Landmark Ruling: Importers Win GST Refund Battle, Tax Authorities Ordered to Reassess Ocean Freight Import Claims

HC allowed petitioner's writ petition challenging GST refund denial. The court directed tax authorities to reconsider the refund application in line with Supreme Court precedent on IGST payment for ocean freight imports. Deficiency memos were quashed, mandating proper processing of the refund claim under GST regulations.

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Issues involved: Refusal of refund under GST Act, applicability of Supreme Court decision on IGST payment, violation of CGST Act.

Refusal of refund under GST Act: The petitioner sought a writ of certiorari to quash deficiency memos rejecting the refund under the GST Act and a writ of mandamus directing the respondent to grant refund of the IGST amount paid. The petitioner, engaged in trading pharmaceutical products, imported goods on CIF basis and paid Ocean Freight. Citing a Supreme Court decision, the petitioner argued that no IGST is payable on Ocean Freight under Reverse Charge Mechanism for CIF imports. The respondent issued deficiency memos asking for a fresh refund application, stating the Supreme Court decision cannot be given retrospective effect and the IGST balance in the ledger was insufficient. The court directed the respondent to consider the refund application in line with the Supreme Court decision, quashing the deficiency memo and allowing the petition.

Applicability of Supreme Court decision on IGST payment: The petitioner contended that the Supreme Court decision regarding IGST payment on Ocean Freight should be applied to their case, leading to a refund of the IGST amount paid. The petitioner argued that the law of the land should be followed, and the respondent should grant the refund as requested. The respondent, through the Assistant Government Pleader, acknowledged that the Supreme Court decision should be implemented. The court disposed of the petition by directing the respondent to process the refund application based on the Supreme Court decision, quashing the deficiency memo and setting aside any concerns regarding the decision's applicability.

Violation of CGST Act: The petitioner argued that recovering IGST under Reverse Charge Mechanism for transportation services of goods by shipping lines would contravene section 8 of the CGST Act. The petitioner had paid IGST on Ocean Freight under reverse charge mechanism and filed refund applications, which were met with deficiency memos from the respondent. The court, after considering submissions from both sides, allowed the petition, directing the respondent to consider the refund application in accordance with the Supreme Court decision, thereby addressing the potential violation of the CGST Act.

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