Facts of the Case

The petitioner, M/s. Indorama India Pvt. Ltd. (Formerly IRC Agrochemical Private Limited), challenged an appellate order dated 26.04.2024 passed under Section 107 of the Central Goods and Services Tax Act, 2017, whereby the appellate authority set aside a refund sanction order dated 24.02.2023.

The petitioner had filed an application in Form GST RFD-01 on 29.12.2022, claiming a refund of ₹16,18,758/- towards Integrated Goods and Services Tax (IGST) paid on the ocean freight component for imports made during the period 01.02.2019 to 28.02.2019. The refund claim was based on the judgment of the Hon’ble Supreme Court in Union of India vs. Mohit Minerals Pvt. Ltd., wherein levy of IGST on ocean freight under the reverse charge mechanism was held to be unsustainable.

The refund sanctioning authority allowed the refund. However, the department preferred an appeal before the appellate authority under Section 107 of the CGST Act, 2017, which resulted in the refund order being set aside.

Issues Involved

  1. Whether the appellate authority was justified in setting aside the refund order solely due to the absence of a legible Bill of Lading.
  2. Whether the petitioner should be granted an opportunity to furnish legible documentary evidence before rejection of the refund claim.
  3. Whether the refund claim based on the Supreme Court decision in Mohit Minerals deserved reconsideration on merits after submission of proper documents.

Petitioner’s Arguments

  • The petitioner contended that the refund had already been sanctioned by the proper authority after examining the claim.
  • It was submitted that the only objection raised by the appellate authority related to the illegibility of the Bill of Lading.
  • The petitioner expressed willingness to produce a clear and legible copy of the Bill of Lading along with any other supporting documents required for verification.
  • Therefore, the petitioner requested that the matter be remanded for fresh consideration instead of outright rejection of the refund claim.

Respondent’s Arguments

  • The department challenged the refund sanction order before the appellate authority.
  • The appellate authority observed that the refund sanctioning authority had failed to analyse or record any finding regarding whether the shipping lines involved were foreign shipping lines or Indian shipping lines.
  • Although the petitioner claimed that foreign shipping lines had been engaged by the foreign supplier and relied upon the Bill of Lading, the appellate authority found that the copy produced was not legible and, therefore, could not substantiate the refund claim.
  • On this basis, the appellate authority allowed the departmental appeal.

Court Order / Findings

The Calcutta High Court held that, considering the facts and circumstances of the case, the petitioner deserved an opportunity to place a legible copy of the Bill of Lading and any other relevant documents before the appellate authority.

Accordingly, the Court:

  • Directed the appellate authority to reconsider the refund claim on merits.
  • Granted the petitioner liberty to produce a legible Bill of Lading and other supporting documents required for adjudication.
  • Directed the appellate authority to conclude the proceedings within one month from the date of the Court's order.
  • Disposed of the writ petition with the above directions.

Important Clarification

  • A refund claim should not be rejected merely because a supporting document is illegible if the defect can be rectified.
  • Principles of natural justice require that the claimant be given a reasonable opportunity to furnish proper documentary evidence.
  • Refund authorities must examine documentary evidence comprehensively before deciding appeals.
  • The decision reinforces that procedural deficiencies capable of rectification should not defeat substantive refund claims.

Sections Involved

  • Section 107 of the Central Goods and Services Tax Act, 2017 – Appeals to Appellate Authority.
  • Section 54 of the Central Goods and Services Tax Act, 2017 – Refund of Tax.
  • Form GST RFD-01 – Refund Application.
  • Relevant Supreme Court Decision: Union of India vs. Mohit Minerals Pvt. Ltd. (2022) 61 GSTL 257 (SC).

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785404986_2402compressed.pdf

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