2023 (12) TMI 233 - HC - GST

Two-year refund limit u/s 54(1) CGST Act held directory, delay in IGST ocean freight refund condonable

HC held that the two-year limitation under Section 54(1) of the CGST Act for filing refund claims is directory, not mandatory. In the context of a refund ... Imposition of IGST on ocean freight under the Reverse Charge Mechanism - double levy of IGST on ocean freight where exporter bears freight and includes it in price - application of Mohit Minerals precedent disallowing IGST collection from importers on ocean freight - refund of IGST paid on ocean freight - directory nature of the limitation period for refund applications under Section 54(1) of the GST ActImposition of IGST on ocean freight under the Reverse Charge Mechanism - application of Mohit Minerals precedent disallowing IGST collection from importers on ocean freight - refund of IGST paid on ocean freight - Refund entitlement for IGST paid on ocean freight which was earlier levied on importer under RCM - HELD THAT: - The Court held that the petitioner had paid IGST twice on the ocean freight: first by the exporter (included in the price of goods) and subsequently by the importer. Applying the law laid down by the Hon'ble Apex Court in Mohit Minerals, no IGST can be collected from importers on ocean freight when that freight has already been borne and priced into the goods by the exporter. Consequently, the petitioner is entitled to have its refund application reconsidered in light of that precedent. The impugned appellate order rejecting the refund was set aside and the matter remitted to the authority to re-examine the refund claim and pass appropriate orders after affording personal hearing to the petitioner. [Paras 9, 10, 12]Impugned order set aside and matter remitted for reconsideration of the refund claim in accordance with the Mohit Minerals ratio, with opportunity of personal hearing.Directory nature of the limitation period for refund applications under Section 54(1) of the GST Act - refund application limitation and condonation of delay - Whether the refund application could be considered despite delay beyond the two year period - HELD THAT: - Relying on this Court's earlier order in W.P.No.23604 of 2022, the limitation of two years for filing a refund under Section 54(1) was treated as directory rather than mandatory. The Court directed that where reasons for delay are furnished, the authority should consider condoning the delay and decide the refund application on merits. Accordingly, the appellate rejection on limitation grounds could not preclude re-examination; the authority must address any delay explanation and decide whether to condone it while reconsidering the refund. [Paras 11, 12]Authority directed to consider and, if justified, condone delay and to decide the refund application on merits in accordance with law.Final Conclusion: Impugned order dated 24.09.2020 set aside; matter remitted to the appellate authority to reconsider the refund claim for IGST paid on ocean freight in light of the Mohit Minerals decision and this Court's view on the directory nature of the refund limitation period, after affording personal hearing; exercise to be completed within three months. Issues involved: Challenge to imposition of IGST on Ocean Freight Charges under Reverse Charge Mechanism (RCM), rejection of refund application, applicability of limitation period for refund application.Impugned Order Challenge - IGST on Ocean Freight Charges:The petitioner challenged the imposition of IGST on Ocean Freight Charges by the respondent based on the Reverse Charge Mechanism (RCM). The petitioner argued that since the exporter normally includes the Ocean Freight Charges in the cost of goods exported, the imposition of IGST on Ocean Freight Charges for imported goods by the petitioner was unjust. The petitioner was charged IGST on Ocean Freight Charges for specific periods, and despite a previous application for refund being rejected, the petitioner sought reconsideration following the precedent set by the Hon'ble Apex Court in the Union of India vs. Mohit Minerals Pvt Ltd. case.Refund Application Rejection and Limitation Issue:The Department rejected the refund application citing non-acceptance of the petitioner's contention and limitation concerns. The Appellate Authority also upheld the rejection. The respondent contended that the rejection was based on both the petitioner's argument and the limitation aspect. However, a recent judgment by the Madras High Court clarified that the limitation period for refund applications under the Goods and Services Tax Act is directory, not mandatory. Delays in filing refund applications can be considered and condoned if valid reasons are provided.Judgment and Directions:The High Court held that the petitioner was entitled to a refund of the IGST paid on Ocean Freight Charges, following the precedent set by the Hon'ble Apex Court. The impugned order was set aside, and the matter was remitted back to the respondent for reconsideration. The respondent was directed to review the refund application in light of the legal principles established by the courts and provide a personal hearing to the petitioner. Both parties were given the opportunity to raise additional issues, and the respondent was instructed to consider all issues on their merits within three months from the date of the order. The writ petition was disposed of with no costs incurred.