The Goods and Services Tax Appellate Tribunal (GSTAT), Surat Bench, has held that refund of IGST paid on ocean freight cannot be denied merely because the tax was paid before the Supreme Court’s decision in Union of India v. Mohit Minerals Private Limited, or because the claimant was not a party to that litigation.
The bench comprised Sanjaykumar Dwivedi (Judicial Member) and Rameshkumar G. Hadvani (Technical Member) has observed that an officer filing a departmental appeal under Section 112(3) derives authority from the Commissioner’s order and cannot exceed the points specified in it. A ground considered and omitted by the Commissioner could not be revived by the authorised representative during oral submissions.
Buy Now: E-Magazine: 1000+ Landmark GST Judgments (2017–2026)
Dismissing 46 appeals filed by the tax department against refund relief granted to Filatex India Limited, the tribunal held that a judicial declaration invalidating a levy ordinarily operates retrospectively unless the court expressly restricts its operation to the future. It directed the department to process the refund claims and pay the outstanding amounts with interest for the delay beyond 60 days from the original applications. Filatex India Limited
The appellant/assessee, a manufacturer registered under GST, imported goods and paid IGST on ocean freight under the reverse charge mechanism. The payments were made under Entry 10 of Notification No. 10/2017–Integrated Tax (Rate), read with Entry 9(ii) of Notification No. 8/2017–Integrated Tax (Rate).
The tribunal recorded that the Gujarat High Court had invalidated the disputed ocean freight levy in Mohit Minerals. The Supreme Court dismissed the Union government’s appeals against that judgment on May 19, 2022.
Following the Supreme Court’s decision, Filatex filed 46 refund applications in April 2023 seeking repayment of the IGST paid on ocean freight.
The adjudicating authority rejected the claims on two principal grounds. First, it considered the Supreme Court judgment effective only from May 19, 2022, because the judgment did not expressly state that it operated retrospectively. Second, it held that the company had availed and utilised the corresponding IGST credit, and that granting a refund would result in unjust enrichment.
The Additional Commissioner (Appeals), CGST Vadodara, overturned all 46 rejection orders through a common order dated March 28, 2024. The department challenged that decision before GSTAT.
Before the tribunal, the department argued that Filatex could not rely on the Supreme Court judgment because it was not a party to the Mohit Minerals proceedings.
It also invoked Rule 89(2) of the CGST Rules, contending that the company needed an order establishing its own entitlement to refund. According to the department, a judgment delivered in another taxpayer’s case could not satisfy that requirement.
On retrospectivity, the department relied on decisions concerning exemption notifications and argued that no subsequent notification had been issued authorising refunds of ocean freight IGST paid before the Supreme Court’s ruling.
Filatex countered that a levy declared beyond statutory authority and unconstitutional is invalid from its inception. It maintained that the resulting refund entitlement did not depend on a fresh government notification or on having participated in the original litigation.
GSTAT distinguished the operation of legislation and notifications from the operation of judicial decisions declaring the law.
The tribunal explained that courts interpret and declare the law. A finding that a levy is unconstitutional does not ordinarily mean that the levy became unconstitutional on the date of judgment; it means that the defect existed from the beginning.
The bench observed: “The levy did not become ultra vires or unconstitutional due to the judgments. Rather, it was always so.”
It held that prospective overruling is an exception to the ordinary retrospective operation of judicial declarations. Such a restriction must be expressly imposed by the court.
Relying on Kanishk Sinha v. State of West Bengal and other authorities discussed in the order, the tribunal concluded that the absence of an express statement of retrospectivity in Mohit Minerals was not a valid reason to reject refunds for earlier payments.
It also rejected the department’s attempt to draw parallels with beneficial exemption notifications. A question about whether an executive notification applies to earlier periods, the bench explained, is different from the consequence of a court declaring the underlying levy invalid.
The tribunal also rejected the contention that refund relief was available only to taxpayers who participated in Mohit Minerals.
Referring to Article 265 of the Constitution, which prohibits taxation without authority of law, and Article 300A, which protects against deprivation of property without legal authority, the bench held that the invalidity of a levy applies equally to taxpayers who were parties to the litigation and those who were not.
A collection made without authority of law does not acquire legal validity simply because the taxpayer did not personally challenge the levy.
GSTAT relied on the nine-judge Supreme Court decision in Mafatlal Industries Ltd. v. Union of India to distinguish refunds arising from an unconstitutional levy from cases involving an incorrect interpretation or application of an otherwise valid provision.
The tribunal nevertheless recognised an important qualification: a taxpayer who unsuccessfully challenged the constitutional validity of the same provision and allowed that adverse decision to become final cannot ordinarily reopen the matter merely because another taxpayer later succeeded.
That exception did not apply to Filatex. The company had paid tax under the disputed levy and had not unsuccessfully litigated its constitutional validity.
For the same reasons, the tribunal rejected the department’s objection under Rule 89(2).
It held that the judicial declaration invalidating the levy itself provided the legal foundation for the refund claim. A further order specifically naming Filatex was unnecessary.
The bench reasoned that the entitlement arose from the constitutional requirement that tax must have authority of law, rather than from relief confined to the individual parties before the Supreme Court.
It also referred to earlier ocean freight refund decisions, including Comsol Energy, Bharat Oman Refineries and Shree Mahesh Oil Products, in support of its conclusion.
During oral arguments, the department’s authorised representative again contended that refund was barred because the company had already utilised the IGST credit.
The tribunal found that this objection was absent both from the departmental appeal grounds and from the Commissioner’s authorisation order dated December 5, 2024, issued under Section 112(3) of the CGST Act.
The Commissioner had noted the earlier dispute over credit utilisation but had not authorised an appeal against the appellate authority’s finding on that issue.
The tribunal also examined the substance of the credit utilisation objection.
The appellate authority had accepted that the prescribed GST utilisation sequence required Filatex to exhaust IGST credit first, even though sufficient credit remained under the CGST and SGST heads.
The department relied on SN Tradelink Pvt. Ltd. v. State of Gujarat to argue that refund required reversal of the utilised credit. GSTAT observed that the cited decision itself recognised reversal towards IGST by using the available SGST balance through Form GST DRC-03.
The bench therefore rejected the proposition that prior utilisation of IGST credit necessarily made refund impossible.
It explained that maintaining a combined unutilised CGST and SGST balance equivalent to the refund amount, and using that balance to debit the refund amount in the electronic credit ledger, prevented a double benefit.
The finding thus addressed refund alongside the corresponding ledger debit; it did not permit simultaneous retention of the credit benefit and receipt of the same amount as a cash refund.
While discussing Mafatlal Industries and Comsol Energy, GSTAT referred to the distinction between statutory refund limitation and claims arising from unconstitutional levies.
However, the bench expressly recorded that limitation was not a ground of appeal raised by the department in this case.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
Read More: ITC On Resort Construction Blocked Despite Taxable Business Use; ₹9.32 Lakh Demand Upheld: GSTAT
