2024 (12) TMI 208 - HC - GST

Levy of IGST on ocean freight paid by the petitioner - Constitutional validity of Sr. No. 9(i) of N/N. 8/2017-IT(Rate) dated 28.06.2017 read with Sr. No. 10 of N/N. 10/2017-IT(Rate) dated 28.06.2017. Whether the levy of IGST on transactions of CIF value can be imposed by the Department by way of Notification? - Whether this Court has power to direct the refund of the levy as prayed for by the petitioner? - HELD THAT - The first issue is no longer res integra and has decided by the Hon ble Apex Court in case of UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR 2022 (5) TMI 968 - SUPREME COURT and the decision of various High Courts including this Court in case of BLA COKE PVT. LTD. VERSUS UNION OF INDIA ORS. 2024 (10) TMI 492 - GUJARAT HIGH COURT wherein, it has been categorically held that when the Notification itself is struck down, the respondent-authorities cannot insist for levy of IGST on the amount of ocean freight. Such being the position, the main issue falls for determination of this Court is whether the prayers for refund of the amount of levy are maintainable and whether this Court must direct the respondents to refund the same to the petitioner. In case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT the Apex Court has contemplated three situations where the right to refund may arise. Firstly, where the statutory provision under which the tax is levied itself challenged by the assessee on the ground of being violative of some provisions of constitution (question of unconstitutional levy). In this class of cases, the claim for refund arises outside the provision of the Act inasmuch as, this is not situation contemplated by the Act - Secondly, where the tax is collected by the authorities under misconstruction of the statute (including rule or notification) or by erroneous determination (case of illegal levy). In this class of cases, the claim for refund arises under the provision of the Act itself, inasmuch as, these are the situations contemplated by the Act and Rules. Thirdly where, the assessee pays a tax under mistake of law. This is not a case either of unconstitutional levy or illegal levy but, voluntary payment upon mistake of law. The writ petition filed by the petitioner seeking refund of the IGST is maintainable and must be allowed as the levy has been held to be unconstitutional - The petition, therefore, succeeds and is accordingly allowed.

Summary

Issues:
1. Whether the levy of IGST on transactions of CIF value can be imposed by the Department by way of Notification.
2. If the answer to the first issue is negative, whether the Court has the power to direct the refund of the levy as prayed for by the petitioner.

Analysis:
The petitioner in this case sought relief through a writ petition under Article 226 of the Constitution of India, challenging the imposition of IGST on ocean freight paid during the import of goods. The petitioner contended that the levy was unconstitutional and ultra vires of the IGST Act, 2017. The petitioner also sought the quashing of the rejection order by Respondent No. 2 and a direction for the refund of the IGST amount paid. The petitioner had imported Bituminous Coal and paid IGST on ocean freight under reverse charge basis. The petitioner's claim for refund was based on the judgment of the Hon'ble Supreme Court affirming the unconstitutionality of the notifications imposing the IGST levy. The respondent rejected the refund claim citing a delay in filing the application beyond the prescribed period of 2 years from the relevant date.

The primary issue before the Court was whether the levy of IGST on CIF transactions could be imposed through a notification. The Court referred to the decision of the Hon'ble Supreme Court and various High Courts, including a case involving similar issues. It was established that when a notification is struck down, authorities cannot insist on the levy of IGST. The Court then considered the maintainability of the refund claim and the power to direct the refund. Referring to the Mafatlal Industries case, the Court differentiated between unconstitutional levy, illegal levy, and payment under a mistake of law. In this case, the payment was deemed voluntary but based on a mistake of law. The Court held that the writ petition seeking a refund of IGST was maintainable and allowed, as the levy had been declared unconstitutional.

In conclusion, the Court allowed the petition, quashed the impugned order, and directed the refund of the IGST amount paid by the petitioner. The Court found in favor of the petitioner, emphasizing the unconstitutionality of the levy and the petitioner's right to seek a refund under writ jurisdiction. The judgment set aside the rejection of the refund claim and made the rule absolute without any order as to costs.