M/S. Paradeep Phosphates Limited, Odisha. vs. Additional Commissioner, GST (Appeals), Khurda.

Facts

The petitioner, M/s. Paradeep Phosphates Limited, a manufacturer of fertilizers, imported raw materials between April 2018 and May 2018. They paid Customs Duty and IGST on the assessable value, which included "ocean freight." The IGST on "ocean freight" was paid under protest on a reverse charge basis as per Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate). The petitioner challenged the exigibility of IGST on "ocean freight" in a previous writ petition (W.P.(C) No. 1684 of 2019), which was allowed, leading to a refund of the IGST paid on "ocean freight." However, the petitioner's subsequent claim for interest on the refunded amount from the date of deposit was rejected by the Assistant Commissioner and the Additional Commissioner (Appeals). The petitioner filed the present writ petition challenging the appellate order dated January 15, 2024, which rejected their claim for interest.

Held

The Court held that the petitioner is entitled to interest on the IGST amount refunded from the date of its deposit. The Court reasoned that the IGST collected on "ocean freight" was found to be illegal and unconstitutional. The refund was a consequence of this finding. The Court rejected the revenue's argument that the Supreme Court's decision in Mohit Minerals Pvt. Ltd. operated prospectively, stating that unless explicitly stated, such judgments are to be understood as existing from the inception. Therefore, the revenue's contention to avoid payment of interest was not accepted. The Court set aside the order dated January 15, 2024, of the Additional Commissioner (Appeals) and the order dated February 6, 2023, of the Assistant Commissioner, which refused to grant interest. The Court directed the opposite parties to pay simple interest at the rate of 6% per annum on the refunded IGST amount from the date of the petitioner's initial payment of IGST on "ocean freight" until the date of actual refund, with a further direction to pay interest at 9% per annum for any delay beyond eight weeks from the judgment date.

Key Issues

1. Whether the petitioner is entitled to interest on the IGST amount refunded from the date of its deposit until the date of payment, given that the levy of IGST on "ocean freight" was declared illegal and unconstitutional. (Question of law) Petitioner's arguments: The petitioner contended that since the IGST collected on "ocean freight" was illegal and unconstitutional, they are entitled to interest on the refunded amount from the date of deposit. They relied on the principle that when a tax is collected illegally and subsequently refunded, interest should be paid from the date of deposit. They cited the Supreme Court's decision in Mohit Minerals Pvt. Ltd. and this Court's previous order in their own case (W.P.(C) No. 1684 of 2019). They argued that the refund flowing from a Supreme Court ruling should not be treated as prospective, and the revenue cannot avoid paying interest. Revenue's arguments: The revenue argued that the refund was granted based on the Supreme Court's ruling in Mohit Minerals Pvt. Ltd., and since the department refunded the IGST within the stipulated period under Section 54 of the GST Act, interest is not payable. They contended that the Supreme Court's decision should be applied prospectively, thereby absolving them of the liability to pay interest on the refunded amount.