Bombay High Court Directs Dept To Pay ₹71.31 Lakh Interest On Refund Of Illegal IGST Collected Under RCM On Ocean Freight
The Bombay High Court has directed the department to pay Rs. 71.31. Lakh interest on refund of illegal IGST (Integrated Goods and Services Tax) collected under RCM (Reverse Charge Mechanism) on ocean freight. Justices M.S. Sonak and Advait M. Sethna stated that admittedly, the Petitioner had paid the amount of IGST which the respondents utilized up to the date of grant of refund....
The Bombay High Court has directed the department to pay Rs. 71.31. Lakh interest on refund of illegal IGST (Integrated Goods and Services Tax) collected under RCM (Reverse Charge Mechanism) on ocean freight.
Justices M.S. Sonak and Advait M. Sethna stated that admittedly, the Petitioner had paid the amount of IGST which the respondents utilized up to the date of grant of refund. Having utilized such amounts of the Petitioner there is no justification, legal or otherwise to deny interest to the Petitioner. To deprive the Petitioner of interest, in the given facts, would run contrary to the well-recognised legal principle of restitution which also finds statutory force under Section 144 of the Civil Procedure Code (CPC).
In this case, the assessee/petitioner is engaged in the import of palm oil (crude and refined) for trading in India.
The assessee was fastened with the liability to pay Integrated Goods and Services Tax (“IGST”) on a reverse charge basis in terms of notification No.8 of 2017-Integrated Tax (Rate), read with notification No.10/2017-Integrated Tax (Rate) and corrigendum dated 30 June 2017 to the said notification No.8 of 2017 by the respondents/department.
The assessee paid IGST of INR 2.6 crore during the period of July 2017 to April 2019, on ocean freight for the goods imported at the ports, by the assessee, in the State of Maharashtra.
The assessee filed a Writ Petition challenging the notifications No.8 of 2017 and 10 of 2017, respectively. The assessee assailed such notifications as being contrary to Section 5(3) of the IGST Act and beyond the legislative competence of the department to issue the said notifications.
The Bombay High Court held and declared that serial No.10 of the said notifications, read with the corrigendum dated 30 June 2017 to the said notification No.8 of 2017, were unconstitutional to the extent they sought to levy IGST on ocean freight.
The Court also directed the department to refund the amount of IGST along with applicable interest thereon, in accordance with law.
The assessee, by a letter/communication, requested the commissioner/respondent No.3 to grant a refund of IGST of Rs. 2,62,37,558/- paid by them on ocean freight, under the reverse charge mechanism, along with interest thereon.
The assessee filed a refund application on the common portal seeking a refund of IGST of Rs.2,62,37,558/- paid by it, on ocean freight under the reverse charge mechanism, along with interest of Rs.71,31,225/-.
By Order, the Respondent No.2/ Assistant Commissioner issued in FORM GST RFD-06 sanctioned a refund of Rs. 2.6 crore in favour of the assessee and rejected the claim of the assessee towards interest amounting to Rs.71,31,225/-, in light of the reasons recorded in the said order.
The assessee submitted that Section 54 of the Act was applicable only for claiming refund of tax which is paid under the provisions of the said Act. As the amount collected by the department was without authority of law. Therefore, the department's reliance on Section 54 of the CGST Act to justify its action is misplaced and misconceived.
The bench disagreed with the department that the claim of the assessee towards grant of interest is justified under Sections 54 and 56 of the CGST Act.
The bench opined that Section 54 of the Act can only be applicable for claiming refund of any tax which is paid in accordance with and under the framework of the CGST Act and its extant provisions. The said Section would not apply in a situation where revenue or the respondents have no authority to collect the IGST paid by the Petitioner on reverse charge mechanism on the ocean freight, from the date of payment to the date of refund.
The bench observed that the assessee/petitioner was consistently and in a bona fide manner pursuing its refund claim with the department/respondents.
The bench further opined that as the IGST collected from the assessee under the reverse charge mechanism on the ocean freight is itself illegal and in fact unconstitutional.
The bench directed the department to pay interest of Rs.71,31,225/- to the assessee.
In view of the above, the bench allowed the petition.
Case Title: West India Continental Oils Fats Pvt. Ltd. v. The Union of India
Case Number: WRIT PETITION NO. 3000 OF 2023
Counsel for Petitioner/Assessee: Mr. Jas Sanghavi a/w Ms. Linzy Sharan, Mr. Vikas Poojary
Counsel for Respondent/Department: Mr. Y. R. Mishra a/w Mr. Saket R. Ketkar