Facts of the Case

M/s. Yentop Manickavel Sons Edible Oils Private Limited filed a refund application claiming refund of IGST amounting to ₹96,525 paid on ocean freight under the Reverse Charge Mechanism (RCM) for the month of January 2018. The refund was claimed on the basis that levy of IGST on ocean freight was not sustainable in law.

The State Tax Officer rejected the refund application by order dated 03.10.2019, primarily on the ground that the petitioner had relied only upon the interim order passed by the Gujarat High Court in Mohit Minerals Pvt. Ltd. vs Union of India, and that no final decision had then been rendered.

Aggrieved by the rejection order, the petitioner approached the Madurai Bench of the Madras High Court by filing a writ petition under Article 226 of the Constitution of India.

Issues Involved

  1. Whether the rejection of refund of IGST paid on ocean freight under Reverse Charge Mechanism was legally sustainable.
  2. Whether the subsequent judgment of the Hon'ble Supreme Court in Union of India vs Mohit Minerals Pvt. Ltd. required reconsideration of the refund claim.
  3. Whether the assessing authority was required to re-examine the refund application in light of the law subsequently settled by the Supreme Court.

Petitioner's Arguments

  • The petitioner submitted that IGST paid on ocean freight under Reverse Charge Mechanism had been collected in excess and was liable to be refunded.
  • It was argued that although the refund was earlier rejected by relying upon the interim nature of the Gujarat High Court's decision in Mohit Minerals, the issue had subsequently attained finality.
  • The petitioner contended that the Hon'ble Supreme Court had affirmed the Gujarat High Court's decision, thereby entitling the petitioner to reconsideration of its refund claim in accordance with the settled legal position.

Respondent's Arguments

  • The Revenue originally rejected the refund on the ground that the petitioner relied only upon the interim order passed by the Gujarat High Court, which was not a final adjudication at that time.
  • During the hearing before the High Court, the learned Additional Government Pleader fairly submitted that the issue had thereafter been settled by the Hon'ble Supreme Court in Union of India & Another vs Mohit Minerals Pvt. Ltd., and therefore the refund claim could appropriately be reconsidered by the competent authority inaccordance with law.

Court Order / Findings

The Madras High Court observed that the impugned order had been passed before the Hon'ble Supreme Court delivered its authoritative judgment in Union of India & Another vs Mohit Minerals Pvt. Ltd. dated 19.05.2022.

Considering that the legal position had subsequently been settled by the Supreme Court, the Court:

  • Set aside the refund rejection order dated 03.10.2019.
  • Directed the State Tax Officer to re-examine the petitioner's refund claim in accordance with law.
  • Directed that such reconsideration shall specifically keep in view the judgment of the Hon'ble Supreme Court in Mohit Minerals.
  • Ordered that the entire exercise be completed within eight weeks from the date of receipt of the Court's order.

Accordingly, the writ petition was disposed of.

Important Clarification

  • Refund applications rejected solely because the taxpayer had relied upon the interim Gujarat High Court decision require reconsideration after the Supreme Court's final ruling in Mohit Minerals.
  • Authorities are required to examine refund claims in accordance with the law declared by the Hon'ble Supreme Court.
  • The judgment reinforces that administrative orders passed before a binding Supreme Court decision can be revisited where the legal position has materially changed.
  • The decision highlights the importance of applying subsequent authoritative judicial precedents while deciding pending or disputed GST refund claims.

Sections Involved

  • Section 5(3) of the Integrated Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017 

Link to Download the Order

https://mytaxexpert.co.in/uploads/1785134761_2015compressed.pdf

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