Arinsun Clean Energy PVT LTD vs. The State Of Madhya Pradesh

Held

The Court held that the petitioner is entitled to a refund of the tax and interest paid. The Court found that the Supreme Court, in the case of Union of India vs. Mohit Minerals, had upheld the Gujarat High Court's order, confirming that Indian importers are liable to pay IGST on a composite supply (goods and services like transportation and insurance in a CIF contract). The Court reasoned that a separate levy on importers for the supply of service by a shipping line would violate Section 8 of the GST Act. Therefore, the IGST was not liable to be paid on ocean freight under the reverse charge mechanism as per Notification No. 10/2017. The Court dismissed the respondent's contention that the subsequent deletion of Notification No. 10/2017 with effect from October 1, 2023, and the issuance of new notifications only prospectively, precluded a refund. The Court stated that once the earlier notification was struck down by the High Court and the Supreme Court, any tax paid or recovered under it was not saved and was liable to be refunded. The Court directed the refund of the amount of tax and interest paid by the petitioner.

Facts

The petitioner, Arinsun Clean Energy Pvt Ltd, challenged the rejection of its refund claim for Integrated Tax (Rate) amounting to Rs. 26,19,546/- and interest of Rs. 2,26,036/-. This refund pertained to ocean freight paid on imports made on a CIF basis during the financial year 2018-19. The petitioner had paid IGST under the reverse charge mechanism as per Entry No. 10 of Notification No. 10/2017-Integrated Tax (Rate). The refund was initially rejected by the Deputy Commissioner of State Tax, Circle Rewa, on January 24, 2025. The petitioner had previously approached the High Court, which remanded the matter for reconsideration in light of the Supreme Court's judgment in Union of India vs. Mohit Minerals Pvt. Ltd. The respondent-State argued that the notifications under which the tax was paid remained legally valid prior to their deletion and that subsequent notifications were prospective.

Key Issues

1. Whether the levy of IGST on ocean freight under Entry No. 10 of Notification No. 10/2017-Integrated Tax (Rate) was unconstitutional and void, entitling the petitioner to a refund of taxes paid prior to its deletion? Petitioner's arguments: The petitioner contended that the levy of IGST on ocean freight was declared unconstitutional by the Gujarat High Court in Mohit Minerals Pvt. Ltd. vs. Union of India, and subsequently upheld by the Supreme Court in Union of India v. Mohit Minerals Pvt. Ltd. Therefore, the tax paid was void, and a refund was due. They relied on the Supreme Court's decision which held that the separate levy on importers for the supply of service by a shipping line would be in violation of Section 8 of the GST Act. Revenue's arguments: The respondent-State argued that Entry No. 10 of Notification No. 10/2017, under which the petitioner paid IGST, had legal force at the relevant time. They further contended that Notifications 11/2023 and 13/2023, issued to align the statutory framework with the Supreme Court's judgment in Mohit Minerals, were prospectively applicable from October 1, 2023, and did not confer retrospective exemption or entitlement to refund for taxes paid prior to that date.