West India Continental Oils Fats Pvt. Ltd. Vs Union of India (Bombay High Court)
Interest on the refunded amount, as retaining the IGST (RCM paid on Ocean Freight) without legal authority constitutes unjust enrichment
The court ruled in favor of West India Continental Oils Fats Pvt. Ltd., ordering the government to pay interest of ₹71,31,225 on the refunded IGST of ₹2,62,37,558, which was collected unlawfully under unconstitutional notifications, emphasizing that denying interest would violate the principle of unjust enrichment and the constitutional mandate under Article 265.
The case of West India Continental Oils Fats Pvt. Ltd. revolves around the petitioner seeking a refund of Integrated Goods and Services Tax (IGST) paid on ocean freight, which was later deemed unconstitutional. The Petitioner, engaged in importing palm oil, paid a total of ₹2,62,37,558 in IGST from July 2017 to April 2019 under the reverse charge mechanism as mandated by notifications No. 8 and 10 of 2017. Following a legal challenge, the court ruled on August 10, 2022, that these notifications were unconstitutional, directing the Respondents to refund the IGST along with applicable interest.
After filing a refund application on January 6, 2023, which included a claim for interest of ₹71,31,225, the Respondents issued a show cause notice questioning the interest claim, arguing that the refund was processed within the statutory 60-day period, thus negating the need for interest. The Respondents sanctioned the refund but rejected the interest claim in their order dated January 31, 2023, prompting the Petitioner to file a writ petition challenging this decision.
