GST Dept. To Pay 6% Interest On Ocean Freight Tax Refund After Mohit Minerals Ruling: Andhra Pradesh HC

The Andhra Pradesh High Court has held that taxpayers are entitled to interest on refund of GST paid on ocean freight under reverse charge mechanism (RCM) from the date of deposit of tax till the date of actual refund, where the levy itself was later declared unconstitutional by the Supreme Court in the landmark Mohit Minerals case. The Division Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar has observed that the petitioner had been deprived of the right of use of the money paid, on G.S.T., as freight charges from the date of payment till the date of refund. The petitioner would therefore be entitled to be compensated for the loss of use of such money. It must be held that the petitioner would be entitled to interest from the date of deposit of the tax till the date of refund. The dispute arose after Jwala Energy Resources Pvt. Ltd., a power generation company engaged in importing coal on CIF basis, was required by GST authorities to pay IGST on ocean freight under reverse charge mechanism pursuant to Entry No.10 of Notification No.10/2017. The company had paid GST on freight charges during FY 2018-19. However, the levy itself was subsequently struck down by the Supreme Court in Union of India v. Mohit Minerals Pvt. Ltd., which upheld the Gujarat High Court decision declaring the notification unconstitutional. Following the Supreme Court verdict delivered on 19 May 2022, the petitioner sought refund of the IGST amount of Rs.68.36 lakh along with interest at 6% per annum. The petitioner stated that its refund application initially faced technical difficulties on the GSTN portal and was finally acknowledged only on 13 January 2023. The refund claim was initially rejected on the ground that it was barred by limitation under Section 54 of the Andhra Pradesh GST Act since it had allegedly been filed beyond two years from payment of tax. Authorities also cited pendency of an earlier writ petition challenging the levy. Subsequently, after further litigation before the High Court, the department refunded the principal amount of Rs.68.36 lakh through an order dated 7 June 2024, but denied interest of Rs.20.50 lakh on the ground that Sections 54 and 56 of the GST Act did not permit payment of such interest because the refund had been processed within the statutory timeline. Before the High Court, the petitioner argued that the amount collected as GST on ocean freight was an illegal extraction of money because the levy itself had been declared unconstitutional. It contended that once the levy was struck down, the refund became payable from the very date of deposit and could not be restricted by the procedural framework of Sections 54 and 56 of the GST Act. The petitioner further relied upon earlier judgments of the Andhra Pradesh High Court, Bombay High Court and Orissa High Court holding that where a tax levy itself is unconstitutional, limitation provisions governing ordinary refunds would not apply and taxpayers would also be entitled to interest from the date of deposit of such tax. Rejecting the department’s stand, the High Court observed that the present refund did not arise merely under Section 54 of the GST Act but flowed directly from the declaration of law by the Supreme Court in Mohit Minerals. The Court reiterated that where a levy itself is unconstitutional, the refund cannot be governed by ordinary statutory refund limitations. The Court emphasized that the fundamental principle behind grant of interest is compensation for loss of use of money. It observed that this principle applies equally against public authorities when taxpayers are wrongly deprived of their funds. The Bench held that the petitioner had paid GST under protest and was deprived of the use of its money from the date of payment till the eventual refund. Since the Supreme Court had ultimately declared the levy unconstitutional, the taxpayer was entitled to compensation in the form of interest for the entire intervening period. The High Court set aside the rejection of interest and directed the GST department to pay interest at 6% per annum on the refunded amount of Rs.68.36 lakh from the date of deposit till 7 June 2024, the date on which the refund was finally granted. The Court directed the department to complete the payment within three months. Case Details Case Title: Jwala Energy Resources Private Limited Versus The Assistant Commissioners GST, Visakhapatnam Division Citation: JURISHOUR-1220-HC-2026(AP) Case No.: Writ Petition No: 22135/2024 Date: 08/04/2026 Counsel For Petitioner: D S SIVADARSHAN Counsel For Respondent: NAGARAJU NAGURU Click Here To Read Order Read More: Flipkart’s E-Commerce Delivery Model Qualifies as GTA Service, GST Exemption Available for Unregistered Customers: AAAR

GST Dept. To Pay 6% Interest On Ocean Freight Tax Refund After Mohit Minerals Ruling: Andhra Pradesh HC

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