2024 (11) TMI 1330 - HC - GST

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 ... IGST on ocean freight - refund of tax paid pursuant to struck down notification - unconstitutional levy - writ jurisdiction under Article 226 - time-bar and limitation for refund claims - Mafatlal principle on refundsIGST on ocean freight - refund of tax paid pursuant to struck down notification - time-bar and limitation for refund claims - writ jurisdiction under Article 226 - Mafatlal principle on refunds - Whether the petitioner is entitled to refund of IGST paid on ocean freight for June, 2018 after the notification levying such tax was struck down, and whether the refund claim is barred by limitation. - HELD THAT: - The Court proceeded on the binding effect of the decisions in Mohit Minerals (High Court and Supreme Court) holding the Notification imposing IGST on ocean freight to be invalid; consequently the levy cannot be insisted upon by revenue. Applying the categorisation in Mafatlal Industries, the present case falls within the class of an unconstitutional levy where writ remedy is available. It was implicit and reasonable that the petitioner could only apply for refund after the notification was finally struck down and the appeal dismissed by the Union; the refund application filed thereafter for June, 2018 cannot be treated as time barred. In those circumstances the petition under Article 226 is maintainable and the impugned orders rejecting the refund on limitation grounds are not sustainable. [Paras 8, 9, 10]Writ petition allowed; impugned rejection and appellate order set aside and petitioner entitled to refund of IGST paid on ocean freight for June, 2018.Final Conclusion: The petition succeeds: having regard to the authoritative rulings striking down the Notification, the Court holds the levy unconstitutional, the refund claim filed after final adjudication is not time barred, and the orders rejecting the refund are quashed; no order as to costs. 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 freightThe 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 claimThe 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 periodThe 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.