M/S.South INDIA Krishna Oil And Fats PVT. LTD. vs. The Assistant Commissioner Of GST Central Tax

Facts

The petitioner, M/s. South India Krishna Oil and Fats Private Limited, filed a writ petition challenging an order dated January 11, 2024, passed by the Assistant Commissioner of GST-Central Tax. The impugned order granted the petitioner a refund of Rs. 66,00,287/- paid on reverse charge basis for ocean freight, along with interest of Rs. 1,94,211/- from July 17, 2023. The petitioner sought to quash this order and direct the respondent to refund the balance interest claim of Rs. 18,65,700/-. The refund claim was filed after the Supreme Court's decision in Union of India Vs. Mohit Minerals, which held that IGST on ocean freight was not leviable on Indian importers under CIF contracts. The petitioner contended that the tax paid was not due and thus collection was contrary to Article 265 of the Constitution, entitling them to interest.

Held

The Court held that the petitioner was not entitled to the balance interest claim. While acknowledging the Supreme Court's decision in Union of India Vs. Mohit Minerals, which rendered the tax payment by the petitioner on ocean freight not due, the Court found that the input tax credit availed by the petitioner on this payment would have been utilized to discharge their tax liabilities. The Court reasoned that the tax paid on ocean freight would have been availed as Input Tax Credit and utilized at the time of payment. Therefore, the transaction was revenue-neutral for the petitioner, and they had not suffered any prejudice. The Court observed that the petitioner's claim for further interest was avaricious and an undue advantage of court proceedings, especially since they had not unilaterally suffered any prejudice. The Court found no reason to interfere with the impugned order dated January 11, 2024, which sanctioned a refund of the principal amount with limited interest. The Court explicitly stated that the petitioner was not entitled to the refund claim, much less the claimed interest, as the input tax credit availed would have been utilized. The Court dismissed the writ petition.

Key Issues

1. Whether the petitioner is entitled to the balance interest claim of Rs. 18,65,700/- on the refund of tax paid on reverse charge basis for ocean freight, considering the Supreme Court's decision in Union of India Vs. Mohit Minerals? Petitioner's arguments: - The petitioner argued that tax paid was not due, making its collection contrary to Article 265 of the Constitution, and therefore, they are entitled to a refund along with interest at 6% from the date of payment. - Reliance was placed on the Division Bench decision of this Court in M/s.KTV Health Food Private Limited Vs. Union of India and the Gujarat High Court decision in Cosmol Energy Pvt. Ltd. Vs. State of Gujarat, particularly paragraph 6 of the latter, which stated the revenue is obliged to refund erroneously collected amounts, citing State of Madhya Pradesh Vs. Bhailal Bhai. - The petitioner also cited Union of India Vs. Tata Chemicals Limited, referring to paragraphs 31 and 37, which discuss the statutory obligation to refund tax collected wrongfully and the entitlement to interest as compensation for the unauthorized retention of money by the Department. Respondent's arguments: - The respondent contended that the tax was paid on a reverse charge basis and input tax credit was availed under Section 16 of the IGST Act, 2017, and likely utilized for discharging tax liabilities. - It was argued that the petitioner was not put to any loss as they were able to monetize the Input Tax Credit paid on reverse charge basis. - The respondent submitted that the refund interest is to be paid strictly under Sections 56 and 57 of the respective GST Acts, and the petitioner cannot claim interest on tax paid for which Input Tax Credit was claimed and remained unutilized until July 17, 2023.