The Bombay High Court has directed the GST department to pay interest of Rs. 71.31 Lakhs to West India Continental Oils Fats on refund of Integrated Goods and Services Tax (IGST) collected under Reverse Charge Mechanism (RCM) on ocean freight.
The bench of Justice M.S. Sonak and Justice Advait M. Sethna has observed that one cannot enrich oneself illegally and consequently, one is bound to return the amount wrongfully paid without legal authority. The Petitioner had paid the amount of IGST which the department 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 recognized legal principle of restitution which also finds statutory force under Section 144 of the Civil Procedure Code (CPC).
The Petitioner/assessee, West India Continental Oils Fats Pvt. Ltd. engaged in the import of palm oil (crude and refined) for trading in India.
The Petitioner was fastened with the liability to pay IGST on 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 department. The petitioner paid IGST of INR 2,62,37,558 during the period of July 2017 to April 2019, on ocean freight for the goods imported at the ports, by the Petitioner, in the State of Maharashtra.
The Bombay Court held and declared that serial No.10 of the notifications read with the corrigendum dated 30 June 2017 to the notification No.8 of 2017 as unconstitutional to the extent they sought to levy IGST on ocean freight. The Court directed the department to refund the amount of IGST along with applicable interest, in accordance with law.
The Petitioner by a letter/communication dated 30 September 2022 requested to grant refund of IGST of Rs.2,62,37,558 paid by them on ocean freight, under reverse charge mechanism, along with interest.
The department issued a show cause notice in form GST RFD-08 calling upon the Petitioner to show cause as to why the amount of Rs.71,31,225 claimed as interest ought not to be rejected as the refund was paid by the department within the time limit of 60 days, as prescribed under Section 54 read with Section 56 of the CGST Act.
The assessee contended that Section 54 of the CGST Act was not applicable in the given facts. Section 54 of the CGST Act is applicable only to claim refund of any tax paid under the provisions of the CGST Act. According to the Petitioner the amount collected by the revenue from the Petitioner on reverse charge mechanism on ocean freight cannot be considered as tax and therefore Section 54 of the CGST Act would thus not be applicable.
The court has made out a fit case for claiming interest which ought to be sanctioned and paid to the Petitioner and in no event later than 4 weeks from the date of uploading of the judgment.
Case Details
Case Title: West India Continental Oils Fats Pvt. Ltd. Versus The Union of India
Case No.: Writ Petition No. 3000 Of 2023
Date: 17 October 2025
Counsel For Petitioner: Jas Sanghavi
Counsel For Respondent: Y. R. Mishra
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