GST UPDATE

Taxpayers which had reversed the IGST credit availed for the IGST paid on Ocean freight on the imports are eligible to claim refund irrespective of the fact that they were not the party to the Supreme Court judgement subject to fulfilment of condition.

Appeal No.: APL/11-56/SRT/2026

Tribunal: GSTAT (Surat Bench)

Case Title: The Assistant Commissioner, CGST & Central Excise v. M/s Filatex India Limited and various ors.

Outcome:Appeal filed by the department was dismissed.

Judgement Date: 30.09.2026

BRIEF FACTS OF THE CASE:

M/s Filatex India Limited (hereinafter referred to as Respondent) paid IGST, on the ocean freight paid on the goods imported, as required by entry no. 10 of notification No. 10/2017-Integrated Tax Rate read with entry no. 9(ii) of the Notification No. 8/2017-Integrated Tax Rate issued and Section 5(3) of the IGST Act 2017. Later on, Gujarat High Court gave judgement in the case of M/s Mohit Minerals Pvt Ltd v. Union of India in which the notifications (supra) were declared as ultra vires and unconstitutional. Furthermore, appeal by the department before Supreme Court preferred against the said Gujarat High Court was dismissed by the Supreme Court. Pursuant to which, a refund application was filed by the respondent and various other taxpayers for the IGST paid on the ocean freight. The refund claims were rejected by the adjudicating authority on the grounds that the Supreme Court judgment did not expressly provide for retrospective operation and that the taxpayer had already availed and utilised the corresponding ITC. The taxpayer challenged the rejection orders before the Appellate Authority, which allowed the appeals and directed sanction of the refunds. The Department thereafter filed appeals before the GST Appellate Tribunal under Section 112(3) of the CGST Act, 2017, challenging the decision of the Appellate Authority.

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether the judgement given by the Supreme Court declaring a levy ultra vires and unconstitutional operates retrospectively from the inception?

Whether the Department could raise an objection concerning utilisation of ITC before the Tribunal when that issue had not been specified in the Commissioner's authorisation for filing the appeal under Section 112(3)?
Whether the refund could be granted to person who was not the party to the judgement of the Supreme Court?

BRIEF ARGUMENTS BY THE DEPARTMENT - APPELLANT:
Appellant submitted following contentions: -
Apex Court did not mention retrospective effect in its order:

That the High Court and Supreme Court in its decision did not mentioned that the judgement has been passed with retrospective effect. Any benefit/notification cannot be given retrospective effect unless specifically mentioned in the said notification. It relied upon Union of India v. C. Krishna Reddy (2002 (146) E.L.T. A99), Commissioner v. Adani Exports Ltd. and CCE (2002 (146) E.L.T. A213), Chennai v. Indian Organic Ltd. (2004 (166) E.L.T. 19 (S.C.) arguing that a notification could not ordinarily be given retrospective effect unless the same was expressly provided for.

No notification was issued for refund of IGST on ocean freight:

In continuation of above, it was argued that there were no notification issued pertaining to retrospective refund of GST paid on ocean freight. For this reliance has been placed upon the judgements in the case of Mafatlal Industries Ltd. v. UOI [1997 (89) ELT 247 (SC)].

The respondent was not a party to the original litigation

That as per Rule 89(2), taxpayer seeking refund is required to produce a copy of order wherein it has been held that a refund is due to the appellant. As the respondent in the instant case are not a party to the Mohit Minerals case, hence, respondent are not eligible to claim refund on the basis of such order.

IGST paid was utilised for discharging tax liability: Refund if allowed would lead to Unjust Enrichment

Along with that, the respondent have availed input tax credit of IGST paid on ocean freight under RCM for respective months and same was utilised while discharging tax liabilities. Hence, refund of such tax would cause unjust enrichment. Therefore, if the IGST refund is granted to the respondent, it will lead to double benefit to the respondent and is a case of unjust enrichment.

IGST, CGST and SGST balance cannot be treated as one and single:

The department contended that the taxpayer had already availed and utilised the IGST credit for payment of its output tax liabilities. IGST credit constituted a separate pool and could not be treated as unutilised merely because sufficient credit remained available under the CGST and SGST heads.

Reliance placed upon judicial pronouncement:

That based on the Supreme Court judgement given in the case of M. Nagaraj V/s. Union of India when a amendment is dealing with issues of public policy and constitutional amendments, its judgement could be applied prospectively if such an application is necessary for fairness and justice. Hence, in the instant case also, the judgement given should be given prospective effect only.

Therefore, impugned order should be set aside.

BRIEF ARGUMENTS BY TAXPAYER - RESPONDENT:

Respondent contended that:
Provision/Notification/Rule declared ultravires becomes void since inception:

That once any provision, rule, section or notification etc. has been declared ultra vires by the Court , then it should be treated as not in existence right from the beginning i.e. should be given retrospective effect. The judgment does not create a new legal position from the date of its pronouncement; it declares the legal position that already existed.

Regarding which reliance was placed upon the judgement in the case of Kanishk Sinha v. West Bengal, Louis Dreyfus Co. Pvt Ltd. v. Union of India [(2025) 33 Centax 418/2025 (101) G.S.T.L. 329 (A.P.)

Sufficient balance available in CGST and SGST:

It was argued that, question of utilization of credit of IGST does not arise as they had sufficient balance in excess under the CGST and SGST heads and balance of input tax credit should be considered as a whole not in isolation per head wise. Under the prescribed GST credit-utilisation mechanism, IGST credit had to be exhausted first. Consequently, the absence of a balance under the IGST head did not mean that the corresponding credit had been voluntarily consumed while equivalent credit remained available under CGST and SGST. Reliance was placed upon following judicial pronouncements:
Comsol Energy Pvt Ltd. v. State of Gujarat [2021 (55) GSTL 390 (Guj.)]
Louis Dreyfus Company India Pvt. Ltd. v. UOI – 2022 (65) GSTL 261 (Guj.)

Scope of the departmental appeal is limited:

An officer filing appeal under Section 112(3) cannot travel beyond the authorisation granted by the Commissioner. The officer's jurisdiction to appeal at all flows from, and cannot exceed, what the Commissioner has specified. A ground which has been considered and dropped by the Commissioner cannot be allowed to be raised by the Authorised Representative. In the instant case, the objection concerning utilisation of credit had not been authorised as a ground of appeal by the Commissioner under Section 112(3) hence cannot be raised.

Reliance placed by the Appellant on judicial pronouncements was distinguished:

Along with that, the reliance placed upon by the appellant on the judgements in the case of UOI v. C. Krishna Reddy; CCE v. Adani Exports Ltd; does not apply on the instant case as they relate to the question- whether a beneficial exemption Notification/circular can be read to apply retrospectively to period prior to their issuance.

Benefit of the decision should be granted to all persons even if they were not party in the same as the decision is binding on all lower authorities:

Further, that the appellant’s contention that refund cannot be allowed since the respondent was not a party to the decision given in the case of M/s Mohit Minerals is invalid as Supreme Court has declared notification to be ultra vires and hence it is binding on all authorities. Hence, benefit should be extended to all including the person which was not even party to the matter.
Provision/Notification declared unconstitutional should be treated as removed retrospectively:- No further notification or individual judicial order was necessary

With regards to the appellant’s contention that subsequent to 19.05.2022, there was no such notification issued which provided for the retrospective refund of the IGST paid on the Ocean freight, it was argued that a ultra vires and unconstitutional notification. Once a notification is declared unconsitutional and ultra vires, then, there is no requirement of further notification to give effect to the consequential refunds.

FINDINGS & JUDGEMENT:

Following are the findings of the Tribunal in the instant case:
Based on the contentions of both the parties, following are the observations and judgment of the Tribunal:
The Department could not introduce a ground beyond the Commissioner's authorisation under Section 112(3)

With regards to the non-availablility of balance available in the IGST and was therefore disentitled from refund. It found that the objection had not been specified as a ground in the Commissioner's order authorising the appeal under Section 112(3). The Tribunal explained that the jurisdiction of the officer filing an appeal under Section 112(3) flows from the Commissioner's authorisation and cannot exceed the points specified therein. A ground considered and dropped by the Commissioner could not be revived merely through oral arguments by the authorised representative.

Claiming IGST refund after reversal of CGST/SGST balance is permitted in view of the Judicial pronouncement:

Reliance placed upon the by the authorised representative of the department in the case of SN Tradelink Pvt Ltd.in which it was held that reversal of IGST credit by utilising the balance of CGST and SGST is permitted. Even in the case of refund of IGST paid on ocean freight had been claimed pursuant to the same judgement of Hon’ble Supreme Court in the case of Mohit Minerals Pvt Ltd in which it was held that IGST refund cannot be disallowed when the taxpayer has already reversed the IGST credit availed by utilising the balance available under CGST/SGST via DRC-03 and thus, it was held that. Hence, Tribunal therefore rejected the argument that the prior utilisation of IGST credit, by itself, defeated the refund claim.

IGST credit should be treated as unavailed where CGST and SGST combined balance exceeds the IGST credit availed:

It was held that for the combined balance of CGST and SGST balance equivalent to the IGST refund amount and utilising the same to debit the refund amount in the credit ledger amounts to non-utilisation of the credit in substance. Hence, in such case no double benefit will arise. The alleged unjust enrichment could not be inferred merely from the fact that the IGST credit had previously been utilised.

Court judgements should be given retrospective effect as the same are clarificatory in nature:

In this regard, it was observed that it is obvious that unless otherwise specified, all laws are to be treated as prospective. However, it is also clear that all judgements are retrospective in nature unless the court expressly mentions the same to be prospective. Courts interpret and declare the law they do not legislate or amend the law. Hence, it was held that as the supreme court said that the levy was ultra vires and unconstitutional, hence, the state never had the authority to collect the tax. The levy did not became unconstitutional or ultra vires because of the court judgement. Instead, they were always ultravires as the courts merely discovered, interpreted, explained and declared it.
Tribunal observed that reliance placed by the respondent on judicial pronouncements in the case of Louis Dreyfus Co. PVt Ltd. (supra) and Kanishk Sinha v. State of Bengal (supra) also held that the judgement given by the court should be given retrospective treatment.
Furthermore, the reliance placed by the department upon the judgement in the case of M Nagraj (supra) has been distinguished on the ground that the judgement in the instant case neither states that its own ruling is prospective nor does it contain any statement that states judgement to be treated as prospectively.

A taxpayer need not have been a party to the original litigation

In this regard, Tribunal observed that Article 265 of the Constitution states that “No tax shall be levied or collected except by authority of law”. Further, Article 300A states that “No person shall be deprived of his property save by authority of law”. Hence, where the levy itself is declared ultra vires and unconstitutional, the collection of tax is without authority of law from very inception of such levy. Further, collection of such tax does not becomes valid merely because the person from whom it was collected was not a party to the writ petition. Hence, as the provision under which the tax was levied itself is invalid unconstitutionally, hence, refund should be granted for such tax even though if the taxpayer is not the party to the judgement.
Tribunal placed reliance upon the judgement in the case of Mafatlal Industries Ltd. v. Union of India in which it was observed that a person who approaches court challenging the constitutional validity of a provision but fails, then, he shall not be eligible to extend the benefit of the decision given by the Court in other person’s case, because, the decision in case of the appellant has already attained finality.
The tribunal observed that the respondent had not challenged the validity of the levy of tax before any court and as the same has been declared to be void-ab-initio. Further, in view of the decision in the case of Mafatlal Industries Ltd. v. Union of India, it was held that taxpayers are eligible to take the benefit of such decision and can claim refund for the tax paid under a mistake of law.
Based on above, it was held that the order of the appellate authority was upheld and the appeal filed by the appellant was dismissed. Further, interest should be paid under Section 56 to the respondent beyond 60 days of refund application filed.

CA Pradeep Jain_

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GST update /2026-27/0100

GST UPDATE

BRIEF FACTS OF THE CASE:

QUESTION BEFORE HON’BLE TRIBUNAL:

BRIEF ARGUMENTS BY TAXPAYER - RESPONDENT:

FINDINGS & JUDGEMENT:

Opinion

Author’s Comment:

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