TaxTMI 
TaxTMI 
2026 (10) TMI 559
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....6, APL/22/SRT/2026, APL/23/SRT/2026, APL/24/SRT/2026, APL/25/SRT/2026, APL/26/SRT/2026, APL/27/SRT/2026, APL/28/SRT/2026, APL/29/SRT/2026, APL/30/SRT/2026, APL/31/SRT/2026, APL/32/SRT/2026, APL/33/SRT/2026, APL/34/SRT/2026, APL/35/SRT/2026, APL/36/SRT/2026, APL/37/SRT/2026, APL/38/SRT/2026, APL/39/SRT/2026, APL/40/SRT/2026, APL/41/SRT/2026, APL/42/SRT/2026, APL/43/SRT/2026, APL/44/SRT/2026, APL/45/SRT/2026, APL/46/SRT/2026, APL/47/SRT/2026, APL/48/SRT/2026, APL/49/SRT/2026, APL/50/SRT/2026, APL/51/SRT/2026, APL/52/SRT/2026, APL/53/SRT/2026, APL/54/SRT/2026, APL/55/SRT/2026, APL/56/SRT/2026. Appearance: Counsel for Appellant: Naveen Kumar, Superintendent (Authorized Representative) Counsel for Respondent: Adv. Vinay Kansara. ORDER PER: SHRI SANJAYKUMAR DWIVEDI, MEMBER (JUDICIAL) 1. When a High Court or the Supreme Court declares a legal provision ultra vires and unconstitutional, whether the provision becomes ultra vires and unconstitutional after such declaration by the court or right from its inception - this is the principal question posed by these forty-six appeals filed by the department against common Order-in-Appeal No. VAD-CGST-002-APP-ADC-349-394-2023-24, ....
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....d availed the ITC of IGST paid on ocean freight under RCM for respective months and also utilised the same for discharging their tax liabilities. It appeared that claim of availment and utilisation of credit and a simultaneous claim of refund would be a case of "unjust enrichment". 2.3. The Respondent contested the notice and asserted that once any provision, rule, section or notification etc. has been declared ultra vires, the effect of the same is that it was not in existence right from the beginning. On the question of utilisation of credit of IGST, the Respondent submitted before the adjudicating authority that the credit has not been utilised because it had sufficient balance under the CGST and SGST heads; that the balance of ITC is to be considered as a whole and not isolated head wise; that in terms of the prescribed method for utilisation of credits, the IGST is exhausted first; that IGST liability can be discharged even from the balance of ITC in CGST and SGST. The Respondent cited the following judgments to claim that admissibility of refund has already been decided - (i) Comsol Energy Pvt. Ltd. v. State of Gujarat - 2021 (55) GSTL 390 (Guj.). (ii) Lo....
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....dology prescribed under GST law, they were to first exhaust the balance of ITC availed on IGST, and so, there was no balance of ITC in IGST head, but there were sufficient balance in CGST and SGST heads." Applying the principle lex non cogit ad impossibilia, he held that - "Obviously, the appellant in hand was unable to entirely maintain the claimed credit of IGST due to a supervening impossibility of GST law, which the appellant could neither prevent nor anticipate. Hence, I have no hesitation to maintain that these additional grounds to reject the impugned refund claims have no legal backing and are fully devoid of substance." The Appellate Authority accordingly set aside all the 46 orders and allowed the appeals. Grounds of Appeal 3. The department has filed this appeal under Section 112(3) on the following grounds: (i) Rule 89(2) prescribes that the applicant should produce a copy of the order wherein it is held that a refund is due to them. In the instant case, the applicant, not being a party in the Apex Court's decision dated 19.05.2022 of the Mohit Minerals case, cannot treat the same as the Order holding the applicant eligible for the refunds ....
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....e appellate authority. (ii) Once any provision, section, Rule, Notification etc., has been declared as ultra vires, the legal effect of the same is as if it was not in existence right from the beginning. (iii) When the Supreme Court, issues a ruling declaring certain provisions as beyond its legal authority, this decision has to be applied retrospectively. (iv) On the issue of retrospective application of judgments, the Respondent placed reliance on the following case laws: * Kanishk Sinha v. State of West Bengal 2025 SCC OnLine SC 443. * M.A. Murthy v. State of Karnataka [(2003) 7 SCC 517] * Assistant Commissioner of Income Tax, Rajkot v. Saurashtra Kutch Stock Exchange reported in 2008 (230) E.L.T. 385 (S.C.), * Louis Dreyfus Company Pvt. Ltd. v. Union of India (2025) 33 Centax 418 (A.P.)/2025 (101) G.S.T.L. 329 (A.P.) [14-08-2025] * Sunrise Timply Company Pvt. Ltd. v. Union of India (2026) 39 Centax 203 (Cal.) (v) The judgements in case of UOI v. C. Krishna Reddy; CCE v. Adani Exports Ltd.; CCE Chennai v. Indian Organic Ltd., do not apply as they relate to the question - whether a beneficial exempti....
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....ve refund of GST paid on Ocean Freight, it is submitted that this ground proceeds on the same fundamental misconception referred to above. A judicial declaration that a notification is unconstitutional and ultra vires does not require a further executive Notification to be issued in order to give it effect or to make consequential refunds available. Once Notification No. 8/2017-Integrated Tax (Rate) and Entry No. 10 of Notification No. 10/2017-Integrated Tax (Rate) were declared void by a Constitutional Court, they are obliterated from the statute book for all purposes and stand on the same footing as if they never existed. After such decision/judgment, no notification is required. The consequential refund flows directly from such final decision/judgment. (xii) The reliance placed by the Appellant on M. Nagaraj, supra, is also not correct because it deals with the prospective application of a constitutional amendment. (xiii) The issue whether refund claim in such a case, is available or not, has already been decided by the Hon'ble Supreme Court and High Court, in the following cases: * Comsol Energy Pvt. Ltd. v. State of Gujarat - 2021 (55) G.S.T.L. 390 (....
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....he Respondent was not a party to the appeal before Hon'ble Supreme Court. 9. But before coming to the grounds raised in the appeal, we wish to deal with the oral submissions made by the learned Authorised Representative, viz. the IGST cannot be refunded because its credit had already been utilised by the Respondent; and that it is immaterial that sufficient balance is available under CGST and SGST heads. 9.1. We note that this ground is not present in the appeal. We further note that even the Order dated 05/12/2024 passed by the Commissioner under Section 112(3) does not specify this ground. It is not that the issue was not at all present to the mind of the Commissioner. Rather she has noted at paragraph 2.6 of the order that this was one of the grounds on which the notice had proposed to deny the refund. It is also noted that the same was replied by the Respondent (noted para 2.7 (IV)); it was considered and rejected by the Adjudicating Authority (para 2.8 (IV)); and that the Appellate Authority has held that "The methodology prescribed under GST law necessitates exhausting IGST ITC first. Claimant's compliance with this methodology supports their refund claim." (as noted at....
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....raise new grounds if permissible under law. However, a ground which has been considered and dropped by the Commissioner cannot be allowed to be raised by the Authorised Representative. 9.5. In any case, the very judgment cited by the Authorised Representative, viz. SN Tradelink Pvt. Ltd., supra, permits reversal of IGST Credit by utilising the balance of CGST and SGST. Similar to the present case, even in that case refund of IGST paid on ocean freight had been claimed pursuant to the same judgment of Hon'ble Supreme Court in Mohit Minerals Pvt. Ltd. One of the grounds raised by the department to oppose the refund was that the "IGST credit has already been utilised by the petitioner." The ground was summarised at para 4 (b) of the affidavit in reply filed by the department in the following words: "Since the IGST which is sought to be refunded is already availed and utilized, refund cannot be granted. It was held that even though credit utilization is automatic as per Rule 88A and Section 49(5) law does not recognize constructive non-utilization merely because of availability of SGST or CGST." 9.6. The paragraph 10 of the judgment, relied by the department reads as und....
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...., the judgment does not hold that if IGST has been utilised its refund would not be allowed. Thus, the judgment does not support the case of the department. Further, question of unjust enrichment would not arise merely because the IGST equivalent to refund amount is debited by utilising CGST or SGST or both. Whether availment and utilisation of the IGST credit amounts to unjust enrichment 10. However, there is another fallout of the alleged utilisation of the ITC that requires separate mention, viz. the bar of unjust enrichment. The learned AR has argued that refund of IGST which has already been utilised would lead to a double benefit. This argument rests on the premise that IGST, CGST and SGST must be treated as separate, non-fungible silos; that for the purpose of determining whether the credit has, in substance, been utilised or not, the balance of CGST and SGST cannot be equated with a balance of IGST. We have already rejected this argument earlier in this order. It follows that for the purpose of refund of IGST, holding a combined unutilised balance of CGST and SGST equivalent to the refund amount, and utilising the same to debit the refund amount in the credit ledger, ....
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....trospective by default, whereas legislative statutes are prospective by default unless explicitly stated otherwise. In Kanishk Sinha vs State of West Bengal [2025 INSC 278, (2025) 2 S.C.R. 1405] it was held: "Now the law of prospective and retrospective operation is absolutely clear. Whereas a law made by the legislature is always prospective in nature unless it has been specifically stated in the statute itself about its retrospective operation, the reverse is true for the law which is laid down by a Constitutional Court, or law as it is interpretated by the Court. The judgment of the Court will always be retrospective in nature unless the judgment itself specifically states that the judgment will operate prospectively. The prospective operation of a judgment is normally done to avoid any unnecessary burden to persons or to avoid undue hardships to those who had bona fidely done something with the understanding of the law as it existed at the relevant point of time. Further, it is done not to unsettle something which has long been settled, as that would cause injustice to many. 12.4. In Louis Dreyfus Company Private Limited vs Union of India 2025 APHC 32181 (Judgment d....
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....tive. Rather it reinforces the view that where the Supreme Court wants its judgment to be only prospective then it directs so. 12.6. Thus, the refund cannot be rejected on the ground that the judgment in Mohit Minerals, does not state that it has retrospective effect. Whether refund can be claimed on the basis of Judgment in Mohit Minerals, to which the Respondent was not a party: 13. The Department's next contention is that the Respondent, not having been a party to Union of India v. Mohit Minerals Pvt. Ltd., cannot claim the benefit of that judgment, and that in any event the judgment cannot constitute "the order" contemplated by Rule 89(2) of the CGST Rules, 2017 for the Respondent's refund claim. 13.1. We are unable to accept this contention. 13.2. Article 265 of the Constitution provides that "No tax shall be levied or collected except by authority of law." Further, Article 300A states that, "No person shall be deprived of his property save by authority of law.". Where, the levy itself is declared ultra vires and unconstitutional, the collection of tax is without authority of law from the very inception of such levy. The collection of tax from any person is with....
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....1) unconstitutional; or (2) without inherent jurisdiction. Ordinarily, no assessee can be allowed to reopen proceedings that have been finally concluded against him on the basis of a favourable decision in the case of another assessee. This is because an order which has become final in the case of an assessee will continue to stand until it is specifically recalled or set aside in his own case. In cases where the levy of a tax has been held to be (1) unconstitutional; or (2) void for want of inherent jurisdiction (as explained in Class II), it is open for the assesses to take advantage of the declaration of the law so made and claim refunds on the ground that they paid the tax under a mistake of law. This is because such claims are outside the ambit of the Excise Act. In such cases, the limitation period applicable will be that specified in Section 17(1)(c) of the Limitation Act." 13.5. The majority judgment in Mafatlal also discusses the proposition that "each one must fight his own battle" but excludes the category "unconstitutional levy" from this proposition. The para 31 [Internal paragraph 22.] of the majority judgment describes the third category....
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....ble by him for refund on the ground of alleged discovery of mistake of law on the declaration of law by this Court or a High Court (or a Tribunal or any other authority under the Act) in the case of another person. The Union of India denies that such a person can plead payment of duty under a mistake of law within the meaning of Section 72 of the Contract Act. It also denies that such a writ petition or a suit can be filed within three years of such" discovery of mistake of law''. 13.6. Again, at para 79 (internal para 70), the majority judgment expressly excludes the unconstitutional levy "70. Re. : (II) : We may now consider a situation where a manufacturer B * pays a duty unquestioningly - or he questions the levy but fails before the original authority and keeps quite. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may also be a case where he files a second appeal/ revision, fails and then keeps quiet. The orders in any of the situations have become final against him. Then what happens is that after an year, five years, ten years, twenty years or C even much later, a decision rendered by a High Court or the Supreme....
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....imant is not fettered by the provisions of the taxing statute (except for the bar of "unjust enrichment). He may even proceed by way of a civil suit or writ. (b) The limitation under the statute would also not apply. Rather the period under Section 17(1)(c) of the Limitation Act,1963 would be available; and (c) The refund is not barred merely because the claimant was not a party to the judgment that declared the provision unconstitutional. The only exception to this is that a person who himself unsuccessfully challenged the very provision, and allowed that adverse decision to attain finality against him, cannot then claim refund on the basis of judgment in the case someone else. 13.8. Here, it is not the case that the Respondent himself challenged the validity of levy of tax on ocean-freight and lost it. It simply paid tax under a levy that has since been declared void ab initio. 14. To summarise, we find that the levy of IGST on ocean freight has been declared unconstitutional by the Hon'ble Gujarat High Court and the declaration upheld by the Hon'ble Supreme Court. The Respondent paid tax under that very levy. It did not itself litigate the question of con....
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....f the decision given by the Gujarat High Court in the case of M/s COMSOL Energy Private Limited v. State of Gujarat (R/Special Civil Application No. 11905 of 2020) decided on 21.12.2020, the petitioner is also entitled for refund of Integrated Goods and Service Tax (IGST) paid by him. Learned counsel for the respondents have failed to controvert the fact that the issue involved in the present case is covered by decisions given by the Gujarat High Court relied upon by the learned counsel for the petitioner. Learned counsel for the respondents has, however, submitted that the judgment passed by the Gujarat High Court in the case of Mohit Minerals Private Limited (supra) is under challenge before the Apex Court but operation of the judgment has not been stayed." Thereafter, the Hon'ble High Court noted the operative portion of the judgments in Mohit Mineral and Comsol Energy, and held: "Keeping in view the submissions made by the learned counsel for the parties, this petition is disposed of in terms of the decisions given by the Gujarat High Court in Mohit Minerals Private Limited (supra) & M/s. COMSOL Energy Private Limited (supra)." 17. We may note h....