Facts of the Case

The petitioner challenged an order dated 26 April 2024 passed by the Appellate Authority under Section 107 of the Central Goods and Services Tax Act, 2017, whereby the appellate authority set aside the refund sanction order dated 24 February 2023.

The petitioner had filed a refund application in Form GST RFD-01 seeking a refund of ₹59,82,485, representing Integrated Goods and Services Tax (IGST) paid on the ocean freight component for imports made during 1 August 2018 to 31 August 2018. The refund claim was based upon 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 was not sustainable.

The Refund Sanctioning Authority allowed the refund. However, the Department preferred an appeal before the Appellate Authority under Section 107, which resulted in reversal of the refund sanction.

Issues Involved

  1. Whether the appellate authority was justified in setting aside the refund sanction order due to lack of sufficient evidence regarding the shipping line.
  2. Whether the petitioner should be granted an opportunity to produce a legible 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 required fresh consideration on merits after submission of proper documentary evidence.

Petitioner's Arguments

  • The petitioner submitted that the refund application had been validly filed in Form GST RFD-01.
  • The Refund Sanctioning Authority had already examined the claim and granted the refund.
  • The petitioner expressed readiness to produce a legible copy of the Bill of Lading before the appellate authority.
  • The petitioner requested that the appeal be reconsidered on merits after considering the relevant documentary evidence.

Respondent's Arguments

  • The Department challenged the refund order before the Appellate Authority under Section 107.
  • The Reviewing Authority observed that the Refund Sanctioning Authority had not properly examined whether the shipping lines involved were foreign or Indian shipping lines.
  • The Appellate Authority noted that although the petitioner claimed that foreign shipping lines had been engaged and enclosed Bills of Lading, the copies supplied were illegible, making it impossible to verify and substantiate the refund claim.
  • On this basis, the refund sanction order was set aside.

Court Order / Findings

The Calcutta High Court observed that the petitioner was willing to produce a legible copy of the Bill of Lading before the Appellate Authority.

The Court held that, in the interest of justice, the petitioner deserved an opportunity to produce legible documentary evidence along with any additional documents required for proper adjudication.

Accordingly, the High Court directed the Appellate Authority to:

  • provide the petitioner an opportunity to submit a legible Bill of Lading;
  • consider any other documents necessary for deciding the refund appeal;
  • reconsider the matter afresh on merits; and
  • conclude the proceedings within one month from the date of the Court's order.

The writ petition was accordingly disposed of.

Important Clarification

  • A refund claim cannot be finally rejected merely because the documentary evidence submitted is illegible if the taxpayer is willing to furnish readable and complete documents.
  • Appellate authorities should decide refund disputes on substantive merits after granting a reasonable opportunity to produce proper supporting evidence.
  • The decision reinforces the principles of natural justice in GST refund proceedings, particularly in matters arising from the Supreme Court's decision in Union of India vs. Mohit Minerals Pvt. Ltd.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785405005_2404compressed.pdf

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