Case Summary
Case Title: Torrent Power Ltd. v. Union of India
Court: High Court of Gujarat at Ahmedabad
Petition No.: R/SCA No. 13655 of 2024 with R/SCA No. 1659 of 2024
Date of Judgement: 23.10.2024
Bench: Justice Bhargav D. Karia & Justice D.N. Ray
Category of Dispute: Refund of IGST/Service Tax – Ocean Freight
Relevant Sections:
-
Section 54 & 57 of CGST Act, 2017
-
Rule 97 of CGST Rules, 2017
-
Section 11B of Central Excise Act, 1944 (as applicable to Finance Act, 1994)
-
Article 265 of Constitution of India
Facts (Paras 6–7)
Torrent Power Ltd., a licensed electricity distributor, imported natural gas on CIF basis. IGST was paid on ocean freight under Notification No. 10/2017-IGST (Rate). Later, the Gujarat High Court in Mohit Minerals (2020) and Supreme Court in Union of India v. Mohit Minerals (2022) held the levy unconstitutional. Torrent sought refund of IGST (~₹19.28 cr) and service tax (~₹4.72 cr). Authorities rejected refunds citing lack of jurisdiction under Section 54/11B and invoked unjust enrichment, transferring amounts to the Consumer Welfare Fund. Torrent challenged these orders.
Questions for Determination (Paras 5, 12, 13)
-
Whether refund of unconstitutional levy can be denied by transferring it to Consumer Welfare Fund?
-
Whether doctrine of unjust enrichment bars Torrent from claiming refund when tax burden was passed on through tariff?
-
Can refund be structured in a manner that ensures consumers ultimately benefit?
Observations (Paras 10–18)
-
The Court noted Torrent had passed on the tax burden to consumers via tariff but had filed an affidavit undertaking to deposit refund in a separate bank account and not utilize it until GERC adjusts tariff, thereby passing benefit back to consumers (Paras 13–14).
-
The Court relied on Mafatlal Industries v. Union of India (1997) 5 SCC 536 (Paras 10.3, 11.4, 15) holding that refund of unconstitutional levy is permissible under Article 265, subject to unjust enrichment safeguards.
-
Respondents cited Sahakari Khand Udyog Mandal Ltd. v. CCE (2005) 3 SCC 738 (Paras 11.1–11.3), emphasizing unjust enrichment doctrine.
-
The Court balanced both views, finding Torrent’s undertaking consistent with Mafatlal, ensuring that refund benefit reaches consumers (Paras 16–18).
Judgement (Paras 19–20)
-
Orders transferring refund to Consumer Welfare Fund were quashed.
-
Authorities directed to refund ₹19.28 cr (IGST) and ₹4.72 cr (Service Tax) within 2 weeks.
-
Torrent to deposit refund in a designated bank account as fixed deposit until GERC determines tariff.
-
GERC directed to treat refund as part of revenue for tariff fixation under Electricity Act, 2003.
-
Torrent to file compliance report before Court.
Table of Cases Referred
| Case | Court | Citation | Verdict |
|---|---|---|---|
| Mohit Minerals Pvt. Ltd. v. Union of India | Gujarat HC | (2020) 74 GSTR 134 | Struck down IGST on ocean freight as unconstitutional. |
| Union of India v. Mohit Minerals Pvt. Ltd. | Supreme Court | (2022) 10 SCC 700 | Affirmed Gujarat HC, levy ultra vires IGST Act. |
| Mafatlal Industries Ltd. v. Union of India | Supreme Court (Constitution Bench) | (1997) 5 SCC 536 | Refund of unconstitutional levy allowed under Art. 265; subject to unjust enrichment safeguard. |
| Sahakari Khand Udyog Mandal Ltd. v. CCE | Supreme Court | (2005) 3 SCC 738 | Refund denied if tax burden passed on; unjust enrichment doctrine upheld. |
Between Fine Lines
This ruling clarifies that when a levy is declared unconstitutional, refund cannot be diverted to the Consumer Welfare Fund if mechanisms exist to ensure consumers benefit. Power distribution companies can claim refunds provided they transparently route the amount through tariff determination, ensuring no unjust enrichment.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”