Namaste DOST.

Imagine being told to pay a tax even after the Supreme Court has said that tax cannot be levied.

Sounds unreal? Yet, this is exactly what played out in a recent GST dispute before the Calcutta High Court.

Summary

This case concerns a GST demand raised on an importer for IGST on ocean freight under the reverse charge mechanism. The taxpayer relied on the Supreme Court’s ruling in the Mohit Minerals case, which had already declared such levy unsustainable. Despite this, the tax officer confirmed the demand, arguing that the Supreme Court judgment did not specify whether it applied retrospectively or prospectively.

The Calcutta High Court rejected this approach. It held that judgments of constitutional courts apply retrospectively unless expressly restricted, and that a notification cannot override the statute. The demand and the rejection of rectification were both set aside. The ruling delivers a clear message on how tax officers must apply binding court judgments.

Facts of the Case (Background)

The petitioner, Sunrise Timply Company Pvt. Ltd., is an importer.

During audit, the department alleged that the company had failed to pay IGST on ocean freight for the period July 2017 to March 2018. A show cause notice was issued under Section 74 of the CGST and WBGST Acts.

The company responded consistently.

Its stand was simple. IGST on ocean freight for imports was not payable, as held earlier by the Gujarat High Court and later by the Supreme Court in the Mohit Minerals case.

Proceedings continued.

A personal hearing was granted in September 2024. The petitioner again relied on the Supreme Court judgment. Still, in January 2025, the proper officer passed an order confirming IGST demand of ₹18.61 lakh on ocean freight.

The company sought rectification.

That application was rejected in March 2025.

Left with no option, the petitioner approached the High Court.

Legal Issue

The core legal issue was narrow but powerful:

Can a tax officer ignore a binding Supreme Court judgment and still confirm IGST demand on ocean freight by treating the judgment as prospective?

Arguments

Petitioner’s Stand

The petitioner argued that:

• The Supreme Court had categorically held that IGST on ocean freight for imports is not leviable.

• Once the highest court declares a levy invalid, the proper officer has no jurisdiction to impose it.

• Subsequent amendment of Notification No. 10/2017 could not revive or justify an otherwise illegal levy.

Department’s Stand

The department argued that:

• Entry 10 of Notification No. 10/2017 was deleted only with effect from 1 October 2023.

• Since the transactions were of 2017–18, the deletion could not apply retrospectively.

• The Supreme Court judgment did not explicitly state that it applied retrospectively.

This difference in approach led to the litigation.

⚖️ Court’s Decision

The Calcutta High Court, by judgment dated 19 January 2026, set aside:

• The order confirming IGST demand on ocean freight, and

• The order rejecting rectification.

The Court held that the proper officer’s reasoning was fundamentally flawed.

Legal Reasoning & Analysis

The High Court began by laying down a settled constitutional principle.

It observed that a judgment of a constitutional court declaring a law applies retrospectively, unless the court expressly makes it prospective.

On the other hand, a statute or amendment applies prospectively unless it is expressly made retrospective.

This distinction changed everything.

The Court noted that the Supreme Court, in Mohit Minerals, never stated that its ruling would apply only prospectively. So the officer could not invent such a limitation.

Then came the second important point.

The Court rejected reliance on the amendment to Notification No. 10/2017. It clarified that a notification cannot be treated as a law overriding the parent statute. Notifications must operate within the statutory framework. They cannot create a levy where the statute does not permit one.

The Court also referred to the Supreme Court’s own observation that Notification No. 10/2017 was only clarificatory and did not specify a taxable person different from what Section 5(3) of the IGST Act prescribed.

Put simply, the officer tried to do what the law did not allow.

Anyone who has faced prolonged GST litigation knows how stressful this stage can be. Notices pile up. Orders come late. And sleep becomes optional.

Important Takeaways (Message for Business Owners)

• Binding judgments must be followed
  If the Supreme Court has declared a levy invalid, officers cannot selectively apply it.

• Prospective vs retrospective is not optional
  Officers cannot decide on their own how a constitutional judgment operates.

• Notifications have limits
  A notification cannot override or defeat statutory provisions.

• Rectification is not a formality
  If the base order is illegal, rectification rejection cannot survive.

• Don’t assume the demand is final
  A confirmed demand is not the end. Courts still correct legal overreach.

As the saying goes, der aaye durust aaye.

Why This Matters (Broader Impact)

This ruling sends a clear institutional message.

Tax administration cannot dilute constitutional principles through interpretation. It reinforces certainty in GST litigation and protects taxpayers from arbitrary confirmation of demands despite settled law.

Conclusion

This case was never just about ocean freight.

It was about discipline in adjudication.

When courts declare what the law is, officers are expected to apply it, not reinterpret it. The Calcutta High Court’s ruling restores that balance. It reassures taxpayers that constitutional principles still guide GST enforcement.

At GST DOST, we see this often. Confusion at the ground level. Relief at the judicial level. And a reminder that knowing the law is not a luxury. It is protection.

📞 Need help with a similar GST dispute? Contact GST DOST for personalised support.

FAQ

Q: What was the dispute in this case?

A: The dispute was whether IGST on ocean freight could be demanded despite a Supreme Court ruling holding such levy invalid.

Q: How did the High Court rule?

A: The High Court set aside the IGST demand and rectification rejection, holding that the officer wrongly treated the Supreme Court judgment as prospective.

Q: Can officers decide whether a Supreme Court judgment applies retrospectively?

A: No. Unless the court itself restricts its ruling, constitutional judgments apply retrospectively.

Q: Does amendment of a notification validate old GST demands?

A: No. The Court held that a notification cannot override the statute or revive an invalid levy.

Q: Is IGST payable on ocean freight?

A: As per this judgment, no, because the Supreme Court of India has held that such levy is not legally sustainable.

References

• Sunrise Timply Company Pvt. Ltd. vs Union of India & Ors.
  Calcutta High Court, WPA 10415 of 2025, Judgment dated 19.01.2026 (2026-VIL-62-CAL)

• Statutory Provisions Referenced:

  • Section 5(3), Integrated Goods and Services Tax Act, 2017

  • Section 74, Central Goods and Services Tax Act, 2017
    
    

Written by CA Vikash Dhanania | Reviewed by GST DOST Legal Research Team | Updated on 22/01/2026

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