Facts of the Case

M/s. Indorama India Pvt. Ltd. (formerly IRC Agrochemical Private Limited) filed a writ petition before the Calcutta High Court challenging the appellate authority's order dated 26 April 2024, which had set aside a refund sanction order dated 24 February 2023 passed under the provisions of the Central Goods and Services Tax Act, 2017.

The petitioner had submitted a refund application in Form GST RFD-01 on 29 December 2022 seeking a refund of ₹1,76,67,958, representing the Integrated Goods and Services Tax (IGST) paid on the ocean freight component for imports made during the period 1 July 2018 to 31 July 2018. The refund claim was based on the Supreme Court's judgment 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 accepted the refund claim and sanctioned the amount. However, the department preferred an appeal before the appellate authority under Section 107 of the CGST Act, 2017, resulting in reversal of the refund sanction.

Issues Involved

  1. Whether the appellate authority was justified in setting aside the refund solely because the Bill of Lading produced by the taxpayer was not legible.
  2. Whether the taxpayer should be granted an opportunity to produce a readable copy of the Bill of Lading and other supporting documents before deciding the refund appeal.
  3. Whether the refund claim based on the Supreme Court's decision in Mohit Minerals deserved fresh consideration on merits.

 Petitioner's Arguments

  • The petitioner submitted that the refund had already been validly sanctioned by the refund authority.
  • It was argued that the appellate authority rejected the refund mainly because the Bill of Lading submitted during appellate proceedings was not clearly readable.
  • The petitioner expressed readiness to produce a legible copy of the Bill of Lading along with any additional documents required for proper adjudication.
  • It was contended that denial of refund merely due to an illegible document without granting an opportunity to rectify the deficiency was unjustified.

Respondent's Arguments

  • The tax department argued that the refund sanctioning authority had failed to verify whether the shipping lines involved were foreign shipping lines or Indian shipping lines.
  • The reviewing authority observed that although the taxpayer claimed that foreign shipping lines were engaged by the foreign supplier, the Bill of Lading produced was illegible and therefore insufficient to substantiate the claim.
  • On this basis, the appellate authority allowed the departmental appeal and set aside the refund sanction.

Court Order / Findings

The Calcutta High Court observed that the dispute primarily arose because the Bill of Lading produced before the appellate authority was not readable.

The Court held that, in the interest of justice, the petitioner should be granted an opportunity to submit a legible copy of the Bill of Lading together with any other documents necessary for proper adjudication of the refund claim.

Accordingly, the High Court directed the appellate authority to:

  • Provide the petitioner an opportunity to produce a legible Bill of Lading and any additional supporting documents.
  • Reconsider the refund appeal afresh on its own merits.
  • Complete the proceedings within one month from the date of the High Court's order.

The writ petition was accordingly disposed of.

Important Clarification

  • Refund claims relating to IGST paid on ocean freight cannot be rejected merely because supporting documents are not legible if the taxpayer is willing to furnish proper copies.
  • Principles of natural justice require authorities to provide a reasonable opportunity to cure documentary deficiencies before rejecting a substantive refund claim.
  • Appellate authorities should examine documentary evidence on merits rather than dismissing claims solely on procedural shortcomings.
  • The judgment reinforces that refund matters should be decided after giving taxpayers adequate opportunity to substantiate their claims.

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 applications in Form GST RFD-01

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785407580_2412compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.