The Gujarat High Court addressed a case involving Indian Potash Limited, which sought a refund of IGST paid on ocean freight under reverse charge while importing goods on a CIF basis. The refund claim was initially rejected, but the appellate authority allowed the appeal, directing the adjudicating authority to re-examine the limitation period. The petitioners argued that since the tax levy was declared unconstitutional in the Mohit Minerals Pvt. Ltd. case, the limitation under Section 54 of the CGST Act should not apply and that they were not granted a proper hearing before the refund claim was rejected.
The main issue was whether the refund of IGST paid on ocean freight under reverse charge could be denied on the grounds of limitation or technical objections after the levy was declared unconstitutional.
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The High Court ruled in favor of the petitioners, stating that the issue was already addressed in Mohit Minerals and subsequent decisions by the Gujarat High Court. It emphasized that a refund of tax paid under a mistake of law cannot be denied by applying the limitation under Section 54. The Court noted that retaining such tax violates Article 265 of the Constitution. Consequently, the appellate order was quashed, and the respondents were instructed to process and sanction the refund with applicable interest promptly.
Parties: Indian Potash Limited & Anr. v. Union of India & Ors.
Order Date: 16 January 2026
Facts –
- The petitioners paid IGST on ocean freight under reverse charge while importing goods on CIF basis and subsequently claimed refund relying on Mohit Minerals Pvt. Ltd.
- The refund application was rejected, and although the appellate authority allowed the appeal, it directed the adjudicating authority to re-examine limitation.
- The petitioners contended that once the levy itself was unconstitutional, limitation under Section 54 could not be applied.
- It was also contended that no effective personal hearing was granted before rejection of the refund claim.
Issue –
- Whether refund of IGST paid on ocean freight under reverse charge can be subjected to limitation or technical objections after the levy itself has been declared unconstitutional?
Order –
- The High Court held that the issue is squarely covered by Mohit Minerals and subsequent Gujarat High Court decisions.
- It ruled that refund of tax paid under a mistake of law cannot be denied by applying limitation under Section 54 of the CGST Act.
- The Court observed that retention of such tax violates Article 265 of the Constitution.
- The appellate authority erred in directing verification of limitation despite settled legal position.
- Accordingly, the appellate order was quashed and the respondents were directed to process and sanction the refund along with applicable interest within the prescribed time.
