2014 Amendment
Bill in Parliament noted that the object of the constitutional amendment
G is to bring about a “certain amount of convergence between these
taxes so that the taxation mechanism becomes extremely simple”.44
42
“2011 Amendment Bill”
43
“2014 Amendment Bill”
44
Speech by Arun Jaitley in Lok Sabha on 24.4.2015; Tarun Jain, Goods and Services
H Tax: Constitutional Law and Policy (EBC 2018) 16
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

He also highlighted the fact that there was no uniformity in the tax rates A
and structure across the States. The Statement of Objects and Reasons
and the debates and speeches in the legislature indicate the intent behind
the introduction of the Bill.45 The legislative history, the statement of
objects and reasons of the Bill and the speech made when the bill was
introduced indicate the mischief that Articles 246A and 279A to the
B
Constitution sought to remedy, which is to simplify the indirect tax regime
to prevent the complexities inherent in and the cascading effect of a
multiplicity of taxes.
Simultaneous Legislative distribution
25. Article 246 read with the Seventh Schedule vests Parliament C
and the State Legislatures with the power to make laws on subject matters
listed in the Seventh Schedule of the Constitution. Before the introduction
of Articles 246A and 279A by the Constitution Amendment Act 2016,
the legislative powers of the Union and the States on taxation were
exclusive. The general subjects of legislation constitute one group in the
Union List (entries 1 to 81) and the State List (entries 1 to 44). The D
subject heads related to taxation are clubbed together in both the Union
and the State lists (entries 82 to 92B in the Union list and entries 45 to 63
in the State list). The concurrent list does not include any entry related to
taxation.46 For example, while the Union primarily has the power to impose
income taxes, except from agriculture47, the State has the power to impose E
tax on agricultural income48. Therefore, both the Union and the States
had a separate and an exclusive domain over specific heads of taxation.
The Union and the State could not impose tax under the same head
since the concurrent list did not include an entry for taxes. This Court, in
its decision in Hoecst Pharmaceuticals Ltd. v. State of Bihar49,
recognised the exclusive powers held by the Union and the State on F
taxation. The three-Judge Bench observed that:
“75. Legislative relations between the Union and the States inter
se with reference to the three Lists in Schedule VII cannot be
understood fully without examining the general features disclosed
G
45
Abhiram Singh v. CD Commachen, (2017) 2 SCC 629
46
Entry 47 of the concurrent list mentions that “fees in respect of any of the matters in
this List, but not including fees taken in any court.”
47
Entry 82 of List I
48
Entry 46 of List II
49
(1983) 4 SCC 45 H
374 SUPREME COURT REPORTS [2022] 9 S.C.R.

A by the entries contained in those Lists” : Seervai in
his Constitutional Law of India, 3rd Edn., Vol. 1 at pp. 81-82. A
scrutiny of Lists I and II of the Seventh Schedule would show
that there is no overlapping anywhere in the taxing power and the
Constitution gives independent sources of taxation to the Union
and the States. Following the scheme of the Government of India
B
Act, 1935, the Constitution has made the taxing power of the
Union and of the States mutually exclusive and thus avoided the
difficulties which have arisen in some other Federal Constitutions
from overlapping powers of taxation.
76. It would therefore appear that there is a distinction made
C
between general subjects of legislation and taxation. The general
subjects of legislation arc dealt with in one group of entries and
power of taxation in a separate group. In M.P.V. Sundararamier
& Co. v. State of A.P. [AIR 1958 SC 468 : 1958 SCR 1422 :
(1958) 9 STC 298] this court dealt with the scheme of the
D separation of taxation powers between the Union and the States
by mutually exclusive lists. In List I, Entries 1 to 81 deal with
general subjects of legislation; Entries 82 to 92-A deal with taxes.
In List II, Entries 1 to 44 deal with general subjects of legislation;
Entries 45 to 63 deal with taxes. This mutual exclusiveness is also
E brought out by the fact that in List III, the Concurrent Legislative
List, there is no entry relating to a tax, but it only contains an entry
relating to levy of fees in respect of matters given in that list other
than court-fees. Thus, in our Constitution, a conflict of the taxing
power of the Union and of the States cannot arise. That being so,
it is difficult to comprehend the submission that there can be
F intrusion by a law made by Parliament under Entry 33 of List III
into a forbidden field viz. the State’s exclusive power to make a
law with respect to the levy and imposition of a tax on sale or
purchase of goods relatable to Entry 54 of List II of the Seventh
Schedule. It follows that the two laws viz. sub-section (3) of Section
G 5 of the Act and para 21 of the Control Order issued by the Central
Government under sub-section (1) of Section 3 of the Essential
Commodities Act, operate on two separate and distinct fields and
both are capable of being obeyed. There is no question of any
clash between the two laws and the question of repugnancy does
not come into play.”
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 375
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

26. In the pre-GST regime, the Union had the exclusive power to A
impose indirect taxes, that is, on inter-state sale of goods, customs duty,
service tax, and excise duty. The States had the exclusive power to
impose tax on intra-State sale of goods, luxury tax, entertainment tax,
purchase tax, and taxes on gambling and betting. The GST regime has
subsumed all the indirect taxes. Article 246A which was introduced by
B
the Constitution Amendment Act 2016 vests the Parliament and the State
legislatures with the concurrent power to make laws with respect to
GST.
27. The distribution of legislative power between federating units-
the Union and the States, is among the paramount features of a federal
Constitution.50 Articles 246 and 254 have been central to the debate on C
the federal nature of the Indian Constitution. Article 246A, is a ‘special
provision with respect to goods and service tax,’ and begins with a non-
obstante clause overriding Articles 246 and 254. Article 246 sets down
the constitutional framework defining the legislative competence of
Parliament and the State legislatures. Article 254 provides the framework D
for addressing inconsistency between central and state laws on matters
in the Concurrent list. Article 246A entrusts Parliament and State
legislatures the power to legislate on the goods and services tax. The
power of the States is however subject to the conferment of an exclusive
domain to Parliament to levy the goods and services tax where the supply
of goods or services takes place in the course of inter-state trade and E
commerce.
28. In Union of India v. Mohit Mineral Pvt. Ltd.51, this Court
while deciding the constitutional validity of the GST (Compensation to
States) Act 2017 noted that the Constitution Amendment Act 2016
introduced changes in the legislative powers of the Parliament and State F
legislature relating to indirect taxation. It observed that the amendment
“confers concurrent taxing powers on the Union as well as the States
for levying GST on transactions of supply of goods or services or
both”. In Baiku v. State Tax Officer, GST52, a writ petition was filed
challenging the legality of the notices and assessment orders issued under
G
the Kerala Value Added Tax Act 200353 for the assessment years 2010-
50
H.M Seervai, Constitutional Law of India, (NM Tripati Private Limited, 4 th Edition,
vol 1) 289; SR Bommai v. Union of India, (1994) 3 SCC 1
51
(2019) 2 SCC 599
52
2019 SCC OnLine Ker 5362
53
“KVAT Act” H
376 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 11 and 2011-12. The notices and orders were challenged on the ground
that the authorities did not have the jurisdiction to issue them since the
amendments introduced to Section 25(1) of the KVAT Act through the
Kerala Finance Acts 2017 and 2018 did not operate retrospectively. The
Kerala High Court had to decide whether the Kerala State legislature
had the legislative competence to amend the KVAT Act after the
B
introduction of Article 246A to the Constitution, and the repeal of KVAT
pursuant to the amendment. The Court noted that the special power
introduced by Article 246A allows Parliament and the State legislatures
to ‘simultaneously’ make laws.54 Subsequently, while explaining the
‘simultaneous’ nature of power held by Parliament and State legislature,
C it was observed that the power under Article 246A can be exercised
simultaneously by the State legislature and Parliament and none hold
any ‘unilateral or exclusive’ legislative power55.
29. In its decision in VKC Footsteps (supra), this Court noticed
the changes in the constitutional scheme introduced by Article 246A.
D One of us (Dr DY Chandrachud) writing for the two-judge Bench
observed:
“52. Article 246-A has brought about several changes in the
constitutional scheme:
52.1.Firstly, Article 246-A defines the source of power as well as
E
the field of legislation (with respect to goods and services tax)
obviating the need to travel to the Seventh Schedule.
52.2.Secondly, the provisions of Article 246-A are available both
to Parliament and the State Legislatures, save and except for the
exclusive power of Parliament to enact GST legislation where
F
the supply of goods or services takes place in the course of inter-
State trade or commerce.
52.3.Thirdly, Article 246-A embodies the constitutional
principle of simultaneous levy as distinct from the principle
of concurrence. Concurrence, which operated within the
G
fold of the Concurrent List, was regulated by Article 254.”
(emphasis supplied)

54
Paragraph 19 of the judgement.
55
H Paragraph 22 of the judgment.
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

30. Article 246A provides Parliament and the State legislature A
with the concurrent power to legislate on GST. Article 246A has a non-
obstante provision which overrides Article 254. Article 246 A does not
provide a repugnancy clause. Unlike Article 254 which stipulates that
the law made by Parliament on a subject in the Concurrent list shall
prevail over conflicting laws made by the State legislature, the
B
constitutional design of Article 246A does not stipulate the manner in
which such inconsistency between the laws made by Parliament and
the State legislature on GST can be resolved. The concurrent power
exercised by the legislatures under Article 246A is termed as a
‘simultaneous power’ to differentiate it from the constitutional design on
exercise of concurrent power under Article 246, the latter being subject C
to the repugnancy clause under Article 254. The constitutional role and
functions of the GST Council must be understood in the context of the
simultaneous legislative power conferred on Parliament and the State
legislatures. It is from that perspective that the role of the GST Council
becomes relevant.
D
Role of the GST Council
31. The Thirteenth Finance Commission set up the Task Force on
GST. The Task Force recommended that the Empowered Committee of
State Finance Ministers may, upon the introduction of GST, be transformed
into a permanent constitutional body known as the ‘Council of Finance E
Ministers’. The Task Force had recommended that:
(i) The Council would be responsible for modification in the
design of dual GST regulating the indirect tax system;
(ii) The Council would make decisions on the principle of F
majority and not unanimity. The initial decision would be
approved by the Union and three-fourths of the States. The
subsequent changes to the decision could be made upon an
agreement of the Union and two-third of the States;
(iii) The body would maintain the ‘existing balance of federal G
fiscal powers’ since both the Union and the States would
surrender their fiscal autonomy to change to the GST
regime;56

56
Tarun Jain, Goods and Services Tax: Constitutional Law and Policy (EBC 2018) 117
H
378 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (iv) The basis for levy should be common for both the Union
and the States upon agreement. This could be on the lines
of the GST law in Australia, where both the Union and the
States will have to agree before any change in the rate or
base of GST could be implemented;57 and
B (v) If the States deviate from the collectively agreed position
on GST rates, a mechanism ought to be established by which
the defaulting State pays penalty58.
32. The 2011 Amendment Bill sought to include Article 279A in
the Constitution which constituted the GST Council. The provision
stipulated the constitution of the Council, the role of the Council and the
C
quorum necessary for making decisions:
“279-A. Goods and Services Tax Council.— (1) The President
shall, within sixty days from the date of commencement of the
Constitution (One Hundred and First Amendment) Act, 2016, by
order, constitute a Council to be called the Goods and Services
D Tax Council.
(2) The Goods and Services Tax Council shall consist of the
following members, namely:—
(a) the Union Finance Minister – Chairperson;
E (b) the Union Minister of State in charge of Revenue or Finance
– Member;
(c) the Minister in charge of Finance or Taxation or any other
Minister nominated by each State Government- Members.
(3) The Members of the Goods and Services Tax Council
F referred to in sub-clause (c) of clause (2) shall, as soon as may
be, choose one amongst themselves to be the Vice-Chairperson
of the Council for such period as they may decide.
(4) The Goods and Services Tax Council shall make
recommendations to the
G Union and the States on—
(a) the taxes, cesses and surcharges levied by the Centre, the
States and the local bodies which may be subsumed in the goods
and services tax;
57
Thirteenth Finance Commission, Report of the Task Force on GST (2009) Para 10.5
H 58
Ibid, paragraph 9.8
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(b) the goods and services that may be subjected to or exempted A
from the goods and services tax;
(c) the threshold limit of turnover below which goods and
services tax may be exempted;
(d) the rates of goods and services tax; and
B
(e) any other matter relating to the goods and services tax, as
the Council may decide.
(5) While discharging the functions conferred by this article,
the Goods and Services Tax Council shall be guided by the need
for a harmonised structure of goods and services tax and for the C
development of a harmonised national market for goods and
services.
(6) One-third of the total number of members of the Goods
and Services Tax Council shall constitute the quorum at its
meetings. D
(7) The Goods and Services Tax Council shall determine the
procedure in the performance of its functions.
(8) Every decision of the Goods and Services Tax Council taken
at a meeting shall be with the consensus of all the members present
at the meeting. E
(9) No act or proceedings of the Goods and Services Tax
Council shall be invalid merely by reason of—
(a) any vacancy in, or any defect in, the constitution of the
Council; or
F
(b) any defect in the appointment of a person as a Member of
the Council; or
(c) any irregularity in the procedure of the Council not affecting
the merits of the case.
Explanation.—For the purposes of this article, “State’’ includes G
a Union territory with Legislature.”
33. According to the draft of Article 279A, as it found place in the
2011 Amendment Bill, every decision of the GST Council had to be
taken with the consensus of all the members present at the meeting.
The Bill also provided for the establishment of a GST Dispute Settlement H
380 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Authority to adjudicate on any complaint referred to it by a State
Government or the Union Government, arising out of deviation from any
recommendations of the Council that resulted in the loss of revenue or
which affected the harmonised structure of the GST. The draft provision
also provided that Parliament may by law provide that no Court other
than the Supreme Court shall exercise jurisdiction in respect of the dispute.
B
The draft of Article 279B, as in the 2011 Amendment Bill, reads as
follows:
“279B. (1) Parliament may, by law, provide for the establishment
of a Goods and Services Tax Dispute Settlement Authority to
adjudicate any dispute or complaint referred to it by a State
C
Government or the Government of India arising out of a deviation
from any of the recommendations of the Goods and Services Tax
Council constituted under article 279A that results in a loss of
revenue to a State Government or the Government of India or
affects the harmonised structure of the goods and services tax.
D
(2) The Goods and Services Tax Dispute Settlement Authority
shall consist of a Chairperson and two other members.
(3) The Chairperson of the Goods and Services Tax Dispute
Settlement Authority shall be a person who has been a Judge of
the Supreme Court or Chief Justice of a High Court to be appointed
E by the President on the recommendation of the Chief Justice of
India.
(4) The two other members of the Goods and Services Tax Dispute
Settlement Authority shall be persons of proven capacity and
expertise in the field of law, economics or public affairs to be
F appointed by the President on the recommendation of the Goods
and Services Tax Council.
(5) The Goods and Services Tax Dispute Settlement Authority
shall pass suitable orders including interim orders.

G (6) A law made under clause (1) may specify the powers which
may be exercised by the Goods and Services Tax Dispute
Settlement Authority and provide for the procedure to be followed
by it.
(7) Notwithstanding anything in this Constitution, Parliament may
H by law provide that no Court other than the Supreme Court shall
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

exercise jurisdiction in respect of any such adjudication or dispute A
or complaint as is referred to in clause (1).
Explanation.— For the purpose of this article, “State’’ includes a
Union territory with Legislature.”
34. The Standing Committee on Finance, Ministry of Finance in B
its 73rd report on the 2011 Amendment Bill explained the salient features
of the Amendment Bill introducing the GST regime.59 It was noted that
the GST Council will be a joint forum for the Union and the States to
discuss issues on GST and the recommendations of the GST Council
will be a benchmark and guiding force for the Union and State
Governments.60 In the same vein, it was observed that the legislature C
will be free to exercise its power on all issues recommended by the
Council:61
“(c) A Goods and Services Tax Council (Article 279A) will be
created, which will be a joint forum for the Centre and the States
to discuss important issues relating to GST so that the objective of D
having a harmonized structure for GST and a harmonized national
market can be achieved. This Council would function under the
Chairmanship of the Union Finance Minister and will have Minister
in charge of Finance/Taxation or Minister nominated by each of
the States and UTs with legislatures, as members. The Council E
will make recommendations to the Union and the States on
important parameters like rates, exemption list, threshold limits,
etc. The recommendations made by this Council will act as
benchmark or guidance to Union as well as State Governments.
The Parliament and well as State Legislatures will be free
to exercise their power on all issues recommended by the F
Council. One-third of the total number of Members of the Council
will constitute the quorum of GST council. It is further provided
that the decisions of the GST Council shall be with the consensus
of all members present at the meeting. This is to protect the
interests of each State and the Centre when the Council takes a G
decision.

59
Standing Committee on Finance, The Constitution (One Hundred and Fifteenth
Amendment) 2011 (73 rd report, 2013)
60
Ibid, paragraph 12
61
Ibid H
382 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (d) In exercise of their powers, these legislative bodies may
deviate from the recommendations of the Council and may
act in a manner which is prejudicial to the harmonious working of
GST or which adversely impacts the revenue of some other State/
Central Government. Such deviations or actions are required
to be kept to the minimum, if the objective of having a
B
common national market and smooth working of GST is to
be achieved. It is accordingly proposed to set up Goods &
Services Tax Dispute Settlement Authority (Article 279B), which
may be approached by the affected Government (whether the
Centre or the States) seeking redressal for any loss caused by
C any action due to a deviation from the recommendations made by
the Goods & Services Tax Council or for adversely affecting the
harmonious structure and implementation of the GST.”
(emphasis supplied)
35. The Committee also sought the opinion of the Attorney General
D through the Department of Legal Affairs on whether the
recommendations of the GST Council would undermine the power of
the legislature. In response, the Attorney General stated that though the
GST Council has the power to make recommendations, both Parliament
and State legislatures, have the power to either accept or reject those
E recommendations.62 The Attorney General stated:
“This is an important point which has been raised and the short
answer to it is that it is certainly open to Parliament to approve
any recommendation. However, this does not mean that the GSTC
recommendations will have no value. Having regarding to the
F nature of the Constitution of GSTC, the Council would have
performed useful role in making recommendations but the ultimate
authority whether to accept such recommendations can and must
rest only in the Legislatures, namely, Parliament and the State
Legislatures. In this view of the matter, the setting up of the GSTC
does not strike at the root of the legislative powers over Finance.
G The powers of the legislature over Finance are sacrosanct and
are not affected by the setting up of the GSTC.”
36. The States raised concerns over the establishment of the GST
Dispute Settlement Authority on the ground that such authority would
62
H Ibid, paragraph 63
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

have the power to override the supremacy of Parliament and the State A
Legislatures since a legislation, though constitutional, could be struck
down if it deviated from the recommendations of the GST Council. The
Committee, while addressing the concerns raised by the States
recommended that the provision establishing the GST Dispute Settlement
Authority be omitted since it would affect the fiscal autonomy of the
B
States. It was further recommended that a provision be made in Article
279A itself empowering the GST Council to resolve disputes arising out
of its recommendations:
“60. On the GST Dispute Settlement Authority, the Chairman,
Empowered Committee of State Finance Ministers stated that
most of the States have expressed the view that the provision C
pertaining to the GST Dispute Settlement Authority should be
omitted as this authority shall have powers of overriding the
supremacy of the Parliament and the State Legislatures. It shall
affect the fiscal autonomy of the States.
61. The Constitution confers autonomy on the Parliament D
and the State Legislatures to legislate within the respective
fields assigned to them and the fact that a statute enacted
by a competent Legislative body can be called into question
on grounds of deviations from the recommendations of an
essentially executive body, albeit Constitutional, is being E
construed as undermining the supremacy of the Legislature.
Keeping in view the concerns expressed by the States, and
the fact that the proposed provision of GST Dispute
Settlement Authority will affect the fiscal autonomy of the
Parliament and the State Legislatures, the proposed Article
279B providing for GST Dispute Settlement Authority may F
be omitted. However, any dispensation involving multiple partners
does require a mechanism to resolve disputes. A provision can be
made in Article 279A itself empowering the GST Council to decide
about the mechanism to resolve the disputes arising out of its
recommendations.”
G
(emphasis supplied)
37. The Committee reiterated in its conclusion that the GST Council
would only play a ‘constructive and enabling role’ vis-à-vis the legislature
and would not override the role of the legislature63:
63
Ibid, paragraph 15 H
384 SUPREME COURT REPORTS [2022] 9 S.C.R.

A “The Committee would thus expect the proposed GST Council to
follow the principles of cooperative federalism and democratic
governance. As this will be a political and a recommendatory body,
it would be in a position to play a constructive and enabling role
vis-à-vis the Legislature, which needless to emphasise, would
remain supreme in matters of legislation including taxation. In the
B
Committee’s view the mandate entrusted to the GST Council under
the proposed Article 279A of the Constitution (Amendment) Bill
does not in any way alter the existing constitutional scheme in so
far as the Legislature, both Union and State, is concerned.”
38. Taking into account the recommendations of the Standing
C Committee, Parliament introduced the 2014 Amendment Bill in which
Article 279B was deleted and the GST Council was given the power
under Article 279A(11) to devise a mechanism of dispute resolution.
The GST Council consists of the Union Finance Minister as the
Chairperson, the Union Minister of State in charge of Revenue or Finance
D and the Minister in charge of Finance or Taxation or any other Minister
nominated by the State Government. The role of the GST Council is to
make recommendations to the Union and the States on seven specific
categories revolving around GST including principles of levy and
apportionment of GST. Clause (h) of Article 279A(1) also provides the
Council with plenary power by which it can make recommendations
E with respect to ‘any other matter relating to GST’, as the Council may
decide. Clause (6) stipulates that the recommendations of the GST Council
shall be guided by the ‘need for a harmonised structure of goods and
services tax’. One half of the total number of members of the Council
shall constitute the quorum for meetings. Clause (9) provides that the
F Council shall take a decision with three-fourths majority of the members
present and voting. The vote of the Union Government is given the
weightage of one-third of the total votes cast, and the votes of the State
Governments are given a weightage of two-thirds of the total votes.
Parliamentary Debates
G 39. The inclusion of Article 279A in the 2014 Amendment Bill
raised two important concerns in Parliament: first, the GST Council
could effectively override the legislative sovereignty of Parliament and
the State legislatures; and second, the fiscal autonomy of the States
would be diminished since the Centre has the power to stall a consensus
H reached by all the States. On 5 May 2015, a Member of Parliament
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

from the State of Tamil Nadu raised the concern that the GST Council A
would diminish the role of the States in fiscal policy:64
“The GST Council as proposed in the Amendment will make
recommendations on a whole range of issues relating to subsuming
of taxes, cesses and surcharges under GST, exemption for goods
and services, model GST laws, etc. This will override the B
supremacy of the legislature both at the Centre and the States in
taxation matters. In the GST Council, the Union Government has
one-third weightage in vote and only two-third of the weightage
in vote is given to States and Union Territories. Voting rights of
States and Union Territories are equal irrespective of their size. C
We, are therefore, opposed to the idea of GST Council as a
constitutional body as it compromises the autonomy of the States
including in fiscal matters.”
In response, the Finance Minister had said65:
“Once you get into the GST pipeline, the States and the Centre D
will have to interact together; and once they interact together, the
State of Tamil Nadu will be involved in determining and taking
decisions relating to the States. So, none of us is going to be
surrendering his or her authority or autonomy. We are both going
to be pooling our sovereignty together so that we are able to create E
a new taxation mechanism.”
40. A Select Committee of the Rajya Sabha examined proposed
Article 279A. It was suggested before the Select Committee that a
‘dispute settlement body’ to adjudicate on disputes arising from the non-
compliance of recommendations of the GST Council should be F
constituted.66 There was, in other words, a suggestion to reintroduce
Article 279B as it found place in the 2011 Amendment Bill. The
Government submitted that Article 279A(11) provides the GST Council
with the power to decide the ‘modalities’ of dispute resolution, which
may range from mediation, arbitration or even judicial adjudication
depending on the nature of dispute: G

64
Speech of T.G Venkatesh Babu in Lok Sabha on 05.05.2015
65
Speech of Mr. Arun Jaitley in Lok Sabha on 08.08.2016
66
Select Committee, Report on the Constitution (One Hundred and Twenty Second
Amendment) Bill , 2014, (Submitted to the Rajya Sabha, 2015) H
386 SUPREME COURT REPORTS [2022] 9 S.C.R.

A “2.71 It may further be mentioned that Article 279A (11) only
provides that GST Council may decide the ‘modalities’ to resolve
disputes arising out of its recommendations. The ‘modalities’ could
include any dispute resolution mechanism which could be inter-
alia negotiation, mediation, arbitration or even a judicial authority
as deemed appropriate by the GST Council depending on the nature
B
of dispute before it. Thus, as per the proposed Bill, the GST Council
shall, by itself, not be resolving the disputes but decide on the
modalities for resolving the disputes.”
41. The Government also submitted that the voting pattern between
the Union and the States does not provide unequal power to any one of
C
the constituent units:
“2.68 The structure of GST Council represents the federal nature
of governance in this country. This has been done as per the
recommendations of the Empowered Committee after their
meeting in Bhubaneswar in January 2013, and also the
D
recommendations of the Parliamentary Standing Committee. This
provision has been consciously adopted to ensure the federal
balance in the functioning of the GST Council, and also to enhance
co-operative federalism. The existing pattern of vote-share in the
GST Council ensures that no decision can be taken by the Council
E either by the Centre or the States acting on their own. Hence,
neither the States nor the Centre alone can take a decision in the
Council. Providing 3/4th weightage to the States would upset the
federal balance between the Centre and the States. Presently, in
the concurrent list, in case of any difference between Central and
F State legislation, the Central legislation prevails. The present
weightage of votes in the GST Council would ensure that neither
the Centre nor the States are able to take a decision without the
support of the other. In other words both would enjoy a veto.
2.69 Further, with Centre holding only 1/3rd of the votes, the
G Centre would require support of 20 States/Union Territories to
get a resolution passed. This shows that Centre would need co-
operation of States to get any decision taken at the GST Council.”
42. Though the traditional view of interpretation of statutes is that
legislative history is not readily used in interpreting a law, the modern
H trend of thinking on the subject has enabled courts to look into the history
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

of a legislation to understand the full purport of the words used and the A
mischief sought to be remedied by the law. In K.P Varghese v. ITO67,
this Court held that the “speech made by the mover of the Bill explaining
the reason for the introduction of the Bill can certainly be referred to for
the purpose of ascertaining the mischief sought to be remedied by the
legislation and the object and purpose for which the legislation is enacted.”
B
In Kalpana Mehta v. Union of India68, Chief Justice Dipak Misra
held that reports of the Parliamentary Committees and the speeches
made in the Parliament can be referred to identify the circumstances
that led to the enactment of the legislation along with the intention of the
legislature:
“129. We have referred to these authorities to highlight that the C
reports or speeches have been referred to or not referred to for
the purposes indicated therein and when the meaning of a statue
is not clear or ambiguous, the circumstances that led to the passing
of the legislation can be looked into in order to ascertain the
intention of the legislature. It is because the reports assume D
significance and become relevant because they precede the
formative process of a legislation.”
43. The parliamentary debates and the legislative history of the
constitutional amendment, and the committee reports on Articles 246A
and 279A indicate that: E
(i) The draft of Article 279B, in the 2011 Amendment Bill, which
sought to introduce a GST Dispute Settlement Authority to
adjudicate on any dispute ‘arising out of deviation’ from the
recommendations of the GST Council was deleted. The
current Article 279A(11) provides that the GST Council shall F
devise a mechanism to adjudicate on any dispute that ‘arises
out’ of the recommendations of the Council. The deletion
of Article 279B while introducing the 2014 Amendment Bill
and the inclusion of Article 279(11) in the text of the
Constitution has brought about two substantial changes: one,
that instead of the creation of a dispute settlement authority, G
the Council is vested with the power to decide on ‘modalities’
of dispute resolution; and second, while Article 279B
stipulated that the authority shall adjudicate on ‘disputes
67
(1981) 4 SCC 173.
68
(2017) 7 SCC 295 H
388 SUPREME COURT REPORTS [2022] 9 S.C.R.

A arising out of the deviation from the recommendations’,
Article 279(11) states that the disputes arising out of
recommendations shall be resolved. The phrase ‘deviation’
has been omitted. Before the Select Committee of the Rajya
Sabha, the Government had stated that disputes shall be
resolved by modalities including mediation and arbitration.
B
The Standing Committee of Finance in its report specifically
recommended the deletion of Article 279B due to the
concerns raised by the States; and
(ii) Under the 2011 Amendment Bill, the GST Council could
recommend only when a unanimous decision would be
C reached. However, the Standing Committee of Finance had
recommended that since it would be difficult to arrive at a
consensus due to the socio-economic diversity amongst the
States, the recommendations be made with a majority
instead of unanimity. While making this recommendation, it
D was observed that if the GST Council functions like the
present Empowered Committee where the differences are
resolved amicably in an institutional mode, it would foster
the spirit of cooperative federalism.
C.2 The nature of the recommendations of the GST Council
E Indian federalism: Dialogue of cooperative federalism
44. The arguments in favour of reading the ‘recommendations’ of
the GST Council as binding are two-fold69: first, if the GST Council
cannot make binding recommendations, the entire structure of GST will
collapse as each State would then levy a conflicting tax and collection
F mechanism; and second, if the recommendations are non-binding, then
there would be no dispute to be resolved under Article 279(11) as the
States would be free to disregard the recommendations. The arguments
against interpreting the ‘recommendations’ of the GST Council as binding
on the Union and the States are two-fold70: first, it would violate the
G supremacy of Parliament and State legislatures since both have a
69
Alok Prasanna, ‘For a mess of Potage: The GST’s promise of increased revenue to
states comes at the cost of the federal structure of the Constitution’ National Law
School of India Review. Vol. 28, No. 2(2016), pp-97-113.
70
Ajitesh Kir, ‘India’s Goods and Services Tax: A Unique Experiment in Cooperative
Federalism and a Constitutional Crisis in Waiting’ Canadian Tax Journal (2021) 69:2,
H 391-445.
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simultaneous power to legislate on GST; and second, it would violate A
the fiscal federalism of the States since the Centre has a one-third vote
share and the States collectively have a two-third vote share. Therefore,
no recommendation on a three-fourths majority can be passed without
the consent of the Centre.
45. One of the important characteristics of a federal polity is the B
distribution of legislative power between the Union and the States. Mr
H M Seervai while arguing that India is a federal nation, referred to the
exclusive power of taxation held by the States to establish that the States
were not merely given the power to legislate on ‘subordinate’ matters:
“If by ‘subordinate’ is meant ‘not important’, then, with respect, C
the present writer does not agree with Prof. Wheare’s assessment
of the exclusive State List. Public order, the police, administration
of justice, local government, public health and sanitation, to mention
but a few, are matters of great importance; and so are agriculture,
water (subject to Union control of the waters of inter-State rivers), D
land, and fisheries. Again, the allocation of taxes between the
Union and the States is mutually exclusive, and the taxes allotted
exclusively to the States are not negligible. Thus sales tax is an
expanding source of revenue in India as it becomes increasingly
industrialized under the successive five year plans. In the
industrialized State of Maharashtra, the yield from Sales Tax was E
about Rs. 1,580 million for the year of 1971-72, and the estimate
for the year 1972-3 was about Rs. 1,780 million.
[…]
(k) The view that unimportant matters were assigned to the States F
cannot be sustained in face of the very important subjects assigned
to the States in List II, and the same applies to taxing powers of
the States which are made mutually exclusive of the taxing powers
of the Union so that ordinarily the States have independent source
of revenue of their own. The legislative entries relating to taxes in
G
List II show that the sources of revenue available to the States
are substantial and would increasingly become more substantial.
In addition to the exclusive taxing powers of the States, the States
become entitled either to appropriate taxes collected by the Union
or to a share in the taxes collected by the Union.”
H
390 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Justice PB Sawant writing for himself and Justice Kuldip Singh in
SR Bommai v. Union of India71, referred to the exclusive and equal
legislative distribution of heads of taxation to establish the federal nature
of the Indian Constitution.72 Therefore, the exclusive powers held by the
States and the Centre on matters of taxation was regarded as an important
feature of India’s federal polity. The Constitution Amendment Act 2016
B
alters the legislative distribution between the Centre and the State on
indirect taxation by providing Parliament and State legislatures with
‘simultaneous powers’ and no provision for repugnancy. Therefore,
according to Article 246A, both Parliament and the State Legislature
possess equal power to legislate on aspects of GST. It is the contention
C of the Union that the recommendation of the GST Council should be
binding on Parliament and the State Legislatures precisely because equal
power is granted to both the federal units. The Union has argued that if
the recommendations are not binding, then it would lead to an impasse
where different Central and State legislations could be guiding the same
field.
D
46. Article 246A vests Parliament and the State Legislatures with
a unique, simultaneous law-making power on GST. It is in this context
that the role of the GST Council gains significance. The recommendations
of the GST Council are not based on a unanimous decision but on a
three-fourth majority of the members present and voting, where the
E Union’s vote counts as one-third, while the States’ votes have a weightage
of two-thirds of the total votes cast. There are two significant attributions
of the voting system in the GST Council. First, the GST Council has an
unequal voting structure, where the States collectively have a two-third
voting share and the Union has a one-third voting share; and second,
F since India has a multi-party system, it is possible that the party in power
at the Centre may or may not be in power in various States. Therefore,
the GST Council is not only an avenue for the exercise of cooperative
federalism but also for political contestation across party lines. Thus, the
discussions in the GST Council impact both federalism and democracy.
The constitutional design of the Constitution Amendment Act 2016 is sui
G generis since it introduces unique features of federalism. Article 246A
treats the Centre and States as equal units by conferring a simultaneous
power of enacting law on GST.. Article 279A in constituting the GST

71
(1994) 3 SCC 1
72
H Prasanna (n 69)
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Council envisions that neither the Centre nor the States can act A
independent of the other.
47. The dual federalism model or the autonomy model views the
constituting units of the Centre and States as autonomous, independent
and competing units. This model is also termed as competitive federalism,
where the constituent units ‘compete’ with each other. Proponents of B
the cooperative federalism model argue that it is a mistake to view each
unit as a separate autonomous entity. According to the theory of
cooperative federalism, integration and not autonomy is the objective
that federalism seeks to achieve.73 While dual federalism is termed as
‘layer cake federalism’ due to the delineation of the structures of power,
cooperative federalism is known as ‘marble cake federalism’ due to the C
integrated approach of the federal units.74 This Court in State (NCT of
Delhi) v. Union of India75,has observed that India follows the model of
cooperative federalism where the Union and the State Governments
need to iron out the differences that arise in the course of the path of
development. Chief Justice Dipak Mishra elucidated on the concept of D
cooperative federalism:
“119. Thus, the idea behind the concept of collaborative federalism
is negotiation and coordination so as to iron out the differences
which may arise between the Union and the State Governments
in their respective pursuits of development. The Union Government E
and the State Governments should endeavour to address the
common problems with the intention to arrive at a solution by
showing statesmanship, combined action and sincere cooperation.
In collaborative federalism, the Union and the State Governments
should express their readiness to achieve the common objective
and work together for achieving it. In a functional Constitution, F
the authorities should exhibit sincere concern to avoid any conflict.
This concept has to be borne in mind when both intend to rely on
the constitutional provision as the source of authority. We are
absolutely unequivocal that both the Centre and the States must
work within their spheres and not think of any encroachment. But G

73
Robert A. Schapiro, ‘Justice Steven’s theory of Interactive Federalism’ 74 Fordham
L. Rev. 2133 (2006)
74
Jessica Bulman-Pozen and Heather K. Gerken, ‘Uncooperative Federalism’ Yale Law
Journal, Vol. 118. No. 7 (May, 2009), pp. 1256-1310
75
(2018) 8 SCC 501 H
392 SUPREME COURT REPORTS [2022] 9 S.C.R.

A in the context of exercise of authority within their spheres, there
should be perception of mature statesmanship so that the
constitutionally bestowed responsibilities are shared by them. Such
an approach requires continuous and seamless interaction between
the Union and the State Governments.”
B 48. The Indian Constitution has sometimes been described as
quasi-federal or a Constitution with a ‘centralising drift’. This is because
when the Constitution is read as a whole, the Union is granted a larger
share of the power. Instances of this centralising drift can be traced to
Articles 254, 248, and 353. However, there are instances such as Article
246A, where the Centre and the States are conferred equal power.
C Merely because a few provisions of the Constitution provide the Union
with a greater share of power, the provisions in which the federal units
are envisaged to possess equal power cannot be construed in favour of
the Union. The Union and the States have a simultaneous power to
legislate on GST. The GST Council has the power to make
D recommendations on a wide range of subjects relating to GST. Since the
Constitution does not envisage a repugnancy provision to resolve
inconsistencies between the Central and State laws on GST, the GST
Council must ideally function, as provided by Article 279A(6), in a
harmonised manner to reach a workable fiscal model through cooperation
and collaboration.
E
49. The federal system is a means to accommodate the needs of
a pluralistic society to function in a democratic manner. It attempts to
reconcile the desire of unity and commonality along with the desire for
diversity and autonomy. Democracy and federalism are interdependent
on each other for their survival such that federalism would only be stable
F in well-functioning democracies. Additionally, the constituent units in a
federal polity check the exercise of power of one another to prevent one
group from exercising dominant power. The Indian Constitution, though
necessarily federal does confer the Union with a higher share of power
in certain situations to prevent chaos and provide security. 76 However,
G even if the federal units are not entirely autonomous as in the traditional
federal system, the units still wield power. The relationship between two
constituent units that are not autonomous but rely on each other for their
functioning is not in practice always collaborative or cooperative. If the
States have been conferred lesser power they can still resist the mandates
76
H Seervai (n 50)
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of the Union by using different forms of political contestation as permitted A
by constitutional design. Such contestation furthers both the principle of
federalism and democracy. When the federal units are vested with
unequal power, the collaboration between them is not necessarily
cooperative. Harmonised decision thrives not just on cooperation but
also on contestation. Indian federalism is a dialogue in which the States
B
and the Centre constantly engage in conversations. Such dialogues can
be placed on two ends of the spectrum - collaborative discussions that
cooperative federalism fosters at one end of the spectrum and interstitial
contestation at the other end. Jessica Bulman and Heather K, in their
essay connote interstitial contestation as ‘uncooperative federalism’.77
They argue that the States which possess lesser power could use licenced C
dissent, dissent by using regulatory gaps or by civil disobedience such as
passing a resolution against the decision of the Central Government as
means of contestation. Differentiating the forms of cooperative federalism
from the dissent in uncooperative federalism, the authors state:
“We think the best proxy for distinguishing dissent from routine D
negotiations is whether the state’s action can be fairly understood
as an effort to change national policy. An attempt to obtain an
accommodation or modification of federal policy within the state
should usually be understood as an example of cooperative
bargaining. An attempt to contest and alter national policy is rightly
understood as dissent.” E
50. Such form of contestation or as the authors term it,
‘uncooperative federalism’ is valuable since “it is desirable to have some
level of friction, some amount of state contestation, some deliberation-
generating froth in our democratic system.”78 Therefore, the States can
use various forms of contestation if they disagree with the decision of F
the Centre. Such forms of contestation are also within the framework of
Indian federalism. The GST Council is not merely a constitutional body
restricted to the indirect tax system in India but is also an important focal
point to foster federalism and democracy.
51. One of the important features of Indian federalism is ‘fiscal G
federalism’. A reading of the Statement of Objects and Reasons of the
2014 Amendment Bill, the Parliamentary reports and speeches indicate
that Articles 246A and 279A were introduced with the objective of
77
Bulman-Pozen and K. Gerken (n 74)
78
Ibid, page 1284 H
394 SUPREME COURT REPORTS [2022] 9 S.C.R.

A enhancing cooperative federalism and harmony between the States and
the Centre. However, the Centre has a one-third vote share in the GST
Council. This coupled with the absence of the repugnancy provision in
Article 246A indicates that recommendations of the GST Council cannot
be binding. Such an interpretation would be contrary to the objective of
introducing the GST regime and would also dislodge the fine balance on
B
which Indian federalism rests. Therefore, the argument that if the
recommendations of the GST Council are not binding, then the entire
structure of GST would crumble does not hold water. Such a reading of
the provisions of the Constitution diminishes the role of the GST Council
as a constitutional body formed to arrive at decisions by collaboration
C and contestation of ideas.
The contextual meaning of ‘recommendations’
52. The phrase ‘recommendation’ is used in numerous provisions
in the Constitution but the import of the phrase differs contextually. Based
on the submission of the Union Government, there are five categories
D into which the phrase ‘recommendation’ has been deployed in the
Constitution:
(i) Category 1: Recommendation by the President prior to laying
before the Parliament for voting: Articles 3, 109, 111, 113,
117, 203, 207, 255 and 274 discuss the recommendations of
E the President or the Governor. Here the authority
recommending the initiation of the discussion and the
decision-making authority are different.
(ii) Category 2: Recommendation followed by consultation:
Article 233 uses the phrases ‘consultation’ and
F ‘recommendation’. Article 233(1) states that the district
judge shall be appointed by the Governor in ‘consultation’
with the High Court. Clause 2 states that the criteria for
the appointment of a person who is not already in the service
of the Union or the State is that he should have been a
G pleader or an advocate for at least seven years and he
should be recommended by the High Court for the
appointment to the post of a District Judge. There is a two-
step process for appointment, first, the candidature must
be recommended by the High Court; and second, the
recommended candidate is appointed by the Governor in
H ‘consultation’ with the High Court.
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(iii) Category 3: Recommendation with accountability: Articles A
243I, 243Y, 280, 281, 338, 338B and 340. Articles 243I and
243Y stipulate that the Finance Commission shall make
‘recommendations’ to the Governor on apportionment of
taxes to the Panchayats and Municipalities. Article 280
states that it “shall be the duty of the Commission to make
B
recommendations to the President” on the principles
governing distribution of taxes between the Union and the
States. Article 281 fosters accountability by providing that
every recommendation made by the Finance Commission
shall be laid before the House together with an explanatory
memorandum on the action taken on such recommendations. C
Article 338(5)(e) states that the National Commission for
Scheduled Castes shall present a report to the President
annually listing the measures that should be taken to enhance
the protection and development of the Scheduled Caste.
Article 338(6) states that the President shall cause the report D
to be laid before the Parliament along with a memorandum
explaining the action taken on the recommendations or the
reason for non-acceptance, if any. Article 338A is a similar
provision on the recommendatory nature of the National
Commission for Scheduled Tribes. The President has the
power to appoint a Commission to investigate the conditions E
of Backward Classes. The Commission is required to
investigate the matters referred to them and present a report
along with recommendations to the President which shall
be laid before the Parliament along with an explanation
memorandum. F
(iv) Category 4: Non-qualifying recommendation: The
Presidential Order to establish an Inter State Council dated
28 May 1990 issued by the Ministry of Home Affairs, and
Article 263. Article 263 provides that the President may, in
public interest, establish an Inter-State Council which shall G
make recommendations for better coordination of policy
and action. The Inter-State Council was constituted by the
Inter-State Council Order 1990 consisting of the Prime
Minister, Chief Ministers of all States, Chief Ministers of
Union Territories and six Ministers of Cabinet rank.
H
396 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (v) Category 5: Recommendations which are obligatory in
nature: Articles 270, 275, 344, 349 and 371A: Article 344
establishes the Commission and Committee of Parliament
on Official Languages. Article 344(2) states that it shall be
the duty of the Commission to make recommendations to
the President on the usage of official languages. Clause 3
B
states that recommendations shall be made having due
regard to the industrial, cultural and scientific advancement
of India and the claim of non-Hindi speaking persons. Article
344(4) constitutes a Committee of the members of the Lok
Sabha and Rajya Sabha. The Committee will have to
C examine the recommendations of the Commission and
report its opinion to the President. The President after
considering the report, shall issue directions in accordance
with the whole or any part of the report. Article 349 deals
with the special procedure for enactment of law relating to
D language in the first fifteen years from the commencement
of the Constitution. Articles 270 and 275 stipulate that the
percentage of tax apportionment and fixation of the grants
for the States from the Consolidated Fund of India shall be
ordered by the President on the recommendation of the
Finance Commission.
E
53. A survey the above provisions indicates that the nature and
meaning of the term ‘recommendation’ differs contextually. All the
provisions qualify the nature of recommendation. For instance, in category
one, the recommendation of the President is for the initiation of the
discussion; in category two, a decision on the recommendation is arrived
F upon ‘consultation’; in category three, the decision-making authority has
to submit an explanatory note on the action or inaction taken on the
recommendations.; in category four, the recommendations are not
qualified. Article 263 only states that the Inter-State Council has a duty
to recommend. There is no further explanation on whether the
G recommendation ought to be mandatorily accepted, or deliberated upon;
in category five, the recommendations of the authority are expressly
stated to be ‘binding’ on the decision-making authority.
54. The GST Council which is a constitutional body is entrusted
with the duty to make recommendations on a wide range of areas
concerning GST. The GST Council has plenary powers under Article
H
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

279A (4)(h) where it could make recommendations on ‘any other matter’ A
related to GST as the Council may decide. The GST Council has to
arrive at its recommendations through harmonised deliberation between
the federal units as provided in clause 6 of Article 279A. Unlike the
other provisions of the Constitution which provide that recommendations
shall be made to the President or the Governor, Article 279A states that
B
the recommendations shall be made to the ‘Union and the States’. The
recommendation of the GST Council made under Article 279A is non-
qualified. That is, there is no explanation on the value of such a
recommendation. Yet the notion that the recommendations of the GST
Council transform into legislation in and of themselves under Article
246A would be farfetched. If the GST Council was intended to be a C
decision-making authority whose recommendations transform to
legislation, such a qualification would have been included in Articles 246A
or 279A. Neither does Article 279A begin with a non-obstante clause
nor does Article 246A provide that the legislative power is ‘subject to’
Article 279A. D
55. The Constitution employs the phrase ‘consultation’ in certain
contexts. For example, Article 320(3) states that the Public Service
Commission shall be ‘consulted’ on matters relating to civil posts. Article
320(3) reads as follows:
“(3) The Union Public Service Commission or the State Public E
Service Commission, as the case may be, shall be consulted—
(a) on all matters relating to methods of recruitment to civil services
and for civil posts;
(b) on the principles to be followed in making appointments to
civil services and posts and in making promotions and transfers F
from one service to another and on the suitability of candidates
for such appointments, promotions or transfers;
[…]”
(emphasis supplied) G
56. If the GST Council were intended to be a constitutional body
whose recommendations transform into legislation without any intervening
act, there would have been an express provision in Article 246A. Article
279A does not mandate tabling the recommendations in the legislature
like the provisions in category 3, where the recommendations have to be H
398 SUPREME COURT REPORTS [2022] 9 S.C.R.

A mandatorily tabled in the legislature along with an explanatory note. Only
the secondary legislation which is framed based on the recommendations
of the Council under the provisions of the CGST Act79 and IGST Act80
is mandated to be tabled before the Houses of the Parliament. The use
of the phrase ‘recommendations to the Union or States’ indicates that
the GST Council is a recommendatory body aiding the Government in
B
enacting legislation on GST.
57. In Manohar v. State of Maharashtra81, a two-judge Bench
of this Court while interpreting Section 20(2) of the Right to Information
Act 2005 observed that the phrase ‘recommendation’ must be interpreted
in contradistinction to ‘direction’ or ‘mandate’. It was observed as follows:
C
“22. We may notice that proviso to Section 20(1) specifically
contemplates that before imposing the penalty contemplated under
Section 20(1), the Commission shall give a reasonable opportunity
of being heard to the officer concerned. However, there is no
such specific provision in relation to the matters covered under
D
Section 20(2). Section 20(2) empowers the Central or the State
Information Commission, as the case may be, at the time of deciding
a complaint or appeal for the reasons stated in that section, to
recommend for disciplinary action to be taken against the Central
Public Information Officer or the State Public Information Officer,
E as the case may be, under the relevant service rules. Power to
recommend disciplinary action is a power exercise of which may
impose penal consequences. When such a recommendation is
received, the disciplinary authority would conduct the disciplinary
proceedings in accordance with law and subject to satisfaction of
the requirements of law. It is a “recommendation” and not a
F
“mandate” to conduct an enquiry. “Recommendation” must be
seen in contradistinction to “direction” or “mandate”. But
recommendation itself vests the delinquent Public Information
Officer or State Public Information Officer with consequences
which are of serious nature and can ultimately produce prejudicial
G results including misconduct within the relevant service rules and
invite minor and/or major penalty.”

79
Section 166 of the CGST Act
80
Section 24 of the IGST Act
81
H (2012) 13 SCC 14
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 399
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

In Naraindas Indurkhya v. State of Madhya Pradesh82, a A
Constitution Bench observed that a ‘recommendation’ has persuasive
value. In this case, this Court was dealing with the question of whether
textbooks ‘recommended’ by the Board could be held to be in effect
immediately. The Court observed:
“15. … there is a basic distinction between recommendation and B
prescription of a text book. When a text book is prescribed by an
appropriate authority having legal power to do so, it has to be
followed by the schools. Prescription of a text book carries with it
a binding obligation to follow the text book. There is no such
obligation when a text book is merely recommended.
Recommendation has merely a persuasive effect, it being open to C
the schools to accept the recommendation or to reject it as they
think fit. The schools may use the recommended text book or
they may not according as the Principals choose. That is why no
conferment of statutory power is needed to enable the Board to
recommend text books and no question of ultra vires can arise in D
such a case. Now the text books which formed the subject matter
of the notifications dated April 5, 1972, April 25, 1972, April 26
and May 17, 1972 were merely recommended and not prescribed
by the Board and being only recommended text books as
distinguished from prescribed text books, they obviously could not
be said to be ‘in force’ immediately before the appointed day. E
Section 4, sub-section (2) did not, therefore, apply in respect of
these text books and they could not be regarded as text books
prescribed under Section 4, sub-section (2).”
In numerous cases, this Court has reiterated that recommendations
cannot create binding and enforceable rights, in contradistinction to a F
‘direction’ or ‘mandate’.83
Interpretation of ‘recommendation’ vis-à-vis the provisions of
IGST Act and CGST Act
58. The contention of the Union is that the recommendations of G
the GST Council are binding since Parliament and the State legislatures

82
(1974) 4 SCC 788
83
Union of India v. Pradip Kumar Dey, (2000) 8 SCC 580; Kesoram Industries and
Cotton Mills Ltd. v. CWT, (1966) 2 SCR 688; Som Mittal v. Government of Karnataka,
(2008) 3 SCC 753; State of AP v. T. Gopalakrishnan Murthi, (1976) 2 SCC 883. H
400 SUPREME COURT REPORTS [2022] 9 S.C.R.

A have agreed to align themselves with the recommendations as is evident
from the provisions of the IGST Act and CGST Act. Certain provisions
of the IGST Act, CGST Act and SGST Acts expressly provide that the
rule-making power delegated to the Government shall be exercised on
the recommendations of the GST Council. For instance, Section 5 of the
IGST Act provides that the taxable event, taxable rate and taxable value
B
shall be notified by the government on the “recommendations of the
Council”. Similarly, the power of the Central Government to exempt
goods or services or both from levy of tax shall be exercised on the
recommendations of the GST Council under Section 6 of the IGST Act.
Section 22 provides that the Government may exercise its rule making
C power on the recommendations of the GST Council. The CGST Act
also provides for similar provisions in Sections 9, 11 and 164.
59. The provisions of the IGST Act and CGST Act which provide
that the Union Government is to act on the recommendations of the
GST Council must be interpreted with reference to the purpose of the
D enactment, which is to create a uniform taxation system. The GST was
introduced since different States could earlier provide different tax slabs
and different exemptions. The recommendations of the GST Council
are made binding on the Government when it exercises its power to
notify secondary legislation to give effect to the uniform taxation system.
E The Council under Article 279A has wide recommendatory powers on
matters related to GST where it has the power to make
recommendations on subject matters that fall outside the purview of
the rule-making power under the provisions of the IGST and CGST
Act. Merely because a few of the recommendations of the GST Council
are binding on the Government under the provisions of the CGST Act
F and IGST Act, it cannot be argued that all of the GST Council’s
recommendations are binding. As a matter of first principle, the provisions
of the Constitution, which is the grundnorm of the nation, cannot be
interpreted based on the provisions of a primary legislation. It is only the
provisions of a primary legislation that can be interpreted with reference
G to the Constitution. The legislature amends the Constitution by exercising
its constituent power and legislates by exercising its legislative power.
The constituent power of the legislature is of a higher constitutional order
as compared to its legislative power. Even if it is Parliament that has
enacted laws making the recommendations of the GST Council binding
on the Central Government for the purpose of notifying secondary
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 401
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

legislations, it would not mean that all the recommendations of the Council A
made by virtue of its power under Article 279A have a binding force on
the legislature.
60. With this background and context, we shall now proceed to
analyse the scheme of the GST legislation and whether the impugned
levy, imposed on the recommendations of the GST Council, is valid and B
permissible under law.
D Analysis
D.1 Statutory Provisions and Scheme of the IGST Act84
61. The IGST Act enables the Central Government to impose C
IGST on inter-state supply of goods and services. The Preamble to the
IGST Act describes it as:
“An Act to make a provision for levy and collection of tax on
inter-State supply of goods or services or both by the Central
Government and for matters connected therewith or incidental D
thereto.”
In aiding the levy and collection of IGST, the IGST Act provides
for a comprehensive scheme for determining the nature of supply, time
of supply and place of supply.
62. Statutory interpretation will determine whether the IGST Act E
confers the powers on the Central Government, in consultation with the
GST Council, to designate imports as a supply of services under Section
5(3) of the IGST and whether the importer can be considered as the
recipient of such supply, liable to pay tax on a reverse charge basis.
Further, it will determine if the Central Government, in consultation with F
the GST Council, has the powers to designate the importer as a recipient
of a service under 5(4) of the IGST Act, when goods are imported on a
CIF basis. The critical fact in this case is that the service of shipping in
these CIF contracts is availed by the non-taxable exporter who engages
and pays a foreign shipping line of their choice, without the involvement
of the importer. In contrast, in FOB contracts, the Indian importer pays G
for the services of shipping and directly deals with the shipping line. The
respondents herein are importers of non-coking coal on a CIF basis.

84
Note: In order to facilitate convenience while reading the judgment, some of the
statutory provisions are reflected in more than one place in the judgment.
H
402 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 63. Section 5 of the IGST Act provides for the levy and collection
of tax on inter-State supplies of goods or services. The power to impose
such tax is derived from Article 286(2) read with Article 269A(1). Sub-
Section (1) of Section 5 provides for the levy of the integrated goods and
services tax on all inter-State supplies of goods or services or both.
B Section 5 reads as follows:

“5. Levy and collection.— (1) Subject to the provisions of sub-
section (2), there shall be levied a tax called the integrated goods
and services tax on all inter-State supplies of goods or services or
both, except on the supply of alcoholic liquor for human
C consumption, on the value determined under section 15 of the
Central Goods and Services Tax Act and at such rates, not
exceeding forty per cent., as may be notified by the Government
on the recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable
D person:

Provided that the integrated tax on goods imported into India
shall be levied and collected in accordance with the provisions
of section 3 of the Customs Tariff Act, 1975 on the value as
determined under the said Act at the point when duties of
E customs are levied on the said goods under section 12 of the
Customs Act, 1962.”

The proviso to Section 5(1) of the IGST Act clarifies that the tax
is levied on goods imported into India, in accordance with Section 3 of
the Customs Tariff Act 1975. The value is determined under the Customs
F
Tariff Act at the point when the customs duties are levied in accordance
with the Customs Act.

64. The payment of IGST on a reverse-charge basis is
contemplated in sub-sections (3) and (4) of Section 5. Sub-section (3)
G provides that IGST may be paid on a reverse charge basis on specified
categories of supply of goods or services or both. The Central Government
is empowered to specify these categories on the recommendations of
the GST Council. Hence, on its plain terms, the payment of IGST on a
reverse charge basis is envisaged on specific categories of supply of
goods or services, or both as notified by the Central Government. The
H
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DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

tax on a reverse charge basis is payable by the recipient of such goods A
or services, or both. The power, in other words, is to specify categories
of goods or services (or both). The provision does not empower the
government to specify the recipient of the supply of goods or services.
The unamended Sub-section (4) of Section 585 provided that the tax in
respect of the supply of goods or services by an unregistered supplier, B
shall be paid on a reverse charge basis by a specified registered person,
as the recipient of such supply of goods or services. The above provisions
read as follows:

“(3) The Government may, on the recommendations of the Council,
by notification, specify categories of supply of goods or services C
or both, the tax on which shall be paid on reverse charge basis by
the recipient of such goods or services or both and all the provisions
of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services
or both. D
(4) The integrated tax in respect of the supply of taxable goods or
services or both by a supplier, who is not registered, to a registered
person shall be paid by such person on reverse charge basis as
the recipient and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in relation E
to the supply of such goods or services or both.”

65. On 28 June 2017, the Central Government issued Notification
8/2017, in exercise of its powers under Section 5(1), Section 6(1) and
Section 20 of the IGST Act, read with Section 15(5) and Section 16(1)
F
of the CGST Act. Entry 9(ii) of Notification 8/2017 reads as follows:

85
Sub-Section 4 of Section 5 was amended by The Integrated Goods and Services Tax
(Amendment) Act 2018 w.e.f. 1 February 2019 and reads as follows: G
“(4) The Government may, on the recommendations of the Council, by notification,
specify a class of registered persons who shall, in respect of supply of specified
categories of goods or services or both received from an unregistered supplier, pay the
tax on reverse charge basis as the recipient of such supply of goods or services or both,
and all the provisions of this Act shall apply to such recipient as if he is the person
liable for paying the tax in relation to such supply of goods or services or both.”
H
404 SUPREME COURT REPORTS [2022] 9 S.C.R.

A

B

C

D
By Entry 9(ii) of Notification 8/2017, an integrated tax of 5 per
cent was levied on supply of specified services, including transportation
of goods in a vessel from a place outside India up to the customs station
of clearance in India.
66. On 28 June 2017, Notification 10/2017 was issued by the
E Central Government in exercise of powers conferred by Section 5(3) of
the IGST Act. Notification 10/2017 specified the importer as the recipient
of transportation of service when the supplier is location in a non-taxable
territory and the service of transportation is supplied by a person in a
non-taxable territory. Entry 10 of Notification 10/2017 states the following:
F SI Category of Supply of Services Supplier of Recipient of Service
No.
(2) (3) (4)
0)
Services supplied by a person A person Importer, as defined in clause
10 located in non-taxable territory located in (26) of section 2 of the Customs
G by way of transportation of non-taxable Act 1962 (52 of 1962), located
goods by a vessel from a place territory in the taxable territory
outside India up to the customs
station of clearance in India

Thus, Entry 10 of Notification 10/2017 deems an importer of goods
as the ‘recipient of service’ of transportation of goods by a foreign
H shipping line.
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 405
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

67. Both the impugned notifications, Notification 8/2017 and A
Notification 10/2017, have been challenged as ultra vires the IGST Act.
Before adverting to the challenges raised by the parties, it becomes
necessary to advert to some of the key provisions contained in the CGST
Act, IGST Act and Customs Act. These provisions are necessary to
respond to several contentions raised by the respondents, including: (i)
B
whether the taxable event stipulated by the impugned notifications
constitutes a ‘supply’ under the IGST Act; (ii) whether the importer of
goods on a CIF basis can be deemed to be the ‘recipient’ of shipping
services when they do not pay the consideration; and (iii) whether the
import of goods constitutes a composite supply, among others.
68. The provisions of the IGST Act apply to the whole of India as C
provided under Section 1. Section 5 of the IGST Act is the charging
section. Sub-section (1) of Section 5 provides that the levy of IGST shall
be paid by the taxable person. The term ‘taxable person’ is defined in
Section 2(107) of the CGST Act:
“(107) “taxable person” means a person who is registered or liable D
to be registered under section 22 or section 24"
69. Section 2(98) of the CGST Act defines ‘reverse charge’:
“(98) “reverse charge” means the liability to pay tax by the
recipient of supply of goods or services or both instead of the E
supplier of such goods or services or both under sub-section (3)
or sub-section (4) of section 9, or under sub-section (3) or sub-
section (4) of section 5 of the Integrated Goods and Services Tax
Act;”
As defined in the above clause, under the reverse charge F
mechanism, the liability to pay is on the recipient of the supply of goods
or services, as opposed to the supplier of goods or services. Section
24(iii) of the CGST Act provides for compulsory registration of “persons
who are required to pay tax under the reverse charge”.
“24. Compulsory registration in certain cases.—Notwithstanding
G
anything contained in sub-section (1) of Section 22, the following
categories of persons shall be required to be registered under this
Act,—
(i) persons making any inter-State taxable supply;
(ii) casual taxable persons making taxable supply; H
406 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (iii) persons who are required to pay tax under reverse
charge;
[…..]
(xii) such other person or class of persons as may be notified
by the Government on the recommendations of the
B Council.”
(emphasis supplied)
70. Section 2 (105) of the CGST Act defines the ‘supplier’ in
relation to goods or services as:

C “(105) “supplier” in relation to any goods or services or both, shall
mean the person supplying the said goods or services or both and
shall include an agent acting as such on behalf of such supplier in
relation to the goods or services or both supplied;”
71. Section 2(93) of the CGST Act defines the ‘recipient’ of supply
D of goods or services or both and provides:
“(93) “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or
services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the
E person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available;
and
(c) where no consideration is payable for the supply of a service,
the person to whom the service is rendered,
F
and any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and shall
include an agent acting as such on behalf of the recipient in relation
to the goods or services or both supplied;”

G 72. Sections 2(14) and 2(15) of the IGST Act define the location
of the recipient of services and the supplier of services as follows:
“(14) “location of the recipient of services” means,––
(a) where a supply is received at a place of business for which
the registration has been obtained, the location of such place of
H business;
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 407
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

(b) where a supply is received at a place other than the place of A
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment;
(c) where a supply is received at more than one establishment,
whether the place of business or fixed establishment, the location
of the establishment most directly concerned with the receipt of B
the supply; and
(d) in absence of such places, the location of the usual place of
residence of the recipient;
(15) “location of the supplier of services” means,––
(a) where a supply is made from a place of business for which C
the registration has been obtained, the location of such place of
business;
(b) where a supply is made from a place other than the place of
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment; D
(c) where a supply is made from more than one establishment,
whether the place of business or fixed establishment, the location
of the establishment most directly concerned with the provision
of the supply; and
(d) in absence of such places, the location of the usual place of E
residence of the supplier;”
73. Chapter IV of the IGST Act determines the nature of the
supply. Section 7 of the IGST Act determines the nature of supply as
inter-State supply, Section 8 provides for intra-State supply and Section
9 provides for supplies in territorial waters. F
74. Section 7 of the IGST Act lay down the conditions for a supply
to be construed as an “inter-State supply”. The relevant provisions,
particularly sub-Sections (3) and (4) of Section 7 are as follows:
“7. Inter-State supply.—(1) Subject to the provisions of Section
10, supply of goods, where the location of the supplier and the G
place of supply are in—
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
H
408 SUPREME COURT REPORTS [2022] 9 S.C.R.

A shall be treated as a supply of goods in the course of inter-State
trade or commerce.
[…..]
(3) Subject to the provisions of Section 12, supply of services,
where the location of the supplier and the place of supply are in—
B
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,

C shall be treated as a supply of services in the course of inter-State
trade or commerce.
(4) Supply of services imported into the territory of India
shall be treated to be a supply of services in the course of
inter-State trade or commerce.”
D (emphasis supplied)
75. The term ‘supply’ has been defined in the IGST Act with
reference to the CGST Act. Section 2(21) of the IGST Act provides
that:
“(21) “supply” shall have the same meaning as assigned to it in
E section 7 of the Central Goods and Services Tax Act”
Section 7(1) of the CGST Act provides that:
“7. Scope of supply.
(1) For the purposes of this Act, the expression “supply” includes—
F
(a) all forms of supply of goods or services or both such as sale,
transfer, barter, exchange, licence, rental, lease or disposal made
or agreed to be made for a consideration by a person in the course
or furtherance of business;

G [(aa) the activities or transactions, by a person, other than an
individual, to its members or constituents or vice-versa, for cash,
deferred payment or other valuable consideration.
Explanation.—For the purposes of this clause, it is hereby clarified
that, notwithstanding anything contained in any other law for the
time being in force or any judgment, decree or order of any Court,
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 409
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

tribunal or authority, the person and its members or constituents A
shall be deemed to be two separate persons and the supply of
activities or transactions inter se shall be deemed to take place
from one such person to another;]
[(b) import of services for a consideration whether or not
in the course or furtherance of business; [and] B
(c) the activities specified in Schedule I, made or agreed to
be made without a consideration;”
(emphasis supplied)
The term ‘taxable territory’ is defined in Section 2(22) of the IGST C
Act to mean the “territory to which the provisions of this Act [IGST
Act] apply”.
76. Section 13 of the IGST Act deals with determining the place
of supply of services where the location of supplier or location of recipient
is outside India: D
“13. Place of supply of services where location of supplier or
location of recipient is outside India.—
(1) The provisions of this section shall apply to determine the
place of supply of services where the location of the supplier of
services or the location of the recipient of services is outside India. E
(2) The place of supply of services except the services
specified in sub-sections (3) to (13) shall be the location of
the recipient of services:
Provided that where the location of the recipient of services is not
available in the ordinary course of business, the place of supply F
shall be the location of the supplier of services.
(3) The place of supply of the following services shall be the
location where the services are actually performed, namely:—
[…..] G
(6) Where any services referred to in sub-section (3) or sub-
section (4) or sub-section (5) is supplied at more than one location,
including a location in the taxable territory, its place of supply shall
be the location in the taxable territory.
[….] H
410 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (9) The place of supply of services of transportation of goods,
other than by way of mail or courier, shall be the place of
destination of such goods.
(10) The place of supply in respect of passenger transportation
services shall be the place where the passenger embarks on the
B conveyance for a continuous journey.
(12) The place of supply of online information and database access
or retrieval services shall be the location of the recipient of services.
Explanation.—For the purposes of this sub-section, person
receiving such services shall be deemed to be located in the taxable
C
territory, if any two of the following non-contradictory conditions
are satisfied, namely:—
(a) the location of address presented by the recipient of services
through internet is in the taxable territory;
D (b) the credit card or debit card or store value card or charge
card or smart card or any other card by which the recipient of
services settles payment has been issued in the taxable territory;
(c) the billing address of the recipient of services is in the taxable
territory;
E (d) the internet protocol address of the device used by the recipient
of services is in the taxable territory;
(e) the bank of the recipient of services in which the account
used for payment is maintained is in the taxable territory;

F (f) the country code of the subscriber identity module card used
by the recipient of services is of taxable territory;
(g) the location of the fixed land line through which the service is
received by the recipient is in the taxable territory.
(13) In order to prevent double taxation or non-taxation of the
G supply of a service, or for the uniform application of rules, the
Government shall have the power to notify any description of
services or circumstances in which the place of supply shall be
the place of effective use and enjoyment of a service.”
(emphasis supplied)
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 411
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

77. Chapter IX of the IGST Act contains miscellaneous provisions, A
under which Section 20 of the IGST Act provides that the provisions in
the CGST Act relating to the scope of supply, composite or mixed supply,
time and value of supply, shall apply mutatis mutandis to integrated tax.
In this regard, the time of supply of services is provided in Section 13 of
the CGST Act, while the value of taxable supply is determined under
B
Section 15 of the CGST Act.
78. Section 13 of the CGST Act states that the liability to pay tax
on services arises at the time of supply. Sub-section (3) of Section 13
provides for the time of supply when tax is paid on a reverse charge
basis:
C
“13. Time of supply of services.
[…]
(3) In case of supplies in respect of which tax is paid or liable to
be paid on reverse charge basis, the time of supply shall be the
D
earlier of the following dates, namely:—
(a) the date of payment as entered in the books of account of the
recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
(b) the date immediately following sixty days from the date of E
issue of invoice or any other document, by whatever name called,
in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of
supply under clause (a) or clause (b), the time of supply shall be
the date of entry in the books of account of the recipient of supply: F
Provided further that in case of supply by associated enterprises,
where the supplier of service is located outside India, the time of
supply shall be the date of entry in the books of account of the
recipient of supply or the date of payment, whichever is earlier.”
Sub-section (5) of Section 13 provides for the time of supply when G
it cannot be determined under sub-Section (2), (3) or (4):
“(5) Where it is not possible to determine the time of supply under
the provisions of sub-section (2) or sub-section (3) or sub-section
(4), the time of supply shall—
H
412 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (a) in a case where a periodical return has to be filed, be the date
on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.”
79. Section 15 of the CGST Act provides for the determination of
the value of taxable supply. Sub-section (1) provides that the value of
B supply of goods or services shall be the transaction value; sub-section
(2) provides that the value of supply shall include taxes, duties, fees etc.
charged separately under the goods and services tax regime, incidental
expenses, interest, late fee penalty, etc. Sub-sections (4) and (5) provide
for the value of the supply of goods or services if it cannot be determined
C under sub-section (1).
“15. Value of taxable supply.—(1) The value of a supply of goods
or services or both shall be the transaction value, which is the
price actually paid or payable for the said supply of goods or
services or both where the supplier and the recipient of the supply
D are not related and the price is the sole consideration for the supply.
[….]
(4) Where the value of the supply of goods or services or both
cannot be determined under sub-section (1), the same shall be
determined in such manner as may be prescribed.
E
(5) Notwithstanding anything contained in sub-section (1) or sub-
section (4), the value of such supplies as may be notified by the
Government on the recommendations of the Council shall be
determined in such manner as may be prescribed.”

F D.2 Do the impugned notifications suffer from excessive
delegation?
80. Article 286(1) stipulates that the State shall not levy tax when
the supply of goods or services takes place outside the State or in the
course of import or export of goods or services from the territory of
G India. Clause (2) of Article 286 states that Parliament may by law
formulate principles for determining when there is a supply of goods or
services as prescribed by clause (1):
“286(1): No law of a State shall impose, or authorize the imposition
of, a tax, or authorize the imposition of, a tax on the supply of
goods or services or both, where such supply takes place
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 413
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

a) outside the State; or A
b) in the course of import of the goods or services or both into, or
export of the goods or services or both out of, the territory of
India.
(2) Parliament may by law formulate principles for determining
when a supply of goodsor of services or both in any of the ways B
mentioned in clause (1).”
81. Article 269A provides that GST on supplies in the course of
inter-state trade or commerce shall be levied and collected by the Union
Government. The manner of apportionment between the Union and the
States has to be provided by Parliament on the recommendations of the C
GST Council. The explanation to Article 269A(1) states that supply of
goods or services in the course of import shall be deemed to be supply in
the course of inter-State trade or commerce. Clause (5) provides that
Parliament may by law formulate principles for determining the place of
supply and when the supply of goods or services takes place in the D
course of inter-state trade or commerce:
“269A. (1) Goods and services tax on supplies in the course
of inter-State trade or commerce shall be levied and
collected by the Government of India and such tax shall be
apportioned between the Union and the States in the manner E
as may be provided by Parliament by law on the
recommendations of the Goods and Services Tax Council.
Explanation — For the purposes of this clause, supply of
goods, or of services, or both in the course of import into
the territory of India shall be deemed to be supply of goods, F
or of services, or both in the course of inter-State trade or
commerce.
[…]
(5) Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods, or of services, or G
both takes place in the course of inter-State trade or commerce.”
(emphasis supplied)
82. Articles 269A stipulates that Parliament may by law formulate
principles for determining: (a) the place of supply and; (b) when the
H
414 SUPREME COURT REPORTS [2022] 9 S.C.R.

A supply of goods or services or both takes place in the course of inter-
State trade or commerce. Article 286(1) empowers Parliament to
formulate the principles by law for determining when a supply of goods
or services, or both, takes place (a) outside the state; and (b) in the
course of import into or export outside the territory of India. Parliament
enacted the IGST Act prescribing the principles as required under Articles
B
269A and 286(1). The provisions of the IGST Act deal with the levy and
collection of tax (Section 5(1)), export of goods and services (Section
2(5) and 2(6)), import of goods and services (Section 2(10) and 2(11)),
identification of the location of the supplier and recipient of services
(Sections 2(14) and 2(15)), determination of the nature of inter-State
C supply (Section 7), supplies in territorial waters (Section 9), place of
supply with respect to import to India and export from India (Section
11), and place of supply of services where the location of the supplier
and recipient is in India and outside India (Sections 12 and 13).
83. The contention of the respondents is that Section 5(3) of the
D IGST Act only delegates the power to identify the categories of goods
or services on which the tax shall be paid on reverse charge basis. It is
contended that since Notification 10/2017 identifies an importer as a
service recipient for the purposes of Section 5(3), it is ultra vires the
parent Act on the ground of excessive delegation.
E 84. The legislature is required to perform its essential legislative
functions. Once the skeletal structure of the policy is framed by the
legislature, the details can emerge through delegated legislations.86 It is
a settled position that the legislature cannot delegate its ‘essential
legislative functions’.87 The essential legislative functions with respect
to the GST law are the levy of tax, subject matter of tax, taxable person,
F rate of taxation and value for the purpose of taxation. The principles
governing these essential aspects of taxation find place in the IGST Act:
Section 5(1) identifies the subject matter of taxation as inter-State supplies
of goods, services or both; Section 2(107) of the CGST Act identifies a
taxable person; Section 5(1) provides a maximum cap of 40% as the
G rate of taxation; and Section 5(1) stipulates that the value of taxation be
determined under Section 15 of the CGST Act.

86
Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, AIR
1968 SC 1232; Avinder Singh v. State of Punjab, 1979 1 SCC 137
87
In re Delhi Laws Act 1912, AIR 1951 SC 332; Edward Mills Co. Ltd. v. State of
H Ajmer, AIR 1955 SC 25; A.N Parasaran v. State of Tamil Nadu, (1989) 4 SCC 683
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 415
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

85. Section 2(98) of the CGST Act defines “reverse charge” as A
the liability of the recipient of the supply of goods or services or both to
pay tax instead of the supplier. Section 2(93) of the CGST Act defines
“recipient” with reference to three situations (i) when consideration is
payable for the supply of goods or services or both; (ii) when no
consideration is payable for the supply of goods; and (iii) when no
B
consideration is payable for the supply of services. In the first situation,
the recipient is the person by whom consideration is payable. In the
second situation, the recipient is the person to whom (a) the goods are
delivered or made available; or (b) possession or the use of the goods is
given or made available. The CGST Act also stipulates a two-fold
requirement for a recipient to be taxed on reverse charge basis- the C
recipient must be a ‘person’ as defined under Section 2(84) of the CGST;
and the person is a “taxable person” only if registered or is liable to be
registered under Section 22 or Section 24. Section 24(iii) of the CGST
Act states that persons who are required to pay tax under reverse charge
must be registered. Therefore, both the IGST and CGST Act clearly
D
define reverse charge, recipient and taxable persons. Thus, the essential
legislative functions vis-à-vis reverse charge have not been delegated.
86. Section 5(3) of the IGST Act provides the Government the
power to specify categories of supply of goods or services or both on
which tax shall be paid on a reverse charge basis by the recipient. The
Government is to exercise this power on the recommendation of the E
GST Council. The Government in exercise of its power under Section
5(3) of the IGST Act issued the impugned Notification 10/2017 specifying
the ‘categories of the supply’ which shall be subject to reverse charge.
The notification, besides specifying the criteria, has also mentioned the
corresponding recipient in those categories. As discussed above, the F
IGST Act and the CGST Act define reverse charge and prescribe the
entity that is to be taxed for these purposes. Therefore, the stipulation of
the recipient in each of the categories is only clarificatory. The
Government by notification did not specify a taxable entity different from
that which is prescribed in Section 5(3) of the IGST Act for the purposes
of reverse charge. G

D.3 Charging Section: taxable person, taxable rate and
manner of determining value
87. In determining the vires of the impugned notifications, a few
preliminary contentions raised by the respondents would have to be H
416 SUPREME COURT REPORTS [2022] 9 S.C.R.

A addressed. The respondents have argued that no charge has been created
for the ocean freight transaction to be taxed in the hands of the importer.
It has been alleged that only Section 5(1) is a charging provision and
Sections 5(3) and 5(4) cannot independently create a charge.
88. In assessing this claim, this Court is bound by a decision of the
B Constitution Bench in Mathuram Agrawal (supra) which has identified
three essential elements of taxation:
(i) The subject of the tax;
(ii) The person who is liable to pay the tax; and
(iii) The rate at which the tax is to be paid.
C
This test has been further elaborated by a two-judge Bench of
this Court in Gobind Saran Ganga Saran (supra) by further requiring
the designation of the measure or the value to which the rate of the tax
will be applied. Thus, the four canons of taxation are as follows:
(i) The taxable event;
D
(ii) The person on whom the levy is imposed;
(iii) The rate at which the levy is imposed; and
(iv) The measure or the value to which the rate will be applied.
89. Section 5(1) of the IGST Act specifically identifies the four
E canons of taxation: (i) the inter-State supply of goods and services as
the taxable event; (ii) the “taxable person” as the person on whom the
levy is imposed; (iii) the taxable rate as such a rate notified by the Union
Government on the recommendation of the GST Council, capped at forty
per cent; and (iv) the taxable value as the value determined under Section
F 15 of the CGST Act.
90. Section 5(3) and Section 5(4) of the IGST Act are inextricably
linked with Section 5(1) of the IGST Act which is the charging provision.
They must be construed together in determining the vires of the taxation.
In CIT v. B C Srinivas Setty88, a three-judge Bench of this Court has
held that the machinery provisions of an Act and the charging sections
G
are inextricably linked. The Court observed:
“A transaction to which those provisions cannot be applied must
be regarded as never intended by Section 45 to be the subject of
the charge. This inference flows from the general arrangement
88
H AIR 1981 SC 972
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 417
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

of the provisions of the Income Tax Act, where under each head A
of income the charging provision is accompanied by a set of
provisions for computing the income subject to that charge. The
character of the computation provisions in each case bears
a relationship to the nature of charge. Thus the charging
section and the computation provisions together constitute
B
an integrated code. When there is a case to which the
computation provisions cannot apply at all, it is evident that such a
case was not intended to fall within the charging section.”
(emphasis supplied)
Taxable person C
91. The respondents have alleged that the importer cannot be
validly termed as a taxable person. However, this argument has to fail
on a close reading of the impugned notifications alongside Sections 2(107)
and 24 of the CGST Act. Section 24(iii) of the CGST Act mandates
persons required to pay tax under reverse charge to be compulsorily D
registered under the CGST Act. Section 2(107) of the CGST Act defines
a “taxable person” to mean a person who is registered or liable to be
registered under Section 24 of the CGST Act. Neither Section 2(107)
nor Section 24 of the CGST Act qualify the imposition of reverse charge
on a “recipient of service” and broadly impose it on “the persons who
are required to pay tax under reverse charge”. Since the impugned E
notification 10/2017 identifies the importer as the recipient liable to pay
tax on a reverse charge basis under Section 5(3) of the IGST Act, the
argument of the failure to identify a specific person who is liable to pay
tax does not stand.
92. The decision in Laghu Udyog (supra), rendered by a two- F
judge Bench of this Court, invalidated certain service tax rules formulated
under the Finance Act 1997 to give effect to the collection of service
tax. Section 66 read with Section 68(1)(a) of the Finance Act 1997
specifically identified the taxable person to include only those persons
responsible for collecting the service tax. The rules had sought to effect G
a reverse charge by identifying the customers of goods transport operators
and of clearing and forwarding agents as the assessee, even though
they were not responsible for collecting the service tax. The basis for
nullifying the rules was that the Finance Act 1997 did not enable the
imposition of such a reverse charge on the person who is not supplying
the service. The Court held: H
418 SUPREME COURT REPORTS [2022] 9 S.C.R.

A “9. Section 68(1-A) is a special provision which has been inserted
by the Finance Act, 1997. According to Section 68(1) “every
person who was providing the taxable service is the one who is
required to collect the service tax at the rate specified in Section
66”. With respect to the taxable services referred in Items (g) to
(r) of clause (41) of Section 65, Section 68(1-A) provides that the
B
service tax for such service shall be collected from such person
and in such manner as may be prescribed and to such person all
the provisions shall apply as if he is the person responsible for
collecting the service tax in relation to such service. As we read
Section 68 it does not in any way seek to alter or change the
C charge of service tax levied under Section 66, which is on the
person responsible for collecting the service tax. It also does not
to our mind, in any way, amend any of the clauses of Section 65
which contain the definitions of different expressions. All that
Section 68(1-A) enables to be done is that with regard to the
assessees or the persons who are responsible for collecting the
D
service tax, the individual or the officer concerned can be identified
and it is that person who would be a person responsible for
collecting the service tax. In other words this provision, namely,
Section 68(1-A) cannot be so interpreted as to make a
person an assessee even though he may not be responsible
E for collecting the service tax. The service tax is levied by
reason of the services which are offered. The imposition is
on the person rendering the service. Of course, it may be
an indirect tax; it may be possible that the same is passed
on to the customer but as far as the levy and assessment
are concerned it is the person rendering the service who
F
alone can be regarded as an assessee and not the customer.
This is the only way in which the provisions can be read
harmoniously.
[…]
G 10. By amending the definition of “person responsible for collecting
of service tax” in the impugned rules with regard to services
provided by the clearing and forwarding agents and the goods
transport operator a person responsible is said to be the client or
the customer of the clearing and forwarding agents and the goods
transporter. In relation to the services provided by others and
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 419
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

referred to in sub-rules (i) to (xi) and (xiii) to (xvi) of Rule 2(d), A
the definition of the person responsible is in consonance with the
definition of that expression occurring in Section 65 of the Act.
However, with regard to the services rendered by the clearing
and forwarding agents and the goods transport operator the
definitions contained in Rule 2(d)(xii) and (xvii), which seek to
B
make the customers or the clients as the assessee, are clearly in
conflict with Sections 65 and 66 of the Act.”
(emphasis supplied)
The decision in Laghu Udyog (supra) has no applicability to the
facts of the present case since Parliament has statutorily incorporated C
the concept of a reverse charge under Sections 5(3) and 5(4) of the
IGST Act. The impugned notification 10/2017 clearly specifies a taxable
person who is liable to pay a reverse charge that is envisaged in the
statute. Thus, the impugned notifications cannot be invalidated for an
alleged failure to identify a taxable person.
D
Taxable value
93. By a corrigendum dated 8 June 2016, Notification 8/2017 was
amended to include the measure of taxable value to be ten per cent of
the CIF value. Section 5(1) of the IGST Act enables the taxable value to
be determined under Section 15 of the CGST Act. The respondents E
have argued that the value has to be strictly determined by Section 15(1)89
of the CGST Act and not by way of delegated legislation. However,
Sections 15(4) and 15(5) enable delegated legislation to prescribe methods
for determination of value, on the recommendations of the GST Council.
Section 15 is extracted below : F
“Section 15- Value of Taxable Supply:
[…]
(4) Where the value of the supply of goods or services or both
cannot be determined under sub-section (1), the same shall be G
determined in such manner as may be prescribed.

89
“Section 15: Value of Taxable Supply- (1) The value of a supply of goods or services
or both shall be the transaction value, which is the price actually paid or payable for the
said supply of goods or services or both where the supplier and the recipient of the
supply are not related and the price is the sole consideration for the supply.”
H
420 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (5) Notwithstanding anything contained in sub-section (1) or sub-
section (4), the value of such supplies as may be notified by the
Government on the recommendations of the Council shall be
determined in such manner as may be prescribed.”
Rules 27 to 31 of Chapter IV of the CGST Rules 2017, prescribe
B the manner of determining value of supply. Rule 31 also provides for
residual powers to the GST Council for prescribing modes of valuation.
“31. Residual method for determination of value of supply of goods
or services or both.— Where the value of supply of goods or
services or both cannot be determined under Rules 27 to 30, the
same shall be determined using reasonable means consistent with
C
the principles and the general provisions of Section 15 and the
provisions of this Chapter:
Provided that in the case of supply of services, the supplier may
opt for this rule, ignoring Rule 30.”

D 94. The respondents have urged that the determination of the
value of supply has to be specified only through rules, and not by
notification. However, this would be an unduly restrictive interpretation.
Parliament has provided the basic framework and delegated legislation
provides necessary supplements to create a workable mechanism. Rule
31 of the CGST Rules 2017 specifically provides for a residual power to
E determine valuation in specific cases, using reasonable means that are
consistent with the principles of Section 15 of the CGST Act. This is
where the value of the supply of goods cannot be determined in
accordance with Rules 27 to 30 of the CGST Rules 2017. Thus, the
impugned notification 8/2017 cannot be struck down for excessive
delegation when it prescribes 10 per cent of the CIF value as the
F
mechanism for imposing tax on a reverse charge basis.
D.4 Taxable event: Is an ocean freight transaction for import
of goods a valid category of supply of services under Section 5(3)
of IGST Act?

G 95. The other limb for contesting the validity of the impugned
notification is with respect to its identification of a “taxable event”. The
question that falls for the determination is whether the impugned
notifications issued in 2017, under Section 5(3) of the IGST Act, validly
prescribe a taxable event that constitutes an inter-State supply of goods
and services with the importer being a recipient of shipping services in
H CIF transactions.
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 421
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

96. The analysis of whether import of goods under CIF contracts A
constitutes a valid import of service has to be answered on two prongs:
(i) whether classification of imports as a specific category of supply of
shipping service is valid under Section 5(3) read with Section 5(1) of
the IGST Act; and (ii) whether the recipient of the imported goods is
also a recipient of shipping services in CIF transactions under Section
B
5(3).
D.4.(a) Do imported goods procured on a CIF basis
constitute an inter-state supply or is it an extra-territorial tax?
97. Notification 8/2017 specifically delineates the service that is
accompanied with the transportation of goods from a non-taxable territory C
as a specified category of service under Section 5(3) of the IGST Act.
This categorization taxes the recipient of such transportation service on
a reverse charge basis. The respondents have argued that the supply of
service of shipping in a CIF contract is from the foreign shipping line to
the foreign exporter. It is alleged that this transaction has no territorial
D
nexus to India and does not constitute “supply” that can be taxed within
the meaning of the CGST Act and IGST Act.
98. We shall now advert to certain key provisions relevant to
determine whether the taxable event in the present case that is, “services
supplied by a person located in a non-taxable territory by way of
transportation of goods by a vessel from a place outside India up to the E
customs station of clearance in India” constitutes an ‘inter-State supply’
for the purposes of the charging Section 5(1) of the IGST Act, read with
Sections 5(3) and the unamended Section 5(4).
99. Section 5(1) levies IGST on all “inter-state supplies” of goods
or services or both. Section 5(3) of the IGST Act confers power on the F
Central Government, on the recommendation of the GST Council, to
specify categories of supply of goods or services or both where the tax
shall be paid on a reverse charge basis by the recipient. While analysing
the respondents’ contention, it is important to contextualize the purpose
of GST and the constitutional amendment to effect it. In modern G
commerce, the distinction between goods and services is increasingly
becoming a matter of degree than substance. GST seeks to focus on the
taxation of “supply” of goods or services. The provisions of the IGST
and CGST Act focus on implementing a workable machinery to adequately
capture the complexities of supply in a global and digital age.
H
422 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 100. The term ‘supply’ has been defined in the IGST Act with
reference to the CGST Act. Section 2(21) of the IGST Act provides
that:
“(21) “supply” shall have the same meaning as assigned to it in
section 7 of the Central Goods and Services Tax Act”
B Section 7(1) of the CGST Act provides thus:
“7. Scope of supply.
(1) For the purposes of this Act, the expression “supply” includes—
(a) all forms of supply of goods or services or both such as sale,
C transfer, barter, exchange, licence, rental, lease or disposal made
or agreed to be made for a consideration by a person in the course
or furtherance of business;
[(aa) the activities or transactions, by a person, other than an
individual, to its members or constituents or vice-versa, for cash,
D deferred payment or other valuable consideration.
Explanation.—For the purposes of this clause, it is hereby clarified
that, notwithstanding anything contained in any other law for the
time being in force or any judgment, decree or order of any Court,
tribunal or authority, the person and its members or constituents
E shall be deemed to be two separate persons and the supply of
activities or transactions inter se shall be deemed to take place
from one such person to another;]
[(b) import of services for a consideration whether or not
in the course or furtherance of business; [and]
F (c) the activities specified in Schedule I, made or agreed to
be made without a consideration;
[….]
(3) Subject to the provisions of sub-sections (1), (1-A) and (2),
G the Government may, on the recommendations of the Council,
specify, by notification, the transactions that are to be treated as—
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.”
(emphasis supplied)
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 423
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

Further, Section 7 of the IGST Act defines the scope of inter- A
State supply. Section 7(4) of the IGST Act states that “supply of services
imported into the territory of India shall be treated to be a supply of
services in the course of inter-State trade or commerce”:
“7. Inter-State supply.—
(1) Subject to the provisions of Section 10, supply of goods, where B
the location of the supplier and the place of supply are in—
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory, C
shall be treated as a supply of goods in the course of inter-State
trade or commerce.
(2) Supply of goods imported into the territory of India, till they
cross the customs frontiers of India, shall be treated to be a supply D
of goods in the course of inter-State trade or commerce.
(3) Subject to the provisions of Section 12, supply of services,
where the location of the supplier and the place of supply are in—
(a) two different States;
(b) two different Union territories; or E

(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State
trade or commerce.
(4) Supply of services imported into the territory of India F
shall be treated to be a supply of services in the course of
inter-State trade or commerce.
[…]”
(emphasis supplied) G
101. Section 7 of the CGST Act defines the term “supply” with a
broad brush and provides for an inclusive definition. Section 7(1)(b) of
the CGST Act considers import of services for a consideration to
constitute “supply”. Section 7(1)(c) of the CGST Act captures any and
all activities in Schedule 1 of the CGST Act, irrespective of whether
H
424 SUPREME COURT REPORTS [2022] 9 S.C.R.

A they are made for a consideration. Additionally, Section 7(3) confers the
power on the Central Government to specify which transactions are to
be treated as a supply of goods and not a supply of services, and vice-
versa. Section 7(4) of the IGST Act states that supply of services
imported into India would be considered as a supply of services in the
course of “inter-State trade or commerce”. Thus, an Indian importer
B
could also be considered as an importer of the service of shipping which
is liable to IGST on inter-state supply, if the activity falls within the
definition of “import of service” for the IGST Act and CGST Act.
102. The term ‘importer’ is not defined in the IGST Act or the
CGST Act. Section 2(26) of the Customs Act defines an ‘importer’ as:
C
“(26) “importer”, in relation to any goods at any time between
their importation and the time when they are cleared for home
consumption, includes [any owner, beneficial owner] or any person
holding himself out to be the importer”

D The term ‘import of goods’ is defined in Section 2(10) of the CGST
Act as:
“(10) “import of goods” with its grammatical variations and cognate
expressions, means bringing goods into India from a place outside
India”
E “Import of services” is defined in Section 2(11) of the CGST Act as:
“(11) ‘‘import of services” means the supply of any service,
where––
(i) the supplier of service is located outside India;
F (ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;”
The conditions for an “import of service” would entail three
aspects: (i) the supplier of service must be located outside India; (ii) the
recipient of the service must be located in India; and (iii) the place of
G supply of service ought to be in India. The respondents have argued that
conditions (ii) and (iii) are not satisfied in the case of CIF contracts since
the recipient of shipping services would be the foreign exporter and the
place of supply would be the place of business of such foreign exporter.
However, in interpreting the expressions “recipient” and “place of supply”,
H this Court would have to analyse these terms vis-à-vis the IGST Act and
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 425
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

the CGST Act and not exclusively from the provisions of the contract A
between the foreign exporter and the foreign shipping line.
103. Chapter V of the IGST Act provides for methodologies to
determine the place of supply of goods or services or both. Section 13 of
the IGST Act provides the place of supply of services where the location
of the supplier or location of recipient is outside India: B
“13. Place of supply of services where location of supplier or
location of recipient is outside India-—
(1) The provisions of this section shall apply to determine the
place of supply of services where the location of the supplier of
services or the location of the recipient of services is outside India. C

(2) The place of supply of services except the services specified
in sub-sections (3) to (13) shall be the location of the recipient of
services:
Provided that where the location of the recipient of services is not D
available in the ordinary course of business, the place of supply
shall be the location of the supplier of services.
[…]
(9) The place of supply of services of transportation of
goods, other than by way of mail or courier, shall be the E
place of destination of such goods.”
(emphasis supplied)
Section 13(9) of the IGST Act appears to create a deeming fiction,
where in case of supply of services of transportation of goods by a
supplier located outside India, the place of supply would be the place of F
destination of such goods. The supplier, the foreign shipping line, in this
case would be a non-taxable person. However, its services in a CIF
contract for transport of goods would enter Indian taxable territory as
the destination of such goods. The place of supply of shipping service by
a foreign shipping line, would thus be India. G
104. The respondents argued that since Section 7(1)(b) of the
CGST Act does not define “supply” of import of service without
consideration, other than the ones specified in Schedule 1, this would be
inapplicable to importers with CIF contracts as the consideration is paid
by the exporter. Thus, the importer of goods cannot be said to be an H
426 SUPREME COURT REPORTS [2022] 9 S.C.R.

A importer of shipping service since the latter is not an import of service
for a consideration under Section 7(1)(b) of the CGST Act. However,
this argument misses out on some crucial definitions. The term ‘supply’
has been defined in the IGST Act with reference to the CGST Act.
Thus, the three conditions for “import of services” under Section 2(11)(iii)
must be understood with reference to the provisions of the CGST and
B
IGST Acts, including the provisions for determination of place of supply
under Section 13(9) of the IGST Act. As mentioned previously, Section
13(9) of the IGST Act creates a deeming fiction of place of supply of
transportation services to be in India when the destination of goods is in
India. In this case, it is clear the supplier of service- the foreign shipping
C line - is located outside India; and the place of supply is India. Accordingly,
Section 13 of the CGST Act would be applicable to determine the time
of such supply.
105. The respondents have argued that the ocean freight
transaction cannot be considered as “supply” since Section 7(1)(b) of
D the IGST act requires the import of service to be for a “consideration”.
The definition of “consideration” in Section 2(31) of the CGST Act is
instructive:
“(31) “consideration” in relation to the supply of goods or services
or both includes—
E (a) any payment made or to be made, whether in money or
otherwise, in respect of, in response to, or for the
inducement of, the supply of goods or services or both,
whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
F Government;
(b) the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person
but shall not include any subsidy given by the Central Government
G or a State Government:
Provided that a deposit given in respect of the supply of goods or
services or both shall not be considered as payment made for
such supply unless the supplier applies such deposit as
consideration for the said supply;”
H (emphasis supplied)
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 427
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

Thus, Section 2(31) of the CGST Act defines ‘consideration’ to A
include payment made or to be made, in money or any other form, for
the inducement of supply of goods or services to be made by the recipient
or by any other person. Thus, in the case of goods imported on a CIF
basis, the fact that consideration is paid by the foreign exporter to the
foreign shipping line would not stand in the way of it being considered as
B
a “supply of service” under Section 7(4) of the IGST Act which is made
for a consideration, thereby constituting “supply of service” in the course
of inter-state trade or commerce that can be subject to IGST under
Section 5(1) of the IGST Act.
106. At this stage, we note that the respondents have also
C
challenged the impugned levy on the ground that the transaction takes
place beyond the territory of India and is thus, extra territorial in nature.
Mr Arvind Datar and Mr Harish Salve, learned senior counsel have
urged that the service of transportation occurs outside India, that is outside
the taxable territory and bears a nexus with India only as the destination
of goods is India. However, the submission is that since the import of D
goods is taxed under Section 5(1) as ‘supply of goods’, there remains no
territorial nexus of the transportation service with the Indian territory.
An extension of this argument is that in case Parliament seeks to levy a
tax outside its territory, it makes a deeming fiction in the statute and not
by way of delegated legislation.
E
107. A Constitution Bench in GVK Industries (supra), considered
the question whether Parliament is competent to enact legislation with
regard to extra-territorial aspects of certain events. Answering the
question in affirmative, Justice B Sudarshan Reddy, speaking for the
Constitution Bench, held:
F
“124. […]
The answer to the above would be yes. However, Parliament
may exercise its legislative powers with respect to extra-territorial
aspects or causes—events, things, phenomena (howsoever
commonplace they may be), resources, actions or transactions, G
and the like—that occur, arise or exist or may be expected
to do so, naturally or on account of some human agency, in
the social, political, economic, cultural, biological,
environmental or physical spheres outside the territory of
India, and seek to control, modulate, mitigate or transform
H
428 SUPREME COURT REPORTS [2022] 9 S.C.R.

A the effects of such extra-territorial aspects or causes, or in
appropriate cases, eliminate or engender such extra-
territorial aspects or causes, only when such extra-
territorial aspects or causes have, or are expected to have,
some impact on, or effect in, or consequences for: (a) the
territory of India, or any part of India; or (b) the interests
B
of, welfare of, well-being of, or security of inhabitants of
India, and Indians.
125. It is important for us to state and hold here that the powers
of legislation of Parliament with regard to all aspects or causes
that are within the purview of its competence, including with
C respect to extra-territorial aspects or causes as delineated above,
and as specified by the Constitution, or implied by its essential
role in the constitutional scheme, ought not to be subjected to
some a priori quantitative tests, such as “sufficiency” or
“significance” or in any other manner requiring a predetermined
D degree of strength. All that would be required would be that
the connection to India be real or expected to be real, and
not illusory or fanciful.
126. Whether a particular law enacted by Parliament does
show such a real connection, or expected real connection,
E between the extra-territorial aspect or cause and something
in India or related to India and Indians, in terms of impact,
effect or consequence, would be a mixed matter of facts
and of law. Obviously, where Parliament itself posits a degree of
such relationship, beyond the constitutional requirement that it be
real and not fanciful, then the courts would have to enforce such
F a requirement in the operation of the law as a matter of that law
itself, and not of the Constitution:”
(emphasis supplied)
The decision in GVK Industries (supra) clearly recognises the
G power of Parliament to legislate over events occurring extra-territorially.
The only requirement imposed by the Court is that such an event must
have a real connection to India.
108. The impugned levy on the supply of transportation service
by the shipping line to the foreign exporter to import goods into India has
a two-fold connection: first, the destination of the goods is India and
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 429
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

thus, a clear territorial nexus is established with the event occurring A
outside the territory; and second, the services are rendered for the benefit
of the Indian importer. Thus, the transaction does have a nexus with the
territory of India.
109. As an alternative, the respondents submitted that though the
levy may have a nexus with the Indian territory, the levy of tax extra- B
territorially must be provided by Parliament through statute and not by
the Union Government through delegated legislation. We do not find any
applicability of this submission to the facts at hand. As stated above, the
IGST Act under Section 13(9) recognises the place of supply of services
as the destination of goods when the supplier is located outside India.
Since the destination of goods is India, the statute itself is broad enough C
to cover a taxable event that has extra-territorial aspects, which bears a
nexus to India.
110. In determining the vires of the impugned notifications, the
only question that falls for determination is whether the importer of goods
can be considered as the recipient of the service of shipping in CIF D
contracts.
D.4.(b) Are importers service recipients under CIF contracts?
111. The impugned notification 8/2017, inter alia, identifies several
categories of supply of services such as hotels, restaurants, transportation E
by rail/road/air and legal and accounting services. The respondents, as
importers of goods under CIF transactions, are aggrieved by the following
categorization:
“Transport of goods in a vessel including services provided or
agreed to be provided by a person located in non-taxable territory F
to 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 up to the customs station of clearance
in India.”
The respondents are aggrieved by the fact that this categorization,
G
coupled with impugned notification 10/2017, deems the importer of goods
as the recipient of the service of shipping, irrespective of whether the
import of goods was on the basis of a CIF or FOB contract.
112. Section 5(3) of the IGST Act enables taxation of the recipients
of certain specified categories of supply of services on a reverse charge
H
430 SUPREME COURT REPORTS [2022] 9 S.C.R.

A basis. It is pertinent to note that the tax is payable “by the recipient” of
such services, in contradistinction to broad language such as “any person
as may be prescribed” which was otherwise used in Section 98(2) of
the Finance Act 1994 which taxed services. Section 5(3) states:
“(3) The Government may, on the recommendations of the Council,
B by notification, specify categories of supply of goods or services
or both, the tax on which shall be paid on reverse charge basis by
the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such
goods or services or both…”
C
(emphasis supplied)
The term “recipient” of a supply of service has been exhaustively
defined by Section 2(93) of the CGST Act:
“(93) “recipient” of supply of goods or services or both, means—
D
(a) where a consideration is payable for the supply of goods or
services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the
person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available;
E
and
(c) where no consideration is payable for the supply of a
service, the person to whom the service is rendered,
and any reference to a person to whom a supply is made
F shall be construed as a reference to the recipient of the
supply and shall include an agent acting as such on behalf of the
recipient in relation to the goods or services or both supplied;”
(emphasis supplied)
Thus, the language employed in Section 2(93)(a) of the CGST
G Act clearly stipulates that when a consideration is payable for the supply
of services, the recipient would mean the person who is liable to pay that
consideration. However, when no consideration is payable for the supply
of a service, Section 2(93)(c) states that the recipient shall be the person
to whom the service is rendered. Further, Section 2(93) provides that
H “any reference to a person to whom supply is made shall be construed
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 431
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

as a reference to the recipient”. Hence, where the statute refers to a A
person to whom a supply is made, it has to be construed as a reference
to the recipient of service.
113. In a CIF transaction, the foreign exporter contracts with a
foreign shipping line. The service of shipping is rendered by the foreign
shipping line to the foreign exporter and the consideration is accordingly B
payable by the latter to the former. The cost of such shipping may form
a component of the price that is eventually charged to the importer,
based on the negotiated terms. If an FOB contract were to be negotiated,
the importer would independently avail of the service of shipping and
pay for the consideration. The Union Government has argued that import
of goods on a CIF basis would be construed as import of services where C
sub-clause (c) of Section 2(93) applies to determine the recipient. The
respondents have argued that the importer in a CIF contract can be
considered as a recipient of the service only in a colloquial sense. The
mere destination of the service of shipping would not convert it into a
service vis-à-vis the importer without any elements of a contract. Hence, D
they urge that in the absence of specific deeming provisions in the statute,
over-arching principles of privity of contract are relevant for interpreting
the term “recipient” deployed in Section 5(3) of the IGST.
114. The Union Government has argued that Section 2 of the
CGST Act is prefaced with the term “unless the context otherwise E
requires”, and hence would enable taxation of the importer on a reverse
charge basis as the “recipient” of service under Section 2(93). However,
this argument overlooks the context of Section 5(3) of the IGST Act
which reiterates the taxable person to be the recipient of the service and
only enables the Union Government to notify categories of inter-state
supply of goods and services. F

115. The Union Government has attempted to make a far-fetched
argument that Section 24(iii) of the CGST Act mandating compulsory
registration of persons liable to pay tax on a reverse charge basis extends
to designating any person to pay the tax on a reverse charge basis,
irrespective of their status as either a recipient or a supplier of service. G
This argument inverts the identification of a category of goods and
services under Section 5(3) and the recipient therein, who is then liable
to compulsorily register themselves under Section 24(iii) of the CGST
Act. The power of the Central Government to designate persons and
categories of supply for reverse charge derives from Sections 5(3) and H
432 SUPREME COURT REPORTS [2022] 9 S.C.R.

A 5(4) of the IGST Act and not Section 24(iii) of the CGST Act which
mandates the compulsorily registration as a logical corollary to ensure
tax collection. Section 2(98) of the CGST Act, which defines “reverse
charge” reiterates that it means the “liability to pay tax by the recipient
of supply of goods or services or both instead of the supplier…”. It
cannot be construed to imply that any taxable person identified for
B
payment of reverse charge would automatically become the recipient of
such goods or service. The deeming fiction of treating the importer as a
recipient must be found in the IGST Act. As it currently stands, Section
5(3) of the IGST Act enables the delegated legislation to create a deeming
fiction on categories of supply of goods/services alone.
C
116. Interpreting the term “by the recipient” vis-à-vis the categories
of goods and services identified in Section 5(3) of the IGST Act should
necessarily be governed by the principles governing the definition of
“recipient” under Section 2(93) of the CGST Act. Contrary to the
arguments of the Union Government, such an interpretation would not
D annihilate the mandate of compulsory registration under Section 24(iii)
of the CGST Act. It would be applicable to suitably worded provisions in
the CGST or IGST Act which permit the Central Government to identify
a taxable person for a reverse charge. In any event, it would be applicable
to all the recipients liable for reverse charge under Sections 5(3) and
5(4) of the IGST Act. The ineffectiveness of a tax collection mechanism
E
under Section 24(iii) of the CGST Act cannot be argued to obfuscate the
concept of a “recipient” of a good or service that is uniformly understood
across the IGST Act, CGST Act and tax jurisprudence.
117. The Union Government has argued that the expression “by
the recipient” in Section 5(3) of the IGST Act does not impede the
F
authority of the GST Council in making recommendations for issuance
of notifications for identifying such persons who shall be governed by
reverse charge and once the identification is complete, such taxable
person would automatically be interpreted as “the recipient”. This
argument requires the Court to completely discard the principles of
G determining the recipient of a service and replace it with whichever
taxable person is identified. The appellant may argue for such an
interpretation to achieve a favourable outcome in this case. However, in
matters of inter-state supply when the supplier and recipient are within
the territory of India, this Court would have to follow this artificially
bifurcated interpretation which identifies recipients vis-à-vis the nature
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 433
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

of service and supply in some cases, and by a simple equation of the A
identified taxable person in others without considering the literal and
contextual definition of recipient. This is against settled rules of
interpretation and would be an act of judicial legislation. If Parliament’s
intention were to designate certain persons for reverse charge,
irrespective of them being the recipient of such goods and services, it
B
must make a suitable amendment to confer such power for exercise of
delegated legislation.
118. The only argument that supports the case of the appellant is
that of Section 13(9) of the IGST Act read together with Section 2(93)(c)
of the CGST Act which defines a “recipient”. As noted in Section D.4.(a)
above, Section 13(9) of the IGST Act creates the deeming fiction of C
place of supply of service to be the destination of goods when they are
transported by means other than mail or courier. No specific exemptions
for importers have been carved out. This Court is inclined to accept this
reasoning and read it into the definition of recipient in Section 2(93) of
the CGST Act which is as follows: D
“(93) “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or
services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the E
person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available;
and
(c) where no consideration is payable for the supply of a service,
the person to whom the service is rendered, F
and any reference to a person to whom a supply is made
shall be construed as a reference to the recipient of the
supply and shall include an agent acting as such on behalf of the
recipient in relation to the goods or services or both supplied;”
(emphasis supplied) G
Since a reference to a person to whom a supply is made, is a
reference to the recipient, the place of supply is critical. By virtue of
Section 13(9) of the IGST Act, the place of supply is the destination of
goods. The time of supply is then determined through the provisions of
Section 13 of the CGST Act. Sections 2(14) and 2(15) of the IGST Act H
434 SUPREME COURT REPORTS [2022] 9 S.C.R.

A also define the location of the recipient and supplier of services with
respect to the physical location where the supply of services is made or
received.
“(14) _location of the recipient of services means,––
(a) where a supply is received at a place of business for which
B the registration has been obtained, the location of such place of
business;
(b) where a supply is received at a place other than the place
of business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment;
C
(c) where a supply is received at more than one establishment,
whether the place of business or fixed establishment, the location
of the establishment most directly concerned with the receipt of
the supply; and

D (d) in absence of such places, the location of the usual place of
residence of the recipient;
(15) location of the supplier of services means,––
(a) where a supply is made from a place of business for which
the registration has been obtained, the location of such place of
E business;
(b) where a supply is made from a place other than the place of
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one establishment,
F whether the place of business or fixed establishment, the location
of the establishment most directly concerned with the provision
of the supply; and
(d) in absence of such places, the location of the usual place of
residence of the supplier;”
G
(emphasis supplied)
In such a scenario, when the place of supply of services is deemed
to be the destination of goods under Section 13(9) of the IGST Act, the
supply of services would necessarily be “made” to the Indian importer,
who would then be considered as a “recipient” under the definition of
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 435
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

Section 2(93)(c) of the CGST Act. The supply can thus be construed as A
being “made” to the Indian importer who becomes the recipient under
Section 2(93)(c) of the CGST Act.
119. This conclusion comports with the philosophy of the GST to
be a consumption and destinated based tax. The services of shipping are
imported into India for the purpose of consumption that is routed through B
the import of goods. Although the consideration for shipping is payable
by the foreign supplier to the foreign shipping line in CIF contracts, the
price is consequently factored into the price of the shipment. The ultimate
benefactor of the shipping service is also the importer in India who will
finally receive the goods at a destination which is within the taxable
C
territory of India. Thus, the meaning of the term “recipient” in the IGST
Act will have to be understood within the context laid down in the taxing
statute (IGST and CGST Act) and not by a strict application of
commercial principles.
120. Some of the respondents have argued that the possibility of
D
two different recipients of services would create absurdities since
whether a supply of service is an inter-state supply under Section 7(3)
or intra-state supply under Section 8(2) of IGST Act depends on the
location of the supplier and the place of supply, which in most cases is
the location of the recipient of service. Since there can effectively be
two recipients on a reading of Section 2(93)(a) and (c) of the CGST E
Act, the respondents argue that the transaction may simultaneously
become an inter-state or intra-state supply. This could also mean that
two recipients can claim ITC. However, this argument is inapplicable to
the case at hand since Sections 7(3) and 8(2) of the IGST Act do not
conflate the concept of imports. Section 8(2) deals with a scenario where
F
the location of the supplier and place of supply are within the same
State/Union Territory in India. This is inapplicable to determining imports
where the supplier is located outside India. Similarly, Section 7(3) deals
with inter-state supply within the territory of India. Further, both these
sections are subject to the provisions of Section 12 of the IGST Act
where both- the supplier and recipient are located in India. Section 12 of G
the IGST Act does not create the deeming fiction under Section 13(9) of
the IGST Act which is applicable only when the supplier is located outside
India. The applicable section in this case would be Section 7(4) of the
IGST Act which clearly stipulates that “Supply of services imported
into the territory of India shall be treated to be a supply of services
H
436 SUPREME COURT REPORTS [2022] 9 S.C.R.

A in the course of inter-State trade or commerce”. Thus, no absurdity is
created by the deeming fiction argued by the Union Government. In no
scenario would the foreign exporter be claiming ITC in India.
121. The respondents’ arguments of identification of two recipients
do not have any bearing on the determination of the present dispute as
B the foreign exporter is not sought to be taxed in this case. In the digital
age, the concepts of supplier and recipient of service have also been
altered and are not necessarily understood as two parties with a direct
chain of supply. The IGST Act tends to create several such deeming
fictions to adequately capture such complexities. For instance, Section
5(5) of the IGST Act taxes the electronic commerce operator as the
C
supplier of service in spite of it only being a conduit, in the commercial
sense. These deeming fictions need to be respected for the purpose of
the statute, as long as they have constitutional and parliamentary sanction.
Similarly, Section 2(14)(c) of the IGST Act recognizes the possibility of
the supply being received in more than one establishment:
D
“(14) “location of the recipient of services” means,—
(a) where a supply is received at a place of business for which
the registration has been obtained, the location of such place of
business;
E (b) where a supply is received at a place other than the place of
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment;
(c) where a supply is received at more than one establishment,
whether the place of business or fixed establishment, the location
F of the establishment most directly concerned with the receipt of
the supply; and
(d) in absence of such places, the location of the usual place of
residence of the recipient;”
122. Section 13 of the IGST Act is critical to effectively meet the
G aim of the GST statute to tax the destination of supplies, as opposed to
their origins. The deeming fiction therein is critical to interpret the charging
provision under the IGST Act (Section 5). The respondents’ argument
for the irrelevance of determining the beneficiary of the supply or who
has received the supply in view of the definition of ‘recipient’ of Section
H 2(93) of the CGST Act mis-reads Section 2(93) which identifies the
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 437
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

recipient, inter alia, on the basis of the person to whom “supply is made” A
i.e. the place of supply.
123. GST laws mark a departure from the previous policy of taxing
sale/consignments and focuses on the taxing of supplies. The concept of
a supply-centric and destination-based tax runs through the scheme of
the statutory provisions and the proposals issued by the GST Council. B
Thus, an amendment to the Constitution was introduced in the form of
Article 366(12-A) to create a tax on the supply of goods, or services, or
both. In the commercial reality of the times, the conceptual lines between
goods and services wear thin. Hence, the focus is on the taxation of
supply, as opposed to the creation of neat compartments between goods
and services. Section 7(1)(c) of the CGST Act specifically characterizes C
import of services for a consideration to constitute “supply”. The only
question that falls for determination is whether the imports of goods on a
CIF basis would also constitute import of shipping services, by way of
deeming fiction. We have held that Section 5(3) of the IGST does not
confer the powers on the Central Government to create a deeming fiction D
vis-à-vis who constitutes the recipient. Section 5(3) merely enables the
Central Government to identify certain categories of goods and services,
where the recipient of such services is subject to a reverse charge, as
opposed to the usual mode of taxation where the supplier of the service
is charged on a forward charge basis. However, Section 13(9) of the
IGST Act read with Section 2(93)(c) of the CGST Act inherently create E
a deeming fiction of the importer of goods to be the recipient of shipping
service.
D.5 Applicability of Section 5(4) of IGST Act
124. By way of an arguendo, the Union Government has argued
that if the importers do not qualify as service recipients, the impugned F
notifications would derive their validity from Section 5(4) of the IGST
Act. The unamended Section 5(4) of the IGST Act stated as follows:
“(4) The integrated tax in respect of the supply of taxable
goods or services or both by a supplier, who is not
registered, to a registered person shall be paid by such G
person on reverse charge basis as the recipient and all the
provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such
goods or services or both.”
(emphasis supplied) H
438 SUPREME COURT REPORTS [2022] 9 S.C.R.

A On 29 August 2018, Section 5(4) was amended by Amending Act
32 of 2018, to state the following:
“(4) The Government may, on the recommendations of the
Council, by notification, specify a class of registered persons
who shall, in respect of supply of specified categories of
B goods or services or both received from an unregistered
supplier, pay the tax on reverse charge basis as the
recipient of such supply of goods or services or both, and
all the provisions of this Act shall apply to such recipient as if he is
the person liable for paying the tax in relation to such supply of
goods or services or both.”
C
(emphasis supplied)
The amended Section 5(4) came into effect on 1 February 201990.
Amending Act 32 of 2018 enables the Central Government to create a
deeming fiction of declaring a class of registered persons “as the recipient”
D of the supply of taxable goods or service. In deploying the language “as
the”, and not “by the” recipient, the applicability of the definition of
recipient vis-à-vis Section 2(93) of the CGST Act is no longer necessary
for determining the validity of such a notification. The effect of the
Amending Act 32 of 2018 has been as follows:- (i) the powers of the
Central Government to specify through a notification has been clarified;
E and (ii) the power to specify a class of registered persons as the recipient
has been recognised.
125. The Union Government has argued that Notifications 8/2017
and 10/2017 dated 28 June 2017 issued under Section 5(3) may also be
read as issued under Section 5(4) of the IGST, in which case, the importers
F would be liable to tax with effect from 1 February 2019 though exempted
for the period 13 October 2017 – 31 January 2019.
126. The respondents have argued that the amended and
unamended Section 5(4) do not save the impugned notifications since
they still make the reference to the term “recipient”. However, the
G respondents crucially miss out that Section 5(4) employs the language
“as the recipient”, in contradistinction to Section 5(3) of the IGST Act
which uses “by the recipient”. We have held that recipient includes the
importer in Part D above. Further, Section 5(4) clarifies that it may

90
H Notification No. G.S.R. 67(E) dated 29 January 2019
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 439
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

designate a class of registered persons as the recipient, thereby A
broadening the scope of Section 2(93) of the CGST Act, which is anyway
an inclusive definition since Section 2 is prefaced with “unless the
context otherwise requires”.
127. It is settled law that non-reference of the source of power
may not vitiate its exercise and application in given facts and B
circumstances of a case. In Union of India v. Tulsi Ram Patel91, a
Constitution Bench held that when a source of power legally exists, a
non-reference or an incorrect reference during its exercise does not
vitiate the action. Speaking in the context of the Railway Service Rules
which did not account for the power of the Disciplinary Authority under
C
Article 311(2), this Court held:
“126. As pointed out earlier, the source of authority of a particular
officer to act as a disciplinary authority and to dispense with the
inquiry is derived from the service rules while the source of his
power to dispense with the disciplinary inquiry is derived from the
D
second proviso to Article 311(2). There cannot be an exercise of
a power unless such power exists in law. If such power does not
exist in law, the purported exercise of it would be an exercise of a
non-existent power and would be void. The exercise of a power
is, therefore, always referable to the source of such power and
must be considered in conjunction with it. The Court’s attention E
in Challappancase [(1976) 3 SCC 190 : 1976 SCC (L&S) 398 :
(1976) 1 SCR 783] was not drawn to this settled position in law
and hence the error committed by it in considering Rule 14 of the
Railway Servants Rules by itself and without taking into account
the second proviso to Article 311(2). It is also well settled that
F
where a source of power exists, the exercise of such power
is referable only to that source and not to some other source
under which were that power exercised, the exercise of
such power would be invalid and without jurisdiction.
Similarly, if a source of power exists by reading together
two provisions, whether statutory or constitutional, and the G
order refers to only one of them, the validity of the order
should be upheld by construing it as an order passed under
both those provisions. Further, even the mention of a wrong

91
1985 3 SCC 398 H
440 SUPREME COURT REPORTS [2022] 9 S.C.R.

A provision or the omission to mention the provision which
contains the source of power will not invalidate an order
where the source of such power exists. (See Dr Ram
Manohar Lohia v. State of Bihar [AIR 1966 SC 740 : (1966) 1
SCR 709, 721 : 1966 Cri LJ 608] and Municipal Corporation of
the City of Ahmedabad v. Ben Hiraben Manilal [(1983) 2 SCC
B
422 : (1983) 2 SCR 676, 681] .) The omission to mention in the
impugned orders the relevant clause of the second proviso or the
relevant service rule will not, therefore, have the effect of
invalidating the orders and the orders must be read as having
been made under the applicable clause of the second proviso to
C Article 311(2) read with the relevant service rule. It may be
mentioned that in none of the matters before us has it been
contended that the disciplinary authority which passed the
impugned order was not competent to do so.”
(emphasis supplied)
D 128. Similarly, in Titagarh Paper Mills v. Orissa State
Electricity Board92, a three-judge Bench of this Court, in the context
of the Electricity Supply Act 1948, held that a mislabelling of the source
of power would not vitiate its exercise:
“9. …..But, if there is one principle more well settled than any
E other, it is that, when an authority takes action which is within its
competence, it cannot be held to be invalid, merely because it
purports to be made under a wrong provision, if it can be shown
to be within its power under any other provision. A mere wrong
description of the source of power — a mere wrong label —
F cannot invalidate the action of an authority, if it is otherwise within
its power..”
Thus, as long as a source of power to legislate or issue a notification
is available, the lack of a mention, an incorrect reference or mistake
does not vitiate the exercise of such power.
G 129. The impugned notifications were issued with the intention of
creating a level playing field between the Indian and foreign shipping
lines. In the Eighteenth GST Council meeting held on 31 June 2017, the
agenda of taxing importers on a reverse charge basis was discussed:

92
H 1975 2 SCC 436
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 441
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

“”Para 6.7.1: Agenda Item 3(v)- Value for the purpose of levy of A
GST on transportation of goods by a vessel from a place outside
India up to the customs station in India
6.7.1. In the existing Service Tax Law, with a view to provide
level playing field to the Indian shipping companies, it has been
provided that in cases where the goods are imported by an importer B
in India on CIF (Cost, Insurance and Freight) basis and the service
of transportation of goods by a vessel from a place outside India
up to the customs station in India is provided by a person located
in non-taxable territory (a foreign shipping line) to a person located
in non-taxable territory (overseas supplier/ exporter of goods),
the importer in India shall be liable to pay Service Tax on freight. C
In view of the representations that where the importer purchases
goods on CIF basis, he may not have the invoice issued by the
shipping line for freight and may not know the amount of freight
charged by the foreign shipping line from the foreign supplier; it
was stipulated in the Service Tax Rules that in such cases the D
importer shall have the option to pay an amount calculated at the
rate of 1.4% of the CIF value of imported goods. This provision
was stipulated on the basis that freight roughly constitutes 10% of
the CJF value of goods on an average. Under GST too, it was
decided that the liability to pay GST on such transportation service
provided by a foreign shipping line to a foreign supplier shall be of E
the importer in India and the notifications are being issued
accordingly. It is proposed that the similar provision deeming value
of such service at 10% of the CIF value may be incorporated in
the IGST notification. Considering the nature of the service, this
provision is not required in the CGST, SGST or UTGST F
notifications. The Council approved the proposal.
[….]
8(v)…..in respect of agenda item 3 the Council approved to
incorporate a provision in the IGST notification that in cases
where the goods are imported by an importer in India on CIF G
basis and the service of transportation of goods by a vessel from
a place outside India up to the customs station in India is provided
by a person located in non-taxable territory (a foreign shipping
line) to a person located in non-taxable territory (overseas
supplier/exporter of goods) and in case the importer did not know H
442 SUPREME COURT REPORTS [2022] 9 S.C.R.

A the amount of freight charged by the foreign shipping line from
the foreign supplier the deemed value of such service shall be
10% of the CIF value.”
130. The impugned notifications were issued after the GST Council
took note of the fact that since transport of imported goods by Indian
B shipping lines to India is not treated as export of service, the Indian
shipping lines pay IGST on the same on a forward charge basis. On the
other hand, on the same transportation service, the foreign shipping lines
are not required to pay tax as they are not taxable persons in India.
Therefore, to provide a level playing field to Indian shipping lines, the
importer in India has been made liable to pay IGST on transportation of
C goods by foreign shipping lines on a reverse charge basis. If Indian shipping
lines continue to be taxed and not their competitors, namely, the foreign
shipping lines, the margins arising out of taxation from GST would not
create a level playing field and drive the Indian shipping lines out of
business.
D 131. It was contended by the respondents that instead of course
correcting the input tax mechanism, the Union Government has chosen
to tax the Indian importer on reverse charge. However, this Court is not
in a position to adjudicate the desirability of a taxation scheme, as long
as it is legally issued. Commenting on the efficacy of the tax intervention
E with the desired goals would be delving into the arena of policy.
D.6 Composite Supply and Issues of Double Taxation
132. Having examined whether the impugned levy is permissible
under Section 5 of the IGST Act, we shall now advert to the arguments
raised by the respondents regarding the impugned notifications amounting
F to double taxation. The respondents have submitted before this Court
that the transaction between the foreign exporter and the respondents is
already subject to IGST under Sections 5 of the IGST Act read with
Sections 3(7) and 3(8) of the Customs Tariff Act as “supply of goods”.
An additional levy of IGST on imported goods, that is on the supply of
G transportation service, by designating the importer as the recipient would
amount to double taxation.
133. The transaction at hand involves three parties- the foreign
exporter, the Indian importer and the shipping line. The first leg of the
transaction involves a CIF contract, wherein the foreign exporter sells
the goods to the Indian importer and the cost of insurance and freight
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 443
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

are the responsibility of the foreign exporter. In other words, the foreign A
exporter is liable to ensure that the goods reach their place of destination
and the Indian importer pays the transaction value to the exporter. The
second leg of the transaction involves an agreement between the foreign
exporter and the shipping line (whether foreign or Indian) for providing
services for transport of goods to the destination, i.e., in the territory of
B
India.
134. On the first leg of the transaction, between the foreign
exporter and the Indian importer, the latter is liable to pay IGST on the
transaction value of goods under Section 5(1) of the IGST Act read with
Section 3(7) and 3(8) of the Customs Tariff Act. Although this transaction
involves the provision of services such as insurance and freight it falls C
under the ambit of ‘composite supply’. We note from the written
submissions of the Union that the ASG has fairly submitted that this
transaction would include value elements of freight and insurance, and
yet the IGST is levied as a tax on supply of goods only. Such transactions
are termed as “composite supply” under the CGST Act. D
135. Section 2(30) of the CGST Act defines “composite supply”
as
“(30) “composite supply” means a supply made by a taxable
person to a recipient consisting of two or more taxable supplies of
goods or services or both, or any combination thereof, which are E
naturally bundled and supplied in conjunction with each other in
the ordinary course of business, one of which is a principal supply;
Illustration.— Where goods are packed and transported with
insurance, the supply of goods, packing materials, transport
and insurance is a composite supply and supply of goods is a F
principal supply;”
136. Section 2(30) of the CGST Act clearly provides that a
transaction may have two or more taxable supplies, where one of them
is a principal supply. The illustration to Section 2(30) further clarifies
that a transaction such as the CIF contract for supply of goods reflects G
a composite supply under the CGST Act, where the principal supply is
the supply of goods.
137. The tax liability on composite supply is provided under Section
8 of the CGST Act.
H
444 SUPREME COURT REPORTS [2022] 9 S.C.R.

A “8. Tax liability on composite and mixed supplies.— The tax liability
on a composite or a mixed supply shall be determined in the
following manner, namely:—
(a) a composite supply comprising two or more supplies,
one of which is a principal supply, shall be treated as a
B supply of such principal supply; and
(b) a mixed supply comprising two or more supplies shall be treated
as a supply of that particular supply which attracts the highest
rate of tax.”
(emphasis supplied)
C
Section 8 of the CGST Act provides that the tax liability on a
composite supply which comprises of two or more supplies, will only be
levied on the ‘principal supply’. In a CIF transaction, the principal supply,
according to Section 2(30), is supply of goods. Thus, the tax would be
levied as if the transaction was one of supply of goods.
D
138. Section 20 of the IGST Act provides that the provisions
relating to ‘composite supply’ under the CGST Act would apply mutatis
mutandis under the IGST Act. By extension, the IGST in a transaction
of composite supply would be levied on the principal supply of goods.
139. The respondents have urged before this Court that the
E
impugned levy which seeks to impose IGST on the ‘service’ aspect of
the transaction would be in violation of the principle of ‘composite supply’
incorporated under Section 2(30) read with Section 8 of the CGST Act,
which applies equally to the imposition of IGST under Section 20 of the
IGST Act. In contrast, the Union Government has submitted that the
F impugned levy is on the second leg of the transaction, which is a standalone
contract between the foreign exporter and the foreign shipping line. Thus,
the Union has urged that the contract between the foreign exporter and
the foreign shipping line- of which the Indian importer is not a party-
cannot be deemed to be a part of ‘composite supply’. While the first leg
of the transaction, between the foreign exporter and Indian importer, is
G
(according to the submission) a composite supply, the second leg is an
independent transaction. In this regard, the Union has relied on the
decision of this Court in McDowell (supra) to contend that a single
element can constitute a levy and a part of the value for another
transaction. Further the Union Government has urged that the levy is on
H different aspects of the transaction.
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 445
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

140. We are unable to agree with the Union Government on this A
count. The aspect theory that the Union Government has relied on finds
its place in various decisions of this Court, such as in Federation of
Hotels & Restaurant Association of India v. Union of India93 and
BSNL (supra).
141. In Federation of Hotels & Restaurants Association of B
India (supra), a challenge was raised regarding the imposition of an
expenditure tax by the Union Government. In discussing the various
aspects of a transaction, this Court, speaking through Justice MN
Venkatachaliah (as the learned Chief Justice then was), observed that
“31. Indeed, the law “with respect to” a subject might C
incidentally “affect” another subject in some way; but that
is not the same thing as the law being on the latter subject.
There might be overlapping; but the overlapping must be
in law. The same transaction may involve two or more
taxable events in its different aspects. But the fact that there
is an overlapping does not detract from the distinctiveness D
of the aspects. Lord Simonds in Governor General-in-
Council v. Province of Madras [AIR 1945 PC 98 : 1945 FCR
179, 193] in the context of concepts of Duties of Excise and Tax
on Sale of Goods said:
“... The two taxes, the one levied on a manufacturer in respect E
of his goods, the other on a vendor in respect of, his sales,
may, as is there pointed out, in one sense overlap. But in law
there is no overlapping. The taxes are separated and distinct
imposts. If in fact they overlap, that may be because the taxing
authority, imposing a duty of excise, finds it convenient to F
impose that duty at the moment when the excisable article
leaves the factory or workshop for the first time on the
occasion of its sale....””
(emphasis supplied)
There is no doubt that different aspects of a transaction can be G
taxed through separate provisions. However, this Court in BSNL (supra)
observed that the aspect theory does not allow the value of goods to be
included in services and vice versa. In BSNL (supra), this Court dealt

93
(1989) 3 SCC 634 H
446 SUPREME COURT REPORTS [2022] 9 S.C.R.

A with the question of whether provision of telephone services involved a
transfer of goods which would be amenable to sales tax. In this context,
the Court observed:
“88. No one denies the legislative competence of the States to
levy sales tax on sales provided that the necessary concomitants
B of a sale are present in the transaction and the sale is distinctly
discernible in the transaction. This does not however allow the
State to entrench upon the Union List and tax services by including
the cost of such service in the value of the goods. Even in those
composite contracts which are by legal fiction deemed to be
divisible under Article 366(29-A), the value of the goods involved
C
in the execution of the whole transaction cannot be assessed to
sales tax.”
142. In the present case, the question is whether the imposition of
IGST on supply of services can be sustained when there is a concomitant
imposition of IGST on supply of goods. However, we must first analyse
D
the context in which the IGST is levied on the import of goods in this
case.
143. The provisions of composite supply in the CGST Act (and
the IGST Act) play a specific role in the levy of GST. The idea of
introducing ‘composite supply’ was to ensure that various elements of a
E transaction are not dissected and the levy is imposed on the bundle of
supplies altogether. This finds specific mention in the illustration provided
under Section 2(30) of CGST Act, where the principal supply is that of
goods. Thus, the intent of the Parliament was that a transaction which
includes different aspects of supply of goods or services and which are
F naturally bundled together, must be taxed as a composite supply.
144. It is true that in this case, the first leg of the transaction
between the foreign exporter and the Indian importer is a composite
supply, while the second leg, between the foreign exporter and the
shipping line may, from a perspective, be regarded as a standalone
G transaction. Both of them are independent transactions and ordinarily,
the IGST could be levied on both sets of transactions- one as supply of
goods (under the ambit of composite supply) and the other as supply of
services. However, the impugned notifications seek to tax the importer
as the deemed recipient of the supply of service. The ASG has advanced
an interpretation of Sections 5(3) and 5(4) of the IGST Act, read with
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 447
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

Section 2(93) of the CGST Act to contend that the importer can be A
classified as the ‘recipient’ of the services. On this interpretation, we
have upheld the validity of the impugned notifications under Sections
5(3) and 5(4) of the IGST Act in Section D.2-D.5 of this judgment. The
respondents as a matter of fact urged that (i) the Indian importer is not
privy to the contract between the foreign exporter and the foreign shipping
B
line; (ii) the Indian importer does not pay consideration to the foreign
shipping line; and (iii) the Indian importer does not receive any services
from the foreign shipping line since the transportation services are provided
by the foreign shipping line to the foreign exporter. The ASG, while
advancing arguments on behalf of the Union Government, has opposed
these submissions. The Union Government has urged that this Court C
must look beyond the text of the contract between the foreign shipping
line and the foreign exporter to identify the Indian importer as the recipient
of the services. This Court has upheld the validity of the impugned
notifications on this ground. The Union Government is contradicting the
main plank of its submission now by contending that the two legs of the
D
transaction are separate standalone agreements. That would imply, that
while on the one hand the Union Government seeks to levy tax on the
Indian importer by going beyond the text of the contract between the
foreign shipping line and foreign exporter (for the purpose of identifying
the Indian importer as the recipient of services), on the other hand, as
far as the submissions on composite supply are concerned, the Union E
Government urges that the contracts must be viewed as separate
transactions, operating in silos. We are unable to subscribe to this view.
The Union of India cannot be heard to urge arguments of convenience –
treating the two legs of the transaction as connected when it seeks to
identify the Indian importer as a recipient of services while on the other
F
hand, treating the two legs of the transaction as independent when it
seeks to tide over the statutory provisions governing composite supply.
145. This Court is bound by the confines of the IGST and CGST
Act to determine if this is a composite supply. It would not be permissible
to ignore the text of Section 8 of the CGST Act and treat the two
transactions as standalone agreements. In a CIF contract, the supply of G
goods is accompanied by the supply of services of transportation and
insurance, the responsibility for which lies on the seller (the foreign
exporter in this case). The supply of service of transportation by the
foreign shipper forms a part of the bundle of supplies between the foreign
exporter and the Indian importer, on which the IGST is payable under H
448 SUPREME COURT REPORTS [2022] 9 S.C.R.

A Section 5(1) of the IGST Act read with Section 20 of the IGST Act,
Section 8 and Section 2(30) of the CGST Act. To levy the IGST on the
supply of the service component of the transaction would contradict the
principle enshrined in Section 8 and be in violation of the scheme of the
GST legislation. Based on this reason, we are of the opinion that while
the impugned notifications are validly issued under Sections 5(3) and
B
5(4) of the IGST Act, it would be in violation of Section 8 of the CGST
Act and the overall scheme of the GST legislation. As noted earlier,
under Section 7(3) of the CGST Act, the Central Government has the
power to notify an import of goods as an import of services and vice-
versa:
C “7. Scope of supply--—
[…]
(3) Subject to the provisions of [sub-sections (1), (1A) and (2)]16,
the Government may, on the recommendations of the Council,
D specify, by notification, the transactions that are to be treated as—
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.”
No such power can be noticed with respect to interpreting a
composite supply of goods and services as two segregable supply of
E
goods and supply of services.
146. The High Court in the impugned judgment has observed that:
“What has led to the present day problems in the implementation
of the GST:
F 132. The GST is implemented by subsuming various indirect taxes.
The difficulty which is being experienced today in proper
implementation of the GST is because of the erroneous
misconception of law, or rather, erroneous assumption on
the part of the delegated legislation that service tax is an
G independent levy as it was prior to the GST and it go vivisect
the transaction of supply to levy more taxes on certain
components completely overlooking or forgetting the basic
concept of composite supply introduced in the GST
legislation and the very idea of levying the GST. Prima facie,
it appears that while issuing the impugned notification, the delegated
H
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 449
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

legislature had in mind the provision of the Finance Act, 1994, A
rather than keeping in mind the object of bringing the GST by
making the Constitutional (101st) Amendment Act, 2016 to merge
all taxes levied on the goods and services to one tax known as the
GST.
133. It appears that despite having levied and collected the B
integrated tax under the IGST Act, 2017, on import of goods on
the entire value which includes the Ocean Freight through the
impugned notifications, once again the integrated tax is being levied
under an erroneous misconception of law that separate tax can
be levied on the services components (freight), which is otherwise
impermissible under the scheme of the GST legislation made under C
the CA Act, 2016.
134. All the learned senior counsel are right in their
submission that if such an erroneous impression is not
corrected and if such a trend continues, then in future even
the other components of supply of goods, such as, insurance, D
packaging, loading/unloading, labour, etc. may also be
artificially vivisected by the delegated legislation to once
again levy the GST on the supply on which the tax is already
collected.
[…] E
215. Thus, having paid the IGST on the amount of freight
which is included in the value of the imported goods, the
impugned notifications levying tax again as a supply of
service, without any express sanction by the statute, are
illegal and liable to be struck down.” F
(emphasis supplied)
147. We are in agreement with the High Court to the extent that
a tax on the supply of a service, which has already been included by the
legislation as a tax on the composite supply of goods, cannot be allowed.
G
E Conclusion
148. Based on the above discussion, we have reached the following
conclusion:
(i) The recommendations of the GST Council are not binding
on the Union and States for the following reasons: H
450 SUPREME COURT REPORTS [2022] 9 S.C.R.

A (a) The deletion of Article 279B and the inclusion of
Article 279(1) by the Constitution Amendment Act
2016 indicates that the Parliament intended for the
recommendations of the GST Council to only have a
persuasive value, particularly when interpreted along
with the objective of the GST regime to foster
B
cooperative federalism and harmony between the
constituent units;
(b) Neither does Article 279A begin with a non-obstante
clause nor does Article 246A state that it is subject
to the provisions of Article 279A. The Parliament
C and the State legislatures possess simultaneous power
to legislate on GST. Article 246A does not envisage
a repugnancy provision to resolve the inconsistencies
between the Central and the State laws on GST. The
‘recommendations’ of the GST Council are the
D product of a collaborative dialogue involving the
Union and States. They are recommendatory in
nature. To regard them as binding edicts would disrupt
fiscal federalism, where both the Union and the States
are conferred equal power to legislate on GST. It is
not imperative that one of the federal units must
E always possess a higher share in the power for the
federal units to make decisions. Indian federalism is
a dialogue between cooperative and uncooperative
federalism where the federal units are at liberty to
use different means of persuasion ranging from
F collaboration to contestation; and
(c) The Government while exercising its rule-making
power under the provisions of the CGST Act and
IGST Act is bound by the recommendations of the
GST Council. However, that does not mean that all
G the recommendations of the GST Council made by
virtue of the power Article 279A (4) are binding on
the legislature’s power to enact primary legislations;
(ii) On a conjoint reading of Sections 2(11) and 13(9) of the
IGST Act, read with Section 2(93) of the CGST Act, the
H import of goods by a CIF contract constitutes an “inter-
UNION OF INDIA v. M/s MOHIT MINERALS PVT. LTD. THROUGH 451
DIRECTOR [DR. DHANANJAYA Y CHANDRACHUD, J.]

state” supply which can be subject to IGST where the A
importer of such goods would be the recipient of shipping
service;
(iii) The IGST Act and the CGST Act define reverse charge
and prescribe the entity that is to be taxed for these purposes.
The specification of the recipient – in this case the importer B
– by Notification 10/2017 is only clarificatory. The
Government by notification did not specify a taxable person
different from the recipient prescribed in Section 5(3) of
the IGST Act for the purposes of reverse charge;
(iv) Section 5(4) of the IGST Act enables the Central C
Government to specify a class of registered persons as the
recipients, thereby conferring the power of creating a
deeming fiction on the delegated legislation;
(v) The impugned levy imposed on the ‘service’ aspect of the
transaction is in violation of the principle of ‘composite D
supply’ enshrined under Section 2(30) read with Section 8
of the CGST Act. Since the Indian importer is liable to pay
IGST on the ‘composite supply’, comprising of supply of
goods and supply of services of transportation, insurance,
etc. in a CIF contract, a separate levy on the Indian importer
E
for the ‘supply of services’ by the shipping line would be in
violation of Section 8 of the CGST Act.
149. For the reasons stated above, the appeals are accordingly
dismissed.
150. Pending application(s) if any, stand disposed of. F

Divya Pandey Appeals dismissed.
(Assisted by : Preetam Bharti, LCRA)

G

H