IGST levy on ocean freight ruled unconstitutional following Supreme Court precedent in Mohit Minerals case

Gujarat HC held that IGST levy on ocean freight was unconstitutional based on SC precedent in Mohit Minerals case and various HC decisions. The court ruled that when notifications imposing such levy are struck down, authorities cannot insist on IGST collection on ocean freight amounts. Following Mafatlal Industries precedent, the court determined that writ jurisdiction exists for unconstitutional levy cases under Articles 32 and 226. The petitioner's writ petition seeking IGST refund was maintainable and allowed, with the impugned order quashed and set aside.

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Issues:
1. Eligibility for refund of IGST on ocean freight.
2. Validity of the rejection of the refund claim.
3. Maintaining the refund application within the statutory period.

Analysis:

Issue 1: Eligibility for refund of IGST on ocean freight
The Court addressed whether the petitioner is entitled to a refund of IGST on ocean freight paid during June 2018, following the striking down of relevant Notifications by previous judgments. The petitioner filed a refund claim for the period in question, citing unutilized GST on Ocean Freight under Reverse Charge Mechanism. The respondent rejected the claim based on delay, but the petitioner argued that the claim could not be rejected due to the judgment of the Hon'ble Apex Court. The Court referred to previous decisions and held that the petitioner's application for refund was not time-barred and was maintainable, given the circumstances.

Issue 2: Validity of the rejection of the refund claim
The respondent rejected the petitioner's refund claim, citing that it was beyond the statutory period of two years from the relevant date. Despite the petitioner's detailed response and appeal, the claim was dismissed on the same ground. The Court analyzed the situation in light of previous judgments and found that the rejection of the refund claim was not justified, especially considering the unconstitutional levy of IGST on ocean freight.

Issue 3: Maintaining the refund application within the statutory period
The Court emphasized that the petitioner filed the refund application promptly after the relevant Notification was struck down and the Union of India's appeal was dismissed in 2022. It was held that the application for refund was made within a reasonable time and was not time-barred. The Court concluded that the writ petition seeking a refund of IGST was maintainable and allowed the petition, quashing the impugned order and setting it aside.

In conclusion, the Court ruled in favor of the petitioner, allowing the refund of IGST on ocean freight and declaring the levy as unconstitutional. The judgment highlighted the importance of timely refund applications in cases of unconstitutional levies and emphasized the petitioner's right to seek a refund in such circumstances.

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