When Tax Turns Unconstitutional, Refund Is a Right – Not a Favour

Case Title: Jupiter Comtex (P.) Ltd. v. Union of India

Court: High Court of Gujarat

Petition No.: R/Special Civil Application No. 1280 of 2024

Date of Judgment: 14 February 2024

Category: Refund – Ocean Freight IGST

Relevant Sections: Section 54 of CGST Act, 2017; Entry No.10 of Notification No.10/2017-IGST (R); Article 226 of the Constitution of India

Facts of the Case

[Para 2 to 5.3]

1. Petitioner, Jupiter Comtex (P.) Ltd., imported goods and paid IGST on ocean freight under reverse charge per Notification No.10/2017 dated 28.06.2017.
2. Subsequently, the Gujarat High Court in Mohit Minerals (P.) Ltd. and later the Supreme Court in Union of India v. Mohit Minerals (P.) Ltd. declared such IGST levy as ultra vires and unconstitutional.
3. Relying on the above judgment, the petitioner filed for refund of ₹3,39,169 (tax), ₹1,51,305 (interest), and ₹50,875 (penalty) paid under protest.
4. Refund was rejected by the jurisdictional officer stating such refund is not admissible under Section 54 of CGST Act and should be pursued via writ or suit.

Questions in Consideration

[Para 5.4 to 6]

1. Whether refund of IGST paid on ocean freight under protest is maintainable under Section 54 of CGST Act after the levy is declared unconstitutional?
2. Whether the officer could reject the refund solely on the ground that it arose due to the Supreme Court declaring the levy as unconstitutional?

Observations of the Court

[Para 6 to 6.2]

1. The declaration by the Supreme Court that the levy is unconstitutional becomes law of the land; authorities are bound to comply.
2. The petitioner furnished a Chartered Accountant’s certificate affirming non-passing of tax burden, avoiding unjust enrichment.
3. Court deprecated the officer’s view that such refund could not be granted under Section 54.
4. Relied on Mafatlal Industries Ltd. v. Union of India (1997) and other Gujarat High Court cases including:
   • Bharat Oman Refineries Ltd. v. UOI (2020)
   • Torrent Power Ltd. v. UOI (2022)
   • Sandesh Ltd. v. UOI (2022)

Judgment of the Court

[Para 7 to 9]

1. Petition was allowed.
2. Court directed the respondent to verify and refund the IGST on ocean freight paid under protest along with statutory interest within 8 weeks.

Between Fine Lines

• Tax paid under protest pursuant to an unconstitutional levy must be refunded.
• Authorities are bound by Supreme Court rulings and cannot withhold refund on procedural grounds.
• Refund under Section 54 is permissible even for unconstitutional levies.
• Chartered Accountant’s certificate ensured avoidance of unjust enrichment.
• The decision reinforces the binding nature of apex court judgments on field officers.

Summary of Referred Cases

Takeaway

“When Tax Turns Unconstitutional, Refund Is a Right – Not a Favour”