Facts of the Case

The petitioner, M/s. Yentop Manickavel Sons Edible Oils Private Limited, filed a writ petition before the Madurai Bench of the Madras High Court challenging the order dated 03.10.2019, whereby the State Tax Officer rejected its refund application relating to IGST of ₹1,13,234 paid on ocean freight under the Reverse Charge Mechanism (RCM) for the month of August 2017.

The refund was claimed on the ground that levy of IGST on ocean freight under RCM was not legally sustainable. However, the department rejected the refund primarily because, at the relevant time, the petitioner had relied upon only the interim order of the Gujarat High Court in Mohit Minerals Pvt. Ltd., and according to the department, no final judgment had then been delivered.

Issues Involved

  1. Whether the rejection of refund of IGST paid on ocean freight under RCM was legally sustainable.
  2. Whether the subsequent Supreme Court judgment in Union of India vs. Mohit Minerals Pvt. Ltd. required reconsideration of the petitioner's refund claim.
  3. Whether the assessment authority was justified in rejecting the refund solely because only an interim order of the Gujarat High Court was available at the time of passing the impugned order.

Petitioner's Arguments

  • The petitioner submitted that IGST paid on ocean freight under the Reverse Charge Mechanism had been collected in excess and was refundable.
  • It was argued that the levy of IGST on ocean freight had already been challenged before the Gujarat High Court in Mohit Minerals Pvt. Ltd.
  • During the hearing, the petitioner pointed out that the Gujarat High Court's decision had subsequently been affirmed by the Hon'ble Supreme Court in Union of India & Another vs. Mohit Minerals Pvt. Ltd., thereby strengthening the legal basis for refund.
  • Accordingly, the petitioner requested that the rejection order be set aside and the refund claim be reconsidered in accordance with the Supreme Court's decision.

Respondent's Arguments

  • The department had rejected the refund application because, at the time of passing the order, the petitioner had relied only upon the interim order of the Gujarat High Court.
  • According to the department, since no final judgment had then been delivered, the petitioner's reliance on the interim relief was insufficient for granting refund.
  • During the hearing before the High Court, however, the respondent fairly submitted that the issue now stood concluded by the subsequent judgment of the Hon'ble Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd., and agreed that the refund claim could be re-examined accordingly.

Court Order / Findings

The Madras High Court observed that the rejection order had been passed before the final adjudication of the issue by higher judicial forums.

Since the Supreme Court had subsequently affirmed the Gujarat High Court's judgment in Union of India vs. Mohit Minerals Pvt. Ltd., the legal position governing levy of IGST on ocean freight had materially changed.

Accordingly, the Court:

  • Set aside the impugned order dated 03.10.2019.
  • Directed the State Tax Officer to re-examine the refund claim strictly in accordance with law.
  • Directed the authority to keep in view the judgment of the Hon'ble Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd.
  • Ordered completion of the exercise within eight weeks from the date of receipt of the Court's order.

The writ petition was disposed of without any order as to costs.

Important Clarification

This judgment does not directly sanction the refund. Instead, it recognizes that the earlier rejection order had become unsustainable after the Supreme Court settled the law regarding IGST on ocean freight.

The assessing authority must now reconsider the refund claim independently by applying the principles laid down by the Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd., instead of relying upon the earlier interim stage of litigation.

Section Involved

  • Section 5(3) of the Integrated Goods and Services Tax Act, 2017
  • Reverse Charge Mechanism relating to levy of IGST on Ocean Freight
  • Refund provisions under the GST law
  • Article 226 of the Constitution of India

 Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1784961267_1973compressed.pdf

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