Refund claim dismissed for tax paid on reverse charge ocean freight as payment was revenue neutral

The HC dismissed the petitioner's refund claim for tax paid on reverse charge basis on ocean freight with interest. The court held that despite earlier litigation directing refund, the petitioner was not entitled to relief as the tax payment was revenue neutral - the amount paid would have been availed as Input Tax Credit and utilized. The court found the petitioner was taking undue advantage of court proceedings without suffering actual prejudice, noting only importers who bore IGST on ocean freight charges without liability would be prejudiced. The petition was dismissed with no interference warranted in the impugned order.

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Issues Involved:
1. Entitlement to refund of tax paid on reverse charge basis on ocean freight.
2. Legality of tax collection under Article 265 of the Constitution of India.
3. Applicability of interest on refunded tax amount.
4. Availability of alternate remedy under Section 107 of the CGST Act, 2017.
5. Impact of the Supreme Court's decision in Union of India vs. Mohit Minerals on the refund claim.
6. Examination of unjust enrichment in the context of refund claims.
7. Revenue neutrality and its effect on refund entitlement.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Tax Paid on Reverse Charge Basis on Ocean Freight:
The petitioner filed a writ petition challenging the impugned order dated 11.01.2024, which granted the petitioner a refund of Rs. 66,00,287/- along with interest at 6% from 17.07.2023. The refund claim was filed on 04.04.2023 following the Supreme Court's decision in Union of India vs. Mohit Minerals, which held that the recommendations of the GST Council are not binding and that the levy on ocean freight was contrary to the principle of composite supply under the CGST Act.

2. Legality of Tax Collection under Article 265 of the Constitution of India:
The petitioner argued that the tax collected was contrary to Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by the authority of law. The petitioner relied on the decision in Cosmol Energy Pvt. Ltd. vs. State of Gujarat, which emphasized that erroneously collected tax must be refunded.

3. Applicability of Interest on Refunded Tax Amount:
The petitioner cited the Supreme Court's decision in Union of India vs. Tata Chemicals Limited, asserting that the statutory obligation to refund carries with it the right to interest. The petitioner argued that interest should be paid as compensation for the unauthorized retention of money by the Department.

4. Availability of Alternate Remedy under Section 107 of the CGST Act, 2017:
The respondent contended that the petitioner had an alternate remedy by way of appeal under Section 107 of the CGST Act. The respondent also noted that the refund claim was processed and the amount was refunded with interest calculated from the date of application receipt.

5. Impact of the Supreme Court's Decision in Union of India vs. Mohit Minerals on the Refund Claim:
The Supreme Court's decision in Union of India vs. Mohit Minerals was pivotal in the petitioner's claim. The Court concluded that the levy on ocean freight was in violation of the composite supply principle, leading to the refund of the tax paid by the petitioner.

6. Examination of Unjust Enrichment in the Context of Refund Claims:
The Court highlighted that the petitioner, as a supplier under Section 2(105) of the CGST Act, was liable to pay tax on supplies. The refund and interest should have been subject to the petitioner proving no unjust enrichment, as emphasized in the Mohit Minerals case.

7. Revenue Neutrality and Its Effect on Refund Entitlement:
The Court noted that the petitioner had availed Input Tax Credit (ITC) on the tax paid on ocean freight, which could be utilized for discharging tax liability. The refund claim was considered revenue-neutral as the petitioner had monetized the ITC. Therefore, the petitioner was not entitled to a refund or interest. The Court dismissed the writ petition, stating that the petitioner was taking undue advantage of court proceedings without suffering any prejudice.

Conclusion:
The writ petition was dismissed, and the Court found no reason to interfere with the impugned order dated 11.01.2024. The petitioner was deemed greedy and avaricious, and no relief was granted. The connected writ miscellaneous petition was also closed.

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