TaxTMI 
TaxTMI 
2026 (1) TMI 1393
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.... Constitution of India for grant of following relief(s): "Under the aforesaid circumstances it is prayed therefore that this Hon'ble Court may be graciously pleased to: (a) Admit the writ application; (b) Issue rule nisi calling upon the opposite parties as to why the Order dated 15.01.2024 vide Annexure-10 rejecting the appeal shall not be quashed being illegal, arbitrary and in violation of principle of natural justice and contrary to judgment of Hon'ble Apex Court as well as various High Courts and contrary to Order dated 01.12.2022 passed by this Hon'ble Court in W.P.(C) No.31896 of 2022; (c) Issue writ in the nature of mandamus or any other appropriate writ directing the opposite parties to make payment of interest @ 6% on the amount refunded to the petitioner from the date of deposit till the date of payment of retained amount in the interest of justice; (d) If the opposite parties do not show cause or shows insufficient cause make the rule absolute; (e) To pass such order/orders, direction/directions, writ/writs as may be deemed fit and proper in the circumstances of the case; (f) To allow the writ petition; ....
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....t, while entertaining the said writ petition as well as Interlocutory Application bearing No. 1424 of 2019 (arising out of said writ petition), passed the following Order on 20.02.2019: "Heard ***. Admit. *** As an interim measure, it is directed that any payment made by the petitioner, pursuant to the impugned Notification, will be subject to result of the writ petition." 2.3. It may be pertinent to discuss that an identical challenge to aforesaid Notification(s) was made before the Hon'ble High Court of Gujarat in the case of Mohit Minerals Private Limited Vrs. Union of India and others, R/Special Civil Application No.726 of 2018 and batch, which came to be disposed of vide Judgment dated 23.01.2020 [reported at (2020) 74 GSTR 134 (Guj) = 2020 SCC OnLine Guj 49], wherein it has been observed as follows: "253.In our opinion, such observations, on the contrary, supports the case of the writ applicants that in a case of CIF (Cost, Insurance and Freight) contract, the contract for transportation is entered into by the seller, i.e., the foreign exporter, and not the buyer, i.e., the importer, and the importer is not the recipient of the ....
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.... be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation. As noted earlier, under Section 7(3) of the CGST Act, the Central Government has the power to notify an import of goods as an import of services and vice versa: '7. Scope of supply- [...] (3) Subject to the provisions of [sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.' No such power can be noticed with respect to interpreting a composite supply of goods and services as two segregable supply of goods and supply of services. 146. The High Court in the impugned judgment has observed that: 'What has led to the present day problems in the implementation of the GST: 132. The GST is implemented by subsuming various indirect taxes. The difficulty which is being experienced today in proper implementation of the GST is because of the erroneous misconception of law, or rather, erroneous assumption on the pa....
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....mendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units; (b) Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The 'recommendations' of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal un....
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....firming the decision of the Hon'ble Gujarat High Court rendered in the case of Mohit Minerals Pvt. Ltd. Vrs. Union of India, (2020) 74 GSTR 134 (Guj) = (2020) 33 GSTL 321 (Guj) = 2020 SCC OnLine Guj 49 as culled out above, there remains nothing for adjudication in the instant writ petition and, therefore, the writ petition is bound to be allowed in terms of Union of India Vrs. Mohit Minerals Pvt. Ltd., 2022 SCC OnLine 657." 2.6. Pursuant to said order, an application for refund of IGST paid on "ocean freight" in Form GST RFD-01 was made before the authority concerned on 24.08.2022; in consideration of which, the Assistant Commissioner, Central GST and Central Excise, Cuttack-II Division, Cuttack passed the following Order in GST RFD-06 on 29.09.2022: "I, hereby, sanction refund of Rs.8,37,88,501/-(IGST), filed vide ARN AA2108220199871 dated 24.08.2022 to M/s. Paradeep Phosphates Limited, Navaratna Bhawan, PPL Township, Paradeep, Jagatsinghpur-754145." 2.7. Since no interest was awarded, the petitioner approached this Court by way of filing a writ application bearing W.P.(C) No.31896 of 2022, which came to be disposed of on 01.12.2022 with the following order: ....
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....vided in Section 56 of the CGST Act, 2017. I also find that, consequent to judgment and order dated 01.02.2022 of the Hon'ble High Court of Orissa against the writ petition No. 1684 of 2019, in all the cases pertaining to Ocean freight, the refunds were sanctioned within the stipulated time of 60 (Sixty) days from the date of refund applications as per statutory provision of Section 54 read with Section 56 of CGST Act, 2017. Therefore, no interest is payable on the refunded amounts which have been credited to the applicant's account within the stipulated period from the dates of refund applications. 3.5. On going through the SCN reply submitted by the claimant, I find that different periods for calculation of interest have been mentioned in 'Para A', 'Para B2' and 'Para C4' of the claimant's reply and actual calculation has been made from another date i.e. from the date of filing of GSTR-3B return. As found from the above mentioned paras of their reply, the relevant dates have been quoted differently viz., (i) date on which "letters filed by the notices stating that they are challenging the taxability of ocean freight under reverse charge before the Hon'ble Odisha....
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....d that the Appellate Authority in confirming the Order rejecting the application for grant of interest on the amount refunded with respect to the unauthorized levy of IGST on "ocean freight" is outcome of non-application of mind, injudicious and bereft of application of law. The case law referred to by the Appellate Authority is misplaced inasmuch as the refund in the instant case does not emanate from any statutory proceedings or decision rendered by the statutory authority in connection with statutory remedy provided for in the GST Act and the Rules framed thereunder. Nevertheless, the refund flows in the present case is on account of levy of IGST on "ocean freight" being declared unconstitutional, illegal and without authority of law. Since the levy of tax is without authority of law, in view of provision enshrined under Article 265 of the Constitution of India, there is no scope to deny interest on refund of IGST from the date of its collection till the date of actual refund. 4.1. The case law relied on by the statutory authority is in the context of interest on refund of tax paid whenever an amount, which is returned by the tax authorities in exercise of statutory power bec....
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.... held to be without authority of law as "the impugned levy imposed on the 'service' aspect of the transaction is in violation of the principle of 'composite supply' enshrined under Section 2(30) read with Section 8 of the CGST Act" and "since the Indian importer is liable to pay IGST on the 'composite supply', comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the 'supply of services' by the shipping line would be in violation of Section 8 of the CGST Act". 6.1. This Court while entertaining the instant writ petition passed the following Order on 05.08.2024: "4. We find two reasons that straightway appear from paragraph-3 in the adjudication order. First is, as submitted by Mr. Satapathy, the refund was made within time provided by the provision. Second reason is no rule or authority is available to corroborate claim of petitioner. Section 54 provides contingency of withholding refund for purpose of revenue. However, ultimately if the refund is to be made then the payment of statutory interest at 6% is also provided. This case is not a case of withholding refund. The tax w....
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....inciple of restitution takes care of this submission. The word "restitution" in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order (see Zafar Khan Vrs. Board of Revenue, U.P., 1984 Supp SCC 505). In law, the term "restitution" is used in three senses: (i) return or restoration of some specific thing to its rightful owner or status; (ii) compensation for benefits derived from a wrong done to another; and (iii) compensation or reparation for the loss caused to another. (See Black's Law Dictionary, 7th Edn., p. 1315). The Law of Contracts by John D. Calamari & Joseph M. Perillo has been quoted by Black to say that "restitution" is an ambiguous term, sometimes referring to the disgorging of something which has been taken and at times referring to compensation for the injury done: 'Often, the result under either meaning of the term would be the same. ... Unjust impoverishment, as well as unjust enrichment, is a ground for restitution. If the defendant is g....
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....to be for a valid reason. Once it is so, Section 44(2) of the Act^6 had no application." 6.8. Glance at provisions of Section 56 of the GST Act dealing with "Interest on delayed refunds" is silent about grant of interest on refund when it emanates from declaration of the statutory notifications as illegal or ultra vires or the levy and collection of tax being rendered constitutionally invalid. In this connection, this Court seeks to take note of the following discussion rendered by the Hon'ble Supreme Court of India in the case of Dr. Poornima Advani Vrs. Government of NCT, (2025) 2 SCR 1178: "8. Thus, in paragraph 19, the learned Single Judge posed a question for his consideration whether the circumstances in which the refund was prayed for by the appellants herein, would be a relevant consideration for ordering refund of the said amount. In other words, the learned Single Judge asked a question to himself whether the court, in such circumstances, should fold its hands and deny relief to a person, who has lost the e-stamp paper, only because the draftsman has omitted the use of such expression explicitly in the Statute. 9. After an exhaustive discussion on var....
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....In the case of Secretary, Irrigation Department, Government of Orissa Vrs. G.C. Roy, (1992) 1 SCC 508, a Constitution Bench of this Court opined that a person deprived of use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This is also the principle of Section 34 of the Civil Procedure Code. 21. The essence of interest as held in the case of Lord Wright in Riches Vrs. Westminister Bank Ltd., 1947 (1) ALL ER 469, at page 472, is that it is a payment, which becomes due because the creditor has not had his money at the due date. It may be recorded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use. 22. In the case of Commissioner of Income Tax Vrs. Dr. Sham Lal Narula, AIR 1963 Punjab 411, a Division Bench of the High Court of Punjab articulated the concept of interest as under: 'The words 'interest' and 'compensation' are sometimes used interchangeably and on other occasions they have distinct connotation. "Interest" in general terms is....
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....ount is detained or realized by someone, otherwise the person receiving the amount after considerable delay would be losing the entire interest thereon which will be pocketed by the person who managed the delay, it is for this reason that we have ordered for payment of interest alongwith the amount realized as export pass fee.' 25. If on facts of a case, the doctrine of restitution is attracted, interest should follow. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the Court or in direct consequence of a decree or order. The term "restitution" is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation or reparation for the loss caused to another. 26. In Hari Chand Vrs. State of U.P., 2012 (1) AWC 316, the Allahabad High Court dealing with similar controversy in a stamp matter held that the payment of interest is a necessary corollary to the retention of the money to be re....
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.... an equivalent in either money which is but the measure of value, or in actual value otherwise conferred; a recompense in value a recompense given for a thing received recompense for the whole injury suffered remuneration or satisfaction for injury or damage of every description remuneration for loss of time, necessary expenditures, and for permanent disability if such be the result; remuneration for the injury directly, and proximately caused by at breach of contract or duty; remuneration or wages given to an employee or officer.' 29. In the case of Union of India through Director of Income Tax Vrs. Tata Chemicals Ltd., (2014) 6 SCC 335, this Court held that when the collection is illegal, the Revenue is obliged to refund such amount with interest as money so deposited was retained and enjoyed by it. No discrimination can be shown between the assessee and Revenue in paying interest on the refund of tax. Money received and retained without right, carries with it the right to interest. There being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, the Government cannot shrug off its apparent obligation to reim....
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....34 (Guj) = (2020) 33 GSTL 321 (Guj) = 2020 SCC OnLine Guj 49 as culled out above, there remains nothing for adjudication in the instant writ petition and, therefore, the writ petition is bound to be allowed in terms of Union of India Vrs. Mohit Minerals Pvt. Ltd., 2022 SCC OnLine 657. 9. In consequence, the petitioner is at liberty to make appropriate application before the competent Proper Officer in order to raise claim for refund in terms of Order dated 20.02.2019 to the effect that "any payment made by the petitioner, pursuant to the impugned notification, will be subject to result of the writ petition" as directed by this Court in the instant writ petition. The Proper Officer shall quantify the amount in accordance with law particularly taking into account the legal proposition as propounded in Union of India Vrs. Mohit Minerals Pvt. Ltd., 2022 SCC OnLine 657. The Proper Officer may examine the records of the petitioner and take appropriate decision within a period of three months from the date of production of the certified copy of this order." 6.10. It may be relevant to have reference to Commissioner, Commercial and Sales Taxes Vrs. Orient Paper Mills Ltd., (200....
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....he amount was deposited pursuant to the order of the High Court dated 15.03.1995.' The High Court erroneously applied the import of Section 14-C to the facts of the present case." 6.11. In the present case this Court at the time of consideration of prima facie merit of the matter vide Order dated 05.08.2024 made a clear observation that the tax was duly collected on the strength of notifications, ultimately set aside by the Supreme Court of India; as such there was no authority to collect the tax. Therefore, it directed for hearing from the side of the Revenue on the question of scope to allow interest on the amount refunded. Neither any specific averment is made in the counter affidavit nor was it argued by the learned Senior Standing Counsel with respect to levy of interest on refund where the IGST levied and collected by the Department with respect to "ocean freight" was held to be illegal and invalid in the eye of law; thereby retaining the amount representing IGST on ocean freight would be contrary to what is envisioned in Article 265 of the Constitution of India. Rather entire pleading by the Revenue rested on the application made under Section 54 read with Sectio....
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....ngs before a Sales Tax Officer. In rejecting the contention, this Court observed: 'It is, however, clear from Article 265 that no tax can be levied or collected except by authority of law which must mean a good and valid law. The contention of the appellant company is that the Act which authorises the assessment, levying and collection of Sales tax on inter-State trade contravenes and constitutes an infringement of Article 286 and is, therefore, ultra vires, void and unenforceable. If, however, this contention by well founded, the remedy by way of a writ must, on principle and authority, be available to the party aggrieved.' And dealing with the contention that the petitioner should proceed by way of appeal or revision under the Act, this Court observed: 'The answer to this plea is short and simple. The remedy under the Act cannot be said to lie adequate and is, indeed, nugatory or useless if the Act which provides for such remedy is itself ultra vires and void and the principle relied upon can, therefore, have no application where a party comes to Court with an allegation that his right has been or is being threatened to be infringed by a law which is ul....
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....ce. He would in support of his submissions refer to paragraph (iii) of the Impugned Order. This is to contend that as the refund claim of IGST Rs. 2,62,37,558/- was sanctioned/paid by the respondents within the statutory period of 60 days, the issue of payment of interest on such amount does not arise. In this context such submission of Mr. Mr. Mishra does not assist the case of the Revenue. Such is for the reason that as noted above, the said amount of IGST collected from the petitioner by the respondents, which is now refunded, is not payable at all in law. This is because such tax based on the said Notifications were struck down by the Supreme Court in Mohit Minerals Pvt. Ltd. Followed by the decision in the petitioner's own case (supra) which declared the same to be unconstitutional. Given such situation, the liability to pay tax imposed on the Petitioner, on reverse charge mechanism, by the respondents has no legs in law to stand on. At this juncture, it is pertinent to refer to the observation of the Supreme Court in the case of Mohit Minerals Pvt. Ltd. (supra) as noted above, that a tax on supply of service, which has already been included by the legislation as a tax on comp....
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....it Petition No. 8318 of 2019 (West India Continental Oils Fats Pvt. Ltd. Vrs. Union of India) where a coordinate Bench of this Court has in terms struck down Notification No. 8 of 2017 read with the corrigendum dated 30 June 2017 to the extent they seek to impose IGST, to be unconstitutional. This Court directed that wherever the refund is payable, the same shall be paid within 8 weeks with applicable interest, in accordance with law. Thus, it is incumbent on the respondents to pay interest to the petitioner on the IGST of Rs. 2,62,37,558/- paid under reverse charge mechanism on ocean freight, in the given facts and circumstances." 6.16. The learned Senior Counsel referred to and relied on certain other decisions rendered in Adi Enterprises Vrs. Union of India, Misc. Civil Application (For Direction) No. 1 of 2020 in R/Special Civil Application No. 10479 of 2019, vide Order dated 08.06.2022 [2022 (64) GSTL 392 (Guj)]; ETC Agro Processing (India) Pvt. Ltd. Vrs. Union of India, R/Special Civil Application No. 1204 of 2021, vide Order dated 26.04.2023 [(2023) 6 Centax 143 (Guj)]. 6.17. In Jupiter Comtex Pvt. Ltd. Vrs. Union of India, R/Special Civil Application No. 1280 of 2024,....
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....claim has been filed based upon the judgment of the Apex Court in the matter of ocean freight declaring levy of GST on ocean freight as unconstitutional would not fall under any category of refund prescribed under Section 54 of the CGST Act, 2017 and such claim would be outside the scope of and purview of such Section and petitioner can claim refund by way of suit or by way of a writ petition, would not sustain. Such a stand of the respondent is deprecated as the respondent is bound by the law declared by the Supreme Court and the same is required to be implemented in letter and spirit. The respondent No. 2, therefore, could not have rejected the refund claim of the petitioner on the ground that the same is outside the scope of Section 54 of the CGST Act, 2017 inasmuch as when the Notification for levy of IGST on ocean freight is held to be unconstitutional, the petitioner is entitled to the refund of such IGST on ocean freight paid under protest. 6.1. It is also pertinent to note that the petitioner has placed on record certificate of Chartered Accountant that the petitioner has not passed on the tax burden and therefore, refund also cannot be denied to the petitioner on ....
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....to pay interest to the taxpayer from the date of actual payment." As is well-established that the law declared by the Hon'ble Supreme Court of India is the law from the inception. On the notifications based on which the IGST on "ocean freight" was levied and collected by the opposite parties being struck down as invalid, there is no doubt in mind that the petitioner is entitled to compensation by way of award of interest on the amount retained for the period from the date of deposit till the date of its actual refund. 6.20. In Vijaya Vasava Motors Vrs. Assistant Commissioner, (2009) 19 VST 322 (AP) it has been held as follows: "16. The decision of the Supreme Court, enunciating a principle of law, is applicable to all cases irrespective of the stage of its pendency. The law laid down by the Supreme Court must be held to be the law from the inception, unless the Supreme Court itself indicates that its decision will operate prospectively. It is not open for Courts/Tribunals to apply the law laid down by the Supreme Court only from the date on which the judgment came to be passed. (M.A. Murthy Vrs. State of Karnataka, (2007) 4 ALD 105, G. Raja Babu Vrs. The Government of A....
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.... not binding or is of no effect, (People's Union for Civil Liberties (PUCL) Vrs. Union of India (2003) 4 SCC 399), nor has it the power to ask that decisions given by courts be disobeyed or disregarded. [Municipal Corporation of the City of Ahmedabad Vrs. New Shrock Spg. and Wvg. Co. Ltd., (1970) 2 SCC 280]. Exercise of power by the executive must be in accordance with law. If exercise of the power of judicial review by the Supreme Court can be set at naught by the State Government, overriding the decision, it would sound the death knell of the rule of law. [P. Sambamurthy Vrs. State of Andhra Pradesh (1987) 1 SCC 362]." 6.21. It may be relevant to notice what was observed in Himmatlal Harilal Metha Vrs. The State of Madhya Pradesh, (1954) 1 SCC 405: "10. In Mohd. Yasin Vrs. Town Area Committee, (1952) 1 SCC 205 = 1952 SCR 572, it was held by this Court that a licence fee on a business not only takes away the property of the licensee but also operates as a restriction on his fundamental right to carry on his business and therefore if the imposition of a licence fee is without authority of law it can be challenged by way of an application under Article 32, a fortiori als....
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....gal and in pursuance of Order dated 01.08.2022 of this Court in the petitioner's own case the Revenue has refunded the amount. It is in dispute whether the petitioner is entitled to interest on said refunded amount from the date of its deposit as the levy itself was declared not in consonance with the constitutional provisions. There is nothing in Mohit Minerals Pvt. Ltd. (supra) to comprehend that the interpretation and declaration of the Hon'ble Supreme Court of India would operate prospectively. 7.1. Regard being had to the conspectus of very many judgments on the subject as referred to in the foregoing paragraphs, it is unequivocal that the decision of the Hon'ble Supreme Court of India unless spells out explicitly to have prospective effect, the same is to be understood as existing from the inception. In the absence of any direction by the Hon'ble Supreme Court of India that the interpretation set forth or law laid down by it would be prospective in operation, the argument of the Revenue to avoid payment of interest that the refund flows from the ruling of the Hon'ble Supreme Court of India in Mohit Minerals Pvt. Ltd. (supra) and the department having refunded the IGST so c....
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....rvations and directions, the writ petition stands disposed of and pending Interlocutory Application(s), if any, is also disposed of, but in the circumstances there shall be no order as to costs. I agree. ------------------ Notes: 1. The relevant portion of the Notification No. 8/2017-Integrated Tax (Rate), dated 28.06.2017, reads thus: "In exercise of the powers conferred by sub-section (1) of Section 5, sub-section (1) of Section 6 and clause (iii) and clause (iv) of Section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) read with sub-section (5) of Section 15 and sub-section (1) of Section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the integrated tax, on the inter-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corres....
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....t, shall be paid on reverse charge basis by the recipient of the such services as specified in column (4) of the said Table Table Sl.No. Category of Supply of Services Supplier of Service Recipient of Service 10 Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. A person located in non-taxable territory Importer, as defined in clause (26) of section 2 of the Customs Act, 1962 (52 of 1962), located in the taxable territory. " 3. The provisions of Section 54 and Section 56 of the CGST Act as relied on by the Appellate Authority at paragraph 10 of his order are extracted hereunder: "10.1 The relevant portion of Section 54 of the CGST Act, 2017 is reproduced as under: Section 54. Refund of tax.- (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: *** (4) The application shall be acco....
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.... Interest on delayed refunds.- If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub- section till the date of refund of such tax: Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund. ....