Jupiter Comtex Pvt. Ltd. Vs Union of India (Gujarat High Court)
Summary: The Gujarat High Court, in Jupiter Comtex Pvt. Ltd. Vs Union of India, allowed a writ petition challenging the rejection of a refund claim for Integrated Goods and Services Tax (IGST) paid on ocean freight under Entry No. 10 of Notification No. 10/2017-Integrated Tax (Rate), dated 28 June 2017. The petitioner, engaged in manufacturing and selling textile machinery, had paid ₹3,39,169 as IGST, ₹1,51,305 as interest and ₹50,875 as penalty under protest and sought a refund following the Supreme Court’s decision in Union of India v. Mohit Minerals Pvt. Ltd., which upheld the Gujarat High Court’s ruling declaring the ocean freight IGST levy unconstitutional and ultra vires. The jurisdictional authority rejected the refund application on 25 September 2023, reasoning that a refund arising from an unconstitutional levy could not be granted under Section 54 of the CGST Act, 2017, and could be claimed only through a civil suit or writ petition. The High Court rejected this reasoning, holding that tax authorities were bound to implement the law declared by the Supreme Court and could not deny a refund merely because the levy had been declared unconstitutional.
The Gujarat High Court allowed Jupiter Comtex Pvt. Ltd.’s petition challenging rejection of a refund claim for IGST paid on ocean freight. The company, engaged in manufacturing and selling textile machinery, sought refund of ₹3,39,169 in GST, ₹1,51,305 in interest and ₹50,875 in penalty paid under protest. The department rejected its claim on 25 September 2023, reasoning that a refund arising from an unconstitutional levy could not be granted under Section 54 of the CGST Act.
Relying on Mohit Minerals Pvt. Ltd. v. Union of India, affirmed by the Supreme Court, the Court held that the tax authority was bound to follow the judicial declaration invalidating the ocean freight IGST levy. It rejected the department’s contention that the refund had to be pursued only through a civil suit or writ petition. The petitioner had also submitted a Chartered Accountant’s certificate that the tax burden had not been passed on, addressing unjust enrichment under Mafatlal Industries Ltd. v. Union of India. The Court held that the petitioner was entitled to a refund of IGST paid under protest and directed the authority to verify and grant the refund with statutory interest within eight weeks of receiving the order. The petition was allowed.
Cases Discussed:
- Mohit Minerals Pvt. Ltd. v. Union of India — (2020) 74 GSTR 134; Gujarat High Court.
- Union of India v. Mohit Minerals Pvt. Ltd. — (2022) 10 SCC 700; Supreme Court.
- Mafatlal Industries Ltd. v. Union of India — (1997) 5 SCC 536; Supreme Court.
- Bharat Oman Refineries Ltd. v. Union of India — SCA No. 8881 of 2020; Gujarat High Court, 18 August 2020.
- Torrent Power Ltd. v. Union of India — SCA No. 2603 of 2021 (as cited in the order); Gujarat High Court, 4 August 2022.
- The Sandesh Ltd. v. Union of India — SCA No. 12757 of 2021; Gujarat High Court, 4 August 2022.
Alternative SEO Titles
- Gujarat HC Allows Refund of Ocean Freight IGST Paid Under Protest
- Section 54 Cannot Bar Refund of Unconstitutional Ocean Freight Levy
- Jupiter Comtex Wins Ocean Freight IGST Refund with Statutory Interest
- GST Refund Rejection After Mohit Minerals Ruling Set Aside
- Gujarat High Court Orders Ocean Freight Refund Within Eight Weeks
FULL TEXT OF THE ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr.Uchit N. Sheth for the petitioner and learned senior standing counsel Mr.Siddharth Dave for respondent No. 2.
2. The petitioner is engaged in the business of manufacturing and sale of textime machinery and is duly registered under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “GST Act”). When the goods are imported by the petitioner company inside the country, bill of entry for home consumption is filed by the petitioner.
2.1 It was stated that at the time of clearance of the goods for home consumption, the petitioner company pays customs duty and tax under the Integrated Goods and Services Tax and other duties payable on the total value of goods Page which is the Cost, Insurance and Freight (CIF) value.
3. Section 5(3) of the Integrated Goods and Services Tax (hereinafter referred to as “IGST”) empowers the Government to specify the categories of supply of goods or services or both, and the tax on such goods or services shall be paid on reverse charge basis by the recipient of such goods or services. The category of supply of services is mentioned in Entry No.10 of the Reverse Charge Notification.
3.1 By filing the present petition under Article 226 of the Constitution of India, the petitioner prayed to direct the respondent authorities to grant refund of the amount of GST to the tune of Rs.03,39,169/- plus interest thereon amounting to Rs.01,51,305/- and penalty amounting to Rs.50,875/-, which was paid by the petitioner in view of Entry No.10 of the Notification No.10 of 2017 dated 28th June, 2017. It was also prayed to set aside the order dated 25th September, 2023 rejecting the refund claim of the petitioner as above.
4. With the commencement of levy of Goods and Services Tax under the law with effect from 01st July, 2017, Notification No.8 of 2017 dated 28th June, 2017 provided that IGST at the rate of 5% shall be levied on inter-state supply of services when the goods are transported in a vessel etc. Another Notification No.10 of 2017 dated 28th June, 2017 came to be issued notifying that in respect of services supplied by a person located in the non-taxable territory by way of transportation of goods by vessel from a place outside India upto the Custom Clearance Station in India, the entire IGST shall be paid on the reverse charge basis by the importer. The Corrigendum dated 30th June, 2017 was issued. It was provided therein that in the circumstances mentioned therein, the IGST shall be collected at the rate of 10% of the CIF value.
5. Learned advocate for the petitioner submitted that Notification No.8 of 2017 and No.10 of 2017 both dated 28th June, 2017 read with Corrigendum dated 30th June, 2017 came up for consideration for their validity before this Court. This Court in Mohit Minerals Pvt. Ltd. v. Union of India reported in (2020) 74 GSTR 134 struck down Entry No.10 of 2017 – IGST Rate dated 28th June, 2017 as being ultra vires the provisions of the IGST Act as well as being unconstitutional.
5.1 The Supreme Court upheld the decision of this Court in Mohit Minerals Pvt. Ltd.(supra) in Union of India v. Mohit Minerals Pvt. Ltd. reported in (2022) 10 SCC 700.
5.2 The petitioner, therefore, after pronouncement of the decision of the Apex Court, claimed refund of amount of tax, interest and penalty paid on ocean freight under protest along with necessary documents including certificate of Chartered Accountant regarding non-passing of the tax burden annexed with the refund application.
5.3 The respondent No.2 i.e. jurisdictional authority however issued show-cause notice to the petitioner proposing to reject such refund on the ground that it could not be granted by the authority under the GST Act in respect of levy which was held to be unconstitutional. The petitioner filed reply requesting for refund since the amount had been paid under protest.
5.4 The second respondent, however, rejected the refund by impugned order on the ground that refund as a result of levy being held unconstitutional can be claimed only by way of suit or writ petition and that the same cannot be granted under Section 54 of the GST Act.
6. It is trite law that once the Apex Court declares a Notification being ultra vires and unconstitutional, such law becomes the law of land and is liable to be followed by the respondent authorities without raising any objection. The respondent No.2 could not have rejected the claim of the petitioner for refund of ocean freight. The reasons given by the respondent No.2 in the impugned order for rejection of the refund claim of the petitioner on the ground that the claim has been filed based upon the judgment of the Apex Court in the matter of ocean freight declaring levy of GST on ocean freight as unconstitutional would not fall under any category of refund prescribed under Section 54 of the CGST Act, 2017 and such claim would be outside the scope of and purview of such Section and petitioner can claim refund by way of suit or by way of a writ petition, would not sustain. Such a stand of the respondent is deprecated as the respondent is bound by the law declared by the Supreme Court and the same is required to be implemented in letter and spirit. The respondent No.2, therefore, could not have rejected the refund claim of the petitioner on the ground that the same is outside the scope of Section 54 of the CGST Act, 2017 inasmuch as when the Notification for levy of IGST on ocean freight is held to be unconstitutional, the petitioner is entitled to the refund of such IGST on ocean freight paid under protest.
6.1 It is also pertinent to note that the petitioner has placed on record certificate of Chartered Accountant that the petitioner has not passed on the tax burden and therefore, refund also cannot be denied to the petitioner on the principle of unjust enrichment as per the decision of the Apex Court in case of Mafatlal Industries Ltd. v. Union of India reported in (1997) 5 SCC 536.
6.2 In support of such submission, petitioner also placed reliance on the following decisions.
(a) Bharat Oman Refineries Ltd. v. Union of India decided in Special Civil Application No.8881 of 2020 by order dated 18th August, 2020;
(b) Torrent Power Ltd. v. Union of India decided in Special Civil Application No.2603 of 2021 by order dated 04th August, 2022;
(c) The Sandesh Ltd. v. Union of India decided in Special Civil Application No.12757 of 2021 by order dated 04th August, 2022.
7. Considering the above legal position, the petitioner is entitled to the refund of ocean freight paid under protest in view of the decision of the Apex Court in case of Mohit Minerals Pvt. Ltd.(supra) since the impugned Notification has already been declared as ultra vires and accordingly, the present petition deserves to be allowed.
8. In view of the foregoing reasons, the claim for refund of the petitioner towards ocean freight is required to be favourably considered and respondent No.2 is directed to verify the amount of refund and grant such refund of the amount of IGST paid on ocean freight by the petitioner pursuant to the Entry No.10 of the above notification within eight weeks from the date of receipt of copy of this order along with the statutory rate of interest.
9. The present petition stands allowed in the aforesaid terms.
