2024 (9) TMI 539 - HC - GST

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

M/s. South India Krishna Oil and Fats Private Limited, Represented by its Manager (Taxation) Mr. Vikas Rathor Versus The Assistant Commissioner of GST-Central Tax Central Excise, Thanjavur

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 ... Refund claim for the tax paid on reverse charge basis on ocean freight with interest - specific case of the petitioner is that the petitioner has paid tax, which was not due to the Department and therefore, collection was contrary to Article 265 of the Constitution of India - HELD THAT:- The fact remains that the Input Tax Credit that was availed by the assessee under the provisions of the respective GST Acts and the rules thereunder would entitle utilization of the Input Tax Credit for discharging the tax liability under the provisions of the respective GST Acts. This aspect ought to have been examined by the respondent before sanctioning the refund claim even though in the earlier round of litigation in M/S. SOUTH INDIA KRISHNA OIL AND FATS PVT LTD VERSUS THE ASSISTANT COMMISSIONER OF GST – CENTRAL TAX, CENTRAL EXCISE, THANJAVUR [2023 (9) TMI 1548 - MADRAS HIGH COURT], this Court had directed the petitioner to refund claim and disburse the amount within a period of four weeks from the date of receipt of the order. Merely because the tax was paid by the petitioner ipso facto would not entitle the petitioner to refund the amount paid as the issue was revenue neutral. The amount that was paid by the petitioner on ocean freight would have been availed as Input Tax Credit and utilized then and there. Therefore, the petitioner was as such, not entitled to refund claim much less interest. Be that as it may, the rights which have accrued to the petitioner so far need not be disturbed. The prayer of the petitioner in this writ petition shows that the petitioner is avaricious and is greedy and taking undue advantage of the Court proceedings even though the petitioner unilaterally has not suffered any prejudice. Only, where IGST on ocean freight charges were paid on reverse charge basis/mechanism and were borne by the importer, who was not liable/who is no more liable to pay GST alone can be said to have been prejudiced. Under these circumstances, there is no case made out for granting any relief to the petitioner. There are no reasons to interfere with the impugned order - petition dismissed. 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.