Facts of the Case

The petitioner, M/s. Indorama India Pvt. Ltd. (formerly IRC Agrochemical Private Limited), filed a refund application in Form GST RFD-01 seeking refund of ₹97,07,274/- towards Integrated Goods and Services Tax (IGST) paid on the ocean freight component for imports made during the period 1 September 2018 to 30 September 2018. The refund claim was based on the judgment of the Hon'ble Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd., which held that levy of IGST on ocean freight under the reverse charge mechanism in such cases was not sustainable.

The Refund Sanctioning Authority allowed the refund. Subsequently, the department preferred an appeal before the Appellate Authority under Section 107 of the Central Goods and Services Tax Act, 2017, challenging the refund order.

The Appellate Authority set aside the refund sanction order primarily on the ground that there was no proper analysis or finding regarding whether the shipping lines involved were foreign shipping lines, and the Bill of Lading produced by the taxpayer was not legible enough to substantiate the claim.

The petitioner approached the High Court challenging the appellate order.

Issues Involved

  1. Whether the Appellate Authority was justified in rejecting the refund merely because the Bill of Lading submitted was illegible.
  2. Whether the petitioner should be granted an opportunity to submit a legible copy of the Bill of Lading and other supporting documents before deciding the refund claim.
  3. Whether the refund claim based on the Supreme Court's decision in Mohit Minerals should be reconsidered after providing adequate opportunity to the taxpayer.

Petitioner’s Arguments

  • The petitioner submitted that the refund had rightly been sanctioned by the Refund Sanctioning Authority.
  • It was argued that the only objection raised by the Appellate Authority related to the illegibility of the Bill of Lading.
  • The petitioner expressed readiness to produce a clear and legible copy of the Bill of Lading before the Appellate Authority.
  • The petitioner requested that the matter be reconsidered on merits after allowing submission of proper documents.

Respondent’s Arguments

  • The department contended that the Refund Sanctioning Authority had failed to analyse whether the shipping lines involved were foreign shipping lines.
  • It was argued that the documents produced by the petitioner, particularly the Bill of Lading, were illegible and therefore insufficient to establish the refund claim.
  • The department maintained that the refund order suffered from inadequate verification of material facts.

Court Order / Findings

The High Court observed that the dispute essentially arose because the Bill of Lading produced before the Appellate Authority was not legible.

The Court held that the petitioner deserved an opportunity to produce a legible copy of the Bill of Lading along with any other documents required for proper adjudication of the refund claim.

Accordingly, the Court directed the Appellate Authority to reconsider the matter afresh on merits after granting such opportunity to the petitioner.

The Appellate Authority was further directed to complete the proceedings within one month from the date of the Court's order.

The writ petition was disposed of with these directions.

Important Clarification

  • Refund claims should not ordinarily be rejected merely because supporting documents are illegible when the defect is capable of being cured.
  • Authorities are expected to provide a reasonable opportunity to taxpayers to submit legible and complete documentary evidence.
  • Procedural deficiencies should not defeat substantive refund claims where the taxpayer is willing to rectify defects.
  • The decision reinforces the principle of natural justice in GST refund proceedings.
  • Refund claims arising from the Mohit Minerals judgment must be examined on merits after proper verification of supporting evidence.

Sections Involved

  • Section 107 of the Central Goods and Services Tax Act, 2017 – Appeals to Appellate Authority.
  • Refund provisions under the Central Goods and Services Tax Act, 2017 relating to refund of IGST.
  • Principles flowing from the Supreme Court judgment in Union of India vs. Mohit Minerals Pvt. Ltd

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785407533_2411compressed.pdf

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